DEPARTMENT OF DEFENSE APPROPRIATION BILL, 1982

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89M00610R000100050017-3
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 314
• Document Creation Date: December 20, 2016
• Document Release Date: August 29, 2007
• Sequence Number: 17
• Publication Date: November 16, 1981
• Content Type: REGULATION

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97TH CONGRESS REPORT
HOUSE OF REPRESENTATIVES
1st Session No 97?
[FULL COMMITTEE PRINT]
NOTICE.?This report accompanies a bill which was reported in an
executive session of the subcommittee and should not be released until
consideration of it has been completed by the full committee. Please
check on such action before release in order to be advised of any changes.
DEPARTMENT OF DEFENSE
APPROPRIATION BILL, 1982
REPORT
OF THE
COMMITTEE ON APPROPRIATIONS
together with
ADDITIONAL VIEWS
[To accompany H.R. ?]
NOVEMBER 16, 1981.?Committed to the Committee of the Whole House
on the State of the Union and ordered to be printed
U.S. GOVERNMENT PRINTING OFFICE
86-2420 WASHINGTON: 1981
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[FULL COMMITTEE PRINT]
NOTICE.?This report accompanies a bill which was reported in an executive
session of the subcommittee and should not be released until consideration of it
has been completed by the full committee. Please check on such action before
release in order to be advised of any changes.
97TH CONGRESS }
1st Session
HOUSE OF REPRESENTATIVES {
REPORT
No. 97-
DEPARTMENT OF DEFENSE APPROPRIATION BILL, 1982
NOVEMBER 16, 1981.?Committed to the Committee of the Whole House on the State
of the Union and ordered to be printed
Mr. ADDABBO, from the Committee on Appropriations,
submitted the following
REPORT
together with
ADDITIONAL VIEWS
[To accompany H.R. --]
, The Committee on Appropriations submits the following report
in explanation of the accompanying bill making appropriations for
the Department of Defense, and for other purposes, for the fiscal
year ending September 30, 1982.
APPROPRIATIONS AND ESTIMATES
Appropriations for most military functions of the Department of
Defense are provided for in the accompanying bill for the fiscal
year 1982. This bill does not provide for military assistance, mili-
tary construction, military family housing, or civil defense, which
requirements are considered in connection with other appropri-
ation bills.
The new budget (obliFational) authority enacted for the fiscal
year 1981, the President s budget estimates, as amended by House
Documents 97-29, 97-61, 97-94, 97-101 and Senate Document 97-8,
and amounts recommended by the Committee for the fiscal year
1982 appear in summary form in the following table beginning on
page 2:
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COMPARATIVE STATEMENT OF NEW BUDGET (OBLIGATIONAL) AUTHORITY FOR FISCAL YEAR 1981 AND
BUDGET ESTIMATES AND AMOUNTS RECOMMENDED IN THE BILL FOR FISCAL YEAR 1982
Agency and item
(1)
New budget
(obligational)
authority
fiscal year 1981
(2)
Budget estimates
of new
(obligations])
authority 2
fiscal year 1982
(3)
New budget
(obligational)
authority
recommended
in bill
(4)
Bill compared with?
New budget
(obligational)
authority,
fiscal year 1981
Budget estimates
of new (obliga-
tions') authority,
fiscal year 1982
(5) (8)
RECAPITULATION
Title I - Military persohnel
(Transfer from other accounts)
Title II - Retired military personnel
Title III - Operation and maintenance
(Liouidation of contract authority)
(Transfer from other accounts)
Title IV - Procurement
(Transfer from other accounts)
Title V - Research, development, test, and evaluation
(Transfer from other accounts) -
Title VI - Special foreign currency program
Title VII - General Provisions (additional transfer
authority, sec. 733)
Title VIII - Related agencies
36,872,200,000
- (47,800,000)
13,887,800,000
55,980,234,000
(620,053,000)
(226,200,000)
48,003,670,000
(27,900,000)
16,530,664,000
(17966,000)
2,760,000
38,659,760,000 37,447,290,000 +575,090,000
--- (-47,8001000)
14,981,815,000 1419311815,000 +1,04410151000
627590,121,000 61,208,685,000 +5,228,451,000
---
--- (-620,053,000)
-- (-226,200,000)
---
64,225,904,000 63,529,169,000 +15,525,499,000
(73,900,000) (+46,000,000)
20,319,388,000 17,314,878,000 +784,214,000
- --- (-1,966,000)
3,0837000 3,083,000 +323,000
(750,000,000) (1,000,000,000)
73,571,000 98,163,000
Total, Department of Defense (NOA) 171,350,899,000 200,878,234,000
(Transfer from other accounts) (303,866,000)
Total funding available 171,654,765,000 200,878,234,000
(Transfer authority) (750,000,000) (1,000,000,000)
(750,000,000)
97,163,000
194,532,083,000
(73,900,000)
194,605,983,000
(750000,000)
-1,212,4701000
-50,0001000
-1,381,436,000
-696,735,000
(+73,900,000)
-3,004,510,000
(-250,000,000)
+23,592,000 1-17000,000
+23,181,184,000 -67346,151,000
(-229,966,000) (+73,900000)
+22,951,218,000 -6,272,251,000
(-250000,000)
I.
IND
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Distribution bs organizational component:
Army
42,487,623,000
49,6601344,000
48,674,961,000
+6,187,1389000
-985,383,000
(Transfer from other accounts)
(5,000,000)
(-59000,000)
Navy
56,593,919,000
669499,722,000
63,853,926,000
+71260007,000
-2,6459796,000
(Transfer from other accounts)
(242,866,000)
(73,100000)
(-169,766,000)
(+73,100,000)
Air Force
51,659,4709000
62,368,300,000
59,6349654,000
+7,975,184,000
-2,733,646+000
(Transfer from other accounts)
(56,000,000)
(800,000)
(-55,200,000)
(+800,000)
Defense agencies/OSD
6'6487316000
7,269,890,000
7,3391564,000
+691,248,000
#69,674,000
Retired military personnel
13,887,800,000
14,981+815,000
14,931,815,000
+1,044015,000
-50000,000
Related agencies
73,571,000
98,163,000
971163,000
-1-23,592,000
-1,000000
-------------
Total, Department of Defense (NDA)
1719350,899,000
200,878,234,000
194,532,083,000
+23,181,184+000
-6,3461151,000
(Transfer from other accounts)
(303,866,000)
(73,9009000)
(-229,966,000)
(+73,900,000)
Total funding available
171,654,765,000
200,878,234,000
194,6051983,000
+22,9510216,000
-69272,251,000
(Transfer authoritY)
(750,000,000)
(1+000,000,000)
(750,000,000)
(-250,000,000)
I Includes amounts in Supplemental Appropriations and Rescission Act, 1981.
Includes changes proposed in H. Does. 97-29, 97-61, 97-94, 97-101, and S. Doc. 97-8.
CAD
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SUMMARY OF COMMITTEE RECOMMENDATIONS
The revised budget estimates for fiscal year 1982 for those activi-
ties of the Department of Defense and related agencies carried in
the accompanying bill total $200,878,234,000. The amounts recom-
mended by the Committee in the accompanying bill total
$194,533,083,000 in new obligational authority and $73,900,000 in
transfers from other accounts for a total funding availability of
$194,605,983,000. The total obligational authority recommended is
$6,272,251,000 less than the budget estimates and is $22,951,218,000
more than the sums made available for the same purposes for
fiscal year 1981. The $194.6 billion recommended is the largest sum
ever included in one bill for military purposes in the history of the
country.
The magnitude of the increase in Defense funding is even greater
than that indicated by the above amounts because a large supple-
mental request and appropriation for fiscal year 1981 which was
enacted late in the fiscal year substantially increased the base. The
regular annual Department of Defense Appropriation Bill for
Fiscal Year 1981 provided $159.7 billion. Thus, the fiscal year 1982
Defense Appropriation Bill as reported by the House is $34.9 billion
higher than the similar bill enacted into law last year. The fiscal
year 1981 Supplemental included $11.6 billion in addition to the
$159.7 billion. Of that amount, $6.9 billion was for Defense pro-
grams and $4.7 billion was for pay raise costs. The inclusion of
such pay raise costs in a supplemental bill is customary but the
appropriation of substantial sums for program purposes is not. The
program funds in the supplemental may be included along with the
increase proposed in fiscal year 1982 in order to more fully under-
stand the recent increase in Defense funding levels of some $41.8
billion. It is anticipated that similar pay increase supplemental
requests will be made for fiscal year 1982. To the extent that they
are, the difference between the fiscal year 1981 and fiscal year 1982
funding availability for the Defense Department will be increased.
The Committee encountered considerable difficulty in processing
the annual Defense Appropriation Bill. There was a substantial
amendment increasing the Defense budget in April. There were
other smaller amendments and in October there was submitted a
substantial decrease in defense funding estimates. The impact of a
major ($7.6 billion) decrease after the beginning of the new fiscal
year had an adverse impact on the ability of the Committee to
report the bill at the time it desired to do so. The same amendment
had an adverse effect on the completion of the already tardy
annual authorization bill. Once again, the authorization bill had
not been enacted at the time of the Committee mark-up on the
appropriation bill. This, of course, makes the work of the Commit-
tee extremely difficult.
The Committee again recommends $750 million in general trans-
fer authority to the Department of Defense. Recognizing that there
are changing Defense requirements and circumstances during the
year, the Committee has found that the provision of such general
transfer authority gives the Department the ability to react in a
timely way to unforseen program changes. As has been true in the
past, these transfers are to be handled through the regular repro-
gramming process.
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INFLATIONARY IMPACT STATEMENT
The bill reported will provide $194,605,983,000. This is an in-
crease of $22,951,218,000 over the amount appropriated for similar
purposes for fiscal year 1981. It is also $6,272,251,000 below the
budget request for fiscal year 1982.
? The appropriation as proposed by the Committee should not
cause inflation to as great an extent than would enactment of the
budgeted amount. The real growth in Defense spending will have
little inflationary effect in comparison to the forecasted $3,312
billion gross national product for 1982.
This statement is made pursuant to Clause 2(A)(4), rule XI of the
House of Representatives.
TRANSFER OF FUNDS
Pursuant to clause 1(b), rule X of the House of Representatives,
the following is submitted describing the transfer of funds provided
in the accompanying bill.
The Committee recommends transfers of prior year unobligated
balances to fiscal year 1982 totaling $73,900,000. These transfers
are made from funds appropriated in fiscal years 1979 and 1981
and are no longer required. for the purposes for which appropriated
as a result of Department of Defense decisions, Congressional
denial of reprogramming requests, or Committee recommendations.
The Committee recommends a transfer of $15,100,000 from the
fiscal year 1979 Shipbuilding and conversion, Navy appropriation.
This transfer is from unobligated balances in the Trident subma-
rine program.
The Committee recommends a transfer of $58,000,000 from the
fiscal year 1981 Shipbuilding and conversion, Navy appropriation.
This transfer is from unobligated balances in the maritime preposi-
tioning ship programs.
The Committee recommends a transfer of $800,000 from the
fiscal year 1981 Other procurement, Air Force appropriation. This
transfer is explained in the classified annex to this report.
The following table shows the titles and appropriations affected
by the transfers:
APPROPRIATION TRANSFERS RECOMMENDED
Appropriation to which transfer is made Amount Appropriation from which transfer is made Amount
Shipbuilding and conversion, Navy $73,100,000 Shipbuilding and conversion, Navy, 1979/83 $15,100,000
Shipbuilding and conversion, Navy, 1981/85 58,000,000
Other procurement, Air Force 800,000 Other procurement, Air Force, 1981/83 800,000
COMPARISON WITH BUDGET RESOLUTION
In accordance with Section 308(a)(1)(A) of the Congressional
Budget Act of 1974 (Public Law 93-344), the following table pro-
vides comparisons between, the new budget authority target set
forth in the First Concurrent Resolution of the budget, as allocated
by the Committee on Appropriations under Section 302 of the Act,
and the budget authority contained in the accompanying bill:
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National defense: Thousands
Resolution target $214,223,000
Committee bill 194,532,083
Difference 19,690,917
The Appropriations Committee Sec. 302 allocation assumed a
budget authority target for fiscal year 1982 Defense bills of
$214,223,000,000. Included in this figure is $5.5 billion set aside for .
the 1982 pay supplemental next spring. The budget authority pro-
vided in this bill of $194,532,083,000 will not utilize any of the
funds set aside for the pay supplemental.
FIVE-YEAR PROJECTION OF OUTLAYS
In accordance with Section 309(a)(1)(B) of the Congressional
Budget Act of 1974 (Public Law 93-344), the following table con-
tains 5-year projections of the outlays associated with the budget
authority provided in the accompanying bill.
Thousands
Budget Authority $194,532,083
Outlays:
1982 119,058,608
1983 39,698,344
1984 21,405,029
1985 6,839,807
1986 and beyond 7,530,295
ASSISTANCE TO STATES AND LOCAL GOVERNMENTS
In accordance with Section 308(a)(1)(C) of the Congressional
Budget Act of 1974 (Public Law 93-344), no new budget authority
or outlays are provided by the accompanying bill for financial
assistance to state and local governments.
FORCES To BE SUPPORTED
DEPARTMENT OF THE ARMY
The fiscal year 1982 budget will support Active Army forces of 16
divisions, 5 separate brigades, 1 combat brigade?air cavalry, and 3
armored cavalry regiments, and Reserve forces of 8 divisions, 21
separate brigades and 4 roundout brigades to active divisions, and 4
armored cavalry regiments. A summary of the major Active Forces
for fiscal years 1980, 1981 and projected for 1982 follows:
Fiscal year
1980 1981 1982
Divisions:
Airborne 1 1 1
Infantry 4 4 4
Mechanized 6 6 6
Armored 4 4 4
Air Assault 1 1 1
Total 16 16 16
Nondivisional Combat Units:
Armored cavalry regiments 3 3 3
Brigades 5 5 5
Combat brigade air cavalry 1 1 1
Active duty military personnel: End strength (thousands) ' 776.5 781.1 780.0
Actual.
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DEPARTMENT OF THE NAVY
The proposed budget will support a total ship force of 561 ships
at the end of fiscal year 1982 compared to 542 at the end of fiscal
year 1981 and 553 at the end of fiscal year 1980. The active aircraft
inventory (Navy and Marine Corps) of 5480 is slightly reduced from
fiscal year 1981. The forces include 13 aircraft carriers, 195 surface
combatants and 66 amphibious warfare ships at the end of fiscal
year 1982 as well as 2103 Navy and Marine Corps tactical aircraft
and 399 ASW aircraft. Ships which will join the fleet during fiscal
year 1982 include two TRIDENT nuclear submarines, six nuclear
attack submarines, two DD 993 (Iranian) class destroyers, nine
guided missile frigates, five hydrofoil patrol missile combatants, a
"Nimitz Class" nuclear powered carrier, two fleet oilers and a
destroyer tender.
Fiscal year 1980
Fiscal year 1981
Fiscal year 1982
ACT NRF
NFAF
ACT NRF
NFAF
ACT NRF
NFAF
Aircraft carrier type:
Multipurpose carriers
13
12
13
Surface combatant type:
Cruisers
26
27
27
Destroyers
80
16
82
9
84
5
Frigates
71
79
84
4
Submarine type:
Attack submarine
74
83
92
FBM submarine
40
35
34
Diesel submarine
5
5
5
Auxiliary submarine
I
1
1
Patrol combatant type
3
1
6
Amphibious warfare type
63
3
59
6
60
6
Mine warfare type
3
22
3
22
3
22
Mobile logistics type
58
2
14
61
2
15
61
14
Support type
20
6
12
21
6
13
22
6
12
Total
457
49
26
469
45
28
492
43
26
Total ship operation forces
553
542
561
Fiscal year 1980
Fiscal year 1981
Fiscal year 1982
Submarine launched ballistic missile launchers
640
544
520
Aircraft inventory (active)
5,360
5,507
5,480
Tactical aircraft (USN and USMC)
2,121
2,104
2,103
ASW aircraft (fixed and rotary wing)
396
397
399
Marine Amphibious Forces
3
3
3
Active duty military personnel
715,622
731,056
746,800
Navy
527,153
540,456
554,700
Marine Corps
188,469
190,600
192,100
Reserve component strength (average)
120,515
123,249
125,200
Navy
86,874
87,400
87,600
Marine Corps
33,641
35,849
37,600
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DEPARTMENT OF THE AIR FORCE
For end fiscal year 1982, the Air Force budget provides an active
force structure of 78 tactical fighter and attack squadrons, orga-
nized into 26 combat wings, 6 air defense interceptor squadrons,
and 24 strategic bomber squadrons, including both B-52s and FB-
111s. Also supported in this budget are 31 airlift squadrons. The
Minuteman and Titan ICBM force will be 1,053 launchers. Signifi-
cant increases in personnel occurred as shown below.
A summary of major Air Forces as proposed in the President's
Budget as amended follows:
Fiscal year
1980 1981 1982
USAF TAC Ftr & Attack Squadrons 79 78 78
Air Defense Interceptor Squadrons 1 6 6 6
Strategic Bomber Squadrons 25 25 24
ICBM Launchers 1,054 1,054 1,053
USAF Airlift Squadrons 31 31 31
Aircarft Inventory Active 2' 9,268 9,408 9,412
Active Duty Military 558,000 564,500 586,800
Reserve Components Personnel 152,219 155,187 163,019
ANG 94,000 95,844 99,054
AFR 58,219 59,343 63,965
Includes one squadron in Iceland.
2 Includes Active Air Force, Air National Guard, and Air Force Reserve.
UNEXPENDED AND UNOBLIGATED BALANCES
The following tables compare the unexpended and unobligated
balances for the military functions of the Department of Defense
over the past 20 years for both the entire Defense Budget and for
the accounts covered by this bill. The unobligated balances associ-
ated with the accounts are projected in the budget to increase
between end fiscal year 1980 and end fiscal year 1982 from $17.8
billion to $29.0 billion. The unexpended balances at the end of
fiscal year 1980 and the end of 1982 are projected to increase from
$79.7 billion to $134.6 billion.
UNOBLIGATED BALANCES, FISCAL YEARS 1961-82
[In millions of dollars]
Fiscal year
Total unobligated
balance
Pertaining to
appropriations in the
basic DoD
appropriation bill
At the end of fiscal year:
' 1961 7,167 6,483
1962 7,120 6,584
- 1963 9,170 8,150
1964 9,961 9,008
1965 11,029 10,103
1966 13,854 11,830
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UNOBLIGATED BALANCES, FISCAL YEARS 1961-82-Continued
[In millions of dollars]
Fiscal year
Total unobligated
balance
Pertaining to
apprograisaictioDnospin the
appropriation bill
1967
13,725
12,244
1968
13,494
11,666
1969
13,669
12,022
1970
13,565
11,966
1971
11,463
9,689
1972
10,203
8,319
1973
10,911
9,009
1974
13,393
11,131
1975
15,375
12,795
1976
18,655
15,697
1977
17,651
15,613
1978
18,531
16,772
1979
17,862
16,158
1980
19,369
17,750
1981 estimate
23,085
21,270
1982 estimate
31,598
29,035
Basic and military construction bills.
Note.-Unobligated balances for revolving funds and trust funds are excluded from this table.
UNEXPENDED BALANCES, FISCAL YEARS 1961-82
[In millions of dollars]
Fiscal year
Total unexpended
balance,
Pertaining to
appropriations in the
basic DOD
appropriation bill
At the end of fiscal year:
1961
26,922
25,204
1962
27,301
25,765
1963
27,737
25,955
1964
27,560
25,805
1965
29,989
28,194
1966
38,540
35,441
1967
42,541
39,937
1968
43,225
40,111
1969
40,957
38,157
1970
37,394
35,755
1971
33,814
30,953
1972
33,829
30,614
1973
37,143
33,462
1974
40,569
36,522
1975
40,515
35,977
1976
47,539
42,964
1977
58,616
53,785
1978
69,125
64,632
1979
77,423
72,619
1980
84,118
79,658
1981 estimate
102,998
97,489
1982 estimate
139,305
134,623
Basic and military construction bills.
Note: Unexpended balances for revolving funds, trust funds, and unfunded contract authority are excluded from this table.
As shown above, an estimated $97.5 billion balance of unexpend-
ed funds was carried into fiscal year 1982 pertaining to the appro-
priation accounts provided for in the accompanying bill. Of this
amount, about $76.2 billion (unliquidated obligations) represents
legally binding documents calling for ultimate cash payment such
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as contracts for ship, aircraft, or missile construction. (Such major
weapons systems are normally funded even though deliveries may
not occur for 2 or 3 years, or 5 years in the case of capital ships.)
Approximately $21.3 billion of the carryover (unobligated) bal-
ances represents amounts which are made available to fund ap-
proved programs, but which are not -yet obligated in the technical
legal sense. By and large these funds are committed to the pro-
grams for which initially appropriated awaiting the completion of
the contracting or other legal prerequisites of obligation.
CHANGES IN APPLICATION OF EXISTING LAW
Pursuant to Clause 3 of Rule XXI of the House of Representa-
tives, the following statements are submitted describing the effect
of provisions which directly or indirectly change the application of
existing law. Regarding the Defense Appropriation Bill, the Com-
mittee set forth its interpretation of this rule in House Report No.
94-517. That report pointed out that numerous portions of the bill
are technically "legislation" but these provisions have been en-
acted virtually unchanged for many years. For the benefit of the
Members of the House, the Committee is restating the position
taken in House Report No. 94-517:
There have been several interpretations of the new rule
and specifically the phrase, "directly or indirectly changes
the application of existing law." Numerous portions of this
bill, which have been virtually unchanged for many years,
are technically "legislation". To read the new rule as re-
quiring that each of these items be described in the report
would result in a catalogue of items not significantly more
informative than the bill itself. This list would be almost
the same year in and year out. In such a listing new items
would be lost among the reenacted provisions and the
elimination of long standing items would not be mentioned
at all, even though the effect would be significant.
The proper interpretation, which the committee believes
to be more in accordance with the understanding of the
intent of the new rule, requires a description of that "legis-
lation" in the fiscal year 1976 bill which is different from
the existing currently effective language of the fiscal year
1975 act and hence "changes the application of existing
law." This has been the practice of the Appropriations
Committee for many years and appears to be the type of
reporting to which the sponsor was referring in his floor
statement:
"The Committee on Appropriations regularly puts such
a statement in the Committee on Appropriations bill re-
ports, and it does not strike me this is going to constitute
an undue burden."
This method will provide Congress with a clear state-
ment every time any change occurs which might be consid-
ered legislation by inclusion of a new provision, or a sig-
nificant change in a legislative provision in the previous
appropriations act.
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Those changes in the fiscal year 1982 bill, which might be inter-
preted as changing existing law, are as follows:
APPROPRIATION LANGUAGE
1. Words have been added to Other procurement, Army, which
would permit the purchase of vehicles for physical security not-
withstanding the price limitations applicable to passenger carrying
vehicles. These vehicles are restricted to 14 at a cost not to exceed
$100,000 per vehicle.
GENERAL PROVISIONS
2. Section 708 has been revised (A) to permit the Department of
Defense to make payments for depot maintenance contracts for
twelve months beginning at any time during the fiscal year; (B) to
permit payment of unusual cost overruns incident to ship overhaul,
maintenance, and repair for ships inducted into industrial fund
activities or contracted for in prior fiscal year provided that the
Secretary of Defense notify the Congress prior to obligation of any
such payment; and (C) to permit payments from annual appropri-
ations to industrial fund activities and/or under contract for
changes in scope of ship overhaul, maintenance, and repair after
expiration of such appropriations, for such work either inducted
into the industrial fund activities or contracted for in that fiscal
year.
3. Section 723 has been revised to prohibit the military clothing
sales stores from selling optional uniform items obtained from
foreign firms.
4. A proviso has been added to Section 741 which would permit
personnel who have separate health insurance which would pay 75
percent of nonemergency inpatient health care to utilize CHAM-
PUS for the other 25 percent instead of seeking a waiver for not
utilizing military medical facilities if within a 40 mile radius of the
patient's residence.
5. A section contained in last year's bill which prohibited the
implementation of the Competitive Rate Program for transporta-
tion of household goods to and from Alaska and Hawaii was de-
leted.
6. Section 752 has been amended to allow funds appropriated for
the CIA Reserve to remain available until September 30, 1983.
7. Section 757 has been revised to prohibit federal funding of
abortion except where the life of the mother would be endangered
if the fetus were carried to term.
8. The budget proposed new language which would prevent
paying for an increased salary based upon a teacher having ob-
tained an educational level of fifteen additional hours of education
beyond a bachelor's degree. This language is included as Section
769.
9. The budget proposed new language which would impose a 4.8
percent pay cap on the teachers in the system during the school
year 1981-1982. This language is included as Section 770.
10. The budget proposed new language which would prevent an
adjustment in teachers' pay in excess of 4.8 percent for August and
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12
September 1981. The language as amended to include August
through December is included as Section 771.
11. Section 772 has been added to insure the Appropriations
Committee's full participation in decisions to initiate multiyear
contracts for major weapons systems.
12. Section 773 has been added to eliminate the loopholes in the
language contained in the FY 1981 supplemental act which pre-
cludes funds appropriated from being available to reimburse de-
fense contractors for the cost of commercial insurance which would
cover the cost of correcting the contractors' own defects in materi-
als and workmanship incident to the normal course of construction.
13. Section 774 has been added to permit full reimbursement of
subsistence expenses to enlisted personnel in A travel status while
prohibiting double payment for the same expenses.
14. Section 775 has been added which would round military
retirement service credit to the nearest month for any portion of a
year in excess of six months.
15. Section 776 has been added which would limit rental reim-
bursement to the General Services Administration to 50 percent of
the Standard Level User Charge.
16. Section 777 has been added which would exclude the 5.2
percent active duty catch-up raise from the base for calculating
military retired pay.
17. Section 778 has been added to limit the pay of guard and
reserve technicians to $50,112 annually. This is the same level at
which all other government employees are capped.
18. Section 779 has been added which would require the Depart-
ment of Defense to notify the Appropriations Committees before
they waive RDT&E or other costs related to a foreign military sale.
19. Section 780 has been added to prohibit an employee who has
been working in Alaska or Hawaii and who is transferred or reas-
signed to the United States from continuing to receive the higher
Alaska or Hawaii pay rate for two additional years.
20. Section 781 has been added to prohibit giving foreign nation-
als priority over United States citizens living in a foreign country
in filling vacant positions.
21. Section 782 has been added to insure two additional division
sets of Army equipment will not be placed in storage in Europe.
22. Section 783 has been added to prohibit the operation of the
Army Medical Intelligence and Information Agency after Septem-
ber 1, 1982.
23. Section 784 has been added to insure that the status quo is
maintained with respect to the Department of Defense dependents
school system pending Congressional action on the proposal to
repeal the transfer of the system to the Department of Education.
The provision would prohibit funding of the activities of the Advi-
sory Council on Dependents' Education.
24. Section 785 has been added to insure that the Secretary of
Defense is charged to administer the funds provided for operation
of section 6 schools.
25. Section 786 has been added to allow wage board employees in
the Wichita, Kansas, area to have their wages fully updated after
the current wage survey is completed. There is some indication
that due to a previously incomplete wage survey, rates paid to
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13
government employees in this area are somewhat below prevailing
rates.
26. Section 787 has been added to permit the Department of
Defense to lease no more than six aircraft as suitable replacements
for the C-140 aircraft.
27. Section 788 has been added to prohibit the transfer of any
? article of military equipment or data related to the manufacture of
such equipment to a foreign country prior to the approval in writ-
ing by the Secretary of the service concerned.
28. Section 789 has been added to restrict funds made available
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TITLE I
MILITARY PERSONNEL
ESTIMATES AND APPROPRIATION SUMMARY
Virtually every activity of the Department of Defense and mili-
tary services requires both military and civilian personnel as well
as support funding. Therefore, many of the actions taken in the
military personnel appropriations affect the operation and mainte-
nance appropriations and vice versa. In most instances, the interre-
lationships between the two appropriations are identified where
applicable.
Appropriations made under this title finance the programs iden-
tified briefly below:
Pay and Allowances.?Funds are provided for the pay and allow-
ances of active duty officers and enlisted personnel, and cadets at
the military academies. Pay and allowances include basic pay;
incentive pay, special pay to physicians, dentists, veterinarians,
divers, and others; basic allowances for quarters and subsistence;
station allowances overseas; uniform and clothing allowances; sepa-
ration payments; social security contributions; and enlistment and
reelistment bonuses.
Subsistence of Enlisted Personnel.?Funds are provided for the
feeding of enlisted personnel, including both the basic allowance
for subsistence and subsistence-in-kind.
Permanent Change of Station Travel.?Funds provide for perma-
nent change of station travel for military personnel, either as
individuals or as organized units, including transportation; per
diem allowances; travel of dependents; transportation of household
goods; port handling charges; dislocation allowances; nontemporary
storage of household goods; minor supplies and services incident to
organizational movement; expenses of separation travel; temporary
duty directly related to permanent change of station; and junior
enlisted travel entitlements.
Other Military Personnel Costs.?Funds are also provided for
other military personnel costs which include apprehension of mili-
tary deserters, interest on personal savings deposits, Servicemen's
Group Life Insurance and death gratuities.
The accompanying bill provides $37,447,290,000 for military per-
sonnel costs in fiscal year 1982 a decrease of $1,212,470,000 from
the budget estimate of $38,659,760,000. The amount recommended
for fiscal year 1982 is $575,090,000 more than the $36,872,200,000
appropriated in fiscal year 1981 including the fiscal year 1981
supplemental appropriations but excluding projected supplemental
requests for fiscal year 1982.
(14)
t),
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PERMANENT CHANGE OF STATION (PCS)
WASTE, FRAUD
In fiscal year 1982, the Depart
proximately $3 billion on movem
their household goods from one dut
projected force of 2.1 million mili
estimates that on average the De
every three of these personnel on
move during the course of the
assignments at a given installation
nel that must pack up their hou
move from one station to another.
The Federal Government spend
travel. Of that amount, 65 percent
of Defense of which approximate
permanent change of station cost
dated July 30, 1981, sent by the Pr
departments and agencies, "althou
to carry out agency programs, in
wasteful spending have continued
Committee estimates that the man
President will save $40 million in
fore included a reduction in that a
The Committee believes that th
lion in savings is much less than is
ment procedures. For example, th
audit services document that?
Carriers suspended for poor
contracts;
Erroneous and duplicate obli
Claims for reimbursement ar
performing carriers;
Shipments are not weighed
in their own regulations;
There is poor utilization of ?
household goods at a time w
are being procured through co
Personnel are sent back to t
tours with only one or two
service; and
Realignment of personal pro
duce substantial savings thro
The Committee estimates that co
ment deficiencies would produce e
Committee is only making an ad
million in fiscal year 1982 as a fi
expected to accrue.
The Department of Defense sub
proximately nine months before th
a result, the budget contains a nu
may not be entirely accurate. In t
station costs, the numbers include
for fuel and carrier rates will be les
86-242 0 - 81 - 2
AND ABUSE
ent of Defense will spend ap-
nt of military personnel and
assignment to another. With a
ary personnel, the Committee
artment will move two out of
a permanent change of station
ar. This excludes changes in
and includes only those person-
ehold goods and families and
? almost $4 billion a year on
ill be spent by the Department
y 30 percent is for personnel
alone. According to a letter
sident to the heads of executive
h most of this travel is required
tances of mismanagement and
o surface over the years." The
gement changes directed by the
iscal year 1982 and has there-
ount.
President's estimated $40 mil-
easible through better manage-
Department of Defense's own
performance are still awarded
ations are made on the books;
not always made against non-
y DOD personnel as called for
overnment facilities for storing
en additional storage facilities
mercial markets;
e United States from overseas
onths left before leaving the
erty shipping offices would pro-
gh elimination of duplication.
ection of these clear manage-
ormous savings. However, the
itional token reduction of $15
t increment of savings that is
its the budget to Congress ap-
beginning of the fiscal year. As
ber of projections that may or
e case of permanent change of
in the fiscal year 1982 budget
than projected. As a result, an
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16
additional $40.7 million in savings is available and a reduction is
recommended in that amount.
Every year the Committee inquires during hearings on military
personnel PCS requirements as to the true need to have two out of
every three military personnel make permanent duty changes
every year. The problem is compounded in these hearings by the
very fact that so many of the Generals and Admirals appear one
year at the Committee's hearings only to be replaced by someone
different the following year. The Committee has calculated that
this movement of personnel is so pervasive that 41 percent of the
Department of Defense's Generals and Admirals move from one
town to another every year even when excluding from this total
those that move as a part of their retirement from military service.
Moreover, internal Navy documents state that fleet morale could
be drastically improved and a ten percent savings could be pro-
duced by implementing an aggressive program called "Home Port-
ing" whereby the Navy makes a commitment to return sailors for
their periodic shore duty to the same town. The Committee is
therefore deleting a total of $74.5 million from the Permanent
Change of Station request and directing that the Department im-
plement during fiscal year 1982 a plan to reduce the number of
PCS moves by at least two percent with a goal of reducing the
number of moves eventually by five percent.
The Committee believes that the total of all of the above reduc-
tions of $170.2 million is reasonable in view of the $3 billion re-
quest and the potential for vast savings through reduced moves
and improved management as documented by the Department of
Defense itself.
TRAVEL MILEAGE
Less than four months ago, the PCS mileage reimbursement
approximately doubled, increasing from 70 to 130 per mile. The
Department of Defense is now requesting that it be increased to
160 per mile at an additional cost of $46.3 million in fiscal year
1982 alone.
The Committee has reviewed the justification for DoD's increase
of 160 per mile and has concluded that 130 remains the maximum
amount necessary to fully reimburse military personnel for incre-
mental expenses incurred in operating their personal vehicles
while undergoing a permanent change of station move. In fact,
much of the supporting material that the Committee has received
from the Pentagon is misleading in terms of what is a fair reim-
bursement level. Contrary to information provided by DoD:
According to the American Automobile Association, the cost
to operate a six cylinder vehicle is only 8.20 per mile.
Civilian government employees undergoing a permanent
change of station move are reimbursed at a rate which begins
at only 80 per mile.
Internal Revenue Service estimates 90 per mile as a fair
expense for charitable or medical expenses.
IRS estimates that business activity deductions range from
110 to 200 per mile.
The proposal by the Department would permit such expenses as
insurance and interest on car loans to be included as an "operating
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expense" incurred while undergoing
is clearly not the case since thes
whether the military member chan
cases, even licenses and taxes will
members do not change their ho
automobiles when undergoing a per
Finally, the argument for allowing
basis is not fully justified since th
by the Department of Defense ass
permanent change of station mov
The Committee is therefore delet
in the budget and directing that the
more than 130 per mile. The Co
Department establishes a formula
military personnel with full recov
nance, tires, an equitable portion
equitable portion of depreciation n
full amount of depreciation which
were driving brand new cars.
ARMY TEMPORARY LOD
The Army has agreed that the
Lodging Allowance is overstated b
has, therefore, included a reduction
SUBSIST
WASTE, FRAUD,
Since the founding of the Repub
military personnel has been the Go
vide an adequate level of subsiste
this has taken the form of food-in-
due to changes in both life styles a
has been a shift to cash payments i
personnel. In fiscal year 1982 (inc
increase), the Committee estimates
types of subsistence support for mi
comparison, it would take roughly
ury for taxes on either tobacco or a
the military subsistence program fo
Because of the size of this progr
other agriculture and food subsidy
is incumbent upon the Departmen
military subsistence program is pr
the Department of Defense. It w
that the Committee reviewed 17 d'
audit reports published within the
ment a total of at least $100 mil
through waste, fraud and abuse. T
poor control of mess passes, poor
national personnel not being charg
sistence stockage, free issuance of fl
nel, excessive number of dining fac.
a change of station move. This
expenses would be incurred
es duty stations or not. In most
ot change since most military
e of record nor licensing of
anent change of station move.
full depreciation on a mileage
AAA documentation supplied
mes all people undergoing a
are driving brand new cars.
ng the $46.3 million requested
reimbursement rate is to be no
mittee also directs that the
hich will equitably reimburse
ry of all gas and oil, mainte-
of license and taxes, and an
? t to exceed 50 percent of the
ould be allowed if all personnel
ING ALLOWANCE
? udget request for Temporary
$14.0 million. The Committee
'n that amount.
NCE
ND ABUSE
ic one of the major benefits to
ernment's commitment to pro-
ce for the troops. Historically
ind, but in more recent years
d military requirements there
lieu of food for many military
uding the recent military pay
2.6 billion will be spent for all
itary personnel. As a basis for
11 of the receipts to the Treas-
rports and airways just to fund
the year.
and the reductions made to
rograms for fiscal year 1982, it
of Defense to insure that the
perly managed at all levels of
therefore with great concern
fferent Department of Defense
ast year and a half that docu-
ion in subsistence that is lost
ese audits document thievery,
ess hall head counting, foreign
d for food eaten, excessive sub-
ght meals to unentitled person-
lity attendents, and inadequate
;.
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dining facility cash control procedures. The Committee is con-
cerned not only over the exceedingly poor management, but also
over the clear lack of strong enforcement procedures rectifying
these instances of documented poor management and even illegal-
ities by Department of Defense personnel and contractors. The
Committee expects strong enforcement measures to be implement-
ed, and directs the Department to submit a report no later than
April 30, 1982 which lays out a clearly defined plan to reduce the
number of instances of waste, fraud and abuse in the subsistence
area and also the number of arrests and prosecutions under way as
a result of strong enforcement measures.
Traditionally, the year during which military personnel receive
large pay raises there is a decrease in military mess hall attend-
ance as personnel decide to (and are more able to) eat out on the
local economy. In addition, a strong dollar overseas traditionally
represents a decrease in mess hall attendance since a stronger
dollar translates into a real increase in income for military person-
nel assigned to foreign installations. Nevertheless, the Department
of Defense has not budgeted properly to reflect this decrease in
mess hall attendance which will most certainly occur during fiscal
year 1982 resulting in a significant overstatement of the budget
request.
Every year thousands of military personnel eat in dining halls of
other services. This occurs commonly through joint use of facilities
as well as military personnel of one service traveling to an installa-
tion of another for business purposes. Despite the fact that a
member of, say, the Air Force eating at an Army installation
would be eating the same portions side by side with his fellow
enlisted personnel from the Army, the Army has budgeted more
funds for feeding the member of a different service than they have
for their own personnel. Under questioning by the Committee the
Army admitted that it costs no more to feed a member of a differ-
ent service in one of its mess halls than it does to feed one of its
own members and therefore the budget submission for this particu-
lar item of subsistence is overstated.
Two years ago the Committee made an extensive review of DoD's
subsistence budgeting procedures and concluded that the current
system is illogical at best since actual consumption plays no part in
the budget estimate. In the fiscal year 1980 report on the Defense
budget request, the Committee reached the following conclusions:
Enlisted military personnel are entitled by law to re-
ceive a nutritionally adequate ration as part of their over-
all compensation package. To implement this entitlement,
the Department of Defense provides each dining facility
manager a dollar credit to be used to order the necessary
subsistence items based upon the number of meals served.
It appears that the present system works in reverse to
what sound economic principles would dictate. For exam-
ple, a dining hall may be allowed a $3.25 ceiling per day to
buy food per person. If that ceiling is not reached, the
dining facilities receive the money anyway and must find
ways to spend it.
To establish this fixed ceiling amount, called a Basic
Daily Food Allowance (BDFA), DoD has a list of 53 key
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food components that are pric d monthly. If the price of
boneless grilled steak beef is increased by 5 cents, the
allowance would be increased ?n a per person basis from,
say, $3.25 to $3.30 a day. If the price went down 5 cents, it
would be decreased accordingly. The fallacy with this
system, however, is that there i no incentive to substitute
less costly items when there ?s an increase in another
item?for example, substitutio of ham or fish for beef
until there is a future price re lignment. This is what an
individual would do typically i a supermarket. DoD does
not do that, but instead budget for the full price increase
and does not take into account ubstitution of cheaper, but
equally nutritious, items.
The Committee has also lear ed that when an individu-
al dining facility manager pre ? ares meals and orders the
necessary food, the BDFA (whic provides the basis for the
entire subsistence budget reque t) plays absolutely no part
in his food planning decision. Moreover, some overseas
activities are not even authoriz d to purchase some of the
BDFA items used in preparing udget requests.
The Committee believes that the lack of use of substitu-
tion in the subsistence budget g process, as well as the
lack of relationship between p ogram execution and pro-
gram budgeting leads to a high r food bill.
As a result of the documented
misestimation in some of the categ
material; as well as a lack of a 1
procedure; the Committee is deletin
possible through correction of the
impacting on the subsistence entit
directing the Department of Defe
than March 31, 1982 to the Corn
nism for the budget submissions for
be based upon a fixed and firm r
quested and the final distribution
actual consumption.
DEFENSE ENROLLMENT ELIGIBILI
The revised fiscal year 1982 bud
gram includes $15,109,000 of operat.
$1,021,000 of other procurement fu
Since 1979 the Committee and the
tee have encouraged a schedule whi
tion of the DEERS system in vie
mented abuse of eligibility in DoD
ties.
The Defense Enrollment Eligibilit
ly completed its second year of im
30, 1981, the eligibility data base
million beneficiaries, about 4 milli
pendents. With funds made availab
1982, the Committee is hopeful that
waste, fraud, and abuse; the
ries of the budget justification
? gical and coherent budgeting
$100 million in savings that is
e problems without adversely
ement. The Committee is also
se to present a plan no later
ittee which provides a mecha-
fiscal years 1983 and beyond to
lationship between dollars re-
of those dollars in terms of
REPORTING SYSTEM (DEERS)
et request for the DEERS pro-
on and maintenance funds and
ds, for a total of $16,130,000.
enate Appropriations Commit-
h would speed up implementa-
of the wide-spread and docu-
ood service and medical facili-
Reporting System has recent-
lementation. As of September
eing created contained over 6
n sponsors and 2 million de-
e for the fiscal years 1981 and
total enrollment will be accom-
?
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plished during fiscal year 1982 for CONUS based eligible benefici-
aries.
NEW IDENTIFICATION CARD IMPLEMENTATION PLAN
During fiscal year 1982 the Department of Defense will be con-
ducting a six-month pilot program (prototype test) of a new ID card
in selected military installations in North Carolina and Virginia.
The fiscal year 1982 request includes $12.1 million for implementa-
tion of the new ID card program. The Committee recommends that
the Secretary insure that this new ID card system is tied to the
Defense Enrollment Eligibility Reporting System for eligibility ver-
ification and checking purposes and that DEERS and the new ID
card are closely interfaced to insure desired efficiencies and econo-
mies. It is expected that these two integrated systems will enhance
the Department of Defense's ability to plan for and manage re-
sources for the different benefit programs and, simultaneously,
curb the fraudulent use of these benefits by ineligible persons. The
Committee recommends that budgeting for the DEERS system and
the new ID card system be maintained as separate accounts.
Various reports made available by the General Accounting Office
and the Defense Audit Agency have identified gross abuses in the
current identification system and have recommended issuance of a
tamper-proof card with emphasis placed on improving control and
the accountability measures. GAO and the Defense Audit Agency
have identified large losses in areas such as food service ($100
million) and medical care ($50 to $60 million) per year. To stop
losses in these and possibly other areas, a more secure ID card with
a ready means for validation of entitlements is absolutely essential.
This system should interface with the Defense Enrollment Eligibil-
ity Data Base to determine medical eligibility, it should interface
with food service, the service pay system, and other systems that
require using verification of eligibility of benefits such as commis-
saries, exchanges, military clubs and messes. It is obvious that the
cost of implementing this new identification system will be offset
by a reduction of losses through the use of invalid cards to obtain
services, goods, and privileges from commissaries, exchanges, and
medical facilities.
CAREER BASIC ALLOWANCE FOR SUBSISTENCE (BAS)
The Department of Defense has proposed a new program for
fiscal year 1982 called Career BAS which would provide cash in-
stead of subsistence-in-kind to all E-5 and above not otherwise
entitled to a cash payment. This would clearly begin a reversal of
the traditional thrust of military compensation which has been
that quarters and subsistence are entitlements-in-kind and to the
extent that these cannot be provided a cash allowance is paid
instead. The Department proposal in essence makes cash in lieu of
subsistence-in-kind the entitlement for all enlisted personnel E-5
and above.
In requesting Committee approval of this program the Depart-
ment has stated that providing free food instead of an allowance is
a "penalty" which is "essentially a reduction of basic compensa-
tion." This justification continued that "these personnel, who
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occupy troop housing, have receiv
recently enacted compensation ben
understand how pay raises of up
month period can be interpreted as
compensation benefits. Furthermor
how providing high quality free foo
in compensation. The Committee i
fact that if Career BAS is impleme
in the dining halls which will fu
tween NCO's and junior enlisted
lieves that there is already a vacu
enlisted ranks and that such a step would further erode unit integ-
rity. The Committee is therefore de eting the full $34.8 million for
this new program.
d only a small portion of the
fits." The Committee does not
o 30 percent in only a twelve
small portion of the increased
, it is difficult to understand
can be considered a reduction
also very concerned over the
ted, fewer NCO's will be eating
her erode the interaction be-
ersonnel. The Committee be-
m of leadership in the middle
TROOP ISSUE S BSISTENCE
The Army budget justification
$2.7 million for troop issue subsist
budget admendments of September
strength of the Army and therefo
troop issue subsistence. Moreover,
to the need for real growth in this
justification that indicated the mo
for the purposes for which reques
therefore deleting the entire $2.7 m
NEW C-R
In fiscal year 1982, the Army an
in of the Meal, Ready to Eat (MR
the Meal, Combat, Individual (MCI
is roughly twice the cost of the MCI
in the calories, fat content, etc. Ac
vided by the Department the price
ration because the thermostabiliz
MRE production is extremely adva
production base in the American f
However, the Committee was also
manufacturers will be switching t
years.
Because there is no clear or co
ment of the MRE in fiscal year 1
the budget by $3.5 million and di
the procurement of this new ratio
ble in the American food process'
price should be roughly comparable
DOUBLE SUBSISTE
The military compensation syste
officers in lieu of providing subsist
sonnel may receive either subsiste
when subsistence-in-kind is not av
subsistence allowance for officers
enlisted personnel who do not have
aterial reflects real growth of
nce. In view of the President's
1981, there is no growth in the
e no basis for real growth in
hen the Committee inquired as
rea the Army responded with a
ey would clearly not be going
ed anyway. The Committee is
Ilion in real growth.
TION
Marine Corps reflect a phase-
) ration and the phase-down of
Ration. The price of the MRE
without substantial differences
ording to the information pro-
is nearly doubling for the new
ng retort technology used in
ced and does not have a broad
od processing industry to date.
advised that U.S. commercial
this technology in two to five
pelling need to begin procure-
82, the Committee is reducing
ecting the Department to slow
until the technology is availa-
g industry at which time the
to the old MCI.
CE PAYMENTS
provides a cash allowance to
nce-in-kind while enlisted per-
ce-in-kind or a cash allowance
ilable. For fiscal year 1982 the
is only $94 per month while
subsistence-in-kind available to
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them will receive $153 per month. Because enlisted personnel re-
ceive substantially higher subsistence allowance payments than
officers, the Committee has not objected in previous years to the
practice of paying officers both their basic allowance for subsist-
ence and that portion of the per diem allowance designated for food
when traveling on government business.
Because of what was perceived in some quarters to be a "per
diem inequity", the Uniformed Services Pay Act of 1981 extended
to enlisted personnel the same entitlement to receive both a sub-
sistence allowance and the food portion of per diem simultaneously.
The Committee does not believe that this "inequity" is a real one
but is rather attributable to the confusing complexity of military
pay and allowances which permits enlisted personnel to be paid
over 60 percent more for subsistence than an officer. Because en-
listed personnel receive either subsistence-in-kind or a large cash
payment, the Committee does not believe it is equitable in any
sense of the word to pay that portion of the per diem allowance for
food in full?in essence fully compensating enlisted personnel twice
for the same food expense. As a result, the Committee is including
a general provision in the bill which would limit enlisted personnel
traveling under government orders to either the subsistence allow-
ance or that portion of the per diem specified for food, which ever
is greater. The Committee believes that this will insure the per
diem payment is equitable for enlisted personnel in terms of the
expenses incurred for food. The Committee has continued for offi-
cers the traditional payment of that food portion of per diem in
addition to the subsistence allowance since officer subsistence al-
lowance payments are substantially less than those of enlisted
personnel.
KATUSA RATE ERRORS
The Army request overstates the requirement to support Korean
personnel assigned to duty with the U.S. Eighth Army. The Com-
mittee is therefore deleting $100,000.
TRAINING AND EDUCATION
SKILL QUALIFICATION TEST (SQT)
For several years the Committee has made reductions to the
Army Skill Qualification Test because of repeated findings by the
General Accounting Office and Army auditors that the test does
not measure what it was intended to measure, that personnel have
consistently high failure rates, and that unit commanders make
poor utilization of test results for planning training.
Based upon an ongoing review of this program by the GAO, the
Committee has reluctantly concluded that the SQT is completely
ineffective and has therefore deleted the entire $40.0 million in-
cluded in the budget. While the concept of using an objective test
to support personnel decisions is sound, the SQT has clearly proved
not to be the proper test. The Committee believes that any such
test can only be one of several tools available to the experienced
NCO and unit commander to plan meaningful unit training and to
make decisions on individual promotions and assignments. The
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Army should review the policies of the other services in this area
before proposing a replacement for the SQT to ensure that a new
test is designed to complement, not replace, the judgment of the
NCO's and commanders in the field.
DUPLICATE LEADERSHIP TRAINING
Based upon an extensive review by the Defense Audit Service,
the Committee believes that all three military departments to some
extent provide duplicate leadership training. For example, the
Army sends soldiers to NCO Academies too early before eligibility
to promotion to NCO rank. Many, therefore, leave the service after
receiving this training long before they are even in a position to
need it. The Air Force sends personnel to out of town locations for
training even though the course is offered at the individual's home
base. The Navy sends some individuals to both local courses and
centralized formal courses which are nearly identical.
The Committee therefore believes that a reduction of $9.7 million
in fiscal year 1982 is possible to improve management of leadership
training without reducing this important effort.
RESERVE OFFICER'S TRAINING CORP (ROTC) PAYBACK
In a report published by the Department of Defense it is revealed
that over the past several years the military services have recruit-
ed sufficient numbers of qualified students into the ROTC program
but have been unable to retain them. As the report indicates,
attrition is excessive particularly after the sophomore year for
four-year scholarship students. The Defense Department has indi-
cated that almost one-half of all ROTC attrition occurs then, and
two-thirds of it is voluntary. In other words, ROTC scholarship
students decide to leave the program before they enter their junior
year and incur an obligation to serve in the armed forces.
When students in their junior or senior years drop ROTC, they
are breaching a contract and a specific remedy is available to the
federal government in terms of ordering the student to active duty
as an enlisted person. However, in recent years the Department of
Defense has been reluctant to use this option with the stated
reason that "it singles out ROTC students by involuntarily requir-
ing them to serve on active duty as enlisted in an otherwise volun-
teer force." The Committee believes that ROTC students have
indeed volunteered since they have been accepting federal subsidies
for their education. The Department is therefore directed to order
to active duty as an enlisted person every obligated ROTC student
who withdraws. The Secretary of Defense, of course, should retain
the authority to waive the involuntary ordering of ROTC students
to active duty for clear cases of physical or mental disability, moral
unfitness, and so forth. Although ROTC students who drop out are
under no obligation to reimburse the Government for expenses
incurred, the Secretary of Defense should take into consideration if
the student has made a voluntary payback to the Treasury of the
United States for the ROTC costs incurred.
The Committee is also concerned that college students take ad-
vantage of ROTC scholarships for their freshman and sophomore
years and voluntarily drop out before beginning the junior year
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and incurring an obligation to serve. The Committee is therefore
directing that beginning with the 1982 fall collegiate term, all
freshman and sophomore ROTC scholarship recipients must ex-
ecute an agreement with the Department of Defense to join a
guard or reserve unit with the stipulation that participation in
drills is waived while serving in the ROTC program. In the event
that a freshman or sophomore scholarship recipient voluntarily
drops out, the Secretary of Defense is directed to make arrange-
ments for that individual to begin drilling with a guard or reserve
unit near to that individual.
ARMY BASIC TRAINING
In fiscal year 1982 the Army plans to add one week to the basic
and one station unit training programs. While the Committee sup-
ports the Army's efforts to improve its individual training of sol-
diers prior to assignment to units, the Committee is concerned that
the Army is not applying sufficient manpower resources to make
the increase in training effective. For example, for the initial entry
training program the General Accounting Office reports that the
Army training program had approximately 1,000 fewer instructors
assigned than was required even prior to the week extension in
training. For fiscal year 1982, the first year of the extension, the
Army has only approved an increase of 888 additional staff while
the General Accounting Office indicates that 1,200 additional staff
are required for the program. In other words, the Army is adding
insufficient staff to support the training even at the old level,
shortchanging the training program by nearly 1,400 instructors
and support personnel.
The Committee is also concerned that the GAO has reported that
Fort Knox data showed that trainers had to operate at about 74
percent strength of the E-6's and E-7's required. At Fort Leonard
Wood there was only a 58 percent fill in infantry training posi-
tions. Moreover, the GAO has reported to the Committee that
during a recent test, drill sergeants in the basic training brigade at
Fort Knox were not able to pass the end of course test given to new
recruits.
The Committee believes that improving the Army's readiness is
substantially dependent upon improving the quality of its training.
This, however, cannot be accomplished without dedicating the nec-
essary manpower resources to the training establishment. The
Committee is therefore requesting that the Army report back to
the Committee by March 31, 1982 the steps being taken to fully
man the training establishment to the required level in accordance
with the new extended syllabus.
NAVY TRAINING BACKLOG
e,
The average number of Navy enlisted personnel awaiting entry
into "A Preparatory" and "A" schools increased to a level of more
than 5,000 in fiscal year 1981. Some of these personnel are waiting
8 weeks or more to start courses which begin weekly. The Navy
has estimated that it is only necessary to have a maximum pipe-
line of 2,951 Navy students awaiting instruction at any time.
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Recently, the Navy has implemented several measures intended
to reduce this backlog including (a) manning 229 authorized in-
structor billets in those courses with extensive student backlogs, (b)
authorizing an additional $11.1 million in fiscal year 1982 to hire
civilian instructors for some "A Preparatory" and "A" school
courses, and (c) reducing the input into the "A" schools by not
classifying into backlogged courses recruits who were not enlisted
with school guarantees.
It is uncertain whether these measures and many others being
considered by the Training Command Manning Task Force?spe-
cifically set up to address the backlog problem?will achieve the
Navy's objective of reducing the backlog to 2,951 by July 1982. For
example, the Navy's current commitment given to instructor man-
ning has not been formalized to guarantee 100 percent manning
through July 1982 and thereafter. Also, there is no assurance that
the current tommitment will extend to related training billets such
as school support and the integrated training battalions which
commanding officers often use interchangeably. In addition, school
throughput in excess of 100 percent of the fiscal year 1982 training
plan is needed to reduce the backlog and a commitment to exceed
the plan has not been approved. Finally, consideration to reducing
input to the fiscal year 1982 training plan for courses with an
extensive backlog has not been a Navy option for addressing the
backlog problem.
The Committee believes that a long-range commitment by the
Navy toward manning the schools at 100 percent is required. This
would include manning not only instructor billets but also the
related training billets such as school support and the integrated
training battalions.
The Navy is requested to report to the Committee by April 30,
1982 as to the progress being made in reducing the substantial
backlog.
NAVY EXECUTIVE DEVELOPMENT PROGRAM GROWTH
The Navy is requesting an increase of $600,000 for continued
development and implementation of an executive development pro-
gram for senior executive service personnel. This growth is in
addition to several hundred thousand dollars of growth provided
last year for this effort. In response to the Committee's request for
additional justification it was stated that "while there is a rich and
4 varied degree of executive and management development and
training throughout the department, it is uneven in quality be-
cause commands have operated in a policy vacuum." The Commit-
tee does not understand the need for this funding or the occurrence
a of a "policy vacuum" since in recent years the Navy has estab-
lished a new Deputy Assistant Secretary for Civilian Personnel
Policy with several supporting offices. In addition, the Chief of
Naval Operations has on his staff a branch entitled "Personnel
Development" with additional supporting staff below it whose re-
sponsibility it is to provide . overall policy in this area for the
Department of the Navy as a whole. The Committee is deleting the
$600,000 growth requested and suggesting that if such a "policy
vacuum" exists, the Navy may wish to disestablish these offices
and use the savings for additional training support.
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AIR FORCE ACADEMY FOOTBALL STADIUM PA SYSTEM
The budget requested $100,000 for upgrading the PA sound
system at Falcon Stadium at the Air Force Academy "because
some spectators complained that they have difficulty hearing while
others complain that it is too loud." The Committee is deleting the
requested increase of $100,000 and recommending that the millions
of dollars in gate receipts available from the football games be used
for this effort.
ARMY CONTINUING EDUCATION SYSTEM
In fiscal year 1982 the Army is requesting $128 million for the
Army Continuing Education System (ACES). Since 1979, the fund-
ing requested has doubled, but the number of soldiers being sup-
ported has only increased by three percent. Moreover, the Army
has been increasingly recruiting personnel in the higher mental
categories with high school diplomas which should lessen the need
for additional counselors and basic high school training programs.
The Committee is therefore recommending a reduction of $16 mil-
lion which will still provide substantial growth over the fiscal year
1981 level of $97 million.,
ONE-TIME NAVY TRAINING COST
Last year the fiscal year 1981 justification material indicated
that $2.1 million requested for Navy training was for costs to be
incurred on a one-time basis in fiscal year 1981. In reviewing the
fiscal year 1982 request, there is no reduction reflected to offset the
one time fiscal year 1981 cost which will no longer be incurred. The
Committee is therefore recommending a reduction of $2.1 million
in fiscal year 1982 to reflect the offset which should have been
budgeted.
ARMY "LIFE COPING SKILLS"
The Army is requesting an increase of $8.6 million in fiscal year
1982 for what is termed 'life coping skills". According to the Army
these "skills" which must be taught include dealing with others,
civic responsibilities, coping with personal problems, and so forth.
The Committee has deleted the entire $8.6 million since it is not
clear as to how these funds will be specifically used to improve
military readiness, especially in light of the fact that the majority
of the funds appear to be for developing a curriculum rather than
to meet specific needs of military personnel.
TUITION ASSISTANCE
The Committee traditionally includes a general provision in the
Appropriations Bill specifying a maximum amount (in most cases
75 percent) that the Department of Defense can pay for tuition
assistance for off duty education programs. In addition, this gener-
al provision requires that all officers undergoing such training
must agree to continue on active duty for a specified amount of
time after completion of the training. According to audit reports by
the Defense Audit Service and the Air Force Audit Agency, both
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the Navy and the Air Force are not fully complying with the intent
of this general provision.
The Committee is therefore recommending a reduction of $2.0
million which will be saved by proper application of the restric-
tions of the general provision contained again in this year's bill.
The Navy and the Air Force are reminded that the general provi-
sion applies to all appropriations contained in this act regardless of
which program elements the funding may be included within. To
the extent that exceptions are deemed necessary, the appropriate
request should be made during the budget cycle.
NAVY RECRUIT TRAINING
As a result of a decrease in the number of accessions planned for
Navy recruit training since the budget was submitted last winter,
the Committee is recommending a reduction of $400,000 for support
costs which will not now be incurred.
ARMY NON-COMMISSIONED OFFICER ACADEMIES IN EUROPE
The Committee has fully supported the Army's efforts to provide
dynamic leadership training for non-commissioned officers. Howev-
er, in the fiscal year 1982 budget request the Army is showing
substantial real growth for NCO academies in Europe at a time
when the Army is attempting to level off the NCO manning in
Europe in order to man more fully the units in the United States.
The Committee is therefore deleting $.8 million from the $3.6 mil-
lion in growth requested in the fiscal year 1982 budget request
based upon a lack of documented requirement for new NCO in
Europe.
NAVY BOGUS ROTC PROGRAM
The Navy has requested funds in the fiscal year 1982 budget to
pay for tuition, books, fees, and pay and allowances for students
attending their senior year of college majoring in a science or
engineering curriculum. Because this program appeared to be simi-
lar to an ROTC program but was not included within the ROTC
budget line or within the ceiling on ROTC scholarships, the Com-
mittee requested additional details on this program. The Navy
responded that, in fact, the effort was of dubious legality. The
Committee is therefore deleting $5.5 million from the Navy request
for this bogus ROTC program for which funds are not required.
AIR FORCE TRAINING SITES
The Air Force Audit Agency documented excess manning at four
different weapons training sites located in the Mediterranean area.
In March 1981, the Air Force agreed with the audit findings and
deleted 126 military positions with an eventual reduction of as
many as 350. Since the reductions occurred after the submission of
the fiscal year 1982 budget the Air Force has requested funds to
support at least 126 man years that are no longer required. The
Committee is therefore recommending a reduction of $2.5 million
from the budgeted levels.
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NAVY TRAINING LITIGATION COSTS
The Navy requested $200,000 for litigation cost as a result of
claims filed against the government for certain training devices.
The law suit has recently been settled out of court and the Chief of
Navy Education and Training will not require the $200,000 as
requested in the budget submission. The budget has therefore been
reduced by $200,000.
MILITARY PAY AND ALLOWANCES
MILITARY PAY ACCOUNTING WASTE, FRAUD, AND ABUSE
In fiscal year 1982, nearly $60 billion will be spent in the mili-
tary personnel accounts. Even minor aberrations in the accounting
procedures can produce significant amounts of waste. For example,
the Committee has reviewed eight recent audit reports which docu-
ment millions of dollars being wasted due to poor management of
military personnel and retired pay accounts. Moreover, the Depart-
ment of Defense generally agrees with the findings by the General
Accounting Office and the various defense audit agencies. A few
examples of the typical problems are as follows:
Inadequate debt collection procedures
Divorced personnel continue to collect allowances at "with
dependent" rates even though they are not entitled
A member paid by a sister service is sometimes paid twice
because the member's parent service is not notified that pay-
ment was made
Military retirees entitled to either DoD retired paychecks or
VA entitlements sometimes receive both payments
Paychecks written for personnel who have deceased as well
as invalid paychecks are not properly controlled to assure
timely destruction.
- The Committee believes that even minor improvements in the
pay accounting procedures within the Department of Defense for
military personnel will save a minimum of $60 million in fiscal
year 1982 and a reduction has been included in that amount.
MILITARY 'COMPENSATION "DRAG-ALONGS"
Every October 1 the Department of Defense automatically in-
creases several discretionary allowances without making any spe-
cific judgement that the increase is required. For example, the
normal procedure with selective reenlistment bonuses or any of
several continuation pays would be to increase the amount of the
bonus by exactly the percentage of the pay raise.
While the Committee supports the use of bonuses to target com-
pensation, the practice of automatically increasing these several
allowances is done without any review. The automatic increase can
be very expensive for little return. For example, except for the
continuing resolution restriction, the Department of Defense would
have automatically increased the amount of selective reenlistment
bonuses being paid by nearly $100 million without making any
specific judgement that the increase was required in order to sus-
tain retention of each shortage skill at the level necessary.
At%
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The Committee is therefore directing that the practice of auto-
matically increasing the discretionary "drag-alongs" is prohibited.
This will specifically apply to all non-entitlement pay and allow-
ances such as bonuses and continuation pays. The Department
may, of course, continue to increase and decrease these bonuses
within the authorities granted by the Congress as long as the basis
for the increase is a thorough and specific review which indicates
that each individual change is necessary. To the extent that this
discretionary authority is exercised, the Committee anticipates it
would be evenly spaced throughout the course of the year rather
a than automatically occurring at the beginning of every fiscal year,
and vary from one skill to another. It is stipulated, however, that
items that are reimbursement for expenses incurred such as cloth-
ing maintenance may continue to be increased at the beginning of
every fiscal year, but the increase should be in accordance with the
requirement for increased expense reimbursements and not neces-
sary automatically tied to the military pay increase.
?
MILITARY COMPENSATION STATEMENT
Last year the Committee directed the Air Force to develop a
compensation statement to better inform military personnel of the
full value of the military compensation package. The Air Force has
completed development on a compensation statement which meets
the Committee's intent. It is the Committee's understanding that
the Air Force is in the process of implementing the compensation
statement presently. The Committee is directing that now that the
Air Force has prepared a suitable document that the other services
follow suit during fiscal year 1982 so that all military personnel in
the Department of Defense receive such a statement. The process
should be institutionalized so that every member receives a state-
ment at least once a year during the course of his military service.
INSTALLMENT REENLISTMENT BONUSES
Prior to fiscal year 1979, the Department of Defense paid reen-
listment bonuses in equal yearly installments over the entire
period of the reenlistment. However, in fiscal year 1979 the Depart-
ment requested sufficient funds to begin making lump sum pay-
ments. Although the Committee directed DoD to continue the in-
stallment method rather than switching to lump sum payments,
the Conference on the fiscal year 1979 Defense Appropriations Bill
agreed to allow the Department of Defense to try the lump sum
method.
The Committee originally expressed several concerns over
switching to the lump sum method. For example, giving all the
money up front creates difficulties in recoupment if the individual
leaves the military early. In addition, if the bonus is g.iven all at
once, it creates a "what have you done for me lately" syndrome
after the first year of reenlistment when the individual no longer
receives extra pay but is serving an extended obligation tour. And
finally, although DoD believed that a 16 percent savings would be
achieved by using the lump sum method, there has been no data to
support this contention and, in fact, the cost of reenlistment bo-
nuses has gone up exactly 300 percent in only three years. The
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Committee is therefore making a reduction of $397.9 million in
order to change the basis of award for reenlistment bonuses from
lump sum back to the pre-1979 installment method. It should be
clear to the Department that this reduction in funding makes no
change in the number of bonuses that can be awarded, just in the
method of payment.
As a partial offset for the reduction discussed above, the Commit-
tee is increasing the Marine Corps reenlistment bonus request by
$5 million for additional bonuses to be paid on the installment
method.
BARRACKS COST OF LIVING ALLOWANCE (COLA)
The Department of Defense is requesting $26 million and author-
ity to pay a cost of living allowance (COLA) to personnel living on
base in barracks overseas. The Congress has said no twice before
on this new program and the reasons for this denial are even
stronger this year than in previous years. For example, DOD wants
this new allowance on top of a pay raise of as much as 17 percent
in fiscal year 1982. Moreover, the purchasing power of the dollar
overseas is up dramatically from that of a year ago when the
Department of Defense based the justification for the barracks
COLA on the "devalued" dollar.
The Committee still questions the need to pay a barracks COLA
to individuals who are provided free food, free housing, free medi-
cal care, and recreation and exchange prices equal to or less than
the United States. This justification becomes even stronger in light
of the fact that the barracks COLA that the Department wishes to
pay would include extra funds for doing such items as laundry and
dry cleaning off base. The Committee seriously questions whether a
military person living in a barracks with a laundry facility in his
own building will transport his dirty laundry off base rather than
use the more convenient and cheaper on-base facilities. In addition,
the Committee questions whether there is a need to provide a
transportation subsidy for personnel living and working on base in
the same magnitude that is given for those individuals who must
live off base and commute perhaps by public transportation on base
to work.
The Committee is therefore deleting the entire request of $26.0
million in fiscal year 1982 and for the third time denying the
request for barracks cost of living allowance.
PER DIEM, TRAVEL, AND TRANSPORTATION ALLOWANCE COMMITTEE
Prior to July 1, 1947, uniformed administration of travel and
transportation allowances for members of the uniformed services
was rare. From July 1947 to May 1950, an informal Per Diem
Committee Board met periodically to evaluate needed changes in
these pay and allowance areas. Since 1950, these decisions have
been made by the Per Diem, Travel and Transportation Allowance
Committee which has seen its charter grow substantially from
travel and transportation questions to a whole range of pay and
allowance issues.
The Committee is concerned that with the responsibility for in-
terpretation of pay and allowance statutes being farmed out to the
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Per Diem Committee, DOD officials are somehow absolved of the
responsibility for poor decisions that may be made. The Committee
has become increasingly, aware in the last several years that the
Per Diem Committee has made decisions that in some instances
are not fiscally sound and in other instances are admittedly illegal.
The Committee has reluctantly concluded that after 30 years the
Per Diem, Travel and Transportation Allowance Committee has
outlived its usefulness. The Committee has no choice but to direct
that none of the funds contained in this bill may be used to support
such a committee structure and that in fact the committee no
longer exists.
In recognition, however, that some mechanism must exist to
continue the continuity and uniformity of military pay and allow-
ances, the Committee is not deleting the funding for the staff
which has worked for the Per Diem Committee. Rather the entire
23 full time and 18 part time staff should be transferred directly to
the office of the Assistant Secretary of Defense for Manpower,
Reserve Affairs, and Logistics who is the highest ranking military
manpower and compensation official in the Department of Defense.
The Committee is also directing that henceforth every decision that
would in the past have been referred to the Per Diem, Travel and
Transportation Allowance Committee will now be made by the
Assistant Secretary of Defense for Manpower or at a level no lower
than one of his immediate Deputy Assistant Secretaries. If the
Assistant Secretary of Defense for Manpower Reserve Affairs and
Logistics chooses to delegate this authority, the Committee expects
to be notified of the individual designated to make these decisions
in order that the responsibility may be clearly fixed in a specific
position. Furthermore, the Committee expects the Department to
issue a quarterly report itemizing all decisions made which would
affect military pay and allowances or expense reimbursements in
any form and the amount of financial impact that is anticipated as
a result of each decision. The first such report shall be forwarded
to the Committee for the first quarter of fiscal year 1982 no later
then January 31, 1982. The Committee anticipates that the Assist-
ant Secretary of Defense or the Deputy Assistant so designated by
him shall continue to work closely with the uniformed services not
within the Department of Defense in order to insure consistency in
pay and allowance decisions.
INCIDENTAL EXPENSE REIMBURSEMENTS
Prior to December 1979, the Joint Travel Regulations provided
that military personnel travelling overseas when government quar-
ters and messing were available would receive $2.50 per day to
cover incidential expenses. To the extent that quarters and food
are not provided, additional per diem was authorized. On December
12, 1979, the Per Diem, Travel and Transportation Allowance Com-
mittee decreed under Joint Determination number 40-79 that the
amount awarded for incidental expenses would be 8 percent of the
overseas per diem rate in effect for the locality surrounding the
military installation involved. This decision was made despite ob-
jections by some of the military services.
The Committee has reviewed this recommendation and agrees
with those who object to it. There appears to be little logic in
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linking the incidental expense rate for a U.S. military installation
to the per diem rate outside of that military installation since the
incidental expenses are designed to cover those costs incurred for
laundry, haircuts, dry cleaning, and personal hygiene purchases
made generally at the on-base commissary or exchange. Since all of
these purchases are geared to U.S. prices, it is immaterial whether
the per diem rate outside the local installation is high or low.
Consequently the Committee is specifically reversing Joint Deter-
mination number 40-79 and directing the Department to calculate
what is a fair reimbursement for incidental expenses incurred and
insure that military personnel are provided this equitable reim-
bursement without regard to a fixed percentage calculation against
the local per diem rate. The Committee believes that separating
the incidental expense calculation from the local per diem will save
an estimated $10 million in fiscal year 1982 and appropriate reduc-
tions have been made to the proper accounts.
FOREIGN DUTY PAY
In the early 1960's, the Congress authorized foreign duty pay for
enlisted personnel of up to $22.50 per month for assignment to
certain overseas duty areas. Twenty years ago military pay was
low and in many of these foreign areas living was difficult at best.
Military pay is no longer low with enlisted personnel receiving
pay raises within the past twelve months of as much as 30 percent.
Furthermore, a review by the Committee shows that the Depart-
ment of Defense is awarding foreign duty pay to such "arduous"
assignments as Puerto Rico, England, Spain, Virgin Islands, Fin-
land, and Germany. With the strength of the dollar overseas, the
high U.S. military pay levels, and the vast improvements and
amenities available for overseas living since the early 1960's, the
Committee believes that the Department can substantally cut back
on the number of personnel awarded foreign duty pay so that only
those personnel assigned to truly rigorous areas such as Diego
Garcia or a remote and isolated communications site would remain
eligible. By limiting the payments to these hardship areas, the
Committee believes that a reduction of $25.0 million is possible in
fiscal year 1982.
NAVY AND MARINE CORPS BAQ MISMANAGEMENT
Two years ago the Committee criticized the Navy's practice of
improperly paying basic allowance for quarters when in fact ade-
quate quarters were available to house those not meeting the crite-
ria for living off station. The Committee directed the Navy at that
time to correct the problems in this area and insure that empty
housing is fully utilized.
This year, two years later, the Committee has reviewed five new
audit reports that show both the Navy and the Marine Corps are
paying basic allowance for quarters for sailors and marines to live
on the economy when suitable military housing is still available.
This year, however, the Committee has found that the Navy man-
agement has actually deteriorated since there are several instances
of personnel living in government quarters also drawing the basic
allowance for quarters to which they are not entitled. For example,
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the Navy Audit Service has documented cases where individuals
have received BAQ even though they have been living in govern-
ment quarters for up to 24 months. The Committee is therefore
directing the Navy and the Marine Corps to take aggressive action
to correct these chronic problems. A reduction totaling $52.5 mil-
lion is recommended out of the total of $1.4 billion for Navy and
Marine Corps BAQ.
NAVY OVERBUDGETING
The Navy Audit Service documented that the Department of
Navy has consistently requested more funding than required for
the Military Personnel Navy appropriation for fiscal years 1977,
1978, and 1979. In response to this audit finding the Navy stated
that it had taken correct action and that no such problem would
exist in the year 1981. The Committee has reviewed the Navy's
management of the military personnel appropriation during fiscal
year 1981 and finds that in fact the same overbudgeting in certain
areas occurred. The Committee estimates that the fiscal year 1981
amount overbudgeted in the same pay items documented by the
audit service totals $58.5 million. Since the fiscal year 1982 budget
request is substantially based upon the fiscal year 1981 experience,
the Committee is recommending a reduction of $58.5 million from
the current request.
VARIABLE HOUSING ALLOWANCE
The variable housing allowance is designed to compensate mili-
tary personnel for the difference between the actual housing costs
on the one hand and the amount received for reimbursement in
the basic allowance for quarters on the other. The budget submis-
sion for fiscal year 1982 by then-President Carter assumed that the
basic allowance for quarters increase would be only 9.1 percent.
However, as a result of the Uniformed Services Pay Act of 1981,
the actual increase in BAQ was 14.3 percent. Therefore, the Com-
mittee estimates that the variable housing allowance request is
overstated by some $39.1 million and a reduction is recommended
in that amount.
ARMY PROFICIENCY PAY
The Army has requested a new program totaling $44.1 million in
fiscal year 1982 for proficiency pay. This new effort is composed of
two programs: combat arms proficiency pay totaling $26.8 million,
and skill shortage proficiency pay of $17.3 million.
As a result of feedback from field commanders, the Army has
backed off of the proposal to pay a combat arms profieiency pay
because of the difficulty that would be involved in proper adminis-
tration. The Committee is therefore deleting the $26.8 million.
The Committee agrees with the Army's proposal to pay ntw skill
shortage proficiency pay. However, the skills and pay grades pro-
posed to receive this new pay indicate that the full amount is not
necessary. Therefore, the Committee is approving $11.4 million of
the request and specifying that the new skill shortage proficiency
pay should be limited to Career E-5 through E-9's in skills manned
at less than 95 percent of the required levels.
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FLIGHT PAY
In the Uniformed Services Pay Act of 1981, an increase of up to
30 percent in monthly flight pay was authorized. Since this is an
entitlement and no additional funds have been included in the
fiscal year 1982 budget, the Committee is recommending an in-
crease of $57.3 million to finance this Congressional initiative.
AVIATION BONUS
The Uniformed Services Pay Act of 1981 terminates the aviation
bonus for the Air Force effective October 1, 1981. The Committee is
therefore deleting the entire $47 million requested by the Air Force
in fiscal year 1982 for payment of this no longer authorized bonus.
The pay act of 1981 also terminates the Navy and Marine Corps
aviation bonus effective at the end of fiscal year 1982. Since the
pay act also makes all Marine and Navy aviators who do not
execute an agreement for the aviation bonus eligible for the 30
percent increase in flight pay, the Committee believes that it will
not be necessary for the Department of the Navy to continue to
pay this aviation bonus throughout the entire fiscal year. A reduc-
tion of $26 million is therefore made and the Navy and Marine
Corps are directed to phase out the aviation bonus effective March
31, 1982.
MARINE CORPS FLIGHT AND SEA PAY RATE ERRORS
The Marine Corps has acknowledged that incorrect rates were
used to prepare the FY 1982 request for non-crew flight pay and
officer sea pay. The Committee is recommending deletion of
$400,000 based upon a recalculation using the correct rates.
PAY LONGEVITY OVERSTATEMENT
Both the Army and the Air Force budget submissions originally
projected that the average pay grade for military personnel would
be higher than now appears to be the case. The Committee has
therefore deleted a total of $20.6 million.
CURRENCY CHANGES
Due to the continued strength of the U.S. dollar overseas, the
Committee estimates that the military personnel request is over-
stated by $20.8 million and a total reduction is recommended in
that amount to the Army, Navy, and Marine Corps accounts. No
reduction is recommended to the Air Force since $34 million was
already deleted for currency changes in the September 1981 budget
amendment.
ARMY BASIC ALLOWANCE FOR QUARTERS (BAQ)
The Army has acknowledged that the budget request is overstat-
ed by $5.8 million for basic allowance for quarters. A reduction is
included in that amount.
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ARMY MEDICAL PAY
Public Law 96-284 permits the Army to pay up to a total of $4.3
million in fiscal year 1982 for doctor incentive pay. After reviewing
the Army's request, the Committee has concluded that the Army
does not know how many doctors they want to pay, which skills
will receive the pay, or what the average payments will be. It is
apparent that the Army simply budgeted the maximum amount
possible without a specific plan to document the request. The Com-
mittee recognizes, however, that there will of course be certain
skills that warrant this special pay. In the absence of a specific
plan, the Committee is recommending deletion of $2.3 million from
the Army's request which can be restored via a supplemental or
reprogramming once the Army can justify the full amount.
UNIFORMED SERVICES PAY ACT OF 1981
The Uniformed Services Pay Act of 1981 included several discre-
tionary increases for which no funds were included in the budget
request by the Department of Defense. Since the Department has
not had adequate opportunity to justify the cost of the items to the
Appropriations Committees or how the discretionary authorities
would be exercised, the Committee is requesting that the Depart-
ment request funds either through a supplemental or through a
reprogramming request and present a plan for approval by the
House and Senate Appropriations Committees prior to implementa-
tion.
FORCE STRUCTURE AND MANAGEMENT
PROPOSED REDUCTION TO THE SEVENTH DIVISION
In a budget amendment to the fiscal year 1982 request, the
Department had proposed reducing the Seventh Infantry Division
at Fort Ord, California temporarily to active cadre status in fiscal
year 1983 and then reinstating it to active status in fiscal year
1986. The Committee strongly opposes this recommendation. Al-
though there may be merit in proposing that the Army reduce the
number of divisions in its force structure while maintaining its
strength at current levels as well as merit in proposing closure of
entire bases, there is little merit in the present proposal since none
of the economies and efficiencies would accrue while most of the
disadvantages and diseconomies would result.
Although the Committee opposes any direct or indirect reduction
in the status of the seventh division or any other Army division
that might be proposed for temporary reduction to cadre status,
the Committee requests that the Army review its current division
and base structures and report to the Committee by March 31, 1982
the advisability of reducing the number of active Army divisions
while maintaining the strength at current or perhaps even in-
creased levels in order to "flesh out" the Army and improve its
combat capability.
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DRUG AND ALCOHOL ABUSE
For the past three years, approximately $267,000,000 has been
devoted to the alcohol and drug abuse prevention program. The
request for fiscal year 1982 is approximately $100,000,000. The
Department employs about 3,900 persons full time and about three
times that number part time. The expenditure of these resources
impacts adversely on readiness. There is no question that alcohol
and drug abuse increases the cost of maintaining readiness.
The Committee is deeply concerned about the alcohol and drug
abuse problems in the military services. The hearings revealed that
more than 130,000 members of the armed services are dependent
on alcohol or illegal drugs, and that over one-third of the military
personnel reported they had used some type of drug for nonmedical
purpose during 1980. It has been reported that 19 percent of the
junior enlisted personnel report that, on some occasion they have
been "high while working."
The Committee recognizes that there is no easy solution to this
problem in the Department of Defense or in the country as a
whole. Although it appears that DOD is awakening to the extent of
the problem, clearly more needs to be done. At a minimum the
Department should consider:
?An aggressive media campaign in military communities, espe-
cially those served by American Forces Radio and Television.
?Awarding less than honorable discharges to abusers who refuse
rehabilitation
?Increased use of urinalysis kits
?Increased use of military working dogs
?Increased narcotics agent manning
?Submission of proposed legislation to authorize X-ray of mail
as well as other initiatives to stop trafficking.
RECRUITING AND ADVERTISING
In fiscal year 1982, the Department of Defense budget calls for
spending approximately ,$1.3 billion for military recruiting and
advertising. This represents an increase of 55 percent during the
last two years alone. More specifically, the number of male non-
prior service recruits required in FY 1982 decreases by 7 percent
DOD-wide, but the level of funding requested increases by 24 per-
cent in just one year. The Committee believes this increase is
unwarranted since:
?All services met or exceeded their recruiting goals in FY 1981
in terms of both quality and quantity;
?The President has declared the U.S. to be in a recession which
will influence many young men to join the military;
?Unemployment is presently at 8 percent and projected to
remain at high levels;
?The Congress recently passed a pay raise as high as 17 percent
which makes military service much more attractice;
?The supply of 18-year-old males is presently at near-record
levels;
?There is a substantially reduced need for unskilled recruits
due to the greatly improved retention of skilled NCO's and
Petty Officers;
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?The Army has not reorganized their recruiting command as
they agreed to do two years ago.
The Committee therefore believes that a reduction totalling $110
million is possible in FY 1982 with no adverse impact on the
recruiting effort. The Committee is offsetting this decrease, howev-
er, by $10 million for the Army to reflect the increase in bonus
ceiling that is now available for recruiting as a result of the Uni-
formed Services Pay Act of 1981.
PHYSICIAN ASSISTANTS
The fiscal year 1982 Defense Authorization Bill directs that the
appropriate rank for physician assistants in the Air Force is a
Commissioned Officer. The Committee believes that if the physi-
cian assistant is to be a true health care professional and to func-
tion as an extender of physician services, there should be minimum
professional standards established for these personnel. Therefore,
the Committee is directing that prior to any physician assistant
receiving a commission in the Department of Defense he should (a)
possess at a minimum a bachelor's degree in a science field directly
related to medicine, (b) graduate from a training program approved
by the appropriate national medical boards, and (c) be certified by
the appropriate national certification authority. Additionally, the
Committee is continuing the restriction that commissioned physi-
cian assistants may not be promoted to a rank higher than 0-4 in
order to prevent establishment of a bureaucracy for physician as-
sistants which would ultimately lead to physician assistants becom-
ing Colonels and Generals and out-ranking their physician counter-
parts.
The Committee is also directing that no later than March 31,
1982, the Department of Defense report to the Committee on any
additional standards recommended for commissioning and include
comments from appropriate physician assistant professional organi-
zations such as the various state societies of physician assistants
and the American Academy of Physician Assistants.
ASSIGNMENT OF MILITARY VETERINARIANS
In fiscal year 1980 the Committee directed the disestablishment
of the Air Force Veterinary Corps and designation of the Army as
executive agent for all veterinary responsibilities. Although the
Department has taken these steps specified, there appears to be a
substantial lack of cooperation between the Army and the Air
Force in terms of proper utilization of the remaining veterinarians.
For example, although the Army now is responsible for performing
all Department of Defense veterinary functions, it is short of veter-
inarians because it has not asked for those Air Force officers
possessing veterinarian skills to be made available to meet the DoD
wide requirement. On the other hand, the Air Force insists that
they no longer have authorized positions for veterinarians and
have not volunteered to make the veterinarians in the Air Force
available to the Army to meet the DoD requirements.
The Committee does not understand the difficulty in the two
services cooperating in executing defense responsibilities for veteri-
nary activities. The Committee is directing the Office of Secretary
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of Defense to insure that proper utilization is made of veteri-
narians currently in the Air Force during the transition period.
The Committee is also directing that no officer in the military
force should receive veterinary special pay even if the individual
has a Doctor of Veterinary Medicine degree unless that person is
assigned to a position specifically requiring a DVM degree and that
the director of the Army Veterinary Corps as the chief veterinary
official in the Department of Defense can certify to the Committee
if the need arises that each individual receiving the pay is indeed
performing a function that is required to meet the Army's veteri-
nary mission.
SHIP RETIREMENTS
The September 1982 budget amendment retired 17 Navy ships
earlier than planned. However, no manpower savings were includ-
ed to reflect the reduced requirement. Excluding those ships re-
stored elsewhere in this report, the Committee estimates that $6.0
million will not be required due to the impact of early ship retire-
ments.
MILITARY BANDS
In fiscal year 1982 the Department of Defense proposes to field
102 separate military bands requiring 5,300 personnel and $102
million (including the military and civilian pay raises). Although
the number of bands has remained level, the request represents an
increase of 210 personnel over the fiscal year 1980 level. The Com-
mittee is denying this proposed growth and deleting savings of $1.0
million.
NAVY EXCHANGE MILITARY PERSONNEL
The House Armed Services Committee has recommended that
the Navy reduce the number of military personnel assigned to its
exchanges. It is estimated that as many as 100 officers and 235
enlisted personnel are involved in this effort. The Committee be-
lieves that $3.8 million can be saved in fiscal year 1982 by replac-
ing up to half of these military personnel with non-appropriated
fund civilian personnel.
GUARD AND RESERVE FORCES
ARMY GUARD AND RESERVE EQUIPMENT TRANSFER
For the past several years the Committee has held detailed hear-
ings which highlight the tremendous shortage of equipment availa-
ble to the Army Guard and Reserve both for training and for
deployment under virtually any scenario. Two years ago the Com-
mittee directed the Army to begin budgeting for sufficient equip-
ment to modernize the Army Guard and Reserve. Last year when
the budget for fiscal year 1981 was submitted no such program was
included. The Committee then added $50 million for this purpose
and directed the Army to continue with this effort and include a
program in the fiscal year 1982 budget submission for moderniza-
tion. Unfortunately the Committee's direction has not been heeded.
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It is obvious from reviewing this year's submission in detail that no
such program has been initiated by the Secretary of Defense or the
Secretary of the Army. The Department was placed on notice in
last year's report on the fiscal year 1981 budget that "The Commit-
tee hopes that sufficient funds will be included in the budget
request when submitted next January (for the fiscal year 1982
budget) and that it would not be necessary, as was done with the
Navy Reserve program last year, to seek funds from within the
Department's request in order to finance this priority effort."
The Committee believes that two years is sufficient time for the
Department to initiate a comprehensive program for equiping the
Army Guard and Reserve. The program is of sufficient priority
that the Committee does not believe the Department should delay
yet another year, especially in view of the lack of cooperation that
has been evident on this issue. The Committee is therefore making
a series of reductions totaling $250 million to every major appropri-
ation contained in the Defense Department request. The Commit-
tee has reallocated this funding amount as follow: $100 million to
Operation and Maintenance and $150 million to Procurement, the
amounts to be equally divided between the Army Guard and Re-
serve. Within the $150 million designated for Procurement, $10.5
million is specifically included in the Aircraft Procurement, Army
appropration for C-12's which the Committee directs to be dedi-
cated to the Guard. The Committee strongly, urges the Department
to comply with the direction of the Committee to begin a vigorous
program of equipment modernization for the Army Guard and
Reserve. The funds added should be for items which will enhance
readiness and training in the near term. It is expected that the
Army will identify via a prior approval reprogramming a specific
plan as to what equipment will be purchased with these funds.
Prior Committee approval is not required for purchase of the
C-12's.
The Committee believes that one of the reasons for inaction in
this area is a lack of personnel dedicated to monitoring the devel-
opment of requirements for the Army Guard and Reserve as well
as the absence of a system for tracking the procurement and as-
signment of this equipment to the target unit. The Committee is
therefore directing that within the funds available to the Depart-
ment of the Army, additional personnel be dedicated to this effort.
The Committee will expect the Army to be able to testify next year
to the equipment requirement, the amounts contained in the
budget specifically to meet this requirement, the specific units to
be receiving the equipment, and what sort of a tracking system is
in place to be able to insure in future years under the Committee's
questioning as to the final dispensation of the equipment pur-
chased for the Army Guard and Reserve.
NAVAL RESERVE STRENGTH
The fiscal year 1982 budget submission requested only 87,600
Naval Reservists although the Navy Manpower Mobilization
System study has determined that the need is for over 114,000.
Last year the Committee recognized the necessity for gradually
building the Naval Reserve program toward this higher figure and
funded the Reserve personnel appropriation for a strength level of
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92,000 personnel. The Department of Defense refused to increase
the Naval Reserve strength by realigning the funds elsewhere.
The Committee is increasing the FY 1982 request by $20.0 mil-
lion and establishing a minimum level for the Navy Reserve at
94,000 personnel. The Department is directed to expend the funds
for the purpose for which appropriated. In the event that the Navy
wishes to reduce the strength below the appropriated 94,000 per-
sonnel level, the Committee reminds the Department of Defense
that the appropriate mechanism is through an appropriation rescis-
sion request.
Last year, the report on the FY 1981 Defense bill stated that "it
is the intent of the Committee that all personnel funding for TAR's
(Training and Administration of Reserves), both officer and enlist-
ed, be included in the RPN appropriation request." In testimony
before this Committee, the Deputy Assistant Secretary of Defense
for Reserve Affairs stated that the "Tar manpower is included in
the reserve manpower authorization and funded in the Reserve
Personnel, Navy appropriation beginning in FY 1983." It is the
intent of the Committee that DOD follow through in FY 1983 on
this commitment.
GUARD AND RESERVE DRILL ATTENDANCE
After an extensive study by the Committee's Investigative staff
on the practice of paying Guard and Reserve personnel for drills
not attended, the Committee concluded last year that "the Con-
gress has no assurance that DoD has properly justified the level at
which appropriated funds should be made available for drill attend-
ance." As a result, the Committee deleted $13.7 million in FY 1981
to reflect this overstated request and included direction for the
Department of Defense to take aggressive action to halt this prac-
tice.
Based upon eight new audits by various Defense audit agencies,
the Committee has concluded that the Guard and Reserve compo-
nents have still not corrected this payroll problem. The Committee
believes that the Department is paying people who are not present
at drills. One audit documented that one out of forty names on
Marine Corps Reserve rosters certified to receive pay never even
attended drills. Based upon the information available to the Com-
mittee, there is no reason to believe that the other Reserve and
Guard components are substantially better than the Marine Corps
Reserve.
While the Appropriations Committee has traditionally been a
supporter of a strong Guard and Reserve force, this support does
not extend to pay practices which border on outright fraud. The
Committee is directing the Department to aggressively pursue cor-
rective procedures, including the prosecution of personnel who
accept pay for time not actually worked. It is the Committee's
belief that millions of dollars are wasted each year because the
Department refuses to crack down on these fraudulent practices.
The Committee is, therefore, deleting $34.5 million from the pay
account for the Guard and Reserve components, and directing that
a report be submitted to the Committee no later than April 30,
1982 on enforcement measures taken and the number of personnel
prosecuted.
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EQUIVALENT TRAINING SESSIONS
In the fiscal year 1979 bill, the Committee included a general
provision directing that reservists be permitted no more than four
make-up sessions per year for missed drills. The Committee has
reviewed several reports that indicate that the Navy Reserve is not
complying with either the spirit or letter of the general provision
that is continued into the fiscal year 1982 Defense Appropriations
Bill. The Chief of Naval Operations in response to the Naval Audit
Service stated that "it is reasonable to assume that the House
Appropriations Committee will advise if it does not agree." The
Committee is hereby advising the Navy that the findings of the
Naval Audit Service are correct and should be implemented imme-
diately. The Department of Defense is also requested to review this
area and insure that action is taken by all Guard and Reserve
components to comply with the Committee's direction.
ARMY GUARD KEY PERSONNEL UPGRADE PROGRAM (KPUP)
The Army Guard has begun implementation of the Key Person-
nel Upgrade Program (KPUP) to provide additional training oppor-
tunities for key leaders from Army Guard units. The program
permits NCO's and Officers to train alongside their active duty
counterparts during operational exercises at times separate from
their own unit's training program. In addition, Guard personnel
may be called to active duty to function in an acting capacity
during the absence of key active duty personnel. The Committee
believes that this program should be expanded and is adding $3.0
million to the fiscal year 1982 request for this effort.
3679 VIOLATION BY THE NAVY RESERVE
The Reserve Personnel, Navy appropriation for fiscal year 1979
incurred a violation of Section 3679 of the Revised Statutes. The
Navy has indicated that additional obligational authority is re-
quired in order to pay the outstanding bills for services rendered.
The Committee is therefore providing authority to transfer up to
$100,000 from the fiscal year 1982 appropriation in order to liqui-
date these obligations. The Committee, however, estimates that
this amount will only be sufficient to cover the additional charge
through this next summer. It is the Committee's intention to hold
a separate hearing on the 3679 violation in order that the Depart-
ment may fully document corrective action taken to ensure that
procedures are in effect to prevent further instances of fiscal mis-
management.
GUARD AND RESERVE VARIABLE HOUSING ALLOWANCE CALCULATION
Section 403 of Title 37 provides that a member of a guard or
reserve component entitled to a basic allowance for quarters is also
entitled to receive variable housing allowance if the housing costs
in that area are substantially in excess of the BAQ provided. The
Committee believes that the implementing regulation by the De-
partment of Defense is unnecessarily cumbersome and confusing.
For example, a member of an aviation unit called to active duty for
two weeks of training may well fly to several different air bases in
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accordance with his training. Under current Department of De-
fense regulations the variable housing allowance will be calculated
independently for each of the several air bases visited even if for
only as short a time as one day. The Committee believes that it
would be both more logical and more equitable to the individual
involved if the regulation covering implementation of guard and
reserve variable housing allowance was based on the location of the
unit or organization to which the member is permanently assigned
and where the housing costs are actually incurred.
AIR GUARD 105TH TASG SQUADRON
Subsequent to the submission of the fiscal year 1982 budget to
the Congress, the state of New York and the Air Force agreed to
the transfer of the 105th Tactical Air Support Group (TASG) from
Westchester County Airport to vastly superior facilities at Stewart
Airport. In addition to approximately $28 million of military con-
struction that the Air Force has agreed to budget for over the next
two years, the state of New York has agreed to provide $6 million
in construction funding for the Air National Guard unit upon
transfer to Stewart. Because of the severe problem with the local
community at Westchester and the first-rate facilities at Stewart,
the Committee is adding $500,000 above the budget request and
directing the Air Force to expeditiously move the 105th TASG to
Stewart during fiscal year 1982. In addition, the Air Force is direct-
ed to report by April 30, 1982 as to the potential for converting the
105th to an airlift or fighter mission as the 0-2's currently as-
signed are phased out.
As discussed elsewhere in this report, the Marine Corps Reserve
has also selected Stewart Airport as a home for an additional KC-
130 tanker squadron. The Committee is directing the Air Guard to
ensure that the transfer of the 105th to Stewart is accomplished in
such a fashion as to be compatible with the needs of a Marine
Corps Reserve KC-130 tanker squadron in future years.
GUARD AND RESERVE TECHNICIAN CONVERSION PROGRAM
The Committee conducted an extensive hearing on the Guard
and Reserve technician conversion program and includes the fol-
lowing direction to the Department.
Each reserve component will be free to determine the
appropriate mix of fulltime military and military techni-
cians.
Fulltime military and military technicians will have a
mobilization assignment with the unit they support and be
mobilized and deployed with that unit.
Military technicians will, when directed by competent
authority, travel on military aircraft on official business
whether traveling in a military or civilian capacity.
Military technicians will occupy government quarters
based on military grade when in a travel status.
DoD will take steps, including submission of any neces-
sary legislative proposals, to clarify the authority of the
states over military technicians serving in the National
Guard not on active duty in a federal status.
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As a policy, similar skills within a reserve component
will be standardized as either military technicians or full-
time military.
INVOLUNTARY INDIVIDUAL READY RESERVE TRAINING
In a letter dated June 9, 1981, the Assistant Secretary of Defense
for Manpower, Reserve Affairs, and Logistics requested that the
Committee remove its prohibition against exercising the authority
contained in 10 USC 270 allowing members of the reserve compo-
nents to be ordered involuntarily to annual training. The Commit-
tee directed that this practice be halted in 1975 in House Report
94-517.
The Committee has reviewed the Department's recent request
and agrees that it is increasingly important for members of the
Individual Ready Reserve to be already trained for deployment.
Therefore, the Committee removes the restriction on involuntary
participation in military training for IRR members for those per-
sonnel required in the first 30 days of mobilization possessing skills
that require periodic refresher training to remain current.
FEDERAL EMERGENCY MANAGEMENT AGENCY (FEMA)
With the establishment of the Federal Emergency Management
Agency (FEMA) in 1979, the Civil Defense function formerly per-
formed by the DoD was assigned to that new Agency. Included in
the programs and resources transferred to FEMA were individual
Reservists and Reserve units that support the Civil Defense effort.
In fiscal year 1981, FEMA assumed the responsibility, and did in
fact provide funding for these Reserve units. However, the Commit-
tee has learned that FEMA consciously did not budget for the
resources necessary to support the fiscal year 1982 program. While
the Department of Defense has taken the position that it is the
responsibility of FEMA to provide funding for this program, an
offset in the Defense budget of $1.6 million has been offered by the
Department of Defense in order to leave sufficient room in the
budget ceiling for the addition of funds to FEMA. The Committee
is, therefore, deleting the $1.6 million from the Defense budget
request since FEMA is pursuing the resources through their own
budgetary process.
AIR GUARD SKILL RETRAINING
The Air National Guard has budgeted an insufficient amount, to
provide for retraining military personnel who possess skills in plen-
tiful supply into shortage skill areas. The Committee is adding $2.0
million to the request for this needed retraining program. Howev-
er, the Committee is stipulating that the Air Guard should not use
as a source of personnel those skills which are already filled to less
than 95% of the requirement.
AIR FORCE RESERVE TECHNICIAN TRANSFER
As a result of the flexibility given to each Reserve component to
establish its own technician conversion schedule, the Air Force
Reserve has requested that the Committee transfer $4.6 million
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from the Military Personnel account into the Operation and Main-
tenance account. This adjustment is reflected in the appropriation
summaries:
IMPROVED RESERVE COMPONENT STRENGTH LEVELS
Based upon information provided to the Committee, it appears
that the Army Reserve and the Air Guard will exceed their budget-
ed strength levels. The Committee encourages recruiting and reten-
tion of qualified personnel for the Guard and Reserve components
and is adding a total of $22.0 million above the budget to support
this increase in projected strengths.
DETAIL OF APPROPRIATION ADJUSTMENTS
MILITARY PERSONNEL, ARMY
Appropriations, fiscal year 1981 $12,148,300,000
Estimate, fiscal year 1982 12,631,700,000
Recommended in the bill 12,278,300,000
Change 353,400,000
The Committee recommends an appropriation of $12,278,300,000
for Military Personnel, Army. This amount is a decrease of
$353,400,000 from the budget estimate of $12,631,700,000. The
amount appropriated for fiscal year 1981 is $12,148,300,000. The
amount recommended herein for fiscal year 1982 is an increase of
$130,000,000 over the prior year. Pay raise costs are not included in
the fiscal year 1982 estimate.
Specific adjustments addressed elsewhere are summarized below:
Duplicate Leadership Training ?$7,200,000
Subsistence Waste, Fraud, and Abuse ?40,000,000
New Rations ?1,000,000
Installment Reenlistment Bonus ?93,500,000
Barracks Cost of Living Allowance ?6,000,000
Foreign Duty Pay ?9,300,000
Career Basic Allowance for Subsistence ?14,400,000
Proficiency Pay ?32,700,000
Medical Pay ?2,300,000
Permanent Change of Station (PCS) Mileage ?13,900,000
Permanent Change of Station Waste, Fraud and Abuse ?5,500,000
Presidentially Directed PCS Savings ?14,500,000
PCS Rate and Fuel Reductions ?22,300,000
Reduced Number of PCS Moves ?20,000,000
Temporary Lodging Allowance ?14,000,000
Army Guard and Reserve Equipment ?17,700,000
Recruiting and Advertising ?10,000,000
Military Bands ?400,000
Currency Changes ?11,000,000
Military Pay Accounting Waste, Fraud, and Abuse ?16,500,000
Variable Housing Allowance (VHA) ?9,900,000
Basic Allowance for Quarters ?5,800,000
KATUSA Rate Error ?100,000
Pay Longevity Overstatement ?7,800,000
New Enlistment Bonus Ceiling +10,000,000
Medical Intelligence and Information Agency ?200,000
Flight Pay +12,600,000
MILITARY PERSONNEL, NAVY
Appropriations, fiscal year 1981 $8,893,095,000
Estimate, fiscal year 1982 9,340,090,000
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Recommended in the bill 8,807,520,000
Change ?532,570,000
The Committee recommends an appropriation of $8,807,520,000
for Military Personnel, Navy. This amount is a decrease of
$532,570,000 from the budget estimate of $9,340,090,000. The
amount appropriated for fiscal year 1981 is $8,893,095,000. The
amount recommended herein for fiscal year 1982 is a decrease of
$85,575,000 below the prior year. Pay raise costs are not included
in the fiscal year 1982 estimate.
Specific adjustments addressed elsewhere are summarized below:
Duplicate Leadership Training
?$1,100,000
Bogus ROTC Program
?4,000,000
Subsistence Waste, Fraud, and Abuse
?30,000,000
Installment Reenlistment Bonus
?205,600,000
Aviation Bonus
?20,000,000
Flight Pay
+3,500,000
Barracks Cost of Living Allowance
?2,700,000
Foreign Duty Pay
?4,100,000
Career Basic Allowance for Subsistence
?9,700,000
Permanent Change of Station (PCS) Mileage
?15,500,000
Permanent Change of Station Waste, Fraud, and Abuse
?3,500,000
Presidentially Directed PCS Savings
?9,500,000
PCS Rate and Fuel Reductions
?18,400,000
Reduced Number of PCS Moves
?13,000,000
PCS Homeporting
?19,500,000
Army Guard and Reserve Equipment
?13,300,000
Recruiting and Advertising
?11,000,000
Ship Retirement
?6,000,000
Military Bands
?100,000
Exchange Military Personnel
?3,800,000
Currency Changes
?7,700,000
Military Pay Accounting Waste, Fraud, and Abuse
?13,500,000
Variable Housing Allowance (VHA)
?13,300,000
Overbudgeting
?58,500,000
Basic Allowance for Quarters
?47,400,000
CINCUSNAVEUR
?2,000,000
Overeaters Anonymous
?100,000
Audiovisual
?2,700,000
TENCAP Office
?70,000
MILITARY PERSONNEL, MARINE CORPS
Appropriations, fiscal year 1981
Estimate, fiscal year 1982 '
$2,633,300,000
2,807,870,000
Recommended in the bill
2,703,970,000
Change .
?103,900,000
The Committee recommends an appropriation of $2,703,970,000
for Military Personnel, Marine Corps. This amount is a decrease of
$103,900,000 from the budget estimate of $2,807,870,000. The
amount appropriated for fiscal year 1981 is $2,633,300,000. The
amount recommended herein for fiscal year 1982 is an increase of
$70,670,000 over the prior year. Pay raise costs are not included in
the fiscal year 1982 estimate.
Specific adjustments addressed elsewhere are summarized below:
Subsistence Waste, Fraud, and Abuse ?$10,000,000
New Rations ?2,500,000
Installment Reenlistment Bonus ?36,800,000
Aviation Bonus ?6,000,000
Flight Pay +2,000,000
Barracks Cost of Living Allowance ?9,300,000
Foreign Duty Pay ?3,300,000
Career Basic Allowance for Subsistence ?2,900,000
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Permanent Change of Station (PSC) Mileage ?7,900,000
Permanent Change of Station Waste, Fraud, and Abuse ?1,100,000
Presidentially Directed PCS Savings ?2,900,000
Reduced Number of PCS Moves ?4,000,000
Army Guard and Reserve Equipment ?3,900,000
Recruiting and Advertising ?2,000,000
Military Bands ?100,000
Currency Changes ?2,100,000 It
Military Pay Accounting Waste, Fraud, and Abuse ?6,500,000
Variable Housing Allowance (VHA) ?3,400,000
Basic Allowance for Quarters ?5,100,000
Additional Reenlistment Bonuses +5,000,000
Flight and Sea Pay Rate Errors ?400,000 t
Audiovisual ?700,000
MILITARY PERSONNEL, AIR FORCE
Appropriations, fiscal year 1981 $10,001,821,000
Estimate, fiscal year 1982 10,440,820,000
Recommended in the bill 10,209,920,000
Change ?230,900,000
The Committee recommends an appropriation of $10,209,920,000
for Military Personnel, Air Force. This amount is a decrease of
$230,900,000 from the budget estimate of $10,440,820,000. The
amount appropriated for fiscal year 1981 is $10,001,821,000. The
amount recommended herein for fiscal year 1982 is an increase of
$208,099,000 over the prior year. Pay raise costs are not included in
the fiscal year 1982 estimate.
Specific adjustments addressed elsewhere are summarized below:
Weapons Training Sites ?$2,500,000
Subsistence Waste, Fraud, and Abuse ?15,000,000
Installment Reenlistment Bonus ?62,000,000
Aviation Bonus ?47,000,000
Flight Pay +32,200,000
Barracks Cost of Living Allowance ?8,000,000
Foreign Duty Pay ?8,300,000
Career Basic Allowance for Subsistence ?7,800,000
Permanent Change of Station (PCS) Mileage ?9,000,000
Permanent Change of Station Waste, Fraud, and Abuse ?4,900,000
Presidentially Directed PCS Savings ?13,100,000
Reduced Number of PCS Moves ?18,000,000
Army Guard and Reserve Equipment ?14,600,000
Recruiting and Advertising ?12,000,000
Military Bands ?100,000
Military Pay Accounting Waste, Fraud, and Abuse ?10,500,000
Variable Housing Allowance (VHA) ?12,500,000
Pay Longevity Overstatement ?12,800,000
Audiovisual ?4,500,000
PARCS ?500,000
RESERVE PERSONNEL, ARMY
Appropriations, fiscal year 1981 $869,300,000
Estimate, fiscal year 1982 955,200,000
Recommended in the bill 962,500,000
Change +7,300,000
The Committee recommends an appropriation of $962,500,000 for
Reserve Personnel, Army. This amount is an increase of $7,300,000
from the budget estimate of $955,200,000. The amount appropriated
for fiscal year 1981 is $869,300,000. The amount recommended
herein for fiscal year 1982 is an increase of $93,200,000 over the
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prior year. Pay raise costs are not included in the fiscal year 1982
estimate.
Specific adjustments addressed elsewhere are summarized below:
Subsistence Waste, Fraud, and Abuse
?$1,600,000
Drill Attendance
?9,600,000
FEMA Transfer
?700,000
Strength Improvements
+18,400,000
Flight Pay
+800,000
RESERVE PERSONNEL, NAVY
Appropriations, fiscal year 1981
$318,758,000
Estimate, fiscal year 1982
329,020,000
Recommended in the bill
346,420,000
Change
+17,400,000
The Committee recommends an appropriation of $346,420,000 for
Reserve Personnel, Navy. This amount is an increase of $17,400,000
from the budget estimate of $329,020,000. The amount appropriated
for fiscal year 1981 is $318,758,000. The amount recommended
herein for fiscal year 1982 is an increase of $27,662,000 over the
prior year. Pay raise costs are not included in the fiscal year 1982
estimate.
Specific adjustments addressed elsewhere are summarized below:
Subsistence Waste, Fraud, and Abuse
?$400,000
Drill Attendance
?3,300,000
Flight Pay
+1,100,000
94,000 Strength Level
+20,000,000
RESERVE PERSONNEL, MARINE CORPS
Appropriations, fiscal year 1981
$120,357,000
Estimate, fiscal year 1982
138,920,000
Recommended in the bill
138,120,000
Change
?800,000
The Committee recommends an appropriation of $138,120,000 for
Reserve Personnel, Marine Corps. This amount is a decrease of
$800,000 from the budget estimate of $138,920,000. The amount
appropriated for fiscal year 1981 is $120,357,000. The amount rec-
ommended herein for fiscal year 1982 is an increase of $17,763,000
over the prior year. Pay raise costs are not included in the fiscal
year 1982 estimate.
Specific adjustments addressed elsewhere are summarized below:
Subsistence Waste, Fraud, and Abuse
?$200,000
Drill Attendance
?1,400,000
Flight Pay
+800,000
RESERVE PERSONNEL, AIR FORCE
Appropriations, fiscal year 1981
$277,360,000
Estimate, fiscal year 1982
298,848,000
Recommended in the bill
291,548,000
Change
?7,300,000
The Committee recommends an appropriation of $291,548,000 for
Reserve Personnel, Air Force. This amount is a decrease of
$7,300,000 from the budget estimate of $298,848,000. The amount
appropriated for fiscal year 1981 is $277,360,000. The amount rec-
ommended herein for fiscal year 1982 is an increase of $14,188,000
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over the prior year. Pay raise costs are not included in the fiscal
year 1982 estimate.
Specific adjustments addressed elsewhere are summarized below:
Subsistence Waste, Fraud, and Abuse ?$300,000
Drill Attendance ?3,000,000
FEMA Transfer ?900,000
Technicians ?4,600,000
Flight Pay +1,500,000
NATIONAL GUARD PERSONNEL, ARMY
Appropriations, fiscal year 1981 $1,168,200,000
Estimate, fiscal year 1982 1,299,100,000
Recommended in the bill 1,287,600,000
Change ?11,500,000
The Committee recommends an appropriation of $1,287,600,000
for National Guard Personnel, Army. This amount is a decrease of
$11,500,000 from the budget estimate of $1,299,100,000. The amount
appropriated for fiscal year 1981 is $1,168,200,000. The amount
recommended herein for fiscal year 1982 is an increase of
$119,400,000 over the prior year. Pay raise costs are not included in
the fiscal year 1982 estimate.
Specific adjustments addressed elsewhere are summarized below:
Subsistence Waste, Fraud, and Abuse ?$2,000,000
Drill Attendance ?13,000,000
Key Personnel Upgrade Program +3,000,000
Flight Pay +500,000
NATIONAL GUARD PERSONNEL, AIR FORCE
Appropriations, fiscal year 1981 $386,209,000
Estimated, fiscal year 1982 418,192,000
Recommended in the bill 421,392,000
Change +3,200,000
The Committee recommends an appropriation of $421,392,000 for
National Guard Personnel, Air Force. This amount is an increase
of $3,200,000 from the budget estimate of $418,192,000. The amount
appropriated for fiscal year 1981 is $386,209,000. The amount rec-
ommended herein for fiscal year 1982 is an increase of $35,183,000
over the prior year. Pay raise costs are not included in the fiscal
year 1982 estimate.
Specific adjustments addressed elsewhere are summarized below:
Subsistence Waste, Fraud, and Abuse ?$500,000
Drill Attendance ?4,200,000
Skill Retraining +2,000,000
Strength Improvements +3,600,000
Flight Pay +2,300,000
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TITLE II
RETIRED MILITARY PERSONNEL
RETIRED PAY, DEFENSE
ESTIMATES AND APPROPRIATION SUMMARY
The Committee is recommending an appropriation of
$14,931,815,000 for Retired Pay, Defense, a reduction of $50,000,000
from the amount requested for fiscal year 1982. The recommended
amount represents an increase of $1,044,015,000 over the fiscal year
1981 appropriation due primarily to projected increases in the Con-
sumer Price Index and also due to the addition of retiring military
and surviving annuitants to the rolls.
Costs associated with military retired pay and benefits fall into
four major categories: (1) pay of military personnel on the retired
lists of the Army, Navy, Marine Corps, and Air Force; (2) military
individuals receiving disability retirement payments on the basis of
either permanent disability or temporary disability; (3) retainer
pay for regular enlisted personnel of the Navy and Marine Corps
Fleet Reserves; and (4) payments to eligible survivors under the
terms of the Survivor Benefit Plan or its predecessor, the Retired
Serviceman's Family Protection Plan.
IMPACT OF ACTIVE DUTY "CATCH-UP" RAISE ON RETIRED PAY
Under the terms of the Budget Impoundment and Control Act,
the Uniformed Services Pay Act of 1981 was referred to the Appro-
priations Committee for consideration. In the report published by
the Committee, full support was given to a special "catch-up" pay
raise for military personnel on 1 October 1981. Although the pay
raise ranged to as high as 17%, on average it was close to the
14.3% requested by the present administration. Included within
the 14.3% pay raise was 9.1% that was requested by the adminis-
tration as the normal impact of inflation and wage increases in the
private sector over the course of 1981. That portion of the raise
above 9.1%, i.e., 5.2%, is solely dedicated to providing a "catch-up"
for active duty military personnel.
While fully supporting the pay raise for active duty and reserve
personnel, it appears that the Congress has overlooked the poten-
tial multi-billion dollar impact of the catch-up pay raise on mili-
tary retired pay costs. For example, an individual can work only
one day at the new higher pay rates, then retire and have the base
for his retired pay calculations increased by 14.3% for the entire
length of his retirement. The Congress has already gone on record
last year approving a phase-in of the high-three retirement system
already in effect for civil servants in order to prevent exactly this
action from taking place.
The Committee believes it is appropriate to exclude the 5.2%
"catch-up" raise from the calculation for military retirement bene-
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fits for military personnel who retire on or after January 1, 1982
and a general provision has been included in the bill to that end.
The Committee, however, does anticipate phasing in the impact of
the "catch-up" raise over the next three years by allowing 2% each
year to be added to the retirement base. For example, beginning in
FY 1983 only 3.2% of the "catch-up" raise would be excluded from
the retired pay base for calculations and in fiscal year 1984 only
1.2% would be excluded. In FY 1985 no exclusion would be made.
Although it is estimated that this will save many millions of dol-
lars over the next several years, no specific dollar reduction has
been made in the military retired pay account during FY 1982 due
to the phase-in one-quarter of the way through the year.
The Committee also urges the Department of Defense to press
forward with implementation of an accrual accounting system for
retired pay in order that the costs of retired pay be fully visible in
the manpower planning process.
RETIREMENT ROUNDING
According to existing statutes, a member of the military who
retires with even one day more than six months service is credited
for a full year. For example, an individual retiring with 23 years 6
months and one day of good service for retirement purposes is
credited as if he had completed 24 full years of service. The Com-
mittee is including a general provision in the bill which will round
the service credit to the nearest month for any portion of a year in
excess of six months rather than rounding to the nearest full year.
This action is in line with recommendations by .the ? Defense Man-
power Commission and the Congressional Budget Office. It is esti-
mated that modest savings will accrue in future years.
BUDGET RECONCILIATION ACT ADJUSTMENT
As a result of changes enacted in the Budget Reconciliation Act
to the Survivors Benefit Plan, the funding for the Retired Pay,
Defense account can be reduced by $37.0 million.
DETAIL OF ADJUSTMENTS
RETIRED PAY, DEFENSE
Appropriations, fiscal year 1981 $13,887,800,000
Estimate, fiscal year 1982 14,981,815,000
Recommended in the bill 14,931,815,000
Change ?50,000,000
The Committee recommends an appropriation of $14,931,815,000
for Retired Pay, Defense. This amount is a decrease of $50,000,000
from the budget estimate of $14,981,815,000. The amount appropri-
ated for fiscal year 1981 is $13,887,800,000. The amount recom-
mended herein for fiscal year 1982 is an increase of $1,044,015,000
over the prior year.
Specific adjustments addressed elsewhere are summarized below.
Military Pay Accounting Waste, Fraud, and Abuse ?$13,000,000
Budget Reconciliation Act Adjustment ?37,000,000
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TITLE III
OPERATION AND MAINTENANCE
ESTIMATES AND APPROPRIATION SUMMARY
The budget estimate for operation and maintenance for fiscal
year 1982 is $62,590,121,000 in new obligational authority. This
amount compares to a fiscal year 1981 including supplemental
appropriations of $55,980,234,000 in new obligational authority.
The accompanying bill recommends new obligational authority.
The amount recommended represents a decrease of $1,381,436,000
in new obligational authority from the fiscal year 1981 request as
amended and is $5,228,451,000 above the total obligational authori-
ty provided in fiscal year 1981.
These appropriations finance the costs of operating and main-
taining the Armed Forces, including the Reserve components and
related support activities of the Department of Defense, except
military personnel costs. Included are amounts for pay of civilians,
contract services. for maintenance of equipment and facilities, fuel,
supplies, and repair parts for weapons and equipment. Financial
requirements are influenced by many factors, including force levels
such as the number of aircraft squadrons, Army or Marine Corps
divisions, installations, military strength and deployments, rates of
operational activity, and quantity and complexity of major equip-
ment (aircraft, ships, missiles, tanks, et cetera) in operation.
The 1982 budget reflects a substantial increase to protect and
enhance Defense readiness capabilities.
Funds to operate the Active Forces and their support are con-
tained in five operation and maintenance appropriations, one for
each of the four services and one for Defense agencies. The pro-
grams covered under this heading are described below:
Strategic forces. ?Strategic offensive forces include more than
400 manned B-52 and FB-111 bombers and 1,052 ICBM's operated
by the Air Force as well as the Navy's submarine missile fleet,
which deploys 568 Polaris, Poseidon, and Trident missiles. Two
Trident submarines are scheduled to enter the fleet in 1982.
Strategic defensive forces consist of interceptor fighter aircraft
and various warning, command, and control systems also operated
by the Air Force.
General purpose forces.?These forces, primarily conventional in
nature, provide the bulk of the flexible combat capability upon
which our national security and our overall defense posture
depend. A portion of these forces are deployed to Europe in support
of NATO commitments, eastern Asian, and the western Pacific.
Naval forces operate in the Atlantic, Pacific, and Indian Oceans.
Army land forces consist of infantry, mechanized, armored, air-
borne, air assault divisions, and supporting force elements, along
with a number of units for combat support. Modernization of
combat units, including delivery of the XM-1 tank will continue.
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Testing of new concepts for lighter, more deployable combat units
has been initiated and will continue in 1982.
Naval forces include aircraft carriers, submarines, amphibious
forces, antisubmarine forces, and anti-air warfare forces. Twenty-
four ships are scheduled to be introduced into the fleet in 1982: five
nuclear attack submarines, two destroyers, five hydrofoil patrol
missile combatants, eight guided missile frigates, two fleet oilers,
one destroyer tender, and one nuclear aircraft carrier. Overage and
obsolete vessels will be inactivated.
Tactical air forces consist of the Air Force tactical air wings,
Navy land and carrier based antisubmarine and fighter/attack air
wings, and Marine air wings. Force missions include air superior-
ity, interdiction bombing, close air support, antisubmarine patrol,
reconnaissance, and special operations. The Navy will continue to
deploy the F-14 to replace F-4's in the fleet air defense role. The
Air Force will continue to fill out their 26-wing structure with
continued delivery of the F-15, F-16, and A-10 aircraft.
Marine Corps land forces, including combat and supporting
units, are designed to conduct amphibious assault operations and
other missions with the close support of Marine aviation.
Intelligence and communications. ?This program comprises the
centrally directed Defense intelligence and security function, the
major portion of the consolidated telecommunications program
(CTP), the National Military Command System, and other special
activities which are related to and support the missions of the
combat forces in the strategic, general purpose, and airlift/sealift
programs. Included in the CTP portion are the Defense Communi-
cations System (DCS), common user transmission and switching
systems, as well as non-DCS communications. Funds to support
intelligence, security, and communications activities are contained
in the various appropriations of each of the military services, and,
in the Defense agencies are Navy oceanographic and weather pro-
grams, Air Force weather, air rescue and recovery, and air traffic
control programs.
Airlift and sealift. ?This program provides air, land, and sea
transportation services for all the Armed Forces in peacetime as
well as quick reaction strategic mobility and logistical support in
wartime. The major commands in this program are the Air Force
Military Aiflift Command, the Navy Military Sealift Command,
and the Army Military Traffic Management Command. These are
primarily industrially funded operations with costs reimbursed by
the users. The operation and maintenance appropriations directly
provide for certain administrative and base service support ex-
penses for each of these industrially funded activities.
Central supply and maintenance. ?This program includes funds
for specialized supply and maintenance activities. It provides re-
sources for the determination of inventory levels, procurement of
supplies, distribution, depot-level maintenance, and transportation
of military material. These functions are managed by the military
services and conducted at various locations worldwide.
In addition, the Defense Logistics Agency provides common
supply and services support to the military services within the
continental United States and manages bulk petroleum worldwide.
The Agency is the Defense manager for standby industrial plant
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equipment, the surplus property disposal program, and the Federal
catalog program. It is also responsible for providing contract ad-
ministration services, administration of Defense materiel utiliza-
tion programs and coordinated procurement programs.
Training, medical, and other general personnel activities. ?In
1982 the military services plan on acquiring approximately 340,000
new accessions into the Active Forces.
These new accessions must then be trained in basic military
skills and in many occupational skills. Training requirements are
also influenced by the total strength of the services, and by the
introduction of new equipment and weapons. Education of prospec-
tive officers is accomplished primarily by the three service acade-
mies and by Reserve Officer Training Corps units at universities
and colleges. The services plan to operate 162 hospitals to provide
medical care for active and retired military personnel and their
dependents. This program finances a medical program at civilian
facilities for personnel in areas where service hospitals are not
accessible. In addition, this activity provides the resources neces-
sary to operate the Uniformed Services University of the Health
Sciences.
Administration and associated activities. ?This program includes
the costs of departmental administration, major field command
headquarters, and general support activities such as finance and
audit. Reimbursement to the General Services Administration for
space occupied is also included in this program.
Support of other nations. ?This program includes military assist-
ance missions, advisory groups for foreign nations, and the U.S.
share of NATO costs, plus support of L .S. organizations related to
international military headquarters.
Reserve Forces. ?The operation and maintenance appropriations
also include funds in a separate appropriation for each Reserve
Component. These funds are used to equip, train, operate and
maintain the Reserve Components of the Department of Defense.
The budget request as amended by the Committee includes some
major increases designed to improve Reserve forces capabilities and
readiness.
NON-PROGRAMMATIC REDUCTIONS, OPERATING ACCOUNTS AND
REPROGRAMMING PROCEDURES
Over the past several years, a phrase has crept into the vocabu-
lary of Department of Defense officials with regard to reductions in
funding ordered by this Committee. That phrase is "non-program-
matic cuts."
The phrase is intended to convey the impression that cuts levied
by this Committee against a specified program or activity cannot,
in fact, be taken against that activity. The result has been a
Department policy that the cut will be taken elsewhere, usually
against training or real property maintenance and in direct con-
flict with the clear intent of the cut.
One "fact sheet" circulated by DoD in connection with the con-
sideration of this bill stated that a proposed $39 million reduction
in a $640 million allowance item could not be taken, but that DoD
would instead be forced to reduce manpower by 8,000 personnel.
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The Committee has grown increasingly intolerant of this ap-
proach by the Department to Congressional action and hereby
serves notice that this practice is to end.
In order to help insure the Department's compliance with the
above direction the Committee has attempted, with the help of
defense department personnel, to allocate the operating appropri-
ation reductions and additions to the summarized program element
aggregate structure used as the basis for the Military Services and
Defense agencies budget submissions. This summarized program
element aggregate listing has been printed in conjunction with
each of the operation and maintenance appropriations. The reduc-
tion and additions in funding allocated by this Committee, if even-
tually adopted by the Congress, will be levied against the specific
program or activity impacted.
The Committee expects to be notified of any changes larger than
$5.0 million (plus or minus) that occur as a result of reallocation of
resources between these program element aggregates. The Commit-
tee does not want a specific accounting system established for this
purpose or a single accountant or other bookkeeper added to the
employment roles. It is desired, however, that the Committee be
notified in writing whenever the headquarters budget offices of the
military services or the offices of the Secretary of Defense and
Comptroller Defense agencies become aware of a change which
exceeds $5.0 million. The Committee also expects to be notified
whenever a military service believes there are overriding reasons
why a reduction approved by the Congress cannot be made as
levied and explained in this report. The Committee expects to
receive few of this latter type notification.
FUEL AND ENERGY
The Department of Defense Budget Request includes $10.5 billion
for consumption of fuel. The following table provides an overview
of the request by title:
[Dollars in millions]
Fiscal year 1980 Fiscal year 1981 Fiscal year 1982
Barrels Barrels Barrels
(mil- Cost (mil- Cost (mil- Cost
lions) lions) lions)
,L?
0. & M 134.9 5,817 142.1 7,082 147.2 8,123
Industrial funds, 34.5 1,498 36.9 1,745 39.2 2,055
R.D.T. & E 2.4 104 2.2 105 2.2 117
Total 171.8 7,419 181.2 8,932 188.6 10,295 le!:
Mostly funded in 0 & M
In addition to the amounts above, the FY 1982 Budget includes
$124.2 million in the Family Housing account, which is considered
in another bill.
The Budget request reflects a composite cost estimate per barrel
of $55.86 or $1.33 per gallon. At the time the FY 1982 budget was
submitted, the DoD estimate for FY 1981 was $51.24 or $1.22 per
gallon. The Committee reduced the FY 1981 request by three cents
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per gallon thereby providing funding in FY 1981 at $49.98 per
barrel.
Since the Committee action, the Department has experienced a
softening of fuel prices. For the first 10 months of the year fuel
costs averaged about $47.00 per barrel, almost $3 per barrel less
than estimated. If that average prevails for all of FY 1981, the total
costs of fuel will be approximately $543 million less than estimat-
ed. This excess is not used to fund programs not approved by the
Congress. Instead, it is retained as a cash balance in the DoD Stock
Fund.
All DoD fuel purchases are made through the Stock Fund. The
Stock Fund "sells" the fuel to the "customers," at a stabilized
price, i.e., the price approved by the Congress in the budget. As
indicated in the table above, most of the customers are funded in
the Operation and Maintenance accounts. Under the stabilized
price concept, the difference between DoD costs and the stabilized
price are reflected in the stock fund as a gain or loss, with a
corresponding increase or decrease in cash. Prices in future years
are established so as to take into account the results of previous
years, and the cash position of the Stock Fund. Generally, prices
are set so as to have a 15 day cash position during the year. The
FY 1982 stock fuel price of $1.33 per gallon included 3 cents per
gallon to increase Stock Fund cash.
Based on the 10 months experience in FY 1981 and current fuel
costs of $47 per barrel, the FY 1982 estimates appear overstated.
The Committee has adjusted the DoD request by 9 cents a gallon.
This will fund a "composite" barrel of fuel at $52 in FY year 1982,
an increase of 10% over the current level.
The Committee recognized the uncertainties inherent in estimat-
ing fuel prices. However, the procedures previously approved by
this Committee will insure that readiness related programs will not
be affected by this reduction. The Department has already stabi-
lized its fuel products at the price included in the budget. Changing
prices at this late date would disrupt orderly execution of the
program. We expect the Department to continue to execute at the
published prices. This should generate cash in the Stock Fund. The
Stock Fund should be in a position to provide a refund to the
customer accounts in the amounts reduced by the Committee. The
price provided for in the bill ($52 per composite barrel) should be
sufficient to cover expected fuel price increases in FY 1982. There
is, however, always the possibility that the world oil markets could
be unexpectedly upset or that OPEC will be able to force a higher
price. If the cost of fuel exceeds the $52 per barrel cost and the
Stock Fund has not generated the cash to provide the refund
A included in the Committee estimate, DoD can invoke R.S. 3732 to
cover the difference.
In discussing this procedure with DoD representatives, the Com-
mittee became aware of a potential cash problem in the Stock
Fund, unrelated to fuel costs. Because of the significant increases
taking place in force levels, activity and the other increases in
customer funding, the Stock Fund managers are projecting sizable
increases in inventory requirements. DoD would normally utilize
the cash generated by the overpricing of fuel to compensate for this
requirement. However, while recognizing that DoD has the respon-
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sibility and authority to manage the overall cash in the Stock Fund
to avoid disruption of Stock Fund procurement, we do not believe
that the sizable buildup in Stock Fund inventories should be ac-
complished through the pricing mechanism. Instead, DoD should
request direct appropriations into the Stock Fund. Since the Com-
mittee has not had an opportunity to review these new require-
ments, we are not in a position to provide the appropriations in
this bill. The Committee expects DoD to request direct appropri-
ations to the Stock Fund in FY 1983. Meanwhile the Department is
encouraged to provide advance payment on FY 1982 orders to
alleviate the cash problem during the current fiscal year.
The Committee action takes into account the September Revision
which reduced the amount in the budget for fuel by $128 million.
The following tables provide more information on the FY 1982
proposed fuel procurement and the Committee adjustments:
ESTIMATED SAVINGS ASSOCIATED WITH REVISED FUEL COST
ESTIMATES
Operation and Maintenance,
Operation and Maintenance,
Operation and Maintenance,
Operation and Maintenance,
Operation and Maintenance,
Operation and Maintenance,
Operation and Maintenance,
R.D.T. & E. Army
R.D.T. & E. Air Force
Millions
Army $19
Navy 181
Marine Corps 4
Air Force 233
Navy Reserve 11
Air Force Reserve 10
Air National Guard 32
3
R.D.T. & E. Navy-(Industria
3
1 Fund Payment) 3
Total
FUEL (SUMMARY CONSUMPTION AND COST DATA)
499
Fiscal year Fiscal year Fiscal year
1980 1981 1982
Fuel Consumption (Mil. BBLS):
O&M
Industrial Funds
RDT&E
Family Housing
Total
Fuel Cost ($ Mil.):
O&M
Industrial Funds
RDT&E
Family Housing
Total
134.9 142.1 147.2
34.5 36.9 39.2
2.4 2.2 2.2
2.2 2.2 2.2
174.0 183.4 190.8
5,816.9 7,082.4 8,182.7
1,397.9 1,745.0 2,055.3
104.1 104.5 117.0
108.6 111.1 124.2
7,427.5 9,043.0 10,479.2
FUEL (CONSUMPTION AND COST BY PRODUCT)
Fiscal year 1980
O&M Total
Consumption (By product) (Mil. BBLS):
AVGAS .7
Sp Fuels 1 .5
Fiscal year 1981 Fiscal year 1982
O&M Total O&M Total
.7 .7 .8
.5 .5 .5
.7
.6
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FUEL (CONSUMPTION AND COST BY PRODUCT)-Continued
Fiscal year 1980
Fiscal year 1981
Fiscal year 1982
O&M
Total
O&M
Total
O&M
Total
Leaded
2.4
2.6
2.5
2.7
2.5
2.7
Unleaded
2.0
2.6
2.2
2.8
2.3
2.9
JP-4
3.4
96.6
73.4
95.9
77.8
101.9
JP-5
76.7
17.5
17.8
18.8
18.3
19.3
JP-8
11.8
2.4
2.2
3.5
3.0
4.4
Distillate
2.9
39.8
36.6
45.1
36.2
45.1
Residual
34.5
11.0
6.0
13.4
6.0
13.3
Sp Fuels 2
.1
.1
.1
.1
.1
.1
Total
135.0
173.8
142.0
183.6
147.3
191.0
Cost (By Product ($ Mil.):
AVGAS
32.7
36.6
42.2
45.4
38.4
41.8
Sp Fuels 1
27.4
29.3
32.0
32.0
38.7
38.7
Leaded
119.8
128.7
132.0
141.8
136.6
146.9
Unleaded
106.6
138.3
119.7
152.3
128.6
163.1
JP-4
2,897.8
3,815.6
3,577.3
4,670.0
4,247.8
5,563.0
JP-5
708.8
740.6
951.9
1,000.2
1,093.8
1,148.3
JP-8
124.0
170.7
127.0
198.2
185.3
274.9
Distillate
1,643.3
1,989.6
1,875.4
2,310.0
2,080.7
2,594.2
Residual
151.3
373.0
219.6
488.0
225.7
501.0
Sp Fuels 2
5.2
5.2
5.3
5.3
7.3
7.3
Total
5,816.9
7,427.6
7,082.4
9,043.2
8,182.9
10,479.2
FUEL (COMPOSITE PRICE BY APPROPRIATION CATEGORY)
Fiscal year 1980
fiscal year 1981
Fiscal year 1982
Gal.
BBL
Gal.
BBL
Gal.
BBL
Composite price:
O&M
1.03
43.12
1.19
49.83
1.32
55.58
Industrial Fund
.97
40.57
1.13
47.26
1.25
52.50
RDT&E
1.04
43.81
1.15
48.39
1.27
53.53
Family Housing
1.19
49.99
1.22
51.26
1.37
57.52
Total
1.02
42.84
1.19
49.89
1.33
55.86
POL UNIT PRICES
Fiscal year 1980
Fiscal year 1981
Fiscal year 1982
Price recommended in
the bill
Gallon
Barrel
Gallon
Barrel
Gallon
Barrel
Gallon
Barrel
Al/GAS
1.14
47.88
1.41
59.22
1.50
63.00
1.43
60.06
Leaded
1.20
50.40
1.26
52.92
1.32
55.44
1.26
52.92
Unleaded
1.25
52.50
1.29
54.18
1.35
56.70
1.29
54.18
JP-4
.94
39.48
1.16
48.72
1.30
54.60
1.23
51.66
JP-5
1.01
42.42
1.27
53.34
1.42
59.64
1.35
56.70
JP-8
1.67
70.14
1.35
56.70
1.49
62.58
1.42
59.64
Distillate
1.19
49.98
1.22
51.24
1.37
57.54
1.30
54.60
Residual
.81
34.02
.87
36.54
.90
37.80
.87
36.54
Spec Fuel 1
1.29
54.81
1.47
61.90
1.67
70.14
1.60
67.20
Spec Fuel 2
1.35
56.70
1.57
65.94
1.74
73.08
1.67
70.14
Composite
1.02
42.84
1.19
49.89
1.33
55.86
1.26
52.92
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JCS EXERCISES
The Reagan Administration Budget contained major increases
for Joint Chiefs of Staff directed and coordinated exercises. The
original budget proposal was to increase the program from the $180
million level in fiscal year 1980 to $485.3 million in fiscal year
1982. The Committee's review of this estimate determined that it
would be exceedingly difficult to conduct an exercise program of
this size in fiscal year 1982 in lieu of the major increases in other
(non-JCS directed and coordinated) exercises also scheduled. In
fact, the original plan was so large that the Military Airlift Com-
mand could not fly the entire program and still conduct necessary
training and support of the overseas air logistics system. The origi-
nal plan called for 62,000 C-141 equivalent flying hours of which
the MAC was programmed to fly 45,000 with the balance being
flown by commercial aviation. Because of the capability problem
and the problem of finding suitable host nations in which to con-
duct some of these exercises, the administration recommended a
$79.4 million reduction in September. The Committee has increased
this reduction by $33 million, $18.0 million in the Army O&M
appropriation and $15.0 million in the Air Force appropriation. In
addition, the bill as reported by the Committee transfers the trans-
portation related funds from the individual military service appro-
priations to the JCS (Defense Agency) appropriation where they
can be managed, supported, and defended by the Joint Chief of
Staff.
THRUST MANAGEMENT/THRUST COMPUTING
In January 1981, the Committee asked the General Accounting
Office to follow-up on .previous efforts by the Defense Audit Service
on the use of thrust/power management for jet aircraft. A prelimi-
nary report from the General Accounting Office dated October 27,
1981 (B-204813) dealt primarily with one particular system for
measuring installed engine thrust. The analysis shows that accu-
rate measurement in setting of thrust for installed jet engines is of
vital importance not only for aircraft readiness and safety but also
for operation and maintenance cost reductions. The Air Force has
conducted extensive tests that will measure thrust of installed J85-
5 engines but has not implemented a program to do so. The Navy
has not performed any test to determine whether its aircraft jet
engines might benefit from a similar system. Engines trimed to
minimum required installed thrusts operate at lower temperatures,
which increases engine life and improves operational readiness.
Also, safety of flights can be enhanced, particularly on take-off,
when a mechanic has the ability to readily check and set installed
engines to required thrusts.
The Air Force has recently experienced major problems in at-
tempting to deal with the thrust management problem on its high-
est technology aircraft engine (the F-100) installed in F-15 aircraft.
Engine durability has been much lower than expected and the Air
Force responded by making a parts-saving decision to down-rate
the F-100 that would produce 96 percent, plus or minus 2 percent
of rated thrust. Unfortunately, the Air Force has no simple way to
measure the thrust of installed engines and the procedures are
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difficult. Because of the inability to measure installed thrust, it has
been estimated by the Air Force that as many as 15 percent of the
F-15 aircraft are operating below the detuned performance levels
with some aircraft 15 percent below these levels. At this point
aircraft safety could become a factor.
Based upon extensive testing of the system designed for the J85-
. 5 engine, the Air Force estimates that it could save about $4.7
million annually in hot section parts and probably an equal
amount in fuel savings. In addition safety can be enhanced by
insuring that no aircraft are operating significantly below perform-
? ance standards.
Although the Air Force has decided to implement the thrust
computing system for its J85-5 engines no funds for this effort
were requested in the fiscal year 1982 budget. If funds are not
made available soon, the system may never be implemented be-
cause the contractor has already waited two years while the Air
Force made up its mind on the system. The GAO states that if
funding is not provided, "the Air Force will lose millions of dollars
already invested in the program in addition to the millions in
projected savings, but more importantly, failure to implement the
system may reduce aircraft readiness." In view of this situation the
Committee has added $9 million to the aircraft modification pro-
gram to complete the J-85-5 thrust computing work.
The GAO will continue its work in reviewing thrust manage-
ment, thrust computing and engine monitoring systems for the
Committee.
CIVILIAN PERSONNEL
The budget for the Department of Defense proposes a moderate
increase in civilian personnel end strength numbers. This is in
contrast to a steady decline throughout the decade of the 1970's.
The Committee believes that the civilian personnel ceilings have
served as a deterrent to the effective and economical execution of
the Defense budget. Because of the ceilings, the Department has
had to depend on consultant contractors to perform technical engi-
neering and management support services. Efforts in shipyards,
depots, and repair facilities appear to be adequately funded but
undermanned because of the personnel ceiling.
The responsibility for lower than adequate Defense personnel
levels rests with the Administation. The two percent latitude in
civilian personnel hiring provided by the Congress would easily
allow the Defense Department to man all of its requirements. The
Administration, through the OMB, continues to impose artificial
ceiling constraints on programs that the Congress has fully funded.
An increase of from ten to twenty thousand (10,000-20,000) spaces
would allow the Department to perform its mission with no in-
crease in funding and with a corresponding decrease in consulting
contracts.
Keeping in mind the Administration's policy of increased De-
fense readiness, the Committee urges that civilian personnel ceil-
ings for the Department of Defense be eliminated. Otherwise the
logic of major funding increases for defense provided in this bill
make little sense. Obviously, the amounts requested by the Admin-
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istration in 1982 exceeded the work level that could be executed
because of the civilian personnel limitation in many areas.
The following table provides a summary of civilian employment
in the DOD by appropriation:
DEPARTMENT OF DEFENSE CIVILIAN EMPLOYMENT
Department/Agency
1980 1981 1982
Army: ?
O&M, Army 183,128 183,992 189,825
. O&M, Army National Guard 25,284 22,971 22,827
O&M, Army Reserve 12,330 12,636 12,668
RDT&E 19,898 19,665 19,358
Army Industrial Fund 62,622 64,749 64,816
NBPRP 14 17 17
Military Construction, Army 6,893 7,098 7,137
Military Construction, Army Reserve 113 121 121
Military Family Housing 1,160 1,129 1,126
MAP 353 364 364
Total, Army direct hire 311,795 312,742 318,259
Total, Army indirect hire 48,713 57,891 63,057
Total, Army end strength 360,508 370,633 381,316
Navy/Marine Corps:
O&M, Navy 113,829 116,653 111,090
O&M, Marine Corps 15,111 15,135 15,005
O&M, Navy Reserve 2,682 2,740 2,924
O&M, Marine Corps reserve 142 144 201
RDT&E 2,315 2,484 2,523
Military Construction, Navy 2634 2,575 2,627
Navy Industrial Fund 159,684 165,371 166,257
Marine Corps Industrial Fund 1,335 1,318 1,318
Laundry Service, Naval Academy 89 82 42
Military Assistance Executive 163 169 170
Total, Navy/MC direct hire 297,984 306,671 302,157
Total, Navy/MC indirect hire 10,727 10,838 10,832
Total, Navy/MC end strength 308,711 317,509 312,989
Air Force:
O&M, Air Force 138,015 138,232 139,352
O&M, Air Force Reserve 10,681 10,957 11,589
O&M, Air National Guard 23,529 23,212 23,536
RDT&E 18,628 18,827 18,844
Air Force Industrial Fund 40,085 39,350 40,903
Total, Air Force direct hire 230,938 230,578 234,224
Total, Air Force indirect hire 13,404 13,256 13,129
Total, Air Force end strength 244,342 243,834 247,353
Defense Agencies: '
O&M, Defense Agencies 72,656 17,426 78,423
Court of Military Appeals 39 49 49
RDT&E 719 806 799
Defense Industrial Fund 1,611 1,638 1,602
MAP 77 90 87
Total, Defense Agencies direct hire 75,102 80,009 80,960
Total, Defense Agencies indirect hire 1,719 1,915 1,882
Total, Defense Agencies end strength 76,821 81,924 82,842
Total, direct hire 915,819 930,000 935,600
Total, indirect hire 74,563 83,900 88,900
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DEPARTMENT OF DEFENSE CIVILIAN EMPLOYMENT?Continued
Department/Agency
1980
1981
1982
Total, Military Function
990,382
1,013,900
1,024,500
By appropriation category?operation and maintenance:
&
Direct Hire
597,529
604,246
607,548
Indirect Hire '
72,566
81,644
86,174
Subtotal O&M
670,095
685,890
693,722
Industrial and Management Fund
265,997
273,259
276,097
Research, Development, Test & Evaluation
41,562
41,786
41,528
.?
Military Construction
12,124
12,335
12,525
Military Assistance
604
630
628
Total
990,382
1,013,900
1,024,500
FEDERAL EMPLOYEE INJURY COMPENSATION SYSTEM
In past years, the Committee has expreised its concern over the
escalating cost of the federal employees compensation program and
expressed a need for corrective action by the legislative and execu-
tive branches. In fiscal year 1979, the Committee placed a general
provision in the bill for the first time which limited payments that
the DoD can make to the Department of Labor for the federal
employee compensation fund at $170.6 million in lieu of the $182.1
million requested at that time. Each year the Committee has con-
tinued such a limitation awaiting improvements in administrative
procedures. There are indications that the Department of Labor
has tightened up these requirements and has made some steps in
reducing the numbers of personnel on the disability compensation
roles. In June 1981, the Secretary of Labor transmitted to the
Congress a number of proposals to lower costs of the program. The
draft bill, "The Federal Employee's Reemployment Compensation
Amendments of 1981," is designed to assure that federal workers,
disabled as result of their employment are returned to gainful
work as soon as possible. This legislation is designed to: (1) alter
the compensation rate for disability to 80 percent of spendable
income which is defined as gross pay less standard tax deductions;
(2) establish a seven work day waiting period before a claimant
with a traumatic injury could receive compensation benefits in
order to promote the return to work of employees with less serious
a disabilities; (3) authorize agencies to advance compensation to em-
ployees when there is medical information pointing to serious dis-
ability; (4) make mandatory the cut-off of disability benefits of an
employee who unjustifiably fails to accept rehabilitation; and (6)
authorize employing agencies to withhold from the pay of an em-
ployee who has returned to work the amount of compensation
overpayments made, if any, in order to help assure that such
amounts are collected.
Since the Committee's policy of recent years has been to reduce
the amount paid by the DoD into the employee compensation fund
to an amount equal to the average cost increase of the direct labor
for that year in order to encourage passage of legislation similar to
that described above, the Committee is once again proposing to
limit DoD's payment. The Committee is recommending a payment
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of $206.1 million to the fund in lieu of the $229.5 million requested.
This is an increase of approximately 7 percent from the $192.8
million provided in FY 1981. Section 735 of the bill contains this
limitation.
CIVILIAN PERSONNEL PROGRAM EVALUATION
In January 1981, the Defense Audit Service completed a review
of DoD civilian personnel program evaluation systems. In accord-
ance with a 1969 Office of Personnel Management directive, each
of the military departments established a civilian personnel pro-
gram evaluation function. The civilian personnel program evalua-
tion systems established by each military department differ sub-
stantially in organization, structure, staffing and methods of pro-
viding oversight of civilian personnel activities to higher levels of
management. The auditors found that none of the military depart-
ments routinely provided the results of individual on-sight reviews
to the Office of the Assistant Secretary of Defense (Manpower,
Reserve Affairs and Logistics) for DoD-wide assessment. In general,
it was found that the value of these reviews in terms of the policy
evaluation and development process was marginal. Considering the
$3.5 million annual cost the Committee recommends that such
efforts be cut back. It is difficult to understand how the reviews
can have much impact in changing federal government civilian
personnel policy if their results are not provided to higher manage-
ment levels in a meaningful format for assessment and eventual
transmittal to the Office of Personnel Management. Accordingly a
reduction of $1.6 million is recommended in the bill. ?
REEMPLOYMENT TRAVEL BENEFITS
In 1954, Congress passed Public Law 83-737 (5 U.S.C. 5728 (a)).
This law provides that the government will pay round trip ex-
penses for employees and their immediate families from their post
of duty outside the continental United States to their places of
residence at the time of employment for transfer to such posts, so
that these employees can take leave. Employees recruited in the
United States for duty in Hawaii, Alaska, Puerto Rico or the
territories and possessions are eligible for the annual vacation
leave travel. The largest portion of the cost of this travel is for
personnel recruited within the continental United States who are
employed in Hawaii.
According to the Defense Audit Service, 814 eligible employees
have been in Hawaii an average of 12 years and as long as 38
continuous years. The current estimated total cost for all areas for
all government agencies is in excess of $2.5 million annually.
The bill contains a general provision which will limit the number
of such trips to one per eligible employee during his employment in
the affected areas. The Department of Defense, the General Serv-
ices Administration and the Office of Personnel Management sup-
port changes in the law which will restrict such travel. Employees
would retain their entitlement for transportation back to the conti-
nental United States if their employment were terminated. They
will also have the benefit of one free vacation trip during the tour
at an "overseas" location.
?
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SUPPLY AND OTHER LOGISTICS ACTIVITIES
The DoD has placed most of its priorities and funds in areas of
R&D and the procurement of weapons systems. The logistical sup-
port for those weapons systems on-line or coming into the inven-
tory has been sorely neglected for many years. The Appropriations
Committee has practically begged DoD in years past to submit
adequate budgets for operating spares. This problem has been rec-
ognized and successfully dealt with in the last two Defense budgets.
The logistics segment of DoD's readiness posture while receiving
lower funding priority does receive more than its share of "man-
agement systems." DoD employs legions of accountants and com-
puter programmers to track funds passed between and among var-
ious DoD activities. The complexity of the systems created by these
accountants and computer programmers boggles the mind. Stock
funds (at least 20 separate systems), numerous industrial funds,
vast systems of property accountability, and control have turned
combat commanders into "clerks" who read and respond to volumi-
nous products produced by the accountants and programmers. In
spite of this effort, the Investigative Staff found that the 82nd
Airborne Division, the Army's premier combat outfit, frequently
failed to submit requisitions for material they needed (material
which was readily available at Army depots) due to the fact that
they did not have sufficient Army O&M funds to procure the item
from the Army stock fund!
Each military service has its own supply capability, supplement-
ed by the Defense Logistics Agency and the General Services Ad-
ministration. Duplication, overlapping, and even waste abounds in
this area, and attempts by OSD to make improvements in supply
management and reduce costs have met with great resistance on
the part of the military services. As a consequence, the DoD is
saddled with myriad inefficient and costly supply systems.
The following section of the report addresses supply and other
logistics activities in more detail. Included are discussions of spare
parts provisioning, positioning of spares, inventory control proce-
dures, procurement of non-standard/non-stocked items, consumable
item management, loss and theft of equipment government fur-
nished material, etc. The Committee has allocated a general reduc-
tion of $54.2 million to the various O&M appropriations. There is of
course the potential for saving hundreds of millions of dollars
annually if the shortcomings, mismanagement and waste docu-
mented on the following pages could be eliminated.
SPARE PARTS PROVISIONING
The military services maintain inventories in order to furnish
requested material within specified leadtimes and to meet surge
mobilization requirements when an emergency requires it. With
needed inventories on hand at depots, the customers (using organi-
zations) do not have to wait for their needs to be satisfied by a
manufacturer. Since the inventory manager's mission is to satisfy
the customer's request in a timely manner, he must place orders
with the manufacturers and receive the material in advance of
customer's requests. To do this, the inventory manager must be
able to forecast customer's future needs or requests.
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The most accurate method of forecasting these requirements is to
know which items in what quantities have failed or were needed in
the past?historical evidence or prior experience. As long as the
same systems remain in use and perform like functions or missions
in similar environments, requirements to support them in the
future will statistically approximate prior experience.
When new weapon systems are brought into the military serv-
ices, spare parts must be procured and placed at the various orga-
nizational levels to support those systems during their initial de-
ployment. The range and quantities of the new spare parts in most
instances are determined on the basis of engineering or other
technical estimates, since past requirements experience is not
available. This process is known as initial provisioning.
Failure to complete provisioning review
DoD directives state that after an item has been used in an
operational environment for 2 years, the use of estimated factors is
prohibited. They also state each responsible organization will main-
tain a 2-year history of part numbers, and stocked and nonstocked
item requisitions received by the inventory control managers for
the purpose of identifying for review and possible stockage of those
items which subsequently meet DoD stockage criteria on the basis
of actual demand.
In the Army, this subsequent determination of the range and
quantities of items to be included in the inventory for support of
additional systems operationally introduced is supposed to be based
on a "post provisioning review.' This review is to be conducted 12
to 18 months after initial deployment of a weapons system which
begins the Demand Development Period (DDP). It is to be a valida-
tion of the adequacy and validity of selection of the rqnge and
quantity of spare parts made in the initial provisioning. Further-
more, this review requires that revisions to the initial provisioning
be made as expeditiously as practicable.
In general, the military services have not been determining their
requirements for spare parts subsequent to initial provisioning?on
actual failure/demand rates. The military services should be using
actual data for computing requirements at 24 months of experience
after initial deployment and thereafter.
The Army's Blackhawk helicopter was first fielded in October
1978; however, the Army indicated its DDP would run from No-
vember 1979 to January 1982. The Army has been using contractor
support and has received very little operational demand data for
the spare parts needed to support this system. The Navy plans to
assume supply support responsibilities from the contractor for the
F/A-18 aircraft in October 1982 and only then will it begin its
DDP. This is approximately 21/2 years after the first aircraft
became operational.
As a result, actual operational demands will not be used com-
pletely to compute requirements for spares to support these Army
and Navy systems for approximately 4 years after their initial
deployment. These years are arrived at by computing the time
frame from the date of first delivery (to a unit for operational use)
to 2 years after the service planned date of beginning its DDP. The
rationale for using actual operational data as soon as possible is
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evident from the failure rates experienced by the Air Force for the
F-16.
In its March 19, 1980, report on Repair Parts Provisioning at the
Army Missile Command (MICOM), the Army Audit Agency dis-
closed that provisioning reviews were not being made to determine
whether the kinds and quantities of repair parts supplied to sup-
port past deployments of the end items were correct or should be
revised for use in future deployments. Army Regulation 710-1 pro-
vides that when the extent of failures, as shown by the number of
demands for a part, varies from the initial failure factor used for
initial provisioning estimates, a review should be made to deter-
mine the causes and adjust the estimates to be used in the future.
Army Audit stated significant differences existed between estimat-
ed and actual failure rate for over 15,000 repair parts. Further-
more, the Army Audit Agency found 23 of 100 highly demanded
repair parts were not even listed on the support list allocation
cards. These cards identify the items and quantities estimated to be
needed for support during the initial deployment period.
The report stated, because most failure factors were not reviewed
and updated as required, there was no assurance the range and
quantity of repair parts and components to be provided on future
deployments of the same weapon systems would be corrected.
OSD has stated that present policy allows for the transition to
use of actual experience in the requirements computation and this
transition should be made as soon as possible, with a maximum
allowable time of 2 years. Discussions with DOD officials indicate
although this is the stated policy, OSD has no management con-
trols, other than internal or GAO audits, to effectively ensure the
policy is carried out as intended.
CANNIBALIZATION AND "HANGAR QUEENS" DOD SOLUTION TO
SPARE PARTS PROVISIONING FAILURES
Cannibalization is a short term fix. It is extremely expensive in
terms of man-hours, because the part must be removed and re-
placed twice instead of just once. Because a good part may be
damaged during removal, the overall spares requirement generated
by cannibalization will be more than one-for-one in the long run.
"Hangar queen" is the term applied to a piece of equipment that
is deadlined and then "plundered" of its parts to make another
piece of equipment operational. Any aircraft deadlined more than
21 days because of the lack of spares is designated a "hangar
queen."
The services are concerned over cannibalization and "hangar
queens." The pressure of maintaining a high readiness posture and
the failure of the logistics system to provide critically needed
spares, has forced cannibalization combat units. It is a very expen-
sive proposition when seven aircraft, costing $20 million each are
on "static display" due to lack of spare parts (some costing as little
as $5).
This results in the following situations:
At one A-10 base 60 percent of the parts used to repair
grounded aircraft were obtained by cannibalization.
Of 151 parts on order for the A-10s TF-34 engine 75 of the
orders were the result of cannibalization.
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The F-15 aircraft still experiences very high cannabilization
and larger queen rates and only through intensive "manage-
ment" have the rates been kept from going even higher.
A lack of spare parts for helicopter engines, in part because
the manufacturer is overcommitted to producing M-1 tank
engines has reduced the operational readiness of Army helicop-
ters in Europe.
The F-16 is experiencing a cannibalization rate of 1.5 per-
cent per 100 sorties and maintenance personnel estimate that
it will reach 30 per 100 sorties.
Ten percent of F-ill's are hangar queens.
The M-730 tracked vehicle for the CHAPARRAL missile
system which has been in the Army inventory in large number -
for over a decade has serious parts shortages. It is not uncom-
mon to tow the M-730 into field positions.
Even less sophisticated standard commercial items such as
the Dodge (M-880) pickup truck cannot be maintained.
The Army accepted from a contractor a circuit card for the
HAWK system that was unreliable and placed the so called
improved HAWK at a zero operational ready rate for a period
of time.
POSITIONING SPARE PARTS
The Air Force Logistics Command (AFLC) has not positioned its
spare parts inventories at the air logistics centers which could best
service customers while still minimizing distribution cost. Most of
this inventory is first stored at an air logistics center with item
management responsibility, and then shipped long distances to
using activities located at or near air logistics centers. The Air
Force can save up to $28.7 million on inventory investment costs
and $1.8 million yearly in handling, transportation, and inventory
holding costs by storing spare parts at the air logistics center
located nearest the ultimate user. The Air Force reports limited
progress in correcting this situation.
A serious lack of spare parts has degraded the operational readi-
ness status of DOD's weapon systems. This tragic state has resulted
from the military services' mismanagement of the provisioning,
procurement, and budgetary processes. The military services must
shoulder the blame themselves. Their failures to (1) conduct the
required post provisioning reviews, (2) respond to documented pro-
visioning and procurement abuses, and (3) develop accurate re-
quirements for spare parts, have jeopardized the readiness of front-
line weapon systems.
While many DOD officials point to a declining industrial base as
the cause of the shortage of spare parts, the DOD provisioning
procedures are also a major cause for this situation.
The production of new weapon systems is primary, the support of
existing systems is secondary. Replenishment of spares takes a
"back seat" to getting new weapon systems deployed to field units.
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INVENTORY CONTROL PROCEDURES AND PRACTICES
Validation of Outstanding Requisitions
DOD and the military services have established procedures for
reconciliation and validation of outstanding requisitions. The pur-
pose is to identify requisitions for supplies and materials no longer
needed. These procedures are inconsistent, overlapping, and dupli-
cative and they have not been effective. As a result, requisitions for
material no longer required have not been cancelled and, converse-
ly, valid requisitions have been erroneously cancelled?seriously
delaying the receipt of needed supplies by combat units.
Over the years, numerous GAO, DOD, and military service audit
reports have? demonstrated the inadequacy of the reconciliation
validation procedures, particularly the lack of understanding of the
concept of the reconciliation/validation process and the perfunc-
tory performance by personnel involved. The reports demonstrated
the resulting procurement or stockage of unneeded materials worth
hundreds of millions of dollars through the failure to promptly
cancel requisitions for unneeded materials.
Many of the findings of the earlier reports will be reiterated in
two reports soon to be issued by GAO and the Army Audit Agency
(AAA). A synopsis of these findings follows.
?Requisitioning activities do not always furnish listings or cards
of outstanding requisitions to the end-user.
?When listings or cards were furnished to the end-user, they are
not always returned and the requisitioning activity does not
followup.
?Review for continuing need of an item by the requisitioner is
perfunctory.
?End-users do not always report receipt of materials requisi-
tioned.
?End-users do not request cancellation of requisitions filled by
other means such as lateral transfer from another organiza-
tion, substitution, repair, etc.
?Cancellations attributed to the reconciliation/validation proc-
esses are overstated because?
many (67 percent) of the cancellation reported resulted
from normal day-to-day operations rather than the reconcili-
ation/validation processes,
the Army, unlike other military services, included requisi-
tions for major end items in its reconciliation/validation
processes (these accounted for only a small percentage of the
number of cancellations but a large percentage of the dollar
value of cancellations) and these requisitions should not be
included,
rejected requisitions are counted as cancellations although
they were usually corrected and put in subsequently as new
requisitions, and
cancellations are included in the reported statistics al-
though the material had been received and were duplicates
of previous normal day-to-day operations cancellations.
?Cancellations, particularly automatic cancellations for nonre-
sponse, are frequently reinstituted in a subsequent period.
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?Requisitioners requested cancellation without regard to the
dollar value of the requisition or supply status of the material
although the ICP will not cancel a requisition if (1) there is a
record of a transportation release at the depot and the dollar
value is less than $25 or (2) the item is backordered for direct
delivery procurement and the dollar value is less than $50.
The Committee's Investigative Staff observed similar findings
during its review. As described above, the impression is clearly
drawn of a harrassed stock clerk, repetitively shuffling through his
dog-eared files to satisfy the requirements of the various reconcili-
ation and/or validation processes to the extent that normal day-to-
day requisitioning and cancellation are not accomplished promptly,
if at all. These processes are inconsistent, overlapping, and duplica-
tive in that the ages of requisitions, types of requisitions, sources of
supply, and cycles vary.
The Investigative Staff concludes that (1) time and effort is de-
voted to procedures which provide little more than a records-to-
records check between the wholesale and retail supply levels, (2)
reported savings resulting from the procedures are exaggerated
and misleading, and (3) standardizing and strengthening of proce-
dures under a single monthly "bottom-up" process offers the best
chance for a viable user validation program. The various inconsist-
ent, overlapping, duplicative, and time-consuming efforts for top-
down, bottom-up, and other periodic reconciliation/validation proc-
esses should be eliminated in favor of a single standardized valida-
tion process. The reconciliation function should be accomplished in
a time frame which takes into account the capabilities and needs of
all the parties involved. Most importantly, specific procedures and
training should be provided to personnel involved in the process.
The Committee urges the Department to get on with the process of
standardizing the supply validation process in the interests of
saving money and at the same time improving supply support.
MATERIAL RETURN PROGRAM
The Department of Defense has a standard program for manag-
ing material eligible to be returned to the wholesale supply system
that has been in effect for about two years. While the new system
is an improvement in that it provides wholesale managers with
better visibility of retail stock, the Defense auditors determined
that significant savings could be achieved if wholesale managers
did not instruct activities holding the stock to ship it, including
excess material, to a supply depot but instead directly to a custom-
er who had a back ordered requisition for the material. There is a
need to build into this system changes which preclude unnecessary
handling of material excess to one activity but required at another
activity.
The auditors estimate that correcting this problem can save at
least $5.8 million annually in unnecessary shipping and handling
costs. In addition they identified another $2.6 million in savings to
be achieved simply by instructing military activities to retain in
storage material which they report as excess to that activity and
which is also excess to the wholesale management requirements.
There is also a tendency to throw good things away (disposal
actions) and buy the same thing at the same time. DOD and Air
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Force auditors reported that the Air Force has a policy which
permits wholesale managers to authorize disposal of material when
wholesale assets exceeded the wholesale approved force acquisition
objective, without consideration of the wholesale retention level.
This policy was contrary to DOD instructions. It was estimated
that the Air Force made some 98,000 unauthorized disposal actions
annually. The Defense auditor concluded "that as many as 122,000
disposals of defected material, worth at least $2.4 million, were
authorized annually which may be required to support operational
equipment."
The Air Force can save at least $1.0 million annually by shipping
items in need of repair directly to the repair center (either ALC or
a contractor facility) rather then returning material to the logistic
center with management responsibility for the item. The Air Force
is in the process of attempting to correct this problem.
EXCESS MATERIAL AND SUPPLIES RETAINED AT NAVY INDUSTRIAL
ACTIVITIES
Navy industrially funded activities (shipyards, aircraft repair
facilities, weapons stations, etc.) continue to retain material and
supplies far in excess of amounts permitted by the Navy controller
manual. Despite repeated findings by the Navy Audit Service these
activities continue to expand their shop stores or materials and
supply accounts in excess of inflationary increases. Causing the
Navy-wide total to grow from $249.2 million at the end of fiscal
year 1979 to $304 million at the end of fiscal year 1980.
Material inventories maintained at the Navy Air Rework Facili-
ty, Cherry Point, North Carolina, have consistently been above
that authorized to meet the production demands of the facility.
Navy auditors reported this situation in February 1978. Subsequent
to that report, the inventory has increased 58 percent in value to
$10.3 million at the time of the next audit and excesses on hand at
that time were $6.6 million or 64 percent of the Cherry Point
NARF's total inventory. Despite statements that the unneeded ma-
terial inventory would be reduced, it in fact grew to $11.2 million
by the end of fiscal year 1980. The Navy could not tell the Commit-
tee how much of these excesses had been returned to the supply
system and how much was sent to property disposal.
In fact, accounting for supplies at least in the aircraft portion of
the Navy industrial system has deteriorated despite the introduc-
tion of an elaborate Industrial Material Management System. This
system records material transactions and accounting data and con-
trols inventory range and depth based on accepted Economic Order
Quantity Inventory Control Principles. This system costs about one
million dollars annually to operate.
The Committee estimates that one time savings of $30 to $40
million are possible through proper management of material inven-
tories at Navy Industrial Activities.
NON-STANDARD/NON-STOCKED ITEMS
In addressing the matter of invalid requests for non-standard/
non-stocked items through the supply system, last years Committee
report (No. 96-1317) stated that: "Based upon these findings, the
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Committee directs that the DLA place in effect a challenge system
on these requisitions until such time as the customers (military
services) have a valid requisition rate for nonstandard/nonstocked
items which exceeds 90 percent for at least 18 months." DoD has
done nothing to comply with the Committee's direction on this
matter.
Recently the Committee Surveys and Investigations Staff re-
viewed procedures for requesting these types of items by interview-
ing numerous DoD officials at Inventory Control Points and at the
working level, and determined that if nonstandard and nonstocked
requisitions are "challenged" for validity from the Inventory Con-
trol Point back to the requisitioner, savings in unnecessary pro-
curement could exceed $140 million annually.
The Defense Audit Service (DAS) found in June 1979 the Defense
Logistics Agency's procedures did not provide for the special valida-
tion of requisitions for nonstandard and nonstocked items. A statis-
tical sampling of these requisitions showed that, if questioned,
about 23 percent of the requisitions would be cancelled because the
requirements were invalid. The Defense Electronics Supply Center
DAS found that $5.6 million could be saved annually by suspending
requisitions pending the validation of nonstandard and nonstocked
requirements. The failure to cancel the invalid requisitions for
nonstandard and nonstocked items results in a virtual loss of the
money spent to buy them. These items are not authorized for
stockage; thus, they cannot be returned and, as a result, they are
probably disposed of in new condition when they are received.
The Services have failed to respond to the Committee direction to
challenge these requisitions because they believe new procedures
will (1) increase workload, (2) increase message traffic, (3) delay
support, (4) possibly evolve into wholesale validations and cancella-
tion of requisitions if users do not respond, and (5) savings are
questionable.
The Committee's Investigation staff has reviewed this matter
again and found that a nonstandard, nonstocked requisition chal-
lenge process can be effective. For example, the Army's Missile
Command supply center has a procedure to challenge requisitions
for nonstocked items coded Issue Priority Group III (routine replen-
ishment). Nonresponse to the challenge within 30 days results in
cancellation by the supply center. During the past two quarters,
230 such requisitions were challenged, of which 5 were validated by
the requisitioner, 5 were requested to be cancelled, and 220 were
cancelled for nonresponse.
The Investigative Staff found Defense Logistics Agency supply
centers had filled about 540,000 requisitions for nonstandard and
nonstocked items with a standard price of about $185 million
during the first half of FY 1981, or an annual rate of about $370
million. These figures exclude requisitions?considered to be inap-
propriate to be subjected to a challenge process?for fuels, subsist-
ence, and Military Assistance Programs.
Projection of the 19 percent, (requisitions validated for cancella-
tion) discussed above, means that about $70 million of nonstandard
and nonstocked items may be procured by DLA during FY 1981
even though the items are no longer needed by the requisitioner.
The Investigative Staff believes this figure could be doubled to $140
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million if requisitions for such items managed by the military
services and GSA were included.
In view of the above finding, the Committee is repeating the
directions made last year to establish a system to challenge such
requisitions until there is a long term indication that at least 90
percent of requests for non-standard/non-stocked items are valid
? and cannot be filled by a substitute stocked item. Automatic can-
cellation after a 30 day failure in responding to the challenge
should also be instituted.
CONSUMABLE ITEM MANAGEMENT
Each of the services and the Defense Logistics Agency (DLA)
operate separate facilities required to receive, store, and issue the
material for which it has wholesale management responsibilities.
There exists a multiplicity of managers performing essentially du-
plicative functions for the same types of consumable material.
Each manager has developed his own management philosophy,
policies, procedures, and data systems, resulting in significant
waste, particularly in the areas of manpower and supporting facili-
ties costs. Additionally, the consolidation of procurement require-
ments for classes of consumable items rarely occurs. Thus, the
possibility for substantial savings, which could be achieved by ap-
plying DLA's much higher level of price competition, is lost. Spe-
cifically, during FY 1979 the military services awarded 25 percent
of their procurement dollars competitively compared with 68 per-
cent achieved by DLA centers. An analysis by the Defense Logistics
Analysis Office (DLAO) reveals that, "For each 1 percent that DLA
improves competition beyond the level achieved by the Services an
annual savings of $12.7 million will result."
In December 1978, the Office of the Secretary of Defense pro-
posed the transfer of consumables from the military services to
DLA in order to achieve total potential savings of $200 to $300
million. The proposal provided data which demonstrated that
DLA's management of consumables will improve DOD's overall
logistics readiness and reduce costs. The Committee supported this
effort.
The Army, Air Force, and to a lesser extent the Navy, are
opposed to the consolidation of consumables under DLA for reasons
that can be classified as parochial and sometimes emotional.
Further Savings in Item Management Transfer Can Be Achieved
A further review by the Committee's Investigations Staff indi-
cates that the transfer of the remaining 1.3 million consumable
items from the services to DLA could realistically result in annual
saving of $200-$300 million. These savings will be achieved through
the reduction of personnel and facilities as well as more stream-
lined, efficient, and economic procurement practices. In addition to
these "direct" savings other major indirect savings could occur if
all consumable items were transferred to DLA making it no longer
necessary for the military services to each operate separate stock
funds.
The largest potential area for savings clearly lies in achieving
more efficient and economic procurement procedures. A review of
FY 1979 procurement data reveals that the military services
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awarded only 25 percent of their procurement dollars competitively
for consumable items compared with 68 percent achieved by the
DLA centers for the same type of items.
The Defense Analysis Office presented the following data to sup-
port the competitive procurement difference between the military
services and DLA centers for items subject to transfer.
In millions
Percent
Fiscal year Competitive competitive
1979 totalcompetitive Non-
DIA $1,398.6 $948.4 $450.2 67.8
Services 7,570.9 1,918.9 5,652.0 25.3
DLA has an aggressive program for "breaking" sole-source pro-
curements. The objective of the program is to review currently
noncompetitive purchased items, to find or develop additional tech-
nical data, and to interest new sources to bid on their solicitations
in order to expand competitive procurement.
The analysis of the results of this program at three DLA centers
shows the following:
DLA PROCUREMENT EVALUATION DOLLAR SAVINGS, FISCAL YEAR 1978
In thousands
DLA center
Cost before DLA Cost after DLA
evaluation evaluation
Savings
Percent
savings
DISC (172 cases) $3,834 $1,563 $2,271 59.2
DESC (48 cases) 2,636 1,502 1,134 43.0
DCSC (283 cases) 6,804 4,204 2,600 38.2
Total (503 cases) 13,274 7,269 6,005 45.2
During FY 1980 the military services made $3.748 billion in
wholesale stock fund purchases. Assuming the DLAO competitive
percentage for the services is still valid (25 percent), then approxi-
mately $2.811 billion of these purchases were made noncompetitive-
ly. If these consumable items are transferred to DLA and DLA
applies its procurement evaluation effort to these items, the poten-
tial for savings is $1270 billion ($2.811 billion times 0.452), or for
each 1 percent that competition increases beyond the level current-
ly being achieved by the services, an annual savings of $12.7 mil-
lion will result ($1.27 billion divided by 100).
The military services could possibly achieve some of these sav-
ings under the current distribution of consumable items. However,
there are several factors which mitigate against pursuing this
course. First, the Investigative Staff, in numerous discussions with
military service procurement officers, perceived that these officers
are primarily interested in receiving a quality product, when they
need it, from a contractor who causes few, if any, problems. Cost-
effectiveness and the pursuit of competition are less important
considerations in their procurement philosophy, analysis, and pro-
cedures. Second, each of the services and DLA are procuring the
same type items from various contractors around the country.
There is no single source of information to determine the total
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DOD requirements for a particular type of item. The Investigative
Staff is working with the Defense Contract Administration Service
(DCAS) to develop the magnitude of this situation.
The Military Services' Objections
While the reasons for effecting the consolidation of consumables
at DLA appear to be overwhelming, the Army, the Air Force, and
to a lesser extent the Navy, are opposed to this proposal. Their
concerns lie in three major areas: readiness (supply support), item
complexity, and the validity of the economic analysis. Each of these
objectives is analyzed in some detail in the Committee's staff report
on this matter. (See pages 60-66). The material is too voluminous to
repeat here. The data presented shows that to a major extent the
military services objections to any further transfer of consumable
items are a parochial attempt to retain control over supply system
manpower assets which can be better utilized by the Defense Logis-
tics Agency.
The services can interminably rebut, or disagree with any eco-
nomic analysis performed by any organization regardless of qualifi-
cations. It is virtually impossible to perform the finite analysis the
services will continue to insist on. The Investigative Staff feels that
there is sufficient data and evidence upon which to make a decision
on this matter. There are a number of management considerations
that deserve attention and emphasis in accomplishing the proposal
to transfer management of 1.3 million consumable items from the
military services to DLA. However, in view of the magnitude of the
estimated annual savings in direct costs of between $63 million and
$124 million, and in view of the Secretary of Defense legal respon-
sibility to, "take appropriate action (including transfer, reassign-
ment, consolidation or abolition of any function, power or duty) to
provide more effective, efficient, and economical administration
and operation and to eliminate duplication in the Department of
Defense;" it appears that the proposed realignment of management
for all consumable items should be directed for implementation
without further delay. The Committee notes that the Deputy Secre-
tary of Defense has directed the process of item management trans-
fer to begin in a limited way with 200,000 items.
Loss AND THEFT OF EQUIPMENT
DOD makes adjustments to its inventories valued at billions of
dollars each year. These adjustments have been noted in numerous
reports by GAO and the various DOD audit agencies. The losses
have generally been attributed to (1) weakness in supply manage-
ment of equipment under control of the services, (2) highly inaccu-
? rate financial inventory report data, (3) the use of tens of thou-
sands of codes involved in processing transactions through supply
and financial records, (4) high turnover rate for personnel involved
in complex supply and financial systems, (5) physical inventory
adjustments, (6) losses in transit, and (7) reported theft.
The Investigative Staff directed its attention to the procedures
used by DOD to control or account for cargo/items which enter the
Defense logistics pipeline. These procedures were found to be con-
fusing, conflicting, and poorly coordinated. As a result, millions of
dollars of Defense cargo is routinely reported as "missing" and
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little, if any, effort is made to resolve these discrepancies. Addition-
ally, the Investigative Staff has obtained strong evidence that the
confusing nature of the DOD cargo accountability procedures is
causing many activities to ignore the reporting procedures and
thus, the extent of the total losses cannot be fully determined.
ARMY
?
The U.S. Army Material Development and Readiness Command
(DARCOM), the largest inventory manager in the Army, reported
the average value of its inventory during fiscal year 1980 to be
nearly $15.9 billion. During the same period inventory adjustments
showed a net loss of $24.6 million out of about $950.8 million of
adjustments, $463.1 million in gains and $487.7 million in losses.
NAVY
The Navy has a long and continuing problem of financial control
over its inventories. Since 1966, the Navy Audit Service has issued
more than 80 reports showing that the Navy's financial inventory
report data is highly inaccurate due to numerous different types of
problems and/or errors that occur in both the financial and supply
system records. In its most recent report of February 2, 1979, the
Navy Auditor General stated the Navy financial inventory report
showed an inventory of $13 billion as of the end of fiscal year 1979.
During the same year a total of $29.3 billion inventory gain and
loss adjustments were noted in the financial inventory report:
AIR FORCE
The Air Force Logistics Command (AFLC) had sales from stock
and industrial funds of $8.74 billion during fiscal year 1980. During
the same period, AFLC made 170,756 inventory adjustments with a
total gross value of $194 million. Of this amount $92 million was
for inventory increase and $102 million was for inventory de-
crease?a net decrease of $10 million.
MARINES
Out of a total inventory of over $2.7 billion, the Marine Corps
made a total of $87.7 million in physical inventory adjustments
resulting in a net gain of over $8.8 million during fiscal year 1980.
During the same period accounting adjustments totaled $165.3 mil-
lion for a net gain of over $9.4 million.
DEFENSE LOGISTICS AGENCY
The Defense Logistics Agency (DLA) had sales of nearly $10.8
billion during fiscal year 1980. During the same period, DLA had
physical inventory adjustments of $222.8 million, which included
$117.1 million in gains and $105.7 million in losses, for a net gain
of $11.4 million. These adjustments are the result of differences
between stock records and book balances, adjustments made to
vouchers and inspection reports, and differences in transfer docu-
ments.
In fiscal years 1978 and 1979 the Defense Personnel Support
Center, major DOD supply center of DLA lost control of hundreds
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of millions of dollars in stock funds. The center made adjustments
of about $566 million in an attempt to correct its financial records
but the validity of most of these adjustments could not be deter-
mined because of inadequate documentation.
These accounts were certified as correct by officials at the center
despite their knowledge of the center's financial problems.
? During the course of its review the Investigative Staff noted a
number of significant instances where Government property was
stolen, unaccounted for, or misappropriated. The Surveys and In-
vestigations Staff Report pages 17-18 list some examples of theft.
Audit reports and the semi-annual Report to the Congress on
Audit, Inspection and Investigative Organizations contain many
more.
It is clear that some DOD procedures used for the accountability
of its property are confusing, contradictory, and poorly coordinated.
Even the author of one of the primary property accountability
regulations found his and the related regulations to be confusing.
The Investigative Staff found that this confusion extended from the
Inventory Control Points down to and including individual combat
support units in Europe.
In order to improve this situation, DOD must take aggressive
action to remedy this situation. A thorough review must be made
of all the regulations relating to the control and use of Government
property. These regulations must be revised and adhere, as a mini-
mum, to the following characteristics:
Simplicity?they must be written in such a manner that
even the lowest graded soldier or civilian employee can under-
stand them since it is at this level that these procedures must
be implemented.
Clarity?the procedures must be stated in such a way that
they are clearly understood with little or no confusion as to
what items should be reported and what activity should re-
ceive the report.
Fully Coordinated?these procedures concerning the control
and use of Government property must be fully coordinated so
one regulation does not contradict or negate instructions stated
in a related procedure. Ideally, DOD should issue one instruc-
tion which would cover all elements of transportation, inven-
tory control, and financial accountability for all DOD property.
Command Supported?the old axiom that "people do well
only those items which the boss checks" certainly applies here.
Commanders at every level must show concern for the security
and accountability of DOD's property. Incentives must be built
into the accountability system so that the supply, transporta-
tion, and financial clerks will want to report discrepancies.
LACK OF CONTROL OF GOVERNMENT FURNISHED MATERIALS
Despite a Congressional instruction, the military services contin-
ue to be negligent in their control of Government furnished materi-
al (GFM) and are providing equipment worth millions of dollars
yearly to contractors whose inventory controls are inadequate to
provide the proper records and control of its use. The services have
not yet established procedures as mandated by Congress and, as a
result, have not gained visibility of the amount of GFM that con-
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tractors possess. This lack of visibility has resulted in widespread
over-requisitioning, uneconomical requisitioning, unauthorized use
of GFM and lack of proper inventory controls of GFM causing a
loss of millions of dollars to DOD.
The DAR allows the Government to furnish material to contrac-
tors when it is determined to be in the best interest of the Govern-
ment by reason of economy, standardization, the increased produc-
tion, or other appropriate circumstances. This most commonly
occurs in Maintenance and Overhaul (M&O) contracts.
? Contractors can acquire GFM from the DOD supply system by
requisition or transfer. The official accountable records for the
property are maintained by the contractor as a part of their prop-
erty control systems. A Government property administrator is re-
quired to conduct periodic tests of the contractor's property control
systems as a technique to assure that adequate inventory controls
are used by the contractor to protect the interests of the Govern-
ment.
During the past several years numerous audits and studies have
identified a number of deficiencies including:
(1) unauthorized requisitioning of supplies by contractors
from Government supply sources,
(2) over-requisitioning of material,
(3) lack of accountability of GFM shipments,
(4) excessive number of requisitions,
(5) abuse of priority designators,
(6) unreasonable issues of Government owned material,
(7) GFM being used on commercial work,
(8) inadequacies in material control,
(9) no records of issues,
(10) lack of cost effectiveness in the use and acquisition of
GFM, and
(11) excessive spares on hand at contractor plant, when air-
craft were not operational because of the unavailability of
these spares.
A recent GAO report found that while the Navy was providing
billions of dollars of GFM to contractors for use in constructing,
overhauling, and repairing Navy ships, the Navy did not know the
amount of GFM in their contractor's possession because there were
no overall financial or other management systems to account for
these materials.
GFM Dollars Cannot be Easily Identified
An Air Force audit identified an overhaul contractor who was
not preparing the documents required to account for GFM. Thus,
Air Force item managers were neither aware of nor had visibility
of those assets. As a result of the audit, $316,000 of excess GFM
was identified and used to fill requirements on other commercial
contracts.
The audit also identified $950,000 of excess GFM charged to one
? contractor but in possession of another contractor. GFM was issued
as initial spares for a maintenance program which did not materi-
alize. Although the item managers were aware of GFM, they did
not know it could have been used to satisfy other demands.
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The Investigative Staff requested from three major Army com-
mands the amount of GFM that had been provided to contractors
on active M&O contracts. While these commands had contracts
worth billions of dollars, only one could provide an exact dollar
amount of GFM issued, the other two commands stated that they
would have to go to the individual contractors to obtain the figures.
DOD and the Services Slow to React With Appropriate Controls
The Committee has addressed the problem of the lack of control
over GFM which was allowing contractors to utilize and requisition
GFM in an uneconomical, wasteful, and fraudulent manner in
previous reports. The Committee's FY 1979 report requested DOD
to resolve the problem by allowing the contractors' use of the DOD
supply system with the understanding that they (the contractors)
would pay cash on the delivery of GFM when received from the
supply system. DOD deferred, citing legal barriers to selling GFM
to contractors. These impediments were removed in FY 1980 DOD
Appropriations Act (P.L. 96-154, Sec. 767, December 12, 1979). DOD
then proceeded to develop a test program to measure the effective-
ness of selling GFM to contractors. This pilot program has devel-
oped snags since it was difficult to find contractors to participate.
Five out of six contractors solicited by a Navy ICP refused to
participate in the test program. Additionally, the services stalled in
their development of the program. As of June 1981, only one con-
tract had been signed by the Navy, with several others in the
negotiation stage. The Army has only selected one system for the
pilot program and is not yet near signing a contract. The first
results of the pilot program will not be available until 1982, with
final results available in 1985.
DOD has issued new instructions (DODI 4140.48, dated March 3,
1981) to control the access to GFM by maintenance contractors.
These instructions require DOD components authorizing the use of
GFM by a minimum of two contractors to establish a Management
Control Activity (MCA) which is tasked to (1) maintain control over
all contractor access to DOD's supply systems, (2) establish guide-
lines to validate contractors' requests, (3) maintain a contract, req-
uisition, and shipment status file, and (4) provide a status report to
DOD on all contractors' GFM requests. This regulation, which took
effect 120 days from date of issue, requires semiannual reports for
the periods ending June 30 and December 31. However, the Investi-
gative Staff has found that the major commands have not yet
received the DOD instructions. This, of course, will delay imple-
mentation and the subsequent reporting. Moreover, as officials of
one Army command stated, the DODI (4140.48) cannot be fully
implemented until changes are made to four other regulations.
The DOD approach that is being undertaken seems to be similar
to previously proposed systems that were rejected by OMB because
they greatly increased government paperwork at a time when the
Federal Government is attempting to reduce paperwork. The basic
idea behind the Committee's approach from the start was to sell
the material at a sufficiently high cost to recover the government's
investment and thereby reduce "management" systems.
While DOD and its components have finally responded to Con-
gressional urging to establish controls over contractors' use of
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GFM, it will still be sometime before the new regulations are
actually implemented and an even longer time before the results of
the pilot program of selling GFM to contractors are known. Too
many years have passed since the GFM problem was made known
to DOD and many items of GFM have been improperly requisi-
tioned by contractors during this period.
MANAGING GOVERNMENT FURNISHING SPECIAL TOOLING
Millions of dollars of special tooling (with no foreseeable use or
need) are being stored at contractors' plants.
During the productive life of many major acquisitions and even
beyond that time, substantive contractor and Government manpow-
er is used in the administrative accountability of special tooling, its
storage, and disposal, costing the Government many millions of
dollars. For example:
One contractor plant visited by the Investigative Staff has
over $30 million in special tooling lying idle which could be
excessed or otherwise disposed of.
Another contractor charges the Navy almost $100,000 a year
to store special tooling for which there is no apparent need.
A recent study revealed that for five out-of-production air-
?
craft programs, storage and control costs exceeded $750,000 for
unneeded special tooling. About 37 percent of the tooling was
unneeded.
Another major aviation contractor still retains special tool-
ing, at Government expense, for a dormant aviation program
based on the possibility a foreign military sales program cus-
tomer might need a part.
One Air Force logistics center wants to keep the special
tooling for the F-4 to build spare parts that have not yet
failed.
Special tooling is a necessary element of DoD contracting for
weapon systems. The contracting official has the responsibility of
deciding whether to acquire or not to acquire title. In either case,
the Government pays for the tooling either directly or indirectly.
However, acquiring title to special tooling results in extra adminis-
trative costs. Since tooling may become obsolete, the contracting
official should consider each piece carefully. Stability of design, the
proposed manufacturing technique, and anticipated future require-
ment should be evaluated to insure that the huge administrative
costs justify the storage and accountability of these items during
periods of nonuse. Once a program is over, DoD should insure that
prompt disposal of the special tooling is made to prevent unneces-
sary accumulation of administrative costs for its storage and ac-
countability.
INDUSTRIAL PLANT EQUIPMENT
Industrial plant equipment is that part of DoD-owned plant
equipment with an acquisition cost of $1,000 or more; used for the
purpose of cutting, abrading, grinding, shaping, forming, joining,
testing, measuring, heating, treating, or otherwise altering the
physical, electrical or chemical properties of materials, compo-
nents, or end items entailed in manufacturing, maintenance,
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supply, processing, assembly, or research and development oper-
ations.
The House Committee on Armed Services in its report number
29, dated December 31, 1980, noted there has been a serious decline
in the Nation's defense industrial capacity that places our national
security in jeopardy. In preparing the report, the Committee panel
held 13 days of hearings, including 4 days of field hearings, and
took testimony from 34 witnesses. These witnesses included repre-
sentatives of (1) defense prime contractors and subcontractors, (2)
associations, (3) the military, (4) the General Accounting Office
(GAO), (5) the Department of Comme,rce, (6) the Federal Emergency
Management Agency (FEMA), (7) DOD, and (8) the Congress. Wit-
ness after witness testified before the panel that an erosion of U.S.
industrial capability is occurring that, coupled with America's
mushrooming dependence on foreign sources for minerals, is en-
dangering our defense posture at its very foundations.
Section 2 of P.L. 93-155, the Defense Industrial Reserve Act,
states, "In enacting this Act, it is the intent of Congress (1) to
provide a comprehensive and continuous program for the future
safety and for the defense of the United States by providing ade-
quate measures whereby an essential nucleus of Government-
owned plants and Industrial Reserve of machine tools and other
industrial manufacturing equipment may be assured for immediate
use to supply the needs of the armed forces in time of National
Emergency or anticipation thereof."
Out of approximately 20,000 items of Industrial Plant Equipment
in general reserve, which has an acquisition value of about $362
million, only about 20 percent of the items are in known "operable
ready" for "immediate use" condition. Senior officials advised the
Investigative Staff the reasons the equipment was not ready for
immediate use were because (1) funding has not been available and
(2) Defense Logistics Agency maintenance policy limits mainte-
nance almost totally to items being shipped to users. Efforts to
improve the situation were made by DIPEC in March 1980 with a
proposed 5-year program to test, inspect, and repair IPE in the
general reserve. According to DIPEC officials, the cost of this pro-
gram would be about $16 million, however, the proposal was not
approved by DLA.
The policy of only providing maintenance to IPE items being
shipped to users is inconsistent with the intent of Congress that
equipment be ready for immediate use. Failure to have about
16,000 items of industrial plant and equipment items valued at
about $290 million ready for immediate use can result in (1) con-
tractors obtaining other equipment and passing these costs to the
Government, and (2) delaying contract performance on those con-
tracts where Government owned equipment can be used. The Com-
mittee added $2.0 million to the bill to start reordering this equip-
ment for immediate use.
PROCUREMENT PRACTICES AT THE DEFENSE PERSONNEL SUPPORT
CENTER
On April 30, 1980, the Defense Audit Service completed a review
of procurement practices related to clothing and textile purchases
made by the Defense Personnel Support Center. This review shows
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that there is room for major improvement in the procurement and
contract administration procedures at the center. The auditors
found that:
?The DPSC lack adequate procedures and controls for billing
foreign military sales customers. About $9.9 million was identi-
fied by the auditors as lost.
?The center awarded at least $14.9 million in contract awards
which were not needed and was awarded solely for the purpose
of "buying a round" 8(a) set-aside awards because the center
lacks confidence that the small business receiving the contract
could perform.
?Internal controls and procedures for small purchases of non-
stock clothing items were not adequate. In some cases, require-
ments were split to avoid the limitations of the defense acquisi-
tion regulation and suppliers were listed as unsuccessful bid-
ders even though they had not been solicited. (Previous audits
at the DPSC contain similar findings.) The center could save
an estimated $7.0 million if it provided as government fur-
nished material textiles to clothing manufacturers.
?At least $5.5 million could be saved if DLA stopped making
purchases as frequently as it does. DLA pays a higher unit
price because of small quantity buys. An additional $1.8 mil-
lion is wasted because of the unnecessary administrative
charges.
MISMANAGEMENT OF STOCK FUNDS AT THE DEFENSE PERSONNEL
SUPPORT CENTER
The Defense Personnel Support Center, a major Defense supply
center, lost control of hundreds of millions of dollars in stock funds.
The Center could not accurately determine amounts paid and
amounts of unliquidated obligations. In an attempt to correct its
records, the Center made financial adjustments of about $566 mil-
lion during fiscal 1978 and 1979. However, the validity of most of
these adjustments could not be determined because they were not
supported by adequate documentation.
The chaotic condition of the Center's funds control systems and
records prevented it from systematically detecting fraudulent con-
tract payments of $794,101 which were processed. The fraud was
detected only because of a clerical error.
The Center's problems were compounded when erroneous ac-
count balances were certified as correct. The balances were certi-
fied by Center and Defense Logistics Agency officials even though
both were aware of the Center's serious funds control problems. In
addition, full disclosure was not made in financial statements of
either the Center's funds control problems or the large amount of
adjustments made without adequate supporting documentation.
The certifications were accepted and relied upon by Defense offi-
cials in preparing consolidated annual reports to the President and
the Congress on the Condition and operations of all Department of
Defense working capital funds.
According to the GAO the DPSC lost control of hundreds of
millions of dollars worth of stock fund money because of the "funds
control system had a complete breakdown. DLA has recognized
the seriousness of the problem and has developed a proposed plan
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to correct the financial system at this inventory control point. The
DLA has informed the Committee that it intends to correct the
financial records and have in place an effective accounting system
by June of 1982. The Committee expects an interim report from the
DLA.
The Committee expects that the DLA will be able to submit an
unqualified certification of its stock fund balances prior to the end
of fiscal year 1982. If it appears that such a certification cannot be
made, the Committee expects to be notified as soon as this determi-
nation is made.
PRECIOUS METAL RECOVERY
In early 1976, DoD assigned the responsibility to the Defense
Supply Agency for developing, in coordination with the military
services, a system of standard codes for identifying items that
contain precious metals and the quantities of precious metals con-
tained therein. The Air Force auditors stated that "In air logistics
center maintenance shops, we identified 227 items that contain
gold or silver." However, air logistics center personnel had identi-
fied the precious metal content of only 41 of these items in techni-
cal orders. The auditors went on to state that about 37,000 items in
the Air Force are believed to contain precious metals. The Air
Force has finally begun the process of coding items that contain
precious metals which was required back in 1976.
Air Force auditors also found that the Air Force was as a general
rule purchasing gold and silver needed for Air Force contracts on
the open market rather than using the material available to the
government which had been recovered. The auditors estimate that
on 6 contracts reviewed the Air Force could have saved over $3.6
million. In responding to a Committee question on this matter the
Air Force indicated that the situation was being resolved in so far
as gold was concerned but did not address the open market pur-
chase of silver.
Since 1979, DoD has been contracting for the recovery of precious
metals from end items rather than using in-house facilities to
recover the metals. This was done because a cost study indicated it
would be less expensive to contract for recovery of precious metals.
However, as the following examples demonstrate, the recovery rate
of precious metals recovered under contracts is substantially lower
than the rate of recovery when accomplished in-house.
?The last two batches of B2 battery plates processed by Defense
were for 24,288 lbs. of plates with 202,951.96 troy ounces of
silver recovered (a 57.3 percent recovery rate) and 40,344 lbs.
with 361,826.98 troy ounces recovered (a 61.5 percent recovery
rate). Under contract recovery, 67,033 lbs. of plates resulted in
only 444,808.15 troy ounces (a 46 percent recovery rate) while
Defense had expected to receive 557,199.08 troy ounces, a dif-
ference of over 112,000 troy ounces.
?From 1972-1978, Defense processed film ash for silver recov-
ery. From 1972-1976 the yield was 7,474 troy ounces of silver
per ton of film ash and from 1976-1978, the yield was 5,737
troy ounces per ton. Two contracts have been used for film ash
with yields of 1,865 troy ounces per ton and 1,405 troy ounces
per ton.
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DoD is directed to investigate the reasons for the wide variances
in recovery rates and report the finding to the Committee.
The Army and the Navy have been selling precious metals-
bearing items to foreign military sales customers charging them
only the stock funded price of the item even though it may have
been purchased before and contains previous metals. The Army's
DARCOM was selling batteries to foreign customers at 850 a piece
when the silver content of that battery was worth at least $10. The
Army has already found that batteries containing at least 100,000
troy ounces of silver at the stock fund price instead of a price
approaching their real value.
The Navy's system for managing the FMS sales was so poor that
it is virtually impossible to track. Also a Navy facility (Navy Un-
derwater System Center, Newport, R.I.) recently "lost" 100,000 or
more ounces of silver in batteries. These 19 batteries contained
4,000 silver zinc cells. Each battery was so large that it could be
moved only by forklift truck but all 19 batteries disappeared. No
battery has been recovered to date.
COMMISSARY STORE OPERATIONS
Last October after nearly a decade of debate on commissaries'
legitimacy and viability the Office of the Secretary of Defense
made a decision to continue operation of separate military service
commissary systems. Prior to this decision the DoD had been seri-
ously studying the feasibility of consolidating commissary store
operations into a single defense activity. In reading this decision
the Department of Defense created an executive board to provide
broad policy guidance on commissary operations and to set goals
and evaluate peformance. It was also indicated that certain man-
agement improvements and cost reductions could be affected
through decentralized administration, as well as through the cen-
tralization proposals. The decision not to consolidate was made
despite the fact that many studies including a detailed GAO report
entitled "Military Commissaries: Justification as Fringe Benefit
Needed?Consolidation Can Reduce Dependence on Appropri-
ations," strongly supported a consolidated management agency for
the commissary store system.
Operating costs for commissaries as separate line items in the
DoD budget were about $510 million in FY 1981. This represents
the direct cost of operating commissaries. However, the military
services provide extensive uncharged indirect support such as pro-
curement support, real property maintenance, security, fire protec-
tion, etc. This support adds at least another $50 million to the cost
of commissary operations.
The commissary operation budgets for fiscal year 1982 as pre-
sented to the Committee do not include any apparent reductions or
management efficiencies as was expected. The Committee is pro-
posing that each of the commissary systems produce savings of $5
million in their operations during fiscal year 1982. A portion, al-
though by no means all, of this savings is possible through the
testing and implementation of different operating techniques.
The Department of the Navy has repeatedly indicated that it
desires to convert all of its 3,021 commissary personnel employees
from an appropriated fund status to a nonappropriated fund status.
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This would be similar to the conversion which took place for DoD
clothing sales stores when they were combined with the clothing
sales facilities of the post exchanges. The Committee believes that
the Navy should proceed with this proposal as a test case for the
other military services.
One of the biggest problems facing the Department of Defense is
making management improvements in critical supply and mainte-
nance activities within the very tight personnel ceilings which the
Office of Management and Budget has imposed upon the Depart-
ment. The Navy contends that it should be permitted to convert
these 3,000 positions to a nonappropriated fund status and allowed
to retain the overall ceiling points in order to reduce the Navy's
dependence upon contractors for management, engineering, and
logistic services. The Committee completely agrees with the need to
make additional positions available and it is therefore recommend-
ing that the Department of Defense allow the Navy to proceed with
the conversion. The Navy estimates that average pay differential
for these positions is approximately 21 percent. They also estimate
that very few employees, if any, would ever be riffed and that the
entire process can be accommodated through attrition and by the
reassignment of commissary employees to other base supply activi-
ties as positions become available in those functions.
Navy testimony indicated that there would be an annual savings
of $10 to $12 million when the Navy commissary stores were oper-
ated in the military clothing store modus operandi. The Navy
should submit implementing plans to the Committee within 125
days of passage of the Appropriations Act and semi-annual prog-
ress reports should be provided to the Appropriation and Armed
Services Committees, to include the cost of operations and accumu-
lated savings data.
The Committee also believes that the Army should go forward
with its proposal to contract out the entire operation of at least two
commissary stores. This contracting out should be done in accord-
ance with the provision of A-76. Testing the contracting out con-
cept for the operation of an entire commissary will serve as a test
case to determine the potential savings, if any, and potential prob-
lems that are likely to ensue through contracting out commissary
store operations.
As a part of this proposal the Committee is also recommending
that the Air Force test the back to "basics" approach to marketing
and merchandizing of food products. This approach is becoming
more popular in civilian supermarket sales and is often referred to
as a warehouse supermarket. This concept involves providing the
patron with somewhat less in the way of services, fancy displays
and non-food product lines. It is hoped that the Department of
Defense will test this approach at at least two Air Force commis-
saries in a way in which the savings are shared between the
government and the commissary patrons. Hopefully this concept
will be tested in areas where other services also operate nearby
Commissaries to determine if lower prices attract more customers,
or if customers are lost to other commissaries. It will be difficult to
find an adequate pricing incentive since commissary prices only in-
clude a 4-percent surcharge.
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ALCOHOLIC BEVERAGE SALES
The Department of Defense through its so-called CLASS VI
stores sells approximately $400 million worth of alcoholic bever-
ages annually. When the sales of clubs (NCO and Officer) and
exchange beer sales are included the figures are nearly doubled
this amount.
Highlights from the worldwide survey of nonmedical drug use
and alcohol use among military personnel show that most military
personnel (83 percent) drank at least occasionally. As expected,
beer was the most commonly consumed beverage; it was drunk by
73 percent of all military personnel at least once within the "past
30 days" of the survey, and hard liquor (including mixed drinks)
was consumed by about one-half of the respondents (50 percent)
within the "past 30 days". In general, the highest prevalence of
drinking any alcohol was recorded by senior officers, followed by
junior officers and junior enlisted personnel, senior enlisted person-
nel and warrant officers. The survey showed that 28 percent of the
El-E5's and about 5 percent of E6-E9's reported heavy drinking of
hard liquor.
It is estimated that seven percent of military personnel world-
wide were alcohol dependent during the past year. One out of four
military personnel reported some work impairment because of alco-
hol use during the last year. Approximately 13,000 military person-
nel received alcohol treatment in residential treatment facilities,
while approximately 33,000 personnel received alcohol treatment in
nonresidential military facilities.
The military services operate 69 residential facilities and 441
nonresidential facilities for treatment of alcoholics.
In view of the above statistics and the fact that alcoholic bever-
ages as sold through the CLASS VI store system are priced consid-
erably below local prevailing market prices the Committee is rec-
ommending that the Department of Defense immediately increase
the price of these beverages by 10 percent. This will yield an
annual increase in revenue of about $40 million which can be made
available to support morale, welfare and recreations activities.
Since fiscal year 1982 will probably be one quarter completed prior
to passage of the Defense Appropriations Bill the Committee has
estimated fiscal year 1982 savings at $20.0 million. The additional
receipts can be used to offset a portion of the appropriated fund
support to non-appropriated fund activities.
SOFT DRINK PROCUREMENT
On April 15, 1981, the Defense Audit Service issued an audit
report on the procurement of soft drinks by the military exchange
system. It is estimated that the Army Air Force exchange system
purchases over $20 million worth of soft drinks annually and that
inclusion of the Marine Corps and Navy systems plus procurement
for vending machines would bring the total in excess of $40 mil-
lion.
Prices paid for two leading soft drinks producers led the auditors
to believe that certain soft-drink franchises had questionable pric-
ing practices. The audit shows many cases of "follow-the-leader"
pricing patterns, identical pricing and unusually high pricing of
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soft drinks. Also, soft drinks purchased for resale usually were
priced higher than soft drinks purchased for vending operations,
even though the suppliers furnished and serviced the vending ma-
chines. The Department of Defense is in the process of taking steps
to monitor its soft-drink purchases and seek the lowest possible
prices throughout new competitive procurement practices. The
Committee has reason to believe that this will produce additional
"profits" in excess of $3 million in fiscal year 1982 which can be
applied as a contribution to the welfare, morale and recreation
fund.
BASE OPERATIONS
The Department of Defense is expected to spend about $9.5 bil-
lion, excluding the repair and maintenance of real property, on
base operations support in FY 1982. Base operations support funds
activities of a'n installation support nature, such as administrative
services, facility engineering services, vehicle operation and main-
tenance, security and police activities, laundry and dry cleaning,
audio visual, printing and reproduction, safety and legal services
and various community support services such as morale and recre-
ation activities, housing functions etc. The cost of base operation
support increases by $916.9 million in FY 1982 over FY 1981. Price
growth accounts for about $470 million leaving real program
growth of about $446 million.
The following table provides the estimated cost for base oper-
ations support. The FY 1982 column does not include the cost of
civilian personnel pay raises which will be added in a supplemental
request next spring. Also excluded from the cost estimates are the
pay and allowances of the 121,700 military personnel who work in
base support activities. There are approximately 183,800 civilians
so employed in FY 1982.
BASE OPERATION SUPPORT 1
[In millions of dollars]
Appropriation summary
Fiscal year
1980
actual
1981
estimate
1982
estimate
Operation and Maintenance, Army
2,854.8
3,467.2
3,920.2
Operation and Maintenance, Army Reserve
104.8
115.9
125.9
Operation and Maintenance, Army National Guard
30.7
34.4
43.7
Operation and Maintenance, Navy
1,523.0
1,748.4
1,865.9
Operation and Maintenance, Navy Reserve
75.9
91.3
105.3
Operation and Maintenance, Marine Corps
318.5
375.0
410.3
Operation and Maintenance, Marine Corps Reserve
5.4
7.0
8.5
Operation and Maintenance, Air Force
2,194.7
2,469.3
2,701.7
Operation and Maintenance, Air Force Reserve
37.1
38.9
46.7
Operation and Maintenance, Air National Guard
52.6
63.9
82.5
Operation and Maintenance, Defense agencies
134.3
158.2
175.7
Total
7,331.8
8,569.5
9,486.4
Excludes real property maintenance, repair, and minor construction.
The bill as reported by the Committee recommends a number of
adjustments to various base operation support activities. Some of
these adjustments are financial in nature.
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Absorption of Fiscal Year 1981 Pay Raise Supplemental Costs
The pay raise supplemental for FY 1981 as originally submitted
by the Carter Administration forced the military services and other
DoD activities to absorb a portion of the pay raise. The Reagan
Administration amended this supplemental request to include
funds for all pay raises. The Congress fully financed the FY 1981
pay raises and provided an additional $500.0 million to offset the
effects of inflation on the operation and maintenance appropri-
ations.
In preparing the FY 1982 justification material some military
services, particularly the Air Force, justified certain add-ons in the
base operations program as necessary to offset or serve as a resto-
ration to the reductions which they were forced to make in FY
1981 to finance the pay raise. Since in the end it was not necessary
to finance the pay raise from within the 1981 funds previously
appropriated, in that the Congress eventually appropriated addi-
tional funds, there is no need to restore reductions that never took
place. Accordingly, the bill as recommended by the Committee
reduces the Air Force request by $87.0 million, the Navy Reserve
request by $9.1 million and the Air National Guard request by $2.7
million.
Overseas Military Banking Program
The Department of Defense provides banking services at 181
locations overseas for its military dispersing officers, nonappro-
priated fund activities and military and civilian personnel. Prior to
FY 1978, the program was managed by the Treasury and funded by
Treasury compensating balances. In 1975 the Congress took steps
to place management and funding of the program with the Depart-
ment benefitting from the program. Since placement of this pro-
gram in DoD there has been a tendency to budget more funds than
the program requires. For example a total of $22 million in O&M
resources was requested in the FY 1981 budget. During execution
of that budget, the O&M program was reduced to $17.0 million and
subsequently further reduced to $12 million. This was made possi-
ble by a drop in estimated net cost due to higher earnings resulting
from continued high money-market interest rates and favorable
foreign exchange rate fluxuations and advoidance of lease costs by
purchasing 30 automated teller machines in Germany. DoD pro-
curement funds were used for this purpose.
The various service budgets for FY 1982 include a total of $25
million for this purpose. The Defense Department now indicates
that $22.0 million will be adequate to finance the program. It is
highly likely that additional reductions could be made but the
Committee limited the reduction to $3.0 million. Additional adjust-
ments can be made in conjunction with the FY 1982 pay raise next
spring, if warranted.
Occupational Safety and Health Administration and Environmen-
tal Programs
The Department of Defense budget request for fiscal year 1982
contained some major program increases for activities related to
health and occupational safety and the environment. Included in
the budget was implementation of a hazardous material manage-
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ment program. Also included were funds for ecology base-line sur-
veys, preparation of new and updating old environmental impact
studies. In reporting the bill the Committee deleted all real growth
for these efforts, leaving the programs at their FY 1981 level plus
inflation. Only the Navy proposed deletion of funds designated to
improve compliance with these federal regulations during the Sep-
tember amendment. In view of the Administration's announced
intention to review these programs and issue new guidelines in the
near future it seems prudent to defer their expansion at this time.
Accordingly, reductions of $4.0 million to the Army request,
$800,000 to the Marine Corps request, $3.5 million to the Air Force
request, $1.4 million to the Army Reserve request, $1.6 million to
the Army National Guard request and $1.5 million to the Air
National Guard request have been made in the bill.
Using Productivity Measurement in Managing Base Operations
Information provided by the General Accounting Office indicates
that there is a significant disparity between what DoD work meas-
urement and other management systems designed to measure pro-
ductivity of base operating employees are suppose to do what is
actually being accomplished. The Committee regularly receives re-
ports which indicate that integrated facility management systems
and automated work managment systems are not working as they
are supposed to because management does not pay enough atten-
tion to them. For example, the Army implemented a work manage-
ment system which is described in DA pamphlet 420-6. It is doubt-
ful if a single Army installation is using the prescribed system as
intended.
The military services have made only marginal progress in using
engineered performance standards or work measurement standards
for real property maintenance even though the Committee has
been urging adoption of such system for years. The Navy attempts
to apply engineered performance standards to about 75 percent of
its real property maintenance work. The Army attempts to apply
such standards to about 86 percent of its work and the Air Force
doesn't even use engineered work standards.
Unbalanced Bidding On Multiple Line Type Requirements Con-
tracts
Multiple line type requirement contracts for real property main-
tenance are those in which the contracts list kinds of work to be
performed and then request a price based on an undefinite quanti-
ty of the work to be performed. For example, a roofing contract is
offered with an estimate number of square foot but the bid is
submitted on a cost per square foot. The actual amount of roofing
to be done remains open and can vary greatly. Thus if a contractor
has just a little "inside" information he is able to bid those projects
he actually expects to be done very high and those which will not
be done, even though they are part of the contract, very low. He
thus establishes himself as the low bidder, even though the charges
for work actually performed are excessively high.
Also, various DoD auditors constantly find contracts where the
amount of lawn to be watered, cut or fertilized is considerably less
than the amount listed in the contract. The same situation appears
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with respect to obtaining contracts on the installations of carpet-
ing, painting etc. Better management of such contracts would save
millions of dollars.
Consolidation of Military Base Support Activities
For years the General Accounting Office has been issuing reports
recommending consolidation of various inter and intra military
service base support activities. The most recent report was issued
in September 1980 and is entitled "Consolidating Military Base
Support Services Could Save Billions". While the Department of
Defense continues to give lip service to this program very little, if
any, progress has been made. The bill as reported by the Commit-
tee sets an objective of saving $8.0 million in the Army, $2.0
million in the Navy through such consolidations. A similar type
reduction is made to the Air Force estimates since the Air Force
failed to reflect a savings of $4.4 million for support of the U.S. Air
Force Base at Kadena on Okinawa. The Navy is providing the Air
Force with an additional $4.4 million in FY 1982 because under the
previous arrangement the Air Force provided base operations sup-
port to the Navy on a nonreimbursable basis. Base operation sup-
port will be continued to be provided by the Air Force but Navy
will pay for the support in FY 1982 thus in effect saving the Air
Force $4.4 million.
The FY 1982 budget does nothing to push aside long standing
military department parochial interest and move in the direction
of consolidating military base suppport activities. Despite the fact
that the Comptroller General sent the Secretary of Defense a
memorandum on January 21, 1981, which urges "the establishment
by directive of the Secretary of Defense, of an authoritative single
manager, or project director, to effect optimum base support econo-
mies can, we believe, produce several hundred million dollars in
savings annually. It is one of the most obvious . . . and one of the
easiest . . . sources of true economy which the new Secretary of
Defense can achieve". In responding to a question on this matter
the Defense Department stated that regional consolidations such as
Regional Medical Centers and Real Property Maintenance Activi-
ties are being considered, nothing of a definite nature has been
submitted to the Congress.
An example of the lack of cooperation between the military
services is the family housing situation in Hawaii and at Wheeler
Air Force Base in particular. Family housing units at Wheeler
exceed Air Force requirements and more then 220 members living
at Wheeler make an approximate 30 mile daily round trip to their
jobs at Hickham Air Force base and Camp Smith. Concurrently
more than 700 Army members travel in the opposite direction. This
is due to the fact that the Army is by far the principal user of
Wheeler Air Force Base. The Air Force base is adjacent to Scofield
Barracks home of the Army's 25th Infantry Division and the Army
uses the Air Base to house over 200 aircraft. While the Air Force
has only 10 small observation aircraft bedded down there. In addi-
tion about 115 Army service members could be assigned to Wheeler
housing occupied by ineligible Air Force personnel. This situation
has existed for years.
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Passing ownership of Wheeler from the Air Force to the Army
would enhance response time, contribute to energy conservation
program goals and reduce housing costs to say nothing of improv-
ing the readiness of the 25th division. Instead of making some
decisions on this matter, the Department of Defense hired a con-
tractor to further study this situation. The Committee has received
no further information from the Department of Defense on the
matter although the final report from the contractor was to be
delivered to the Defense Service Support Program Office on April
23, 1981.
STANDARD LEVEL USER CHARGES (SLUC)
The Department of Defense reimburses the General Services Ad-
ministration for space and services by payment of a standard level
user charge (SLUC). The General Services Administration then
uses this income to finance activities of the Public Buildings Serv-
ice which provides space and services for federal agencies in a
landlord-tenant relationship. The space provided by the General
Services Administration may be in federally constructed buildings
or through leases with commercial firms.
In fiscal year 1982, the Department of Defense is requesting
$173.6 million for the SLUC reimbursements to GSA. The Commit-
tee believes that the Department of Defense pays what appears to
be excessive amounts of SLUC rents for space in GSA control
buildings. For example, the GSA charges rent for buildings that
DoD built with monies appropriated to DoD for military construc-
tion, not by the Public Buildings Service. In essence the military
budget has reflected payment for the same building twice.
The General Services Administration is also generally delinquent
in notifying the services of increases of rental rates so that the
budget submitted to the Congress for any fiscal year would be
substantially understated from what would actually be required by
the Department of Defense for reimbursements to GSA. For exam-
ple, GSA raised the rental rates by 65 percent in fiscal year 1981
alone after the budget was submitted to the Congress.
It appears that GSA uses the inflated reimbursements from the
Department of Defense to construct new space for civilian agencies
while DoD generally must ask the Congress directly for its own
appropriation for construction. In other words, it appears that the
Department of Defense is subsidizing the construction and space
requirements of civilian agencies of the government since the De-
partment of Defense rarely has facilities constructed for it by GSA.
Finally, the Committee has reviewed the annual position of the
reimbursements of the General Services Administration and found
that the receipts from SLUC rental from Federal Agencies exceeds
the cost to GSA by some $400 million. As a result, the Committee
is including a general provision in the Defense Bill limiting the
reimbursements to GSA for space provided to only 50 percent of
the budgeted levels. The Committee estimates that this would save
$86.7 million in fiscal year 1982 and still leave GSA with a surplus
in excess of $300 million. It is the Committee's intent that the same
level of space be provided by GSA as requested in the fiscal year
1982 budget, but that the General Services Administration be reim-
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bursed at a rate no more than 50 percent of the rates that were in
effect on October 1, 1982.
NATIONAL CAPITAL REGION TRANSPORTATION CONSOLIDATION
Last year the Committee reviewed the Navy's National Capital
Region Transportation Consolidation Program and concluded that
the effort was producing better transportation service at a substan-
tially reduced cost. Language was included in the report on the
fiscal year 1981 Defense Appropriations Bill encouraging continued
initiatives along these lines including cross service consolidation.
After additional review, the Committee believes that further con-
solidations in this area are not only feasible but desirable and is
therefore directing that a centralized national capital region motor
pool be established patterned after that created by the Department
of the Navy. No dollar reduction is made this year because the
Committee believes that the savings the first year of consolidation
will be required for procurement of communication equipment for
the vehicles. The Committee specifically is directing consolidation
into one central pool in order to prevent each service from dupli-
cating the computer and management overhead that currently
exists within the Department of the Navy. The Committee also
requests that the Department review the feasibility of centralizing
the transportation efforts in other geographic areas of substantial
defense presence in future years using the national capital region
consolidation as a model.
The Navy Audit Service has recently recommended that the
national capital region facilities and services staff consider consoli-
dating the maintenance and operation of general purpose transpor-
tation equipment in the national capital region. The audit indicates
that although the Navy agreed with the concept, no action had
been taken to implement the findings. The Committee directs that
the Navy immediately begin consolidation of general purpose
transportation equipment in the National capital region.
OTHER BASE OPERATIONS ADJUSTMENTS
Army
Other base operations adjustments to the Army, Operation and
Maintenance request include a reduction of $10 million to a pro-
gram which the Army lables "quality of life. One particular por-
tion of this program referred to as community support has in-
creased from $105 million in FY 1980 to $175 million in the amend-
ed budget despite the fact that the Army's end strength has re-
mained essentially unchanged during this time period.
The base operations budget of the Army, Pacific forces, includes
an increase of $8.2 million for what is referred to as "pay back" to
Korea for resources previously withdrawn as a result of the Presi-
dent's intent to reduce U.S. forces stationed on the Asian main-
land." The Congress did not accept the proposed phase down of
U.S. troops in Korea and added money above the budget request
each year in order to support continuence of U.S. forces in Korea.
Basically the Army argues that it needs funds greater than those
originally withdrawn as a result of a "bare bones' funding policies
during the early planning stages of the Korean redeployment and
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because of higher inflation. The Committee did not provide the
additional $8.2 million requested since the FY 1981 Supplemental
included a significant amount to improve living conditions of U.S.
Army forces in Korea and it is not evident that the Army sus-
tained a real decrease in "living standards" in Korea as a result of
the attempt to withdraw U.S. forces.
Finally the Committee made an adjustment of $1.6 million to the
base operating request for Rocky Mountain Arsenal in Colorado.
The Committee has been urging the Army to close this facility once
the 888 chemical Weteye Bombs were removed from the facility.
This represents a minor adjustment to the $16.9 million in FY 1981
budget and the $15.8 FY 1982 request. This reduction will help to
bring this facility on a glide slope towards closure in FY 1984 or
1985.
Air Force
The original Carter Administration budget proposed the phase
out of 18 Dew line radars in FY 1982. This reduction in Dew line
radars was estimated to save $19.4 million. The Air Force did not
like the decision as made by the Office of the Secretary of Defense
and found offsetting funds and restored the reduction prior to
submitting the original Carter Administration budget. The Reagan
Administration March supplemental provided an addition of $19.4
million to continue operation of these radars. Since the Air Force
never reduced its planned funding of the Dew line system in the
first place there is not need to provide an additional $19.4 for base
operating support for these systems.
In recent fiscal years 1978, 1979 and 1980 costs of operating the
Cadin/Pine Tree Radar line have increased significally for the
United States as a result of changing policies with respect to their
operation. The agreement with the Canadian Department of Na-
tional Defence and the Department of Defense basically requires
that the Canadian government provide for the personnel to operate
and maintain these radars while the United States would pick up
the contractual and related support cost. Over the years the
amount of direct military support has declined while contractual
support has increased significantly. The budget for FY 1982 request
an increase from $44.8 million to $52.1 million. The Committee
considers this excessive and has reduced the request by $3.8 mil-
lion. The Department of Defense should consider renegotiation of
this working agreement with the Canadian Department of Defence.
The Air Force budget for FY 1982 proposes the phase-out of two
F-106 squadrons and the phase-in of one F-15 squadron. The Air
Force budget made the appropriate flying hour adjustment but
failed to make a reduced base operating cost adjustment. A reduc-
tion of $2.1 million is recommended.
The General Accounting Office issued a report on July 8, 1981
(MASAD-81-27) on the Air Force's use of contractor operated
supply stores. The General Accounting Office basically concludes
that these contractor operated stores are unmanagable and vulner-
able to abuse. These stores were once envisoned as a practicable
and cost effective means for buying vehicle repair parts and civil
engineering supplies, but are now plagued by pricing irregularities,
contract abuses and repeated allegations of fraud. The GAO be-
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lieves that the Secretary of Defense should discontinue the use of
contractor-operated base supply stores. Workable, cost-effective al-
ternatives such as the government-operated store should be used to
reestablish purchasing control. The Committee agrees with the
GAO position and has included the addition of $3.0 million in the
bill to support the phase-out and conversion to in-house operation
contractor-operated civil engineer supply stores (COCESS) and con-
tractor-operated parts stores (COPARS) as soon as possible. Exist-
ing contracts are not to be renewed.
TRANSPORTATION MANAGEMENT
Study after study during the past ten years has addressed the
need for the Department of Defense to unify and realign its traffic
management functions. The Conferees on the FY 1981 Defense
Appropriations Act recommended that the DoD move expeditiously
in the direction of establishing a unified Military Traffic Manage-
ment Agency or Command. The creation of such a command has
been recommended by the GAO, two studies by the Committee's
Surveys and Investigations Staff and by a recent contractor study.
While the Committee did not have an opportunity to conduct a
detailed hearing on the plan to improve deployment planning and
traffic management, there is every indication that the Department
of Defense is moving in the right direction. On June 29, the Deputy
Secretary of Defense notified the Committee of his intentions to
reorganize management of the Defense Transportation System to
make it more compatible with the commercial transportation re-
sources on which the Department must rely in peace and war. This
involves the transfer of the Sealift Cargo/Passenger Booking and
Contract Administration functions from the Military Sealift Com-
mand (MSC) to the Military Traffic Management Command
(MTMC). This action, when completed, will establish MTMC as the
single manager for all surface cargo movements from origin in the
U.S. to overseas destination in peace and war.
There is also under development a plan to clearly delineate
passenger movement responsibilities of the Military Airlift Com-
mand and the MTMC and the various installation transportation
officers.
On September 16, 1981, the Deputy Secretary of Defense further
informed the Committee of a decision to consolidate the Military
Sealift Command and the Military Traffic Management Command
into a single agency. This is to be done in conjunction with a plan
to strengthen the Joint Deployment Agency giving it responsibil-
ities for contingency and time-phased deployment planning.
The Committee heartily supports all of the above efforts and
looks forward to receiving additional information on the proposal
as various aspects are finalized. The proposals presented in sum-
mary fashion by the Department of Defense appear to offer the
potential for reducing logistic support costs while improving the
ability of our deployment and transportation management systems
to react to emergency situations.
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TRANSPORTATION ADJUSTMENTS
The budget request for the Department of Defense includes about
$3.2 billion in the operation and maintenance appropriation for
transportation expenses. Included is all second destination trans-
portation, most first destination transportation funds and funds to
operate the LOGAIR/QUICKTRANS commercial contract airlift
systems. This represents an increase of about $1.4 billion from the
fiscal year 1980 level.
The bill as reported by the Committee contains some minor
adjustments for transportation activities. The Committee found
that the Air Force request contained about $14.6 million for what
was referred to as "readiness shipments". These shipments of mu-
nitions and lumber are scheduled for the near term pre-positioned
ships. The ships will not be ready to receive the equipment in fiscal
year 1982. The bill also includes a reduction of $14.7 million to the
Army second destination transportation request. The Army did not
justify this portion of the program growth. This reduction is offset
by the transfer of $25 million for first destination transportation of
ammunition from the ammunition procurement account, Army.
PERSONAL SERVICES/CONSULTING TYPE CONTRACTS
On March 31, 1981, the General Accounting Office issued an-
other in a series of reports showing serious and pervasive problems
in DoD's use of consulting services and other management support
service contracts. This report was based on a review of 256 random-
ly selected contract awards valued at about $175.4 million. The
sample was drawn from contracts for (1) consulting services; (2)
management and professional services and special studies and
analysis; and (3) management support services for RDT&E.
In fiscal year 1979, DoD spent about $2.6 billion for these types
of contracts according to the GAO. The contracts range from rela-
tively simple studies to aid in management decisions to contracts
involving complex engineering support for major weapons systems.
No one really knows how much is spent for this type of contract.
A special analysis on Consultants, Studies and Analysis and Man-
agement Support Contracts submitted in conjunction with the
budget shows a total of about $1.6 billion for such contractual
efforts. However, the amount of funds shown on this special analy-
sis have varied greatly in each of the past three years. The $1.6
billion reported by DoD differs from the $2.6 billion estimate of the
GAO or from a $3.2 billion estimate which was reached by analyz-
ing the Commerce Business Daily for a category contract award
called Expert and Consultant Contracts. On the other hand a
review by DoD using the contracting reporting system (DD-350
form) showed that there was only $156 million of such contracts.
The latest GAO reports disclosed many of the same problems
that have been repeated in these annual reports dealing with de-
fense appropriations for the past three years. Much additional
information on this subject is provided in Part 5 of the Committee's
hearings for FY 1982 (pages 575 to 1042). Despite considerable
attention having been focused on this matter in recent years,
misuse of consulting service contracts remains a serious, pervasive
problem which has been documented in these hearings.
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There remains almost a complete absence of competition and
awarding consulting type contracts initially and even when the
initial contract award is made on a competitive basis there is a
tendency to lump task order on top of task order never completing
the contract. It is not at all unusual to find contracts where the
amounts paid under the contract exceed the face value by ten
times or more.
The use of unsolicited proposals remains high. Over 40 percent of
the contracts randomly selected and reviewed by GAO resulted
from unsolicited proposals. Many of the contracts turn out to be a
complete waste because the organizations awarding them never use
the resulting studies.
Last June the GAO issued an overview report on the use of
consulting service contracts to perform work that rightfully should
be done by federal employees. ("Civil Servants and Contract Em-
ployees: Who Should Do What For the Federal Government"
FPCD-81-43). This report discussed several previous GAO audits
that found many agencies using contractors on work which in-
volved basic management decisions. Generally, the agencies, includ-
ing DoD, claim that the contractors are not making final decisions.
However, there remains much concern that contract personnel are
influencing the Department's control of federal programs and poli-
cies.
GAO found that DoD contractors were playing a significant role
in identifying defense needs and, in effect, articulating and per-
forming DoD management functions. The result is that DoD is
weakening its ability to perform in-house work essential to its
mission. Several contracts reviewed by DoD appeared to be pre-
empting DoD's perogatives and directing national defense and in
managing and directing the Armed Services. The Department uses
contractors to:
?Develop plans and organizational responsibilities in the event
of mobilization;
?Review the performance of other contractors;
?Prepare basic contracting documents, evaluate other contrac-
tor's proposals and help negotiate the final contract.
These functions are the responsibility of the Secretary of Defense
and should be delegated only to other federal officials. Many wit-
nesses appearing before the Committee in recent years have re-
peatedly stated that the expertise to perform these government
functions was not available. Personnel ceilings and to a lessor
extent pay ceilings were cited as reasons why the government must
rely so heavily on personal service type contracts.
This same GAO report contains an interesting dichotomy. At the
same time that federal agencies, including the DoD, are using
contractor personnel for work that should be done in-house they
are using government employees to provide commercial services
that contractors could provide in many cases at a lower cost. The
Committee continues to believe that appropriate and proper appli-
cation of the policies contained in OMB circular A-76 would be
effective in freeing positions and thereby having room under cur-
rently existing ceilings to perform government management func-
tions by government employees. Another alternative long support-
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ed by this Committee is to eliminate the civilian personnel ceilings
in their entirety.
The bill as presented by the Committee contains adjustments in
personel service type contracts. In many cases, these adjustments
have been allocated to individual line items within the various
appropriations contained in the bill.
-;$ Included are reductions to programs of the Naval Air, Sea and
Supply systems commands, the Joint Cruise Missile project office,
engineering service support at overseas bases, and various research
and development programs.
EFFICIENCY REVIEW PROGRAM
The Committee is continually interested in promoting efforts to
improve efficiency in the operations of the Department. One par-
ticularly promising initiative toward this goal is the efficiency
review process required under Circular A-76 for activities being
considered for contracting out. Circular A-76 requires that an ac-
tivity being studied for conversion to contract must use the most
efficient possible organization in comparing the cost of each oper-
ation.
The General Accounting Office, in a report issued September 30,
1981, documents that for those activities where efficiency reviews
are conducted, an average 5 percent savings results. However,
about 80 percent of DoD's 15,000 commercial activities are exempt
from the program for various reasons. The Committee believes the
Department should substantially expand the scope of these efficien-
cy reviews to include activities not under consideration for con-
tracting. A conservative estimate of the savings that would result
from these reviews is $50 million. Thus, the Committee recom-
mends a reduction of this level to be allocated among the services
based on their proportion of the Department's commercial activi-
ties. The Committee has tentatively allocated this reduction as
follows:
Million
Army
$1217
Navy
Marine Corps
1
Air Force
14
Defense Agencies
6
FOREIGN MILITARY SALES
On May 21, 1981, the Subcommittee on Defense conducted a
hearing on the Defense Department's continued failure to establish
an adequate accounting and financial management system to elimi-
nate U.S. subsidies to the foreign military sales program. Testimo-
ny was presented by the U.S. General Accounting Office, and the
Defense Security Assistance Agency.
Background
Foreign military sales are authorized by the International Secu-
rity Assistance and Arms Export Control Act of 1976 which amend-
ed and revised the Foreign Military Sales Act of 1968. During the
past decade, a decade in which foreign military sales have grown
from an annual rate of $1 billion to $12 billion, this committee has
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been critical of the Department of Defense's unwillingness and/or
inability to comply with the Arms Export Control Act and related
laws to ensure that the cost of this program is, in fact, borne by
foreign governments and not by the United States Department of
Defense and ultimately by the U.S. taxpayer.
The FMS sales program continues to grow. Even though the
previous Administraton adopted a policy to restrain arms sales,
annual sales and active cases continued to increase in value. As of
June 30, 1979, the Defense Security Assistance Agency was manag-
ing about 15,500 cases valued at $72.5 billion.
By the end of April 1981, this had grown to 16,891 cases valued
at $96.3 billion. Annual sales are currently running at a $15.0
billion level. When dealing with management effort of this size
"minor" mistakes and shortcomings can translate into tens of mil-
lions of lost dollars to the U.S. Treasury.
Foreign military sales accounting and financial management in-
volves more than 40 Defense organizations. The Security Assist-
ance Accounting Center in Denver, Colorado, was established in
November 1976 and is Defense's central foreign military sales bill-
ing and collection organization. The Center is responsible for pro-
viding foreign customers an accounting of what has been done with
their deposits into the foreign military sales trust fund.
The trust fund contains advance payments from foreign govern-
ments as required by the Arms Export Control Act. Each year
between $8 billion and $9 billion is deposited into and disbursed
from the trust fund. The average trust fund balance is about $6
billion. The Center was created to (1) provide a single point in the
Defense Department for foreign countries' inquiries concerning fi-
nancial aspects of sales agreements and (2) assure uniformity in
billing and collecting. The military departments previously were
responsible for these functions, but they have done a poor job, and
their efforts to standardize billing and collecting have failed.
The military departments are responsible for detailed obligation,
expenditure, and cost accounting; for paying contractors; and for
reporting these disbursements as well as other financial informa-
tion to the Center. Each department developed its own system to
account for and report sales transactions. The Center is dependent
upon their input, which is nonstandard, to prepare foreign custom-
er's bills, reimburse the departments' appropriations, and account
for trust fund expenditures.
OVERVIEW OF PROBLEMS IDENTIFIED IN ACCOUNTING FOR FMS
For years, Defense has experienced serious accounting and finan-
cial management problems with regard to the foreign military
sales program. Over the past decade, GAO and Defense internal
audit staffs have issued numerous reports on the Department of
Defense's continued failure to recove hundreds of millions of dol-
lars in costs incurred for foreign military sales and Defense's in-
ability to give foreign governments a proper accounting of how
their money was spent. The military departments and Defense
agencies have not adequately implemented Defense pricing policies
and Defense policymakers have not performed sufficient followup
or monitoring of actual cost recovery. Further, Defense has not
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developed an adequate centralized accounting and financial man-
agement system for foreign military sales.
Testimony during the hearings showed that corrective action has
been taken by Defense on some of the problems noted in the GAO
and Defense internal audit reports. This action, however, has
usally been slow in coming, narrowly confined, and implemented in
an inconsistent manner. Moreover, Defense's attention to the over-
all problem of inadequate foreign military sales cost recoupment
has been largely limited to policy formulation with considerable
less impact on program execution.
In April 1981, the Deputy Secretary of Defense alerted the mili-
tary departments and Defense agencies to the need for particular
emphasis on certain financial management areas. A memorandum
by the Deputy Secretary of Defense pointed out that less than full
recovery of costs when billing foreign customers must be borne by
Defense appropriations. In addition, the memorandum recognized
that Congress has reduced Defense appropriations because of past
failures to recover full costs and stressed the need to avoid such
cuts in the future.
Although testimony indicated that some improvements have
been made and management awareness has increased, it also was
apparaent that more must be done.
The Department of Defense still has serious financial manage-
ment problems in accounting for Foreign Miltary Sales. Many mil-
lions of dollars are not being recovered from foreign customers as
required by law. Further, a centralized accounting system has not
been developed, although a study/test program has finally got un-
derway. Many of the more important recommendations made by
GAO and endorsed by this committee to improve accounting sys-
tems for foreign military sales have not been implemented.
Major unresolved problems that continue to plague accounting
and financial management of the foreign military sales program
include the following:
?Defense's foreign military sales policies have not been uniform-
ly implemented because each of the military departments has
a different accounting system. There has been little progress
by Defense in moving toward the development of a centralized
accounting system.
?Personnel ceilings have affected the ability of the military
services to improve their accounting and financial manage-
ment systems for the foreign military sales program.
?Defense needs to estabish and implement pricing policies that
result in full cost recovery.
?Congress is not provided with adequate information to exercise
oversight and control over the waiving of nonrecurring re-
search, development, and production charges on sales to for-
eign customers.
?A huge backlog of unclosed cases because billing data cannot
be matched with delivery data.
CENTRALIZED ACCOUNTING SYSTEM FOR FOREIGN MILITARY SALES
Defense has continued to experience accounting and financial
management problems during the past decade because it lacks an
adequate centralized accounting system. The exising accounting
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systems were not designed to accommodate the phenomenal growth
of the foreign military sales program, and a standard Defense-wide
system was not developed. The inability to properly manage the
finances of the foreign sales program will, in all probability, contin-
ue until a comprehensive centaralized accounting and financial
managment system is developed solely for foreign military sales.
Even then problems will remain, and it will probably be years
before centralization is completed.
Foreign military sales are unique in that funds of another coun-
try are involved. The United States has a fiduciary responsbility
that goes beyond normal Government appropriation and expendi-
ture accounting. By the terms of the Arms Export Control Act, the
cost of the program must be assessed foreign governments, and,
therefore, good accounting, costing, and financial management
sytems are required.
In the past decade, Defense has been criticized by the Congess for
its inability to properly manage the finances of the foreign sales
program. Defense has acted to improve accounting, costing, billing,
and collecting. Several systems, have been developed and are under
development. Nevertheless, serious problems still exist.
The advantages of developing a comprehensive centralized ac-
counting and financial management system include:
?Uniform accounting and financial reporting, thus eliminating
the reporting of nonstandard accounting data and providing
greater accounting control. Each of the military departments
has a different accounting system for foreign military sales.
?Timely and complete adoption of Defense Department account-
ing policies such as direct cite accounting.
?Improved control over foreign military sales disbursements to
preclude such problems as the Navy's inability to reconcile
$554 million in differences between foreign government cash
balances shown on its records and the balances shown in the
foreign military sales trust fund. Further, as of September
1979, detailed accounting records for foreign military sales cus-
tomers differed by $1.5 billion from trust fund records showing
cash on hand. After considering manual processing delays,
system deficiencies, and identifiable accounting errors, unex-
plained differences were still about $390 million.
?Improved accounting for the program, thus better enabling the
Department to meet its fiduciary responsibility to its foreign
customers. Because the correct balance of Defense's foreign
military sales trust fund was unknown, Defense did not have
adequate control over foreign military sales accounting. As a
result, it could not provide foreign customers with an accurate
accounting for funds deposited in trust accounts. Also, Defense
could not determine the amount of money available to foreign
customers for purchasing military goods and services.
?Better programwide planning because accounting and financial
management will not be fragmented.
Under the central accounting proposal, military departments
will still be responsible for implementing foreign sales agreements.
The centralized accounting system would provide for supporting
systems to be used by the military departments to report certain
needed financial data. The military departments, however, would
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no longer be responsible for accounting and case management of
the program.
In 1979, GAO identified the advantages of developing a compre-
hensive centralized accounting and financial management system.
However, since that time, Defense has allowed each military de-
partment and the Security Assistance Accounting Center to contin-
ue to operate their own financial management and accounting
systems. Because of this need for a centralized accounting system,
Defense has continued to experience problems in identifying costs
incurred to operate the foreign military sales program and has not
been able to provide foreign countries with an accurate accounting
for funds deposited in their trust fund accounts.
Because Defense has not developed an adequate accounting
system, its problems in identifying costs incurred to operate the
foreign military sales program and in providing foreign countries
with an accurate accounting for their funds have continued. To
remedy this serious problem, in May 1979, GAO recommended that
the Congress require Defense to produce a plan for centralizing
accounting and financial management of its foreign military sales
program. This plan was to include obligation and expenditure ac-
counting and disbursing of funds, and was to ensure that all costs
properly chargeable to the program were fully recovered.
This committee, in its fiscal 1980 report, recommended that De-
fense produce a plan for centralizing accounting and financial man-
agement. The plan was to be developed by March 1980.
However, Defense did not develop a plan addressing the commit-
tee's recommendation. Instead, in March 1980, the Department
provided a detailed schedule for completing a centralized disburse-
ment test and providing the findings, conclusions, and recommen-
dations by January 31, 1980. Defense stated that it recognized the
need to improve the financial management of the program, but had
reservations about centralizing the accounting and disbursing.
By June 1980, it became evident that the centralized disburse-
ment test would not result in valid conclusions, primarily because
the number of contracts and cases were considered by Defense to
be inadequate to constitute a valid test. Also, because significant
delays were encountered, the remaining time available for the test
was insufficient. The Defense Audit Service, in September 1980
recommended, and Defense agreed, to expand the test and change
the established milestone dates given to the Committee.
A revised test plan was developed in October 1980. The revised
plan increased the test size and called for completion by September
30, 1981, with a final report to the Congress by December 31, 1981.
However, significant interim milestone dates have been missed. For
example, the transfer of the additional contracts for the test was
not accomplished by the date planned.
The test addresses centralizing disbursement of funds for selected
contracts, and expenditure accounting for contracts. However, the
test does not address problems in obligation accounting, expendi-
ture authority, or case level accounting, and does not ensure that
all costs properly chargeable to the foreign customers are fully
recovered. Although Defense has taken other actions to address its
problems, it has not developed a comprehensive plan for an inte-
grated foreign military sales accounting system.
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DoD efforts to centralize financial management have, in the past,
been primarily limited to billing and collecting. In establishing the
Security Assistance Accounting Center in November 1976, Defense
sought to centralize billing and collecting. Although the Center has
provided standardized billing, collecting, and other financial man-
agement controls, it still depends on the military departments'
accounting systems for its financial information. For the most part,
the Center acts as a clearinghouse operation that reports to foreign
customers only what it is told.
Although one of the Center's primary fiduciary responsibilities is
to advise foreign customers how their money was spent, the Center
has had little, if any, input into the design of the military depart-
ment systems for reporting financial information. As a result, these
systems, which were developed independent of each other, have not
provided accurate or timely financial data. For example:
In June 1977, the Assistant Secretary of Defense (Comptroller)
directed that a new foreign military sales financial reporting
system be adopted. The system, when fully implemented, was
intended to give the Department a better view of and dontrol
over the use of foreign military sales budget authority and to
improve management of the trust fund. Nearly four years after
its implementation was mandated by the Assistant Secretary,
the system has not been fully implemented and actions by the
military services to implement it have varied.
Currently, each service is developing a separate customer order
control system and data base that will not be integrated or
standardized. The Navy is designing its system, while the
Army and the Air Force have partially implemented their
systems. These systems, if completely implemented, would give
each military department a system to control obligations and
expenditures. However, these developments are a step toward
three separate accounting systems?not one integrated Defense
system at the Security Assistance Accounting Center.
- The hearings demonstrated that, as a result of the need for a
centralized accounting case level system accompanied by central-
ized standardized case management, past problems are continuing.
Although there was general agreement on this point, there was
disagreement on the extent of the problems. However, the hearings
made it apparent that, until a centralized accounting system is
developed, problems such as inadequate accounting for trust funds ?e,
can be expected to continue.
The proposed DoD approaches are likely to prove unsuccessful
and only waste additional time and money. The Committee once
again reiterates the need for Defense to move expeditiously in the
establishment of a centralized accounting system for FMS sales.
This system need not include centralized disbursing initially, since
there is some information that disbursing against the FMS trust
fund, if limited to a reasonable number of disbursing activities and
reported promptly and accurately to the Security Assistance Ac-
counting Center (SAAC) can be done more economically using ex-
isting disbursing offices. The Committee does not wish to preclude
centralization of FMS disbursing, if it proves necessary in order to
gain effective management control.
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STAFFING LIMITATIONS IMPAIR EFFORTS To IMPROVE ACCOUNTING
AND FINANCIAL MANAGEMENT
One of the most serious constraints on the development of an
adequate accounting system for the foreign military sales program,
has been limitations on staffing. Security Assistance Accounting
Center personnel, although agreeing with the principle of central-
ization, indicated that the Center does not have adequate personnel
or computer capabilities to deisgn and operate the required system.
Additional personnel and resources would probably be needed to
develop and carry out a detailed implementation plan for central-
ization and to assure that any new system provided accurate and
timely data before its adoption. The Arms Export Control Act
requires foreign countries to reimburse Defense for the cost of
administering the foreign sales program. The cost of any additional
personnel or computer equipment needed to administer the pro-
gram will be covered by reimbursements. However, military and
civilian personnel ceilings imposed by the Congress and OMB re-
strict the hiring of additional personnel to administer the foreign
sales program. Defense officials said that personnel ceiling and
restraints on the purchase of computer equipment have affected
their ability to impove their accounting and financial management
systems for the program.
Once a centralized system has been developed and thoroughly
tested, existing personnel positions in the military departments
could be transferred to the central accounting organization, and
duplicate accounting operations could be stopped. The new system
should conform to the accounting principles and standards pre-
scribed by the Comptroller General and should be submitted to him
for approval as required by the Budget and Accounting Procedures
Act of 1950.
Because the additional personnel needed to improve accounting
and financial management of the FMS program would not cost the
U.S. taxpayer any money, personnel ceilings should not be im-
posed. The Committee believes the personnel ceiling should exclude
personnel who spend fifty percent or more of their time on FMS
functions. If there is trouble in gaining OMB approval in removing
FMS management personnel from Deparment of Defense ceiling
limitations, the Committee recommends that the positions be con-
verted to non-appropriated fund status. These positions are in fact
non-appropriated fund because Foreign Governments pay the bill
even though they are not counted as non-appropriated fund em-
ployees.
PRICING PROCEDURES Do NOT RESULT IN FULL COST RECOVERY
During the past decade, DOD has repeatedly failed to recover all
costs of foreign military sales. This failure has resulted in large
subsidies to the sales program?a practice which this committee
has previously gone on record as wanting Defense to avoid. Con-
tinuing weaknesses in pricing procedures and practices have, ac-
cording to over thirty GAO audits, resulted in hundreds of millions
of dollars not being recouped from foreign governments.
Failure to charge the right amount for equipment and spare
parts is the most significant overall problem Defense has experi-
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ence in pricing foreign sales. However, GAO and Defense auditors
have also identified a wide range of other problems regarding the
failure to recover full costs such as those for
?administrative support of the program,
?use of U.S. Government-owned plant and equipment, and
?normal inventory losses.
Some of the more serious deficiencies discussed during the hear-
ings require prompt corrective action by Defense.
Pricing of Secondary Equipment Items and Spare Parts
In 1978, Defense was not charging foreign governments the re-
placement cost of items sold from its inventories as required by
law. Defense's failure to charge the replacement cost resulted from
?pricing policies that were ambiguous, conflcting, and difficult
to apply; and
?an unworkable system of identifying item replacement cost.
A more current review of pricing for stock fund and secondary
items, performed by GAO at the request of Senators Percy and
Hollings, showed that Defense is still not recovering replacement
costs because item prices are established without
?considering the most recent purchase price,
?accumulating inflation factors, and
?consistently and accurately apply Defense policies and proce-
dures.
As a result, Defense is still losing millions of dollars each year
because of underpricing of stock fund and secondary items sold to
foreign customers. Accordingly, the Committee is recommending a
reduction of $16.0 million to the procurement accounts, and $120
million to the stock fund requests. It should be relatively easy for
DOD to recover these funds from the customers since final billing
or case close-out has not been completed. Procedures for repricing
these items can be updated rather quickly.
Recovery of Administrative Support Costs
GAO reports issued in 1977 and 1978 showed that inadequate
methods of accounting for and recovering personnel costs incurred
in administering the foreign military sales program resulted in
millions of dollars of costs not being properly billed to foreign
governments. A followup review by GAO indicates that millions of
dollars are still not being recovered for administrative costs associ-
ated with the foreign purchases of military equipment and services.
In addition, both GAO and the Defense Audit Service have found
that the Defense Security Assistance Agency has adopted the posi-
tion that only those costs that can be proven to vary with fluctu-
ations in the military sales program will be recovered. In the
Committee's opinion, this is a restriction upon the military services
that will not allow them to budget for identifiable expenses. Exam-
ples of identifiable expenses that will not be allowed are:
?Salaries and related expenses for personnel working less than
10 percent of their time on supporting the foreign military
sales program.
?Pro rata rent or utilities at locations that are not considered to
be 100 percent dedicated to supporting foreign military sales.
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?Other miscellaneous expenses, such as base support personnel,
that could be prorated based on applicable direct man-years of
effort.
An idea of the effect of this restriction can best be conveyed by
quoting a high level Air Force official regarding the Air Force's
fiscal 1981 administrative budget. Commenting on the restriction,
the official said:
This budget estimate was computed by using Defense
Security Assistance Agency's interpretation of 'full cost-
ing." However, if we had used the GAO interpretation, the
estimates would be some 750 man-years or $21 million
higher.
Production Costs Still Not Fully Recovered
Since early 1970, GAO has reported that the costs of using Gov-
ernment-owned assets to produce items sold to foreign governments
were not being recovered. In all, six GAO reports have been issued
disclosing millions of dollars in unrecovered costs. A GAO report,
issued in June 1979, recognized that DoD had made a marked
improvement in its effort to recover in accounting and billing
systems still existed. During fiscal 1979 and early 1980, Defense,
acting on GAO's recommendations, collecting over $52 million in
asset-use and rental charges from foreign governments.
DoD has not solved all of its problems in this area. In September
1980, the Defense Audit Service disclosed that DoD had not billed
foreign customers for nearly $1 million in asset-use charges on
selected foreign military sales cases. These undercharges resulted
because the military services did not ensure that customers were
charged for contractors' use of Government-owned facilities and
plant equipment and because of cost reporting problems.
Normal Inventory Losses Still Not Recovered
In September 1977, August 1978, and May 1979, GAO reported
that Defense appropriations were being used to subsidize the for-
eign military sales program because customers were not assessed a
portion of the cost of normal inventory losses. GAO reported that
the Department of Defense was losing millions of dollars on sales
to foreign governments each year.
Inventory losses are a normal cost of operating the Defense
supply system and include such elements as disposal of excess or
obsolete equipment caused by technological improvements and
errors in estimating needed quantities, damage and deterioration
due to normal wear, shortages and overages discovered in physical
inventories, and pilferage.
The Arms Export Control Act was amended in September 1978 to
expressly require the recovery of these costs on Defense items sold
under cooperative logistics supply support arrangements. However,
more recent audits show the military service still have not imple-
mented this requirement.
In a recent report, GAO recognized that the Arms Export Con-
trol Act does not expressly require that normal inventory losses be
charged on sales under other than cooperative logistics supply
support arrangements. GAO has long contended that inventory loss
costs should be included on all sales of secondary items. Informa-
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tion developed as part of the followup work requested, indicates
that Defense will lose several million dollars on secondary item
sales each year if a factor for normal inventory losses is not includ-
ed in sales prices of these items.
There is little doubt that noncooperative logistics supply support
arrangement customers benefit from Defense s maintenance of an
inventory system. Allocating indirect costs such as inventory losses
to all customers benefiting from the system which generated those
costs is a standard accounting practice. While the act does not
expressly require that inventory loss costs be recovered on nonco-
operative logistics supply support arrangement sales, it does not
prohibit such charges, and their inclusion would be consistent with
the intent of the act that Defense appropriations not subsidize the
foreign military sales program. It is also pointed out that the
selling price of stock fund items does include a surcharge for
normal inventory loss whether or not the sales are under coopera-
tive logistics supply support arrangements. No specific reduction is
recommended for inventory losses, but this loss has been taken into
consideration in the reduction made for pricing procedures for
secondary and stock funded items.
Need To Monitor Implementation of Pricing Policy
The persistence of pricing problems over several years resulted
in a GAO recommendation in August 1978, which this Committee
supported, that a new or existing organization be given specific
responsibility for ensuring effective and consistent implementation
of foreign military sales pricing policies. The Security Assistance
Accounting Center was told, in September 1978, to periodically
perform quality assurance pricing tests. At the time of the Commit-
tee's hearing (June 1981), this function has not been fully staffed.
The continuing nature of the many pricing problems discussed
during the hearings serves to illustrate the need for one activity to
have specific responsibility for administering pricing policy and
monitoring pricing systems. Until this activity effectively provides
the needed surveillance over the pricing function, problems can be
expected to continue. In view of the Committee's earlier guidance
concerning staffing limitations and personnel ceilings there is no
reason not to provide personnel needed to conduct these pricing
reviews.
WAIVERS OF NON-RECURRING COSTS
Congressional oversight and control over the foreign military
sales program is necessary to ensure compliance with congressional
intent that foreign governments not be subsidized through the
program. To carry out this oversight and control, the Congress
must have adequate information.
One of the most significant problems of this nature reported by
both GAO and Defense auditors is that DoD has not kept the
Congress informed of waivers for non-recurring research, develop-
ment, and production costs. Since 1976, Defense has authorized cost
waivers of over $800 million without being required to report to the
Congress on how the United States benefits from the waivers. The
Arms Export Control Act provides that the President may waive or
reduce charges for non-recurring costs if the sale would significant-
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ly advance U.S. interests in NATO weapons standardization or
foreign procurement in the U.S. under coproduction arrangements.
In 1976, a Defense Audit Service report stated that the Air Force
had not included over $31 million in recoverable non-recurring
production costs on selected sales to foreign countries. Similar prac-
tices continued and in 1978, GAO reported on the need for more
attention to and control of cost waivers under the foreign military
sales program. The report addressed actions taken by DoD to au-
thorize, account for, and report significant costs waived for foreign
military sales and the pricing of these sales. The report showed
that the Congress had not been informed of the amounts being
waived and the specific reasons for granting waivers although this
information would have improved its oversight of the program.
GAO, the Defense Audit Service, and the Army Audit Agency all
have recently issued audit reports on cost waivers and the failure
to recoup the appropriate nonrecurring costs. These reports empha-
size the need for compliance with nonrecurring cost recovery re-
quirements and recommend improvements to protect the interests
of the United States. Although these deficiencies have been contin-
ually reported for the last several years, costs still are either not
computed, not computed correctly, or computed but not billed.
Defense did not concur with the GAO recommendations and has
waived several hundred million dollars in costs since the GAO
report was issued without reporting to the Congress on the
amounts of and justifications for these waivers. As a result, the
Congress is not being provided a complete picture of the costs
excluded from proposed foreign military sales prices. These waived
costs are often significant in relation to the total sales price and
should be disclosed so that the Congress can carry out its oversight
and control responsibility.
A report by the Legislation and National Security Subcommittee
of the House Government Operations Committee disclosed that
foreign governments waiver requests are granted routinely. The
report goes on to state that:
Since DoD is not required to get Congressional approval
before authorizing waivers or to report to Congress the
amount of the waivers, the value of these amounts are not
included in the U.S. financial contributions to NATO.
According to the Director of the Defense Security Assist-
ance Agency, no written criteria for reductions or waivers
? of pro rata non-recurring costs exist. DoD has rejected
GAO's recommendations that such criteria be stated pub-
licly and approved by the Congress. Currently, most waiv-
ers are granted on the basis of NATO standardization if a
member of the alliance purchases the U.S. manufactured
weapon systems.
Aside from NATO standardization, the Defense Security
Assistance Agency has granted a waiver when the number
of units purchased by a foreign government is increased
over the original contract. The sale of F-18 aircraft to
Canada resulted in a waiver of $70 million in non-recur-
ring costs and a matching contribution by the Canadian
Government which enabled the Canadian Government to
purchase additional airplanes.
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It also appears that waivers are granted to facilitate the
sale of U.S. weapon systems to other countries. By waiving
non-recurring charges, the unit price of the weapon sys-
tems can be reduced. The Defense Security Assistance
Agency, therefore, often acts as a "salesman" for U.S.
manufacturers and also is in the position of influencing
the unit price of an item, an apparent conflict of interest.
The bill as reported includes a provision (Section 779) which
requires prior notification to the Appropriations Committees when-
ever DoD proposes to wave cost otherwise required to be recovered
under the Arms Export Control Act.
FOREIGN MILITARY SALES, SUMMARY AND CONCLUSIONS
DoD has failed to operate the foreign military sales program at
no cost to the U.S. taxpayers. Although the amount lost is in
dispute, the U.S. undoubtedly has absorbed hundreds of millions of
dollars in costs which should have been recovered from foreign
customers. Centralization of foreign military sales accounting and
financial management should; in the long term, be the best alter-
native for solving the accounting and financial management prob-
lems now plaguing the foreign military sales program.
The Committee recognizes that full centralization of accounting
and financial management for foreign military sales could take
several years and, in the short run, require additional staff re-
sources. However, in the long run, this centralization will undoubt-
edly reduce the overall costs of administering this program. As a
result, it is believed that now is the time to move from the study
phase to the implementation phase and that personnel whose time
is primarily funded by foreign customers should be exempted from
personnel ceilings.
DoD pricing policies and practices for foreign military sales of
stock fund and secondary items still do not recover estimated re-
placement costs as required by law. As a result, many millions of
dollars continue to be lost and Defense appropriations continue to
subsidize the foreign military sales program. To comply with this
statutory requirement and the intent of the Congress that these
sales not be subsidized, DoD must correct the weaknesses in its
pricing policies and practices. The Committee is recommending
certain financial adjustments in the bill as discussed earlier.
Defense should also make a reasonable attempt to collect from
foreign customers the undercharges that resulted from failure to
charge a reasonable approximation of replacement cost.
Action should be taken to attempt to collect undercharges as
expeditiously as possible before the military services make final
billings for contracts on which the undercharges have occurred.
Also, final billings should be adjusted when unauthorized devi-
ations from DoD pricing policies are discovered. The longer it takes
to attempt to collect undercharges, the more difficult it will be to
recover these amounts from foreign governments.
Also evidence presented at the hearing clearly indicates that
Defense may be routinely waiving non-recurring charges without
adequately considering whether the sale would significantly en-
hance U.S. interests in NATO standardization. Although the com-
mittee supports the goal of greater standardization within the
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NATO alliance, the Committee believes that this exception to the
general requirement of recovery of all costs associated with foreign
military sales should be more specifically justified. If the laudable
goal of increasing NATO standardization is viewed as an automati-
cally applied marketing tool, the chance exists that Congress may
rightfully conclude the U.S. taxpayer is being unfairly burdened by
a program that is not closely managed. The committee believes
that clearly defining and documenting the justification for each
waiver is in our national interest and will sustain the support
needed for this program.
Finally DoD is directed to: (1) move promptly to phase-in central-
ized accounting and financial management of the foreign military
sales program. This centralization should be accomplished by (a)
establishing centralized case level accounting and financial man-
agement for all new sales cases, (b) maintaining current accounting
systems for existing sales cases, (c) taking action to expedite closure
action for existing sales cases, and (d) developing and designing the
new centralized accounting and case managment system in accord-
ance with the Comptroller General's principles and standards; (2)
provide relief from personnel ceilings for individuals who spend
more than 50 percent of their time performing foreign military
sales functions for which Defense is reimbursed by the foreign
customers. This relief will permit Defense to add the necessary
personnel to phase in the centralized accounting and financial
management system for all new foreign military sales cases while
maintaining the present accounting system for existing foreign
military sales cases; (3) assign sufficient staff to the quality assur-
ance unit recently established at the Security Assistance Account-
ing Center to ensure that Defense components adequately and
uniformly implement equitable and effective pricing of stock fund
and secondary items to avoid subsidies to foreign customers; and (4)
report to Appropriations Committee the amounts and justification
for waiving non-recurring production and RDT&E cost of the FMS
program.
PROCUREMENT OF EAST GERMAN TYPEWRITERS
Testimony was received by the Committee concerning the pur-
chase of manual typewriters, to be used by the military services,
from Communist East Germany to the detriment of free-world
manufacturers.
There is no prohibition in the Defense Acquisition Regulation
against purchases of office equipment from East Germany manu-
facturers. Office sized manual typewriters from East Germany are
sold in the United States far below fair market value, at about half
the cost of almost all free-world manufactured manual typewriters.
American importers, wholesalers, and retailers cannot compete
using products of free-world countries when the manufactured
products of a state-controlled economy are allowed into the United
States at half the fair market value.
The Committee recommends to the Department of Defense that
an examination of existing regulations be made, to consider regula-
tions which would correct purchases of this kind, notwithstanding
the Treasury Department's contention that it would not be in our
best interest to disqualify East German manufacturers from bid-
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ding on ordinary commercial items like manual typewriters consid-
ering the excellent balance of trade in favor of the U.S. economy.
MEDICAL OPERATIONS
FIELD HOSPITAL PROGRAMS
The Army, the Navy, and the Air Force are embarking on major
programs to provide wartime medical care capability behind the
combat zone. The capability is directed to both a NATO and a
rapid deployment force scenario. The cost of this program for the
Navy alone is estimated to be about $700 million. The need for this
capability is not questioned. In fact, it is doubtful whether we could
now provide effective medical care in a war situation involving the
RDF. However, the Committee is concerned that there is lack of
coordination between the services. This situation can cause overlap,
duplication, and the wasteful expenditure of large sums of money.
The concern is highlighted by the appearance that the services are
taking different approaches to providing this capability.
The Committee believes, therefore, that it is premature to ap-
prove procurement funding. There is apprehension with respect to
the procurement of this type of hospital because the Committee
feels that the Services may not have adequately planned for joint
use and support of available medical resources in a NATO/Warsaw
Pact conflict or in a rapid deployment scenario. Facilities and
personnel may not be employed and/or utilized to their maximum
advantage.
The Services are individually responsible for programming funds
and resources to provide peacetime medical support. However, in
wartime, medical facilities should support United States forces
without regard to the parent service of the casualty. The Commit-
tee believes plans should be drawn to ensure that maximum usage
is made of hospitals regardless of Service affiliation. There are
hospitals that the Services have not made plans to expand to
maximum capacity to support wartime efforts. There are physical
plants which could be expanded to 1,000 beds or more in an emer-
gency. It would seem that this would be a better alternative than a
fleet hospital projected to contain 1,000 beds that will cover 60
acres; stored in Oakland, California; and to be flown to a "hot spot"
and then probably wouldn't be fully operational for 30 days. There
appears to be little or no comprehensive planning for the use of
existing facilities (hospitals, schools, or other buildings) that could
be converted into hospitals in a more efficient manner than trying
to deliver plane loads of collapsable type shelters. More considera-
tion should be given to using troop barracks, dependents' quarters,
buildings of opportunity with their related equipment to reduce the
anticipated shortfall in bed capacity.
For these reasons, the Committee recommends reductions of
$87,800,000 in Other Procurement, Navy, and $19,500,000 in Other
Procurement, Air Force.
The Committee also recommends that the DoD create a joint
project office to coordinate the planning and procurement for field
hospitals.
4P,
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CONTRACTING-OUT HOSPITAL OPERATIONS
For a number of years the Appropriations Committee has been
urging the Department of Defense to test the contracting out of an
entire military medical facility. In fiscal year 1981 the Committee
appropriated $19.4 million for contracting-out the operation of
three non-tertiary care in-patient medical treatment facilities.
These funds were not used to contract-out hospital operations but
were reprogrammed "to offset higher cost of care provided at PHS
and VA facilities" and higher priority "must pay" requirements.
The fiscal year 1982 estimate for contracting out hospital facili-
ties totaled $29.3 million. The Defense Authorization Bill for 1982
contains a provision prohibiting the contracting-out of an entire
medical facility. The authorizing bill also recommends deletion of
$15 million of the $29.3 million requested for contracting out. The
bill as reported by the Committee deletes the remaining $14.3
million.
Significant administrative foot dragging occurred with respect to
testing contract operations of a military hospital. The Appropri-
ations Committee viewed this approach as a means of challenging
the status-quo to induce efficiencies and economies in the in-house
system. Contracting has been successfully used by city and county
governments and by non-profit institutions. The Surgeons General
saw contracting as a threat to their organizations.
The Committee believes that contracting-out would have helped
the services staff other hospitals where medical personnel short-
ages exist and improved medical care at locations having high
proportions of active duty personnel. The contracted hospitals
could have concentrated on areas of high retired population. Also
there is good reason to believe that expansion of the in-house
system through contracting in certain geographical areas would
reduce the need to issue thousands of non-availability certificates
making personnel eligible to seek medical assistance elsewhere
because the in-house system cannot provide it. The incremental
cost of treating additional persons in already operating but under-
utilized in-house facilities would have been much less than the cost
of CHAMPUS care.
Finally, it was argued that contracting-out would have been det-
rimental to military readiness and war time health care. This
argument assumes that military personnel would not be available
in war time because they would have been replaced by contract
personnel. Certainly, availability of personnel who are already
working for the DoD, even if in a contract status, is more assured
than is the availability of a physician or other health provider
serving CHAMPUS patients in private practice. Contracting hospi-
tal operations, if properly administered, could insure the early
availability of additional health care providers to the military
health care system.
A larger, more efficient in-house military medical program would
reduce dependence on the billion dollar CHAMPUS program that
the surgeons general are quick to complain about. The Committee
is not unmindful of the many complaints directed at the CHAM-
PUS program as well as those directed at in-house military medical
facilities as they are currently operated. Challenging the existing
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system in this way offered an opportunity to make real manage-
ment improvements in the Defense health care system.
CIVILIAN HEALTH AND MEDICAL PROGRAM OF THE UNIFORMED
SERVICES (CHAMPUS)
The revised budget request for the Civilian Health and Medical
Program of the Uniformed Services for fiscal year 1982 is
$938,631,000, an increase of $57,867,000 over the $880,764,000 ap-
propriated for fiscal year 1981. The original January budget esti-
mate was $1,006,535,000.
The Committee is recommending a reduction of $2.5 million of
CHAMPUS funds relating to "study monies". CHAMPUS has pro-
grammed $1,231,600 for studies in fiscal year 1982. Also, the DoD
stated that an additional $2 million of CHAMPUS funds are with-
held annually to finance studies/projects which are initiated by the
Assistant Secretary for Health Affairs. The Committee recom-
mends deletion of the $2 million in CHAMPUS funds, which are
withheld annually to finance studies for the Assistant Secretary of
Defense for Health Affairs. The Committee is recommending that
$1 million of this money be transferred to the Office of the Secre-
tary of Defense where it can be identified and justified as money
for studies. The Department agrees that several projects funded
with CHAMPUS monies should have been charged to the DoD
studies and analysis program rather than CHAMPUS. The CHAM-
PUS request for fiscal year 1982 includes an estimate of $500,000 to
make a "study to determine factors which influence beneficiary
access to civilian medical care and providers acceptance of CHAM-
PUS." The $500,000 award of a contract that DoD is considering is
a study to determine why more physicians do not participate in
CHAMPUS. This study would, in effect, test physician participa-
tion under outdated procedures. The Department has already
taken action on what many perceive are the two possible factors
affecting physician participation in CHAMPUS: (1) legislation to
make physician reimbursement levels more reflective of current
reasonable charges and (2) CHAMPUS has taken major steps to
simplify claims processing, including adopting the American Medi-
cal Association's claim form and requiring less physician documen-
tation. The provision recommended by the House Armed Services
Committee would correct many of these problems and would result
in improved health care delivery to military families.
HEALTH CARE PROVIDED IN NON-DEFENSE FACILITIES (PUBLIC
HEALTH SERVICE HOSPITALS AND CLINICS)
For fiscal year 1982, the Department of Defense requested funds
totaling $48.9 million to pay for health care provided by Public
Health Service hospitals and clinics. The Services' operation and
maintenance break-out for fiscal year 1982 shows the Army re-
questing $20.4 million, the Navy requesting $19.9 million, and the
Air Force requesting $8.6 million.
The Committee recommends a total appropriation of $32.9 mil-
lion, a reduction of $16,000,000 distributed as follows: a reduction of
$6.7 million for the Department of the Army; a reduction of $6.5
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million for the Department of the Navy, and a reduction of $2.8
million for the Department of the Air Force.
The Committee believes that savings to the DoD will be realized
since many persons using the Public Health facilities will return to
the "in-house" medical system which will only bear the increment-
al costs, not the full cost of this cost. Obviously, the workload that
these dollars pay for will not entirely disappear.
ABORTION
The Committee concurs with the President's recommendation
concerning federal funding of abortions. The budget amendment
proposal of March 10, 1981, permits the use of Defense funds for
abortions only in cases where the mother's life would be endan-
gered if the fetus were carried to term. The recommended language
is the same as contained in the House-passed version of the fiscal
year 1980 Defense Appropriations Bill.
The language is as follows:
SEC. 757. None of the funds provided by this Act shall be
used to perform abortions except where the life of the
mother would be endangered if the fetus were carried to
term.
CAPITATION BUDGETING
The Department of Defense had been engaged in a program to
test whether a plan to manage medical resources on a population
served basis rather than by using past workload data would result
in improved medical care and efficiency. Under pressure from
rising health care costs that were drawing revenues from other
priority military needs, the military health service system engaged
a private company in 1976 to develop and test a capitation budget-
ing system for its hospitals. In one region, capitation budgeting
followed traditional lines of authority for budget development and
execution (based on past workload data). In the second test region,
a tri-service regional committee developed and executed the
budget.
Based on independent evaluation of the four year capitation
budgeting test, along with comments from the three Services, the
Assistant Secretaries of Defense for Health Affairs, Manpower,
Reserve Affairs, Logistics, and the Comptroller, the Department
concluded: (1) the methodology and regional management aspects
tested did not result in significant improvements over the tradi-
tional budgeting system, and (2) the management flexibilities in-
cluded in the test deserve further study as they indicate potential
for improving oeprations.
The net result was that the test was terminated at the end of
fiscal year 1981, and that a study of the management flexibilities
will be pursued for possible integration into the existing planning,
programming, budgeting structure. Therefore, the Committee rec-
ommends deletion of the capitation budgeting provision (Sec. 750 of
last year's Defense Appropriation Act).
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MILITARY GRADUATE MEDICAL EDUCATION PROGRAMS
The ,number of Army physicians involved in graduate medical
education and training programs continues to increase and re-
mains considerably higher than the Navy and the Air Force. The
total number of Army physicans engaged in residency education
and training as of March 1979 was 1,068: as of June of this year,
the number had increased by 192, totaling 1,250, or an 18 percent
increase over the March 1979 level. Two years ago the Committee
strongly recommended that the Army reduce its graduate medical
education programs over a period of years. The Office of Secretary
of Defense backed up the Committee on this matter at that time?
March..1979 but it is apparent that no progress has been made.
In 1979 the Army had approximately 35 percent of their physi-
cians engaged in graduate medical education and teaching pro-
grams, a large portion of these students and instructor physicians
were -located at the Army medical centers generally distant from
the active duty and active duty dependent population. Today the
same situation prevails. Information made available to the Com-
mittee by the Army Surgeon General on June 23, 1981 shows a
total of 3,151 military physicians in the continental United States.
Of this total, 1,260 were residents in training. Thus, over 40 per-
cent of the total CONUS Army physicians are in a training status.
The Institute of Medicine stated in its report of July 1981 that
almost -60 percent of active duty Army physicians are assigned to
eight Army medical centers where most of the Graduate Medical
Education is provided. Thus, five percent of Army hospitals employ
or' teach 60 percent of Army physicians. Most of these large hospi-
tals (medical centers) are located in large cities and are not near
posts 'with major troop concentrations. This results in a significant
portion of the patients treated in these centers being retirees, their
dependents, and other secondary beneficiaries.
, The increase in graduate medical education programs is designed
to assist in recruiting and retaining physicians but it has also
caused serious mal-distribution of active duty physicians among the
facilities operated by each military medical department. Some
posts in relatively remote areas are unable to provide essential
medical services for the active duty personnel and dependents pri-
marily because of physician shortage?the shortage being caused,
in considerable part, by the large percentage of physicians and
support staff being used to operate Graduate Medical Education
programs in metropolitan areas.
It is obvious that the assignment of 60 percent of Army physi-
cians at large Graduate Medical Education facilities and major
medical centers has, and still does have an adverse consequence for
the _staffing of the military hospitals operated by the Army. It also
drives, up the numbers of physicians that must be employed by the
Army.
The. Committee continues to believe that closure of one or two of
these facilities would be in the best interest of the Army and the
taxpayer.
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UTILIZATION OF MEDICAL FACILITIES
For several years, the Committee has discussed the subject of low
active duty utilization of medical facilities, particularly Fitzsimons
and Letterman Hospitals. The Department of Defense health offi-
cials have stated that the government is wasting money in some of
these underutilized areas because of political pressure.
Two years ago, the Army Surgeon General testified that "I am
probably the first Army Surgeon General who has ever been will-
ing to say that perhaps some of the Army medical centers are
located in the wrong place, but don't put the padlock on the door
tonight . . ." Two years have passed and there hasn't been any
padlock put on any door. As a matter of fact not one step has been
taken to relocate these resources.
Senate Report No. 97-67, accompanying the Supplemental Ap-
propriations and Rescission Bill, 1981, states that "The Committee
believes the Public Health Service hospital and clinic system no
longer can be justified as a Federal expense . . . . The Committee
is advised by the Administration that occupancy rates of the hospi-
tals have averaged about 67 percent since 1976 compared to nation-
al minimum standards of 80 percent occupancy.' Testimony re-
veals that there were over 100 military hospitals that reported
occupancy rates of less than 80 percent or the national minimum
standard. There were over 30 military hospitals below the 67 per-
cent occupancy rate?the rate that was used as a criteria for clos-
ing PHS facilities but not a single military hospital is even being
considered for closure. Certainly, the occupancy rates are inform-
ative only when interpreted in light of the location, mission, size
and to some extent, the supported population, of the health care
facility. Nevertheless, if the Administration's criteria for closing
the Public Health Service hospitals is based on the fact that the
hospitals have averaged about 67 percent occupancy rates since
1976 compared to the national minimum standard of 80 percent
occupancy rates, then it would seem that at least some streamlin-
ing of the military medical facilities could be accomplished. One
way to streamline operations and improve utilization of medical
personnel is to close some of the underutilized military medical
facilities and transfer the manpower and equipment elsewhere to
better serve the active military personnel and their dependents.
ARMY MEDICAL INTELLIGENCE AND INFORMATION AGENCY
The Army Medical Intelligence and Information Agency (MIIA)
is located at Fort Detrick, Maryland, and is principally funded in
the intelligence budget. Additional funding is provided by the
Office of the Surgeon General in Program 8. Also this Agency has
used CHAMPUS funds to conduct operations. The mission of the
MIIA is to produce scientific and technical medical intelligence
studies and reports; administer the exploitation of foreign medical
materiel for the Army; to utilize the medical research and develop-
ment successes of other countries to improve U.S. efforts; and to
develop, manage and control medical data bases. As accomplish-
ments, MIIA claims: production of 120 Health Alert and Threat
Summaries in support of deployed U.S. forces and for contingency
planning; provision of information to medical personnel related to
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expected diseases from Cuban and Vietnamese boat people; provi-
sion of general medical information to the Air Force in support of
VIP trips to foreign countries; evaluation of dangers to medical
teams designated to go to El Salvador and other politically unsta-
ble areas; and participation in planning for medical support for
RDJTF deployments.
A review of the mission and particularly the past accomplish-
ments of this Agency leads the Committee to seriously question its
need and utility. The Agency appears to duplicate the efforts of
other military and civilian medical hospitals, institutions, agencies,
and medical libraries in the United States. The Agency is not an
intelligence activity but serves as a medical information agency
and as a staff support agency for the Army Surgeon Generals'
Office.
The total direct funding estimate of the Army Medical Intelli-
gence and Information Agency amounts to $1,214,000 for fiscal year
1982. The Committee recommends a reduction of $485,000 in the
Operation and Maintenance account and the closing of the Army
Medical Intelligence and Information Agency no later than Sep-
tember 1, 1982. To effect this closing by September 1, 1982, the
Committee is recommending the following general provision in the
bill:
SEC. 783. None of the funds provided in this Act shall be
available for operation of the Army Medical Intelligence
and Information Agency after September 1, 1982.
READINESS COMMAND
The Committee considered imposing a reduction to the budget of
the Readiness Command with a view toward disestablishing this
Headquarters. There is reason to believe the roles and missions of
the Command have become unclear since the creation of the Rapid
Deployment Joint Task force.
This concern was heightened when the previous Commander of
the Command testified he intended to recommend abolishing the
headquarters.
The Committee wants to be certain that critical missions would
continue to be carried out should Readiness Command be abolished
or reorganized in a major way. Certain essential transportation
and communication functions and units come under this headquar-
ters. Precipitous action to dissolve the Command at this time could
well be counter-productive both from a fiscal and organizational
standpoint even though the record suggests that major changes are
warranted.
Given this misgiving, the Committee recommends full funding
for the Readiness Command headquarters and will pursue the
matter in next year's hearings, hopefully, leading to a Committee
decision in connection with the fiscal year 1983 budget.
The Department of Defense and Readiness Command leaders
should prepare themselves for questioning as to the future require-
ments for this headquarters to include the planning for alternative
command arrangements.
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EQUAL OPPORTUNITY PROGRAM GROWTH
The Air Force budget request includes an increase of $300,000 to
start a new journal called "Defense Equal Opportunity Manage-
ment Institute Journal". This new publication would be produced
by a civilian firm and would replace the publication called "Reflec-
tions" produced in-house by the Air Force. The Committee believes
that such an important effort as Department of Defense-wide equal
opportunity policies should continue to be done in-house rather
than be farmed out to a civilian firm. Consequently the Committee
is deleting the requested increase of $300,000.
The Navy has requested a real program increase of $400,000 in
fiscal year 1982 in order to advertise the United States Govern-
ment as an equal opportunity employer. The Committee believes
that it is important to insure that there is a representative number
of minority personnel within the Department of Navy. However,
when the Committee requested specific data to indicate how many
additional minority personnel would be hired or if the advertising
would be targeted to difficult to recruit areas such as scientists or
engineers, the Navy was unable to provide justification. The Com-
mittee is consequently deleting the $400,000 and suggesting that
prior to requesting funds to increase this effort, the Navy should be
in a position to provide a comprehensive plan as to the targeted
audiences, the anticipated improvement in recruiting which would
result, and so forth.
AUDIO-VISUAL TRANSFER
In July the Administration submitted a budget amendment to
the Congress which made a reduction of $45.9 million for audio-
visual and related activities. In presenting this amendment all of
the reduction was applied against the operation and maintenance
appropriation even though the procurement and military personnel
appropriations contained significant resources to support audio-
visual activities.
The Air Force and Navy have requested that the Committee
reallocate this reduction in order to make it more equitable and
feasible of accomplishment. The bill makes adjustments to the
audio-visual program which nets to zero.
WORLD WIDE COMMAND AND CONTROL SYSTEM-TRANSFER
The bill as reported by the Committee also reflects the transfer
of $16 million in WWMCCS (World Wide Military Command and
Control System) from the operation and maintenance Air Force
appropriation to the O&M, Defense Agencies appropriation?$2.5
million; the RDT&E Defense Agencies Appropriation?$8.0 million;
and the Procurement, Defense Agencies appropriation?$5.5 mil-
lion. The above transfer is required for the Defense Communication
Agency to accomplish improvements to the WWMCCS information
system and the WWMCCS inter computer network.
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OPERATION AND MAINTENANCE, ARMY
Appropriations, fiscal year 1981 1 $13,160,533,000
Estimate, fiscal year 1982 15,207,500,000
Recommended in the bill 14,788,712,000
Change ?418,788,000
1 In addition, $5,000,000 transferred from other accounts.
, The Committee recommends an appropriation of $14,788,712,000
for Operation and Maintenance, Army. This amount is a decrease
of $418,788,000 from the budget estimate of $15,207,500,000. The
amount appropriated for fiscal year 1981 to date is $13,160,533,000.
The amount recommended herein for fiscal year 1982 is an in-
crease of $1,628,179,000 over the prior year. Pay raise costs are not
included in the fiscal year 1982 estimate.
The. Committee's recommended changes to the Army operation
and maintenance budget, as previously discussed or as discussed
elsewhere in the report, have been allocated as reflected in the
following table and the classified annex:
? . ?
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0
1980 1981 1982 Recommended
actual current budget Committee versus
amount amount amount recommended 1982 Budget
OAMp ARMY
GENERAL PURPOSE FORCES
UNIFIED COMMANDS
5,981
6,766
7,749
7,749
ALASKA FORCES
16,990
131323
13,891
13,891
---
EUROPE FORCES
572,559
765,951
170467904
1,037,701
-97203
PACIFIC FORCES
134,569
170,557
211,201
2117201
---
SOUTH FORCES
5,717
6,457
67722
67722
CONUS FORCES - FORSCOM
386,709
546,681
735,762
735,762
OTHER CONUS FORCES
60,018
148,861
197,117
197,017
-100
JCS DIRECTED & COORDINATED EXERCISES
34,621
51,584
79,623
61,623
-187000
COMBAT DEVELOPMENT ACTIVITIES
4147596
126,447
175,214
175,214
BASE OPNS - FORSCOM AND OTHER CONUS
428,277
469,976
525,114
525.114
BASE OPNS - RPMA - FORSCOM & OTHER CONUS
337,603
395.832
512,589
512,589
---
BASE OPNS - EUROPE
409,272
535,191
672,382
612,382
-607000
BASE OPNS - RPMA - EUROPE
492,852
640,275
859,954
859,954
BASE OPNS - PACIFIC
151.096
183,359
232,464
221,914
-10,550
BASE OPNS - RPMA - PACIFIC
196,138
196,916
226,941
226,941
---
ECONOMIC ASSUMPTIONS
---
---
-1667800
-166.800
TOTAL, GENERAL PURPOSE FORCES
37646,998
4.2587176
5,3367827
57238,974
-977853
INTELLIGENCE & COMMUNICATIONS
WORLD-WIDE MIL COMMAND & CON SYS - ADP
7,257
8,730
16,638
14,638
-27000
TRAFFIC CONTROL AND LANDING SYSTEMS
17,357
19,564
237318
23,318
FOREIGN COUNTER-INTELLIGENCE
5,388
5,952
67135 '
6.135
SECURITY AND INVESTIGATIVE ACTIVITIES
10.693
12,128
12,277
12,277
MANAGEMENT HEADQUARTERS - OTHER
103
20
---
BASE OPERATIONS - OTHER
32,227
27812
3,944
3.944
BASE OPERATIONS - RPMA - OTHER
24,602
2,484
3,217
3,217
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1980 ? 1981 1982 Recommended
actual current budget Committee versus
amount amount amount recommended 1982 Budget
'MISSION INFO IN SEPARATE INTELL JUSTIF BOOK 117,268 120,235 143,820 139,835
BASE OPERATIONS - INTELLIGENCE --- 2,447 19624 1,624
BASE OPERATIONS - RPMA - INTEL --- 3,788 5,379 5,379
WORLD-WIDE MIL CMD 1 CON SYS (WWMCCS) FACIL 8,353 11,335 7,764 7,764
LONG HAUL COMMUNICATIONS 223,905 273,738 3027237 300,237
COMMUNICATIONS SECURITY (COMSEC) 14,518 18,832 18,428 18,428
MANAGEMENT HEADQUARTERS - COMMUNICATIONS 22,985 27/695 28,544 28,544
BASE COMMUNICATIONS 117,757 1449898 200,595 198,995
BASE OPERATIONS - COMMUNICATIONS --- 339976 36,601 36,601
BASE OPERATIONS - RPM - COMMUNICATIONS 2792Z9 '23,643 23,643
TOTAL, INTELLIGENCE Z COMMUNICATIONS
CENTRAL SUPPLY & MAINTENANCE
SUPPLY DEPOT OPERATIONS
SUPPLY MANAGEMENT OPERATIONS
CENTRAL PROCUREMENT ACTIVITIES
LOGISTICS ADMIN SUPPORT
AUDIOVISUAL SUPPORT - LOGISTICS ELEMENT
RESALE COMMISSARIES
TROOP ISSUE SUBSISTENCE ACTIVITIES
MANAGEMENT HEADQUARTERS
FIRST DESTINATION TRANSPORTATION
SECOND DESTINATION TRANSPORTATION
INDUSTRIAL PREPAREDNESS OPERATIONS
LOGISTICS SUPPORT ACTIVITIES
OVERSEAS PORT UNITS
REAL ESTATE ADMIN & CONSTRUCTION SUPERVISION
BASE OPERATIONS
BASE OPERATIONS - RPMA
-39985
-29000
-19600
602,413 715,873 834,164 824,579 -99585
412/157 558,646 683,327
140,083 163,326 173,242
136,638 166,435 207,910
85,964 101,464 123,688
---
3,892 3,161
146,980 166,100 171,782
18,149 22,098 28,087
98,407 110,431 106,426
32,427 40,222 28,831
561,017 799,804 965,203
94,814 112,666 111,166
435,125 184,770 167,503
41,190 53,697 62,850
52,871 56,295 60,219
,1189747 154,453 159,748
1139837 124,546 134,893
671,627 -11,700
173,242
207,910
123,688
3,161
166,782 -59000
25,387 -29700
106,426
53,831 +259000
941,403 -23,800
111,166
167,503
62,550 -300
60,219
158,148 -19600
134,893
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1,070,855
4,649,958
4,670,058
4,1517404
31575r576
TOTAL, CENTRAL SUPPLY & MAINTENANCE
TRN, MED, OTHR GP
119
101 1 10101 110001
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122
INDIRECT HIRE FOREIGN NATIONAL EMPLOYEES
The Army budget for FY 1982 includes approximately
$4,573,000,000 to pay civilian personnel. During fiscal years 1981
and 1982 the Army proposes to add about 15,600 more foreign
national employees out of a total addition of 21,200. By far the
largest allocation of these spaces is to replace borrowed military
manpower in order to return a soldier back to his unit. Other
increases in Army civilian personnel strengths involve additions to
depot maintenance, procurement activities, supply and contract
administration. The netted increase to the Army's FY 1982 budget
resulting from the addition of these civilian workers is
approximately $285 million.
The bill as proposed by the Committee deletes 5,000 of the for-
eign national hires and directs that the Army seek ways to hire
U.S. citizens on a non-PCS basis to fill a large portion of the other
5,000 foreign nationals requested for FY 1982. A general provision
is proposed in the bill which would prohibit hiring foreign national
employees in overseas area when a U.S. citizen is available at the
overseas area. This provision is added to insure that the Army can
make maximum use of American citizens (largely dependents of
military personnel) in filling these positions.
POMCUS
The Committee reports of the last two years have expressed some
of the Committee's concerns with respect to the proposals to in-
crease the numbers of division sets of equipment prepositioned in
Europe as a part of the POMCUS program. (See report 96-1317, FY
1981 pages 167-170 and report 96-450, FY 1980 pages 229-231). The
POMCUS approach to reducing response times for U.S. forces to
Europe was first used in conjunction with the 1961 Berlin crisis.
The objective of the POMCUS program is to reduce U.S. deploy-
ment time in response to a Warsaw Pact attack against NATO's
central region. By prepositioning combat and support equipment,
the initial war time movement requirement is reduced since only
the personnel and their personal equipment need be moved by
aircraft.
In the Committee's opinion the proposals to expand the number
of division sets of equipment in storage in Europe from four to six
represents too much of a good thing. The United States has a very
limited number of active Army combat divisions. (Sixteen divisions,
three of which are only partially manned by active personnel).
Considering this nation's worldwide military requirements and the
limited numbers of Army forces available to meet this threat the
addition of more equipment in Europe further reduces already
limited capabilities to deploy elsewhere. The Army is fully aware of
this problem as reflected from the following quotations taken from
the Army white paper which was written to provide a framework
to structure the Army of the 1980's:
The threats to US interests beyond Europe likely to
emerge in the decades ahead will be extraordinarily di-
verse. The increased demand for limited resources world-
wide is likely to undergird confrontations. They include
not only the USSR, but heavily armed Soviet surrogates
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and independent, militarily sophisticated Third World na-
tions. Threats to US security outside of Europe in the
1980s will span an increased spectrum of conflict ranging
from terrorism to insurgency to highly intense convention-
al warfare. Such contingencies could occur in a variety of
militarily demanding environments, from deserts to moun-
tainous regions to tropical rain forests. The requirement
for flexibility is apparent. * * *
Our capabilities to project combat power worldwide must
be improved. We are approaching the upper limits of feasi-
bility in the POMCUS programmed for Europe. Further
improvement must come from improved strategic mobility
(particularly fast sealift) force structure changes, Host
Nation Support, and, where possible, lighter more capable
forces. The stratetgic deployability of the Army's rapid
deployment forces must make a quantum improvement.
There will be no major near term improvement in the
capability of airlift to move heavy forces. We must seek
alternatives such as deployment by fast moving Roll-On
Roll-Off ships, and light, mobile anti-armor capable forces
that can be deployed by air. * * *
Our current program for the rapid reinforcement of
NATO has focused on the early deployment of heavy
forces. However, we must continually examine the utility
of light, rapidly deployable divisions in Central Europe to
achieve a balance of heavy and light forces that will pro-
vide a better overall defense given the terrain variations
and urban sprawl that exists and is projected in much the
region. * * *
Given the limited sustainment capability of most poten-
tial adversaries, the critical phase of the conflict is likely
to take place within the first few weeks as enemy forces
attempt a quick, decisive victory. In most cases where a
sophisticated threat is present, there will be a need for
some anti-armor capability early. The limitations posed by
stratetic airlift argue in favor of further development of
fast sealift and some form of limited prepositioning. A
force element, incorporating new technologies in conjunc-
tion with light infantry, could enhance flexibility and
achieve the early presence necessary to preclude an unop-
posed threat victory and permit US forces to gain the
initiative. This concept would be enhanced by designing
follow on heavy forces that could begin immediate move-
ment on prepositioned Roll-On Roll-Off ships when the
decision to commit forces is made.
The Committee believes that the philosophy expressed in the
above ? paragraphs from the Army's own white paper is correct.
There is a clear need to retain flexibility with respect to the
deployment of remaining Army divisions, less those already for-
ward deployed or those for which equipment is pre-deployed in
Europe, through the increased use of rapid deployment ships. The
Committee fully supports the budget proposals to provide a near
term roll-on roll-off ship capability to our Armed Forces.
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A study by the Congressional Budget Office determined that if
an attack on Western Europe came without warning, or with little
warning, the POMCUS stocks might be vulnerable to destruction
by both ground and air attack because units from the United
States could not arrive soon enough to withdraw the equipment
from storage sites. On the other hand this study showed that if the
attack occurred following a lengthy Warsaw Pact buildup and the
U.S. reacted to that buildup, programs to increase the number of
divisions in POMCUS are less effective then spending equal sums
to modernize the Army more rapidly or to increase the overall size
of the Army.
The reserve forces policy board has also stated that increasing
the POMCUS goal from the original three full division sets to the
currently proposed six division sets means the withdrawal of equip-
ment from the Army guard and reserve or further delays in provid-
ing these reserve components with modern equipment compatible
with that in the active force. Continued drawdowns of reserve
component equipment hampers training and reduces morale in
addition to inhibiting the training of additional units and replace-
ments in the early months of a national defense emergency. While
the Army has made a commitment not to further drawdown re-
serve component equipment for POMCUS purposes current policy
will have the effect of slowing down the flow of equipment into
reserve components and continue to degrade reserve component
readiness.
The fiscal year 1982 request includes $166.6 million for support
of the POMCUS program. Included in this amount is approximate-
ly $12.5 million for procurement of tool kits and load list items and
for preparation of vehicles to transfer to division set five. The bill
as reported by the Committee deletes this $12.5 million and con-
tains a general provision prohibiting the expenditure of funds for
division sets five and six. The Committee hopes that this action
will put to rest the issue of additional POMCUS sets for Europe
and cause the Department of Defense to move forward expeditious-
ly with programs to improve fast sealift.
The Committee realizes that international relations type argu-
ments will be raised against the Committee's position including the
"old hat" of not living up to our agreements. The fact remains that
the United States has made a major new commitment to the
NORTHAG region in recent years. This major new commitment
was done without any changes to formal agreements and only the
implied consent of the Congress. Also, the division sites under
construction, principally division site five, are being built with
NATO infrastructure funding and thus the facility could be used
for the storage of war reserve equipment by any of the NATO
allies. Finally, since the decision to "POMCUS" more division sets
in Europe, the United States has incurred major new military
responsibilities in Southwest Asia as a result of the Soviet invasion
of Afghanistan and the revolution in Iran. These responsibilities
can not be met by Army divisions when their equipment is stored
in Europe.
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FORCE MODERNIZATION AND INTRODUCTION OF NEW WEAPON
SYSTEMS
The Army's operation and maintenance request for fiscal year
1982 contains a major increase for introducing new weapon sys-
tems into the Army force structure. The amount requested is $977
million compared with $421 million in FY 1981. The Committee
has considerable doubts as to the accuracy of some of the individu-
al increases proposed within this effort but has provided funding as
requested for all items except one. For example the request does
not reflect slowed deliveries of equipment from procurement. The
bill as reported deletes an increase of $5.9 million. This increase is
for studies and analysis (computer programming, etc.) at the
TRADOC Combat Development Activities Center. This increase
cannot be justified as an item of force modernization.
The Committee will also request the General Accounting Office
to undertake a detailed review of the Army's system for program-
ming, budgeting and accounting for these force modernization ef-
forts. The Army projects the cost of introducing new weapon sys-
tems to increase from the current annual rate of $421 million to
$2.6 billion during the next five years.
RUSTPROOFING VEHICLES IN HAWAII
The budget request includes $4.5 million in FY 1982 and $3.1
million in FY 1981 to repair rust damage to vehicles which have
been stored outside in Hawaii. As of the end of October 1981, no
contract had been awarded even though fiscal year 1981 funds
were available. The budget proposal estimates labor costs on this
contract at $29 an hour. The Committee's alternative would pro-
pose a more reasonable labor rate of $20 an hour. Even if the
contract agreement exceeds the labor cost estimates in the bill,
delays in contract awards make the reduction feasible.
EUROPEAN AMMUNITION PROGRAM
The Army budget request included an increase of $26.9 million
related to the on-going ammunition build-up in Europe. Transpor-
tation funds are not included in this portion of the increase. The
increase was to finance a level of effort in FY 1982 which would be
about 35,000 tons greater than that accomplished in FY 1981.
There has been a continuing problem in overcoming the storage
space shortages caused by safety considerations, environmental
problems and delays in construction. The Army's own figures indi-
cate that it will not have room ready on time to store the ammuni-
tion. The Committee recommends a reduction of $17.1 million to
more closely reflect the storage capacities.
ARMY NATO CONTRIBUTION
The Army has budgeted an increase of $5.9 million in fiscal year
1982 for anticipated increases required in the U.S. contribution to
the NATO military budget. The Army has revised the estimate of
its share of the NATO contribution and a reduction of $3.4 million
is recommended.
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NEW CUMBERLAND ARMY DEPOT
The Committee has not provided funding to transfer personnel
from the helicopter maintenance program at the New Cumberland
Army Depot. The Committee recommends that all such mainte-
nance activity be continued at New Cumberland through fiscal
year 1982.
ARMY STOCK FUND
Appropriations, fiscal year 1981 $34,000,000
Estimate, fiscal year 1982 211,300,000
Recommended in the bill 163,300,000
Change ?48,000,000
The change in the estimate for the Army stock fund is explained
in the Foreign Military sales section of the report.
OPERATION AND MAINTENANCE, NAVY
Appropriations, fiscal year 1981 1 $17,728,799,000
Estimate, fiscal year 1982 19,611,170,000
Recommended in the bill 19,258,970,000
Change ?352,200,000
'In addition, $135,500,000 transferred from other accounts.
The Committee recommends an appropriation of $19,258,970,000
for Operation and Maintenance, Navy. This amount is a decrease
of $352,200,000 from the budget estimate of $19,611,170,000. The
amount appropriated for fiscal year 1981 to date is $17,728,799,000.
The amount recommended herein for fiscal year 1982 is an in-
crease of $1,530,171,000 over the prior year. Pay raise costs are not
included in the fiscal year 1982 estimate.
The Committee's recommended changes to the Navy operation
and maintenance budget, as previously discussed or as discussed
elsewhere in the report have been allocated is reflected in the
following table and the classified annex:
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O&M, NAVY
STRATEGIC FORCES
127
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