LETTER TO JOHN A. MCCONE FROM KERMIT GORDON

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80B01676R002800080003-3
• Release Decision: RIFPUB
• Original Classification: C
• Document Page Count: 71
• Document Creation Date: December 14, 2016
• Document Release Date: December 30, 2002
• Sequence Number: 3
• Publication Date: May 16, 1963
• Content Type: LETTER

Approved For Release 2003/01J,29 ,'CIA=--RDP80B016 R002800080003-
ECUTIVE OFFICE OF THE PRESIDENT
BUREAU OF THE BUDGET
WASHINGTON 25. D.C.
e; r,::,_,.~
. d) Kermit Gordon
GORDOR
Dh-reC'to.i'
Approved For Release 2003/01/29 CIA:.RDP84B01676R0028000803 G/ 3 U l
 Ap or Rel ase 2003/01/ 9 CIA RDP80BO1676R002800080003
SENDER WILL CHECK CLASSIFICATION TOP AND BOTTOM
UNCLASSIFIED CONFIDENTIAL SECRET
CENTRAL INTELLIGENCE AGENCY
OFFICIAL ROUTING SLIP
TO
NAME AND ADDRESS
DATE
INITIALS
1
ER - Reading Board and F
ile
2
3
4
5
6
ACTION
DIRECT REPLY
PREPARE REPLY
APPROVAL
DISPATCH
RECOMMENDATION
COMMENT
FILE
RETURN
CONCURRENCE
INFORMATION
SIGNATURE
Remarks :
M/R: this discussed at morning staff
meeting. Original sent to
Comptroller.
FOLD HERE TO RETURN TO SENDER
FROM: NAME, ADDRESS AND PHONE NO.
DATE
O/Exec Dir
ro edt6 U6 W200 /01 29 0o-'iAB~A$@BO
1 May
A 003
FORM 10. 237 Use previous editions (40)
3 U.S. GOVERNMENT PRINTING OFFICE : 1961 0-587282
82
 Approved For Release 2003/01/29 : CIA-RDP80B0'!676R0028000800
EXECUTIVE OFFICE OF THE PRESIDENT
BUREAU OF THE BUDGET
WASHINGTON 25, D.C.
OFFICE OF
THE DIRECTOR
APR 2 6 1963
Honorable John A, Mc Cone
Director
Central Intelligence Agency
Washington 25, D. C.
Dear Mr. McCone:
I wish to draw your personal attention to the enclosed
special report by the Bureau of the Budget entitled
Cost Reduction Throu h Better Management in the
Federal Cn~.pr? ent.
Two points, in particular, need to be stressed regarding
the report. First, it gives specific details about cost-
reduction efforts throughout the Government, d6rrnanstra-
ting that this Administration can point to notable accom-
plishments in management improvement. Secondly, the
report should serve as a stimulus to each department
and agency to intensify its own efforts to find more
economical ways of doing its job.
I urge you to bring the report to the attention of your key
officials, both in Washington and in the field, and to give
personal leadership to the pursuit of further efficiency
gains in your agency. In the light of our budgetary prob-
lem, it seems to me a matter of the highest importance
that this Administration continue to build an impressive
record of managerial excellence.
Enclosure
XERMITT- i GQRMON?
Director
WHO
n______1____~ r___ri_I____ nnnn inw in ?LiNR..
9: - 03-3
 pproved'For Relbase 2003/01/29 : CIA-RDP80B01676R002800080003-3
SENDER WILL CHECK CLASSIFICATION TOP AND BOTTOM
UNCLASSIFIED CONFIDENTIA i SECRET
CENTRAL INTELLIGENCE AGENCY
OFFICIAL ROUTING SLIP
Exec Director
I have asked OCR to get 50 additional
copies and will do a covering memorandum
to the heads of all components.
-l e
LBKirkpatrick
FOLD HERE-TO-RETURN TO SENDER
FROM: NAME, ADDRESS AND PHONE NO.
49 Apr 63
16
I N I t V V-O
 Through
Better Management
in the
Federal Government
 Introduction
Two years ago the Bureau of the Budget published a report
on management improvement in the Government. It reviewed
measures taken in the Government in the Post-war years to
raise the productivity of the Federal work force, economize
in the use of taxpayers' money, and improve the quality of
service to the public. The report showed that substantial
improvements in economy and efficiency had been achieved,
and that efforts towards improvement had strong top-level
support throughout the postwar period. It was clear that
those cost reduction and better management efforts produced
results that merit continuing, vigorous support in the future.
This report, compiled in the Bureau of the Budget, brings
to light important new developments in management improve-
ment and cites selected examples. It does not describe a
utopia; much remains to be done. Nevertheless, it indicates a
healthy climate of critical self-appraisal throughout the Fed-
eral Government and a sustained drive for new and still
better methods of improving the organization, control and use
of manpower.
There is both range and depth to the Government's efforts
to improve the conduct of the public business. From type-
setters in the Government Printing Office to the Defense
Department officials who sign multimillion-dollar contracts,
Federal workers and supervisors are seeking to improve on
their own performance. Their watchfulness and enterprise
are paying dividends, as this report makes clear.
One of the newest and most promising facets of this overall
campaign is a program to improve the use of manpower in the
executive branch. It was launched by the President on
October 11, 1962, in a memorandum to the heads of depart-
ments and agencies. His goal, the President said, is "to limit
the number of Federal employees to the absolute minimum
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 necessary to get the public busin
goal is essential, he explained, no
"t
of Government but because
competing for a scarce supply o
such fields as science, engineering
The President's program has five
(1) the clear placement of 1
control and utilization
(2) establishment in each a
for discovering better us
them into effect,
(3) strong emphasis on reseI
productivity,
(4) budget policy that anti
that contribute to, incr~
(5) the development of pro
manpower utilization p
What follows is a report of
effort to find better and more ec
the vast responsibilities of th
dividual advances in public mal
but the sum total of such advan
the responsiveness of Governm
the people.
Similar reports on future pr
time to time.
APRIL 24, 1963.
Approved For Release 2003/01/29
ss done." Achievi:ig that
only to hold down the cost
i
s
e Federal Government
manpower," especially in
and medicine.
lain elements:
esponsibility for manpower
n the: head of each agency,
ency of systematic methods
es of manpower and putting
arch in methods of increasing
ipates, and budget practices
ases in productivity, and
cedures for reviewing agency
)licies.
progress in the never-ending
)nomieal ways of carrying out
e Federal Government. In-
agenient are rarely dramatic;
ces is an important measure of
nt to! the needs and values of
)gress' will be published from
CIA-RDP80BO1676R002800080003-3
 Approved For Release
Contents
Introduction .............
..........................
Automatic Data Processing ................. .
Highlights of Managing Manpower....... .
.........
Incentive Awards..........
..................
Property and Supply Management ...................
Financial Management .............................
New Approaches for Managing Complex Programs... .
Statistics Reporting and Use ........................
Management of Field Activities .....................
Regulatory Administration ...... .
..................
Future Developments ........................... .
Page
1
1
9
14
20
33
37
48
51
54
60
Approved For Release 2003/01/29 : CIA-RDP80BO1676R00280008000
 the public conqerning the insured status of Social.
Under the punched-card system, requestS from
ity accounts were processed in eight to twelve days or longer.
Secur
to five days after
w processed within three
i
Aided by the computer most of these requests are
their receipt. Also the'computer ii8entifies people wh 0 are eligibk to receive retirement benefits
but are unaware of their eligibilify--an operation not feasible under the previous system.
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
AUTOMATIC DATA PROCESSING
No single technological advance in recent years has con-
tributed more to efficiency and economy in Government oper-
ations than the development of automatic data processing
(ADP) equipment. Most commonly, ADP means the use of
high-speed electronic computers, although it has other aspects.
The Federal Government was the first user of ADP for business
management purposes (as well as research and scientific uses)
and today is far and away the largest such user.
As in any technological breakthrough of this magnitude,
several years of pioneering were necessary before the potential
of the computer for the Government was adequately recognized.
Finding ways to harness the computer to the work of Govern-
ment was a major undertaking. Beginning with the earliest
uses 12 years ago, when few people understood the capabilities
and limitations of computers, beneficial applications have
been made with increasing mometitum. Although the learn-
ing process was costly, it has paid striking dividends.
The benefits have flowed both ways: to the Government,
in the form of more efficient operations; and to the public,
in the form of faster, more reliable services and through ad-
vances in systems design of value to business, educational,
and scientific users.
Many and Varied Uses of Computers
Within the Federal Government, the uses of ADP equipment
have been many and varied-from the control of missiles in
flight to more economical handling of postal money orders.
ADP techniques and equipment, and their intelligent applica-
tion, have permitted reductions in clerical work forces and
even the closing down of entire sections or offices. ADP
equipment has shortened the time needed to compile census
data and make it available to the Government, business firms,
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
and research institutions. It has eased the enormous burden
of producing the millions of checks issued by the Treasury
Department and, by allowing geographical sorting of some of
the checks before mailing, it has eased Post Office's distribu-
tion job. ADP equipment is helping, the Internal Revenue
Service check up on the filing of income tax returns. The use
of ADP equipment is speeding the nation's air traffic. It is
even helping keep undesirable drivers off the Nation's roads.
In these and other ways, it is holding down growth in the
Federal payroll and contributing to greater output per employee.
Benefits in Economy and Efficiency
In virtually every instance, systems designed to use ADP
equipment help the Government economize the taxpayers'
money. Sometimes the saving is' tangible, as when installa-
tion of a computer makes it possible to eliminate jobs. Some-
times the saving is harder to calculate. For instance,
computer-based systems may make it possible for employees to
be shifted to other duties, obviating the hiring of additional
personnel. Or, it may enable an agency to do a better job-
such as faster publication of the results of the decennial count
of the entire population or of more specialized censuses, such
as the census of manufacturing. Aware that a tool is only as
good as the craftsman who wields it, the Government, under
the leadership of the Bureau of the Budget, is making special
efforts to discover the most effective uses for ADP equipment.
It is being introduced on a highly selective basis. Before
automating manual operations, agencies are required to have
a carefully drawn, workable blueprint and the skilled personnel
necessary to operate ADP equipment and get the most out of it.
Since conversion to ADP is typically an expensive undertaking,
particular attention is being given to the use of ADP where it
will yield the greatest return
To get maximum use out of its investment in ADP, and to
prevent excessive investment, strong emphasis is being put on
sharing of computers-among agencies and within agencies.
An experimental sharing exchange has been set up in the
Philadelphia area, where there are 45 sizable offices of Federal
agencies; another is being established in Washington, D.C.,
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
where there is the largest concentration of computers in the
Nation. Measures are under way to establish regional sharing
arrangements in nine other major metropolitan areas. Sharing
is also done on a functional basis; for example, Post Office
money orders are computer-processed in the Treasury Depart-
ment. When this joint use is fully in effect in June 1963, the
Post Office and the Treasury expect to realize a reduction in
personnel requirements of about 170 employees at a saving of
about $650,000 a year.
Significant economies also can be realized from intra-agency
sharing of ADP. A Department of Agriculture computer
center in Kansas City, Mo., handles data formerly processed in
both Kansas City and Evanston, Ill., reducing annual personnel
and machine costs by $800,000. The Federal Crop Insurance
Corporation also uses the Kansas City facilities and other uses
are being planned. The Department's New Orleans computer
center now performs work for the Soil Conservation Service
which formerly was contracted out at a greater cost. The
New Orleans installation also will take on the task of pre-
paring all of the Department's payrolls and will effect effi-
ciencies in certain personnel and fiscal operations which are
expected to save about $1.3 million a year.
One reason computers can cut deeply into a Government
agency's (or a business firm's) costs is that they can be adapted
to handle a variety of information. For example, the U.S.
Geological Survey, a part of the Interior Department, has de-
veloped an integrated computer-based system embracing pay-
roll accounting, leave accounting, personnel cost distributions
and statistics, and budgetary accounting. The heart of the
system is a single master file-a magnetic tape on which are
recorded some 80 items of information for each of the Survey's
8,000 employees.
Similarly, the Peace Corps, through ADP services obtained
from the Agency for International Development, enters on
computer tapes a host of facts about its thousands of prospec-
tive volunteers. Also entered on tape are data about the jobs
which the Corps has been invited to take on in foreign coun-
tries-necessary skills, languages, age and education require-
ments, and so forth. Operating at incredibly high speeds, the
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-R DP80BO1676R002800080003-3
computer "matches" each applicant against job requirements
and produces a printed table which enables Peace Corps staff
employees to select the applicants best suited for the position
to be filled. Manual matching would not be nea:-ly so fast or
thorough.
The computer has been put to still another kiaid of use by
the Agricultural Stabilization and' Conservation Service. It
established a data processing center in the field to carry out
its grain operations more efficiently. So far, the loan opera-
tions of five offices have been consolidated, eliminating five
separate sets of accounts.
Benefits to Industry and the Public
Advances in systems design, with' the aid of ADP equipment,
have made possible cost-cutting industry-Government coopera-
tion. By exchanging information in the form of magnetic
tapes, punched-paper tape and punched cards, both industry
and Government realize mutual reductions in administrative
expenses. For example, some private employers and Federal
agencies are experimenting with giving the Social Security
Administration, in a form usable by ADP equipment, reports
on wages paid and taxes withheld. Some private research
organizations buy copies of magnetic tapes from the Census
Bureau for use in their own computers. These tapes contain
intermediate or summary results with no disclosure of data
regarding individual respondents.l' As technical problems,
such as compatibility of equipment,', are resolved, a more wide-
spread use of such exchanges of it information is likely to
develop.
The Railroad Retirement Board and the railroads are using
ADP equipment to their mutual advantage. The Board
maintains a master file on magneti6 tape of the accounts of 10
million past and present railroad employees. The file is
brought up to date four times a year, with information supplied
by the carriers. About 25% of the quarterly reported infor-
mation is being supplied by the railroads on tape produced by
their own computers.
The Federal Aviation Agency prepares nationwide sum-
maries and detailed reports of significant aircraft mechanical
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
failures and malfunctions. Through the use of high-speed
transmission lines, the input data are fed to and processed
through a computer at Oklahoma City, Okla. Resultant
reports are distributed by the same fast wires to the FAA air
carrier district offices and commercial air lines throughout the
country. Another significant contribution to the safety of air
traffic is the Federal Aviation Agency's Semi-Automatic
Flight Inspection Program. ADP equipment in this program
permits the rapid identification and correction of malfunction-
ing air navigation aids and substantially increases the number
of such inspections that can be made.
Business also reaps a benefit from Government use of ADP
equipment in the tabulation and publication of census data.
The Census Bureau's inquiries-into population, income,
consumer-buying intentions, housing starts, production, sales,
employment, foreign trade, and a host of other economic
matters-produce information of enormous value to business-
men. ADP equipment is enabling the Bureau to broaden the
supply of census information and to make it available while it
is still timely. For instance, many marketing surveys have
relied heavily on the highly detailed data on population,
income and housing developed from the tens of millions of
items of information collected in the 1960 census. The Bureau
completed various parts of that census 6 to 24 months sooner
than the one taken in 1950.
One of the most direct ways in which the use of computers
benefits the public occurs in the National Driver Register
Service. Operated by the Bureau of Public Roads, the Driver
Register Service's purpose is to prevent problem drivers from
securing a license from one State without disclosing prior loss
of driving privileges in another State for drunken driving or
involvement in a fatal accident. The Service's central file
now contains information on more than 267,000 persons
whose driving privileges were suspended or withdrawn.
The Bureau conducts a daily search of the file, checking an
average of 5,000 to 7,000 names, forwarded by the States, of
persons applying for a driver's license. By March 1963,
46 States, 4 Territories and the District of Columbia had agreed
to participate in the Service. Discovery of applicants hiding
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
past offenses and a State's refusal to give them a license helps
make the Nation's streets and roads safer. Without ADP
equipment, operating the Register, Service wouli be more
expensive and slower.
ADP equipment is of major importance in maintaining 6
million Government life insurance policies for veterans.
Automation permitted elimination of about 400 ;obs at the
Veterans Administration's Philadelphia Insurance Center.
In the issuance earlier this year of special and accelerated
dividend checks to policy holders, this computer-based system
saved more than $1 million in personnel costs, as compared
to what the job would have cost on a manual basis. Addi-
tional savings are realized in processing the 70 million checks
the VA sends each year to veterans and their survivors.
(Since 1950, the Veterans Administration has reduced the
number of employees required to handle its 6 million policies
from 17,000 to 3,000. Continuing improvements in organiza-
tion, systems and procedures, separate from the shift to com-
puterized operations, has accounted for much of the manpower
savings.)
Great economies also accrue to the Treasury, which issues
333 million checks a year, including 162 million checks for the
Social Security Administration. By making improvements in
its ADP procedures for reconciling checks, the Treasury added
annual savings of more than $100', thousand in fiscal 1962.
Exchange of tapes among Treasury', Social Security, and the
VA has reduced errors, speeded up issuance of checks, trimmed
personnel costs and contributed to the closing of seven regional
disbursing offices.
Other Special Uses
Due to careful planning, ADP equipment is contributing to
efficiency and economy in Government in countless other ways:
calculating where an astronaut's capsule will land, helping
the Pentagon develop plans for combat operations, analyzing
the impact of taxes, matching servicemen with job vacancies
at overseas bases, predicting electric power demands, expand-
ing the frontiers of science, keeping track of cotton, wheat
and grain inventories, helping prepare a multitude of mechan-
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
ical computations required in the atomic energy program, and
many more.
Computers Require Careful Planning
These gains in efficiency, in economy of operations, in better
service, do not become available automatically. They are
the product of careful planning, of advanced systems design,
and of avoiding past mistakes. They are due in large measure
to the fact that Government-wide policies and guidelines on
ADP equipment utilization are now in existence, and that
the competence to distinguish between profitable and un-
profitable applications is sufficiently widespread to minimize
improper judgments in ADP equipment acquisitions. The
once prevalent tendency to glamorize the hardware has been
replaced by the more sensible view of hardware as only a tool-
a means to the end rather than the end itself; and there are
check points at all levels in the executive branch to make sure
that "hardware addiction" is a thing of the past.
pproved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
SELECTED INDICATORS OF PRODUCTIVITY ADVANCES
Thousands
200-
180-
160-
140-
120-
100-
80-
60-
40-
s
20-
Treasury Department-Disbursements
Number of Checks
and Bonds Issued)
Per Employee
FISCAL YEARS
Production per employee has increased 600%
from 1935 to 1962. Actual processing cost
per check^ and bond issued in 1935 was 5.6
cents as compared to 4 cents in 1962, a de-
crease of 28`/? notwithstanding the more than
100% increase in employee salary rates and
other costs.
1960 1962
Veterans Administration-Insurance Service
Policies Serviced Per Employee
POLICIES PER EMPLOYEE
Policies serviced per employee increased 500 percent from 1950 to 1962. A? erage
number of policies maintained during this 12-year period was over 6 million vifh a
face value of $40 billion. During that some period, operating costs were reluced
from $9.03 per policy to $3.88, even though salaries and other costs increased iur ng
the period.
Approved For Release 2003/01/29 : CIA-RDP80BO1676R0028000800
1935 1940 1945 1950 1955
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
HIGHLIGHTS OF MANAGING MANPOWER
Despite such remarkable technological achievements as auto-
mation, manpower is, and always will be, indispensable to
execution of the Government's responsibilities. People, not
machines or procedures, constitute.the means for making the
Federal Government responsive to the needs of the individual
citizen and the Nation as a whole.
The challenge is to make the most effective use of man-
power. Many Government agencies have attempted, with a
fair degree of success, to pursue this goal through develop-
ment of tools for measuring workloads, performance, and
output. In the process, advances in management technique
have come about. A Government-wide assessment of the use
of manpower, under the direction of the Bureau of the Budget,
is underway. Several notable accomplishments, antedating
the new campaign, are worth reciting.
Matching Manpower and Work
Matching manpower with changing workloads and activ-
ities-always particularly difficult for organizations with a
far-flung network of offices-has been accomplished with the
aid of new work planning and measurement tools. Several
agencies have developed and perfected systems for breaking
down their various operations into standard work units or
categories. The number of work units performed and the
manpower expended are regularly recorded. These data are
the building blocks for program planning, budgeting, sched-
uling work, deployment of available personnel, and super-
vision. Among the agencies employing this approach to
manpower management are the Social Security Administra-
tion, Small Business Administration, Railroad Retirement
Board, Post Office Department, Soil Conservation Service,
Treasury Department, and the Veterans Administration.
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
The Internal Revenue Service has applied a work planning
and control system to the processing of tax returns and remit-
tances in its district offices. The system's essential elements
are a work plan, a work schedule and a work progress report.
The results have been better forecasts of workloads, more
effective scheduling, streamlining of processing and a general
increase in quality of performance. A major benefit: about
175 man-years of work saved in fiscal 1961 and 275 man-years
saved in fiscal 1962.
Another agency which has devised a good way of balancing
workload and staff is the Soil Conservation Service of the
Department of Agriculture. The Service's mission is to help
farmers and ranchers determine the best use of their land and
to promote conservation practices. The Service's manpower
control system provides a clear picture of cost and productivity
in 3,400 field offices spread among nearly every county in the
Nation. The core of the system is bi-weekly reports from
field offices to area supervisors. The reports show how each
man has used his time and what each office accomplished during
the 2-week period. Area supervisors review the reports in
light of what each office is expected to do. They can accept
and pass quickly the normal situation and initiate measures to
remedy problems. At higher echelons, consolidated reports
are studied to spot lagging areas or States, trends in productiv-
ity or costs, and needs for program changes.
Results of the Service's time-and-progress reporting system
are impressive. For example, acres mapped per man-year
increased from 28,006 in 1960 to 30,301 in 1962. This gain of
8.2% in productivity translates into dollar savings of
$278,400-the cost of mapping more than one million acres.
Performance Standards
Several Government agencies have adapted industrial engi-
neering methods, originally designed for factory operations,
to administrative, clerical and technical work. In doing so,
they have broken new paths in work measurement which have
led to economies in money and manpower. A good example
is the Manpower Validation Program of the Air Force. Some
600 technicians, working in teams of about 5 men each at Air
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003
 Chart illustrates how selected performance data from Soil Conservation Service field
offices are compared to spot situations requiring management attention. In this case
the data indicate in field office C and I that the number of landowners and operators
serviced is low and the direct dollar cost is high. The causes of the low performance
were determined and appropriate action taken. (This chart displays only 2 of some
16 to 30 performance items reported by field offices.)
Force bases around the world, use sampling and related pro-
cedures to collect data about man-hours spent on primary
work, support work, delays, and personal allowance time
(coffee breaks, etc.. This information is used to establish
manpower standards for different kinds and volumes of work.
So far, about 10% of the Air Force's manpower has been
studied. About 5,000 positions were determined to be
unnecessary at the activities studied, and were reallocated to
meet priority requirements elsewhere in the Air Force.
 Approved For Release 2003/01/29 : CIA-IDP80B01676R002800080003-3
In the Veterans Administration, the Department of eterans
Benefits has developed a somewhat different approach.
organization which has 15,000 employees in 67 field offices has
designed a work sampling technique for setting performance
standards. It involves test periods, during whicr. employees
record their work activities at random times during the day.
Self-recording has streamlined and' refined the Department's
well-established measurement system, which it employs as a
key tool for evaluating performance and use of manpower,
determining employee training needs, and preparing budgets.
The Navy's Bureau of Supplies and Accounts has taken long
strides toward developing performance standards for office and
warehousing work. Its Methods!, Engineering Program uses
150 technicians who develop standards in 18 field installations.
The standard for each employee is made known to him so that
he is aware of his expected output. For the supervisor, the
standard is a tool for balancing man-hours with workload on
a daily basis. Management also: uses the standards in pre-
paring and controlling budgets. So far, standards have been
set for some 9,000 of the Bureau's 28,000 employees. The
Bureau is striving to develop performa and hones ev e for a y
additional 3,000 employees by June 1963, p
to extend coverage to 80% of its work force.
Engineering of performance standards in the management of
Army transportation terminals, begun in 1960, led to improve-
ments in fiscal 1962 estimated at $550,000. This was a return
of $3.60 for each dollar invested in the program during the
year. In fiscal 1961 the return was $2.54. A key feature of
the program is to have work standards for all personnel re-
gardless of type of work involved. That objective is sought
by the flexible use of a variety of measurement techniques-the
latest in engineered standards (predetermined times, standard
data, pace-rated work sampling); as well as statistical analysis
and technical estimates.
Pooling Use of Manpower
A somewhat different economy in manpower has been
effected by the Public Health Service, the Division of Plant
and Animal Quarantine of the Department of Agriculture, the
Bureau of Customs, and the Immigration and Naturalization
Service. These four agencies are responsible for checking per-
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
sons, animals, plants, and food entering this country. To
perform these functions they are pooling their manpower along
the United States-Mexican border. (This is an extension of
a dual screening program started by Customs and Immigration
a number of years ago.) One inspector asks persons coming
across the border questions that formerly were posed by an
inspector of each of three or four agencies. Unusual problems
outside the inspector's primary area of responsibility are re-
ferred to an officer of one of the other three agencies. Not
only is the need for border manpower reduced, but the formal-
ities of entering the United States are speeded up for the
traveler.
Salary Reform
One of the most important management advances in the
manpower field in many years was accomplished in 1962 by
the executive branch and the Congress. The Federal Salary
Reform Act of 1962, proposed by the President, goes to the
heart of the most critical Federal manpower problem: securing
the services of highly competent personnel. Unduly low sala-
ries at certain levels and defects in the Federal salary structure
had weakened the Government's ability to attract and keep
firstrate men and women.
The 1962 act embodies the principle of pay levels for Federal
employees comparable with the national average of salary
levels in private enterprise. By adhering to the principle of
equal pay for equal work, with differences commensurate
with differences in responsibility and performance, the act
established realistic and appropriate salary levels both within
and among the several statutory pay systems and each of their
grade levels. It provides for administrative discretion to raise
salary rates when necessary to compete more evenly with
private industry for scarce skills. It permits salary increases to
reward exceptional performance. Finally, looking to the
future, it authorizes executive branch machinery for an annual
review and report to Congress on the relationship of Federal
salaries to those in private enterprise and recommendations for
adjustments in Federal pay. Although the act did not apply
the new Federal compensation policy to upper career grades,
Presidential appointees, and other top executives, it did lay a
sound foundation for further improvements.
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
INCENTIVE AWARDS
A rich source of ideas for economies and greater efficiency in
the Government is its own staff. !,Cognizant of this, Federal
agencies are taking vigorous action to make their employees
cost-conscious and alert to the possibility of doing the job
faster, more cheaply, less arduously, or better in some other
way. Begun during World War II, an incentive awards
program is now in effect throughout the Government, serving
to mobilize the energy and brainpower of Federal employees
in all types of jobs and at all pay levels. Cash and honorary
awards, authorized by gGovernmentEemployeesltoecome
Awards Act, help motivate
up with ideas for cutting costs and raising quality, and to
strive for excellence in their own work.
The spirit of the incentive awards program was well ex-
pressed by James L. Harrison, the Public Printer, who is in
charge of the Government
written, ' Oh cdeclaredein bestlsuettgr e
gestions have not yet been
inviting GPO employees to participate in the incentive awards
program. Mr. Harrison's letter; dated May 4, 1961, is worth
quoting at some length as a cogent expression of the spirit
and potential of the program. He wrote in part :
. The Government has scarcely begun to tap the gin wonderful resources availouteof thebknowledge and expe nonce
ing suggestions growing
of its workers. The best suggestions have not yet been
written.
"I know that each of you, being closer to the work you
perform than anyone else, can ','tell whether there is a better
way to do it-a less expensive way, a more efficient way-a
way, even, that may make your work easier for you. Please
take a good look at the operationsmethoon around ds and procedures
submit your suggestions for
. that might eliminate waste of time, effort or material
14
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Worn collars on the gas cylinders shown above used to cause scrapping of the entire
cylinder. At the suggestion of a warehouseman and a stockman at the More Island
Shipyard. the cylinder supplier now replaces worn collars of a nominal cost. Result:
a saving in the supply budget Of $ 11,000 a year.
As a result of Mr. Harrison's personal interest and the
energetic follow-up by GPO supervisors, the rate of awards
in the Printing Office for adopted ideas nearly tripled in a
single year-from 2.3 per 100 employees in fiscal year 1961
to 6.7 in fiscal 1962. Recognition for superior job perform-
ance rose from 2 awards per 100 employees to 3.1 in the same
period.
Other agencies made similar appeals to their work forces.
The results are impressive. In fiscal 1962, Government
agencies adopted 104,545 employees' ideas. Measurable sav-
ings as a result of accepted suggestions from civilian em-
ployees alone came to nearly $65 million. Cash awards aver-
aged $40 per employee, or nearly $3 million in all.
In addition, 76,029 employees received awards averaging
$149 each for excellence of performance. The measurable
benefits of their superior work were estimated at $71.5 million.
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
The Air Force Program
One of the most effective incentive awardsF Togra s i h of
Government has been mounted by the Air
the credit owes to the high level of management interest and
support of personnel officers. In fiscal 1962, the
the excellent sAir Force improved on an already outstanding record be post-
ing a 12% increase in useful ideas and a 64%
measurable benefits. The number; of ideas adopted rose to a
service-wide total of 33,245, or
totaled d $84,770,448-
the and benefits to the Government
cost of 42 Atlas long-range missiles.
One of the many suggestions from Air Force employees was
the $1 million idea of a quality ,control inspector at Tinker
Air Force Base in Oklahoma. A component of the landing
gear of KC-135 jet tankers known as the "trunnion support"
had to be subjected to several hours of heating at 600-degree
temperatures to strengthen its resistance to stress. But it
was found that the supports were warping during the heat
treatment and had to be discarded. Each support cost $2,480
and more than 400 of them required heat treatments.
The quality control inspector had a hunch that the supports
were warping because of variations in their thickness. He
found they ranged from is of an inch to 3% inches at their
thickest part. The warping was occurring in the thin areas,
which were absorbing too much heat. To protect them, the
inspector designed special steel ',bars which could be conven-
iently attached to the tru th m',''at pched, notlaginthe heating.
gle support
They did the trick. With
warped. The Air Force estimates it saved $1,035,910 by not
having to buy new supports.
At Kelly Air Force Base, Texas, an equipment specialist
came up with an even simpler solution to a problem. De-
humidifiers in the air cooling equipment of the B-58 jet
bomber were being thrown out after they had soaked up a
certain amount of moisture. The specialist suggested that
the dehumidifiers be baked in an oven to drive off the moisture
and make them reusable. thThe baking e cost ofnew odehumidifiers at
Force estimates its saving in
$13,397 a year.
16
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Outstanding Suggesfor. Electronics Mechanic Gerd E. Engles stands among . same of
his 250 adopted suggestions. Most were his own ideas alone, some were submitted
with a cosuggesfor. The bulk of his 2~1 adopted improvement ideas consists of
fools, jigs, and fixtures which save time in cissembl ing and disassemblin
'Mr. Engles, employed at the Son Francisco Naval Shi-
awards. His
savings estimated at more than $7;'0-0'0-.--
Special Drive 6y the Federal Aviation Agency
Unusual success also has been achieved by the Federal Avia-
tion Agency. A drive launched in March 1962 by Adminis-
trator Najeeb E. Halaby-with special prizes for the ideas
which led to the greatest economies-produced 6,000 employee
suggestions. About 1 in five, or more than 1,000 in all, was
adopted. Measurable benefits approximated $750,000.
An FAA aircraft pilot and an electronic technician shared
the $1,000 top award. They proposed a set of standardized
charts describing aircraft maneuvers used to test instrument
landing systems. Use of these charts frees pilots from having
to explain each maneuver by radio to air traffic controllers
during the test. The FAA estimates the charts alone will
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
ional
save flight time that would cost $57,308 a year. An coadditi
ntrollers
benefit is greater flight safety because air traffic,
have more time for supervising other aircraft.
Other Employee Achievements
In general, Government employee suggestions and special
achievements reflect the ingenuity and alertness on which we
Americans pride ourselves. It is possible here to give only
a few illustrations:
The Smithsonian Institution needed equipment for rigid
control of temperature and humidity for laboratory inves-
tigation in the field of radiation biology. To buy the
equipment would have cost about $5,000. The problem
came to the attention of a resourceful refrigeration me-
chanic who works for the Smithsonian. His normal
duties are repair and maintenance. By applying superior
skill and knowledge, he converted surplus refrigeration
equipment at modest cost 'so that it could meet the
laboratory performance standards.
An AEC employee recommended a change in an inspec-
tion procedure that would eliminate certain overlapping
or duplicating inspections. The inspection involved tests
that destroyed samples of, the item being inspected.
Adoption of the suggestion led to reduction in the number
of tests and thus items destroyed, saving more than
$91,000 per year. The employee received $1,000 for his
suggestion.
Man-hours valued at $9,750 a year are being saved as
a result of a constructive suggestion from a woman who
repairs parachutes at a Texas Army base. She devised
changes in the method of replacing damaged sections of
parachutes, cutting sewing machine and fitting time from
90 minutes to 45 minutes per section. The more efficient
technique greatly increased production and eliminated a
backlog in repair less fatiguing added the benefit
people doing the
new method was for
work.
One of the most valuable employee ideas came from an
engineer employed by the'Navy's Bureau of Ships. The
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
Navy's dry-docks were too shallow for new deep-draft
vessels, particularly Polaris submarines. There wasn't
enough room between the ships' keels and the bottom of
the dry-dock to admit the supports necessary before the
dry-dock was drained. The only known satisfactory so-
lution was to excavate the floor of the dry-dock to make
it deeper. Doing so would be very expensive and would
take the dry-dock out of service for months. Although
the problem was not part of the engineer's job respon-
sibility, it caught his interest. Why not, he suggested,
pump in additional water, raising a ship much the way
it is raised in a lock canal? Then there would be enough
room to insert supports under the keel. The Navy
adopted the idea. It saved $5,329,325 it otherwise would
have spent to excavate two dry-dock bottoms, mainte-
nance of the ships being indispensable. The Navy engi-
neer reaped an extra, personal benefit. The invention
was patented, the engineer receiving the commercial
rights. The Government received the license for Federal
use. A big shipyard already has negotiated a contract
with the engineer for use of his invention.
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-f DP80BO1676R002800080003-3
PROPERTY AND SUPPLY MANAGEMENT
With the Government spending about $30 billion a year to
buy property, equipment and supplies and owning $59 billion
of real property and $149 billion in supplies and equipment,
property and supply management is a vein of potential savings
well worth working.
This work is going on in all agencies with particular em-
phasis in the Defense Detand te h buysnthelcoServices
untless
Administration. The Defense partmen
items necessary to equip our military forces and maintains a
worldwide chain of tactical, transport, communications, and
support bases. GSA buys items in general use in the Govern-
ment, securing wherever possible the economies of volume
and standardization. It has custodial and maintenance re-
sponsibility for general purpose,' real properties, transferring
them, including defense properties, from agencies which no
longer need them to others that do, buying or renting new
ones as necessary, and selling those which are surplus to the
Government's needs.
In essence, property and supply management is concerned
with reducing procurement expenditures and holding down
the cost of maintaining the Government's inventory of
property, which ranges from warships to mop handles and
real estate. Economies have been achieved in a number of
different ways.
Competitive Procurement
Sometimes the highly complex or advanced nature of a
product makes it impossible to put it out for competitive
procurement and it is bought from a sole supplier. But recent
Defense Department studies have shown that on occasions the
Department was obliged to deal with a single supplier because
20
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 procurement, the Navy s ved 32*/o on purchase of fins for
Tales, an antiaircraft missile carried on warships.
A r ved For Release 2003/01/29: CIA-RDP0801676R002
TALOS FINS
SOLE SOURCE
UNIT PRICE
$1,998.99
COMPETITIVE PROCUREMENT ----- -----------
$1,360.00
UNIT PRICE---------------------------------------------------- $638.99
TOTAL, 420 UNITS ------ -------------------------- $268,375.80
NUMBER OF PROPOSALS RECEIVED---------------- 5
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
of failure to take the preliminary steps necessary, or to take
them early enough, to permit competitive procure:ent.
In the past 2 years, the Army, Navy, and Air Force have
established procedures for developing, where feasible, the nec-
essary drawings and specifications early enough to make com-
petitive procurement possible when a new weapon or other
item reaches the production stage. As a result, procurement
costs of items converted to competitive procurement have been
reduced roughly 25% both for original items and also for re-
placement parts. The Defense Department estimztes that in
fiscal 1962 conversions to competitive procurement reduced
costs by $190 million.
The economies achieved as a result of the shift =o competi-
tive procurement stand out more dramatically for individual
items. The Army's AN/GRC-19 radio is mounted on vehicles
for use by combat units in battle. By switching to competi-
tive procurement, the Army saved $3,295,400 on a recent order,
or 46% of potential cost at prior, sole-supplier prices. Sim-
ilarly, the Navy saved $268,400 or 32% on the purchase of
fins for the Talos, an anti-aircraft missile carried on warships.
And the Air Force, with only 3 firms entering bids, reduced
costs by $9,108,700, or 38%, in buying motor controls for the
KC-135 jet tanker, used in air-to-air refueling of long-range
bombers.
Defense Supply Agency
In November 1961, the Secretary of Defense created the
Defense Supply Agency to take over from the military depart-
ments the management of common supply and service activ-
ities in the continental United States. Substantial economies
are being realized from consolidated management of these
activities. In fiscal 1963, substitution of the Defense Supply
Agency for separate supply organizations in the three services
will yield economies of $30.4 million. In fiscal 1964 it is
expected that $33 million will be saved. Over the 2-year
period more than 4,000 civilian jobs in the defense establish-
ment will be eliminated.
The Defense Supply Agency is now managing a $2.2 billion
inventory consisting of nine major categories of materiel:
Approved For Release 2003/01/29 : CIA-I DP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
BUDGETED OPERATING COSTS
FOR MANAGEMENT OF COMMON SUPPLIES
Military Departments and DSA
Management of certain common supply and
service functions for the Military Departments
has been consolidated in the Defense Supply
Agency. The difference between budgeted
costs for separate management by the Mili-
tary Departments and consolidated manage-
ment by the DSA amounted to $30.4 million
in FY 63. These are annual operating
expense savings derived from management
improvements.
petroleum, food, clothing, medical, general, industrial, con-
struction, automotive, and electronics. Some of these stocks
can be cut back through better inventory management, and
DSA is striving for a $215 million reduction in inventory in
the current year. DSA also mechanically screens all excess
stock of the three services to assure maximum utilization of
such stock within the Defense Department. Through such
transfers, the military services expect to raise the re-use level
of $956 million in fiscal 1961 to $1.14 billion in the current
fiscal year.
Creation of DSA has given greater emphasis to what has
been a continuing Defense Department effort to reduce the
number of items bought and stocked. Elimination of items
yields savings in procurement and inventory handling and
maintenance costs. In the first 3 months of this fiscal year,
DSA identified 8,496 items which would be dropped from in-
ventory when current stocks were depleted. By the end of the
year, DSA expected the number of items to be dropped would
be 27,000. Their elimination was expected to save the Gov-
ernment possibly as much as $1 million a year. The agency
also began a new program to see that any of the Department's
$12 billion inventory of production equipment (boring, mill-
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
ing, and welding machines, etc.) which became idle would be
put to active use.
The Defense Supply Agency, in addition, administers De-
fense-wide programs for coordinated procurement, cataloging,
materiel use, and surplus personal property disposal, and op-
erates the Defense Traffic Management Service and Defense
Logistics Service Center. The agency has also become the
principal Defense office to work out more effective relation-
ships in its sphere of operations with the General Services
Administration, the principal civilian agency in this field.
Value Engineering
In developing the new weapons and equipment our modern
age requires for the military forces, it sometimes happens that
an item becomes fancier or more capable than it needs to be
to do its job. The Secretary of Defense has directed that every
effort be made to remove or change, anything in an item that
will reduce its cost while not impairing its essential function.
One way to do so is ''value engineering." Begun more than
2 years ago by several military procurement agencies, value
engineering is the systematic effort by the Department of
Defense and private contractors to ,'find and eliminate super-
fluities in defense weapons and equipment. Companies doing
business with the Department are given an incentive to per-
form value engineering studies by contract provisions which
normally assure they will receive at least 50% of any savings
they come up with. The Government, of course, gets the
balance of the savings under the contract and all of the cost
reduction on future orders. Contractors are urged to eliminate
or modify excessive requirements in design, components, ma-
terials, processing of materials, tolerances, testing require-
ments and procedures, and packaging requirements.
Value engineering has produced savings such as the
following:
? Complete elimination of a $72;5 electronic testing device
used to test antisubmarine warfare equipment. Analysis
showed the tests could be performed without the device.
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
EXAMPLES OF VALUE ENGINEERING RESULTS
Couplings for Talos Radar Test Set. Review of requirements resulted in use of one
simple type instead of two different types more complex in nature. Cost reduction
$827.52 per system, or 86 percent.
ON,
Fuel and Acid Pickups used in conjunction with the KD2B-I Target Missile were
eliminated after tests proved that fuel and acid flow could be maintained in flight
with the lines terminated at scientifically calculated fixed points in the tanks.
Cost reduction $115,200 FY 1963.
Rotary Switch for Ranging-Detecting Set, Sonar AN/AQS-10. The original switch
consisting of 3 printed circuit boards and 167 pieces was difficult to make, assemble,
and adjust. The redesigned switch has only one printed circuit board and 10 pieces.
Cost reduction $86.20 per switch.
25
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
00
0 0
10 N
o ,.
x
00
aZ
a0
QQ
W J
zm
W <
U 'r
FV W
CL W
z
0
4
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
? An 88% reduction in the cost of capacitors for the
Terrier surface-to-air missile. The old and new prices :
$73.96 and $8.54.
? An 88% reduction in the cost of cooling equipment for
the electronics system of the Navy's Crusader fighter
plane. The old and new prices : $1,243 and $142.
? A cut of 93%, from $2.95 to $0.20, in the cost of a
component for Polaris missile fire-control equipment.
? Reduction in the price of the fuse board for the Nike-
Hercules antiaircraft missile from $59.20 to $12, a 79%
saving.
The Defense Department expects that value engineering will
produce $64 million of economies in the current fiscal year.
Property Use and Disposal
Use of excess property and disposal of surplus property are
other areas in which the Government, by better management
and study of alternative uses and costs, is finding significant
economies. Property is "excess" when the agency which has
it no longer needs it and "surplus" when no other Government
agency needs it.
The use of excess property to meet some of the requirements
of old as well as new and expanded Federal programs-
including our efforts in outer space and scientific research-has
resulted in significant savings for the taxpayers. Hence, GSA
has intensified its efforts to find new uses for excess property.
In May 1961, for example, the National Aeronautics and Space
Administration, preparing for the task of landing men on the
moon, took over the Army's Michoud Ordnance Plant in New
Orleans, which originally cost $37.6 million. Similarly, an
airfield at Shemya, Alaska, which cost $23.1 million, was
transferred from the Federal Aviation Agency to the Defense
Department.
GSA's efforts in the utilization and disposal of property
have been facilitated by a reorganization which combined
previously scattered functions into a single organization, the
Utilization and Disposal Service. This consolidation has led
to accelerated disposal of surplus property, increases in taxable
real estate for States and communities and additional' sales
proceeds to the Federal Treasury.
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-F DP80B01676R002800080003-3
In selling surplus real property, GSA tries to find buyers
who will use the property promptly, thereby creating jobs
and income for the community. In calendar year 1952, 26 such
disposals were made. When the 26 plants are ccnverted to
commercial production, it is expected they will employ some
27,000 people with an annual payroll of about $189 million.
In fiscal 1962, proceeds from the sale of surplus real property
were $78.9 million, compared to $71.6 million for fiscal 1961.
The 1962 proceeds exceeded appraised valuation by 107.
GSA also handles transfer and disposal of excess and surplus
personal property (as distinguished from real estate), such as
furniture, automotive and construction equipment, office ma-
chines, etc. In fiscal 1962 it arranged for transfer among
Government agencies of $362 million (at acquisition cost) of
personal property, a new high and a gain of 17% from fiscal
1961.
Greater attention by GSA in recent years to rehabilitation of
personal property has saved the Government money. GSA has
contracts with 80 commercial firms ,for repair and restoration
of such items as desks, chairs, andfiling cabinets. In fiscal
1961, rehabilitation saved $10.1 million; in fiscal 1962, savings
were $16.8 million.
In February 1961, the Defense Department began an inten-
sive review of its installations around the world to determine
which could be reduced or closed.', These studies involved
detailed on-the-spot inspection by experts. As of December
31, 1962, decisions had been made to reduce or close installa-
tions which will enable the Department, when these actions
are completed, to reassign or drop from its payroll 44,923
employees. Savings in operating, maintenance, and military
personnel costs are expected to amount to an estimated $270.4
million.
The study showed the Department no longer needed 45 Gov-
ernment-owned industrial facilities' operated by private con-
tractors. GSA was advised that the plants were excess to
Department needs. GSA has found'' other uses in the Govern-
ment for three of them. One is scheduled for transfer for
educational purposes to a local community. Six have been
28
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 facilities are no longer needed. The plant pictured above is one of those which has
been sold for commercial industrial use, creating jobs and income for a community.
A former Naval Ordnance Plant at South Charleston, W. Va., the plant has been
converted to the manufacture of aluminum and steel personnel carriers.
sold. The others will be sold to private buyers or assigned
to State or local governments for selected public purposes.
Motor Pools
Ten inter-agency motor pools were established during fiscal
years 1961 and 1962, bringing the total in the United States
and Puerto Rico to 66. In 1962, employees of the participating
agencies rode about 250 million miles in pool cars at an average
cost of 7.6 cents per mile. When each agency was operating
its own vehicles the average cost was 10.78 cents per mile.
In 1962, alone, pooling saved the Government about $8.2
million. Additional savings are being realized from motor
pool management studies and the issuance of guides on main-
tenance and on the use of manufacturer's warranty.
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
THE ECONOMIC ORDER QUANTITY---
AN ILLUSTRATION
NUMBER
OF ORDERS
VALUE OF
EACH ORDER
VALUE OF
INVENTORY
CARRYING
COSTS
PROCUKEME
COSTS
TOTAL
COSTS
1
1600
$800
# 80
$ 5
w s
2
800
400
40
10
50
3
5710 P 7
5
533
A ?
320
267
??
160
27
?
16
15
?
25
42
?
41
6
267
133
13
30
43
CARRYING COSTS = 10% OF INVENTORY
PROCUREMENT COSTS = $5 PER ORDER
The Economic Order Quantity strikes a balance between the costs related to the size
of an inventory and the costs related to the frequency of procurement. In the above
example, four orders per year result in the lowest total costs for carrying the inventory
and for procuring the supplies.
The Economic Order Quantity
In ordering equipment and supplies, a Government agency
(or a private firm) must decide how 'much it needs for im-
mediate use and how big an inventory it should carry. Main-
taining an inventory costs money, and so there is a reason
for keeping it as small as possible and still large enough to
meet ordinary and perhaps some extraordinary needs. On the
other hand, the cost of placing orders for stock replenishment
rises as the number of orders increases. The "Economic
Order Quantity" is the number of units which balances pro-
curement and inventory carrying costs so that the least total
cost results.
In order to carry out the EOQ process, the General Services
Administration has devised procedures and issued regulations
requiring that each agency establish and maintain such con-
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
trol of personal property inventories as will assure that the
total cost involved will be kept to a minimum consistent with
needs. Application of EOQ in various agencies has had con-
siderable effect. For example, introduction of EOQ in
operating the Installation and Materiel Depot of the Federal
Aviation Agency has resulted in inventory reductions estimated
at $1.9 million, plus a reduction of $215,000 in annual in-
ventory carrying costs. At that depot the number of procure-
ment actions was reduced by close to 50%. Initial applications
of the GSA Economic Order Quantity regulation in Federal
agencies in the past 2/'24 years have resulted in identifying
potential economies of more than $20 million.
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
FINANCIAL MANAGEMENT
Cutting across all facets of Federal activity is finance-
estimating costs of work, obtaining funds from Congress,
keeping expenditures within dollar and program limits pre-
scribed by Congress, developing and maintaining financial
systems that are responsive to the needs of management.
Timely and accurate information on the use of Federal dollars
is of major importance to the Government-in both the
executive and legislative branches. In the executive branch,
two agencies' primary responsibilities concern Federal finan-
cial management-the Treasury, whose principal tasks are
raising revenues, paying many Government bills, and main-
taining central accounts for the Government; and the Bureau
of the Budget, whose main job is to look after the effective use
of money. The General Accounting Office prescribes ac-
counting principles and standards and independently scruti-
nizes Federal spending for the Congress.
The Joint Financial Management Improvement Program
These three central agencies have been engaged jointly since
1948 in leading a financial management improvement program.
All executive branch agencies participate. One of the major
objectives of this program is to create more cost consciousness
in managing the tax dollar by developing financial systems
that relate costs to work performance. Timely and meaning-
ful information along these lines can assist managers im-
measurably in conducting operations more efficiently and
economically. Since the start of the program, numerous
agencies have revamped their accounting systems and now
operate under modern, accrual accounting principles.
Another objective of the joint program is to streamline
finance procedures and cut costs involved in accounting oper-
ations themselves. Short cuts have been adopted and new
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
methods have been introduced. Sometimes econoraies have
resulted from alert thinking by employees or superv.sors who
found ways to eliminate duplication. Large savings have come
from using automatic data processing equipment (selected
illustrations are in a separate section).
Governmentwide Improvements
Recent actions by the central agencies that have Govern-
ment-wide effect include the following:
? Adoption by the Treasury Department of a modified
central accounting and reporting system eliminating
redundant practices in Treasury and other agencies.
Savings are estimated at $125,000 this fiscal year, $150,000
each year thereafter.
? The Bureau of the Budget directed other agencies to
submit quarterly estimates and reports of international
transactions. The purpose is two-fold : to obtain Govern-
ment-wide quarterly projections ,of Federal expenditures
and receipts entering into the U.S balance of international
payments; and to develop agency systems to minimize
spending and maximize receipts which affect the balance
of payments.
? To assist and guide agencies in setting up acceptable
accrual methods of accounting, as required by law, the
General Accounting Office has issued an important booklet
explaining and illustrating minimum requirements in
accounting for assets, liabilities, income, and expenses.
? The Civil Service Commission, with help from the
central finance agencies, has run financial training courses
for Federal employees since 1958. In 1962 about 700
Federal employees-both operating officials and financial
personnel-participated in this training.
Agency Accounting Systems
As a part of the joint Financial Management Improvement
Program, actions have been taken by many agencies which
produced significant improvements. Some examples are:
? The Department of State is overhauling its worldwide
accounting system. A new account structure has been
Approved For Release 2003/01/29 : CIA-I DP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
put in-to improve estimating, planning and control.
Financial operations for Europe and Africa have been
centered in Paris, eliminating a need for 22 positions.
Another center is being considered for Latin America.
? The Bureau of Public Roads put in an accrual system
to keep better track of Federal highway programs. This
includes work with State highway organizations to get
them to keep accounts in the same terms.
? USIA is improving its accounting to identify better its
assets, liabilities, income, and expense. Property values
have been determined and recorded as a part of the im-
proved system.
? The Post Office established accounting controls over
its widespread property holdings. The cost of all
property is recorded at over $1 billion. As a part of the
process of establishing the accounts, excess property of
almost $5 million was identified for disposal. Also, more
businesslike identification of costs has been adopted-
providing a more accurate base for considering changes
in postal rates.
Short-cuts and Streamlining
Minor changes in agency procedures are frequently quite
productive in dollar savings. Even though these savings may
be small individually, the cumulative effect is significant, as
indicated by the following examples :
o The Tennessee Valley Authority obtained annual savings
of $90,000 by centralizing procedural work that sup-
ports its payroll operations. By using a 10% sample in
auditing vouchers of $10 or less instead of examining
each one, it is saving another $50,000 each year.
? The Departments of Agriculture and Health, Education,
and Welfare are conducting tests on various possibilities
of statistical sampling in auditing vouchers. Results to
date hold promise for considerable manpower savings
on a Government-wide basis.
o The Public Housing Administration allowed small local
public housing authorities to combine to sell temporary
notes. In the initial application, 17 local authorities
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
realized joint savings of $13,000 in interest and advertising
costs. Further savings will result from expanded use of
this rule. By raising the denomination on all new issues
of housing authority bonds from, $1,000 to $5,000, several
million dollars are expected to be saved in printing costs
and in the costs of employing fiscal agents to service the
bonds to their maturity.
? The Railroad Retirement Board stopped mailing retire-
ment benefit checks to husband and wife separately, now
puts both in one envelope. Estimated savings-$70,000
a year.
? In the Federal Deposit Insurance Corporation, under
revised legislation, 28 audit positions were eliminated by
adopting simpler methods for computing assessments for
insured banks.
? Duplicate accounts were eliminated when the Agency
for International Development took over from the Export-
Import Bank the complete job of accounting for foreign
assistance loans. AID also has transferred to the De-
partment of State its disbursing functions in Latin-
America, which has permitted elimination of AID's
disbursing officers there.
36
Approved For Release 2003/01/29 : CIA-I DP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
NEW APPROACHES FOR MANAGING
COMPLEX PROGRAMS
Advances in technology since World War II have wrought
major changes in military weapons and the support systems,
such as communications and fire control, necessary to back
them up. The technological explosion has spawned a need
for new management techniques but has not automatically
generated them. Indeed, management breakthroughs have
been harder to come by, as a rule, than technological advances.
The lag in increasing our management skills is a serious
problem. Management mistakes and omissions can be costly
in terms of men, money, and materials. They can involve the
loss of time when time is priceless. Perhaps most significant
of all, the new technology-propulsion, release of nuclear
energy, remote control, self-correction, new magnitudes of
speed and firepower, etc.-forces upon defense planners
decisions of awesome complexity. These decisions-the
choice of a major weapons system, the mix of striking and
defense power, the balance of conventional forces and nuclear
capability-are intimately related to our national security.
Need to improve estimates and control
Once the preliminary choices have been made, they must be
translated into action economically, quickly, and effectively.
Schedule slippages endanger operational readiness plans,
generate additional costs and delay related activities, such as
reassigning and training troops. These have been real and
serious problems for the Department of Defense.
Significant headway in solving or minimizing these problems
is being made. Its origins go back a decade-for example, to
establishment by the Air Force in the early 1950's of weapons
system project offices. More recently, the pace of manage-
ment improvement in the Department of Defense has acceler-
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676ROO2800080003-3
ME7TTLT]
Approved For Release 2003/01/29 - CIA-RDP80BO1676ROO2810008000,3-3
I I i
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
ated. New techniques and tools, such as program definition,
incentive contracting, the PERT system for planning and
keeping track of development costs and progress, and value
engineering,' have been developed or elaborated.
Program Planning
The choice of a major weapons system is not only critical
and complex, it is expensive. It may involve the use or
commitment of a large amount of resources over a long period
of time, from the "gleam in the eye" stage to the time when
it becomes obsolete. With high cost and high risk, it is
crucial that the one best choice be made from the possibilities
available. This requires a choice in relation to the mission
to be achieved, the total resources likely to be required for the
acquisition and support of the weapons system during its
entire life cycle, and the trade-off value possible in terms of
contributing to different missions. For example, how much
would a dozen additional land-based ballistic missiles and
their supporting system cost and what would they contribute
to the mission of the Strategic Retaliatory Forces as compared
with a given number of additional Polaris submarines?
Until recently, defense planning, which involves planning
the number and kind of military forces that will be required,
including their weapons, was not tied into the budget process.
In addition, the traditional budgetary categories, e.g., per-
sonnel, construction, procurement, etc., did not focus on the
key choices of major concern to top management, i.e., costly
weapons systems.
Extending horizons
To put decision-making on a more rational basis, and thereby
to avoid if possible decisions which will have to be reversed
after considerable investment of money and manpower, the
Department of Defense has broadened its horizons. It has
begun projecting its force requirements (weapons and troops)
8 years ahead and its money and manpower needs 5 years
ahead. It has developed a mission-oriented programing sys-
1 Value engineering is described in the section of this report on Property
and Supply Management.
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80B01676RQ02800080003-3
tern as a framework for analyzing and selecting rom among
alternative weapons and equipment systems. Once a program
choice is made it is translated back into the mo:-e traditional
budget categories in which the appropriations process is cast.
The system now in effect enables Defense Department top
management to make decisions in the broadest possible per-
spective-one that shows their ultimate costs and long-range
implications.
Program Definition
Program definition is the process, just prior to full develop-
ment, of specifying the performance, schedule, and cost of a
proposed system in order that major decisions and contracts
may be based on the improved understanding of the job to be
done. It brings to light before the development commitment
is made choices that must be resolved about expenditures, per-
formance, design, durability, trade-offs, and other aspects of
the final product. It permits theI use of incentive-type devel-
opment contracts and should result in considerable economies,
more reliable cost estimates and''; schedules, closer working
relationships with contractors, and a more informed and com-
petitive selection of a contractor.
_ C -
Program definition was first tried experimentally in develop-
ment of the Air Force's Titan III standardized space booster.
The original development plan, drawn up in the traditional
way, outlined a $500 million program, a proposed schedule,
and technical features. Titan III in essence was to employ
new solid rocket boosters with a Titan II core and an Agena D
upper stage, the latter two having already been developed.
The Secretary of Defense believed that development should
not be approved until the system was more closely defined.
Two manufacturers who were the' ' prime contractors for Titan
II were given funds to help the Air Force elaborate its design
and plans. As a result of more 'precise program definition,
it was determined that the Agen'a D could not be used as
originally thought and a new upper stage would be required.
This and other changes necessitated new and additional de-
velopment costs raising the total estimate to $800 million.
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
With this more accurate information in hand, the Department
was able to reassess the Titan III's probable benefits in light
of the new cost figure-before a decision was made to go for-
ward and before large and unexpected sums had been spent
on development. The increased specificity of design made it
possible to plan and negotiate an effective system of develop-
ment contract incentives.
Can reduce costs
Another pilot test of program definition proved of con-
siderable value in contract negotiation for the Army's Lance
missile. The Lance is a ground-to-ground tactical weapon
designed to be used by combat troops. Of eight firms which
submitted bids for program definition and subsequent develop-
ment, two were selected and given $500,000 each for the pro-
gram definition phase. At the end of 60 days, the two com-
panies submitted program definitions and proposals for
development and production.
Among the specific results of the Lance program definition
phase were the drawing up of detailed specifications for
major assemblies and subassemblies before final award of the
development contract, resolution of important technical
problems, and realization of significant economies. The
cost of propulsion development was trimmed from the original
estimate of $35 million to about $25 million. The estimated
cost of each Lance missile was reduced by more than one-third.
This latter saving, in light of the considerable inventory of
missiles planned, adds up to a large sum. In addition, manage-
ment relationships were established before the contract was
awarded, paving the way to close coordination in the principal
development effort and faster resolution of problems that might
arise. Finally, for the $1 million spent on the program defini-
tion phase, the Government received technical advice worth
several times as much from the competing companies.
"PERT"
Once in the development stage, a project proceeds on many
fronts at once. If it is development of a big, complex piece of
"hardware", like a missile or submarine, hundreds of con-
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 4pj2Wtgp9al- Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
PERT's Horizon Beginning to Widen
Proven in Polaris program,
concept which now includes
cost measurement may be
U-MITICA.L P,ATI SC
RED
Reprinted b
i
y spec
al permission granted
Office, Comptroller of the Arm
Feetor: magazi
uses on run waa+ N HELP PE
-LANNET CA
by No}han N. Ranak and Ronald o. Farr,
GMRD, Pan American World Airways
Industrial Engineers,
PERT
t where additional resources
applied to expedite the prose
"slack" indicates where availa
sources (manpower, equipmen
may be found.
Thus PERT disciplines the
ager to do rigorously what hi
do anyway if he is to dischar
management responsibilities. I,
ntrol 6c
,I.ANing NETwork (PLANNET) is pan
American World Airway's custom?m,og
management tool for measuring p,
e Div.'s
ress in the Guided Missile Rang
as an aid to
projects. It can be
PERT, because it is time oriented. PERT
t this basic weakness in
PERT
It corrects
dat.
today's most talked-about management
aid.
HERE'S HOW pLANNET WORKS .
Shortcut
for project
planning
PERT/ Cost is hottest new
tool in Space Age
research and development
WPan Am's man
system for the
Range is a "han
meet to PERT.
major ,difference
Range iv., Pan
t
Airways, has i
ented for direct r
Called PLA
NETwork, the
means for de
schedules, and
program Prnge
itself for
pERT vs PLAP
First step in
PLANNET typ
Evaluation Review Technique is the full
of of the newest, most talked about, and
program
of one ? r managing operations.
me e
na
flow to Ytarc
and Control
With PERK
Stem
Sy
ides-8
Jeapoes
died for all Navy
d?
program-management tool in use
W2F-1, and ARM Gives work status
HERE'S HOW
DlD 61 e76R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
tractors and subcontractors may be involved. One's work
may depend on another's, so that delay has repercussions. To
keep track of how a project is progressing and to spot delays
calling for fast action, a system was devised for the Navy
called Program Evaluation and Review Technique, or PERT.
The Navy came up with PERT to assist the project manager
in scheduling and controlling the many contractors involved
in developing the Polaris weapon system.
Since then, the Air Force, Army, the National Aeronautics
and Space Administration, and the Atomic Energy Commis-
sion have also become extensive users of PERT as an aid in
total project management of a nonrepetitive nature. Private
enterprise is adopting the PERT technique not only to fulfill
Government contracts, but also to manage purely commercial
activities. Industry is using PERT for such activities as con-
struction, programing and installing computers, planning
maintenance, planning for distribution, and research and de-
velopment of new products.
The PERT technique may be used to assist management from
the inception of a project to its completion. It aids in the
initial planning which precedes the decision that a program
should proceed; it helps in defining the program in terms of
performance, schedules, and costs; and it helps in the detailed
planning, control, and evaluation of the project throughout
its course.
In concept PERT is simple. It involves four basic steps:
(1) breaking down a project into tasks which are significant
for planning and control; (2) displaying these tasks in a se-
quential fashion which graphically illustrates their interrela-
tionships and dependencies (see network illustration); (3) esti-
mating the time and resources required to complete each task
or group of tasks; and (4) continually reviewing actual per-
formance versus the estimates in order to readjust schedules,
performance, and/or financial plans. PERT can be used in
many ways. In some situations, using only the networking
technique is useful for planning. Nevertheless, its most sig-
nificant use has been in connection with large and complex
projects involving thousands of activities with serious prob-
lems of coordination. In these types of projects, such as those
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 ved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
OT1T
--g C
C S y ,d
d+ u~.
E y o
E d o
+_ u
ao
N S
En.
o.~ ds
C u
~,- a u c S of
0
EE ?
E u~ 3r
O d O u
0 0' d~ E
~ddE0
m E + o y
O,o u
O O
c aC.c c+
c d O ~~ O
.2 WE
o E c
~' o d
E o - E d
=5+~ Q)O
V O- O
S C
0
u 3 O y C
E c
itli!
o ?!c c C_ O ~.
EE.E -
m o o d
_O S d mS
O > 2
--o 0-
> d d a
Y 3 ~ 2 N
3 d o
.c_
0.2.
ed For Release 20M/01/29: CIA-RDP80BO1676 -3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
concerning the development of major weapons and space sys-
tems, PERT techniques requiring the use of high-speed com-
puters are utilized.
Controls time and cost
PERT was developed originally to plan and control in terms
of meeting time schedules. Last year a successful effort was
made by the Department of Defense and the National Aero-
nautics and Space Administration to expand the technique of
PERT to include the planning and control of costs as well as
time. Each of the military services is currently using PERT
to plan and control both timing and cost on at least one major
project on an experimental basis. Lance and Mauler missiles,
the TFX supersonic fighter plane, and SubRoc, a submarine-
launched, rocket-propelled depth charge, are among the pilot
projects. If the technique of employing PERT to control costs
and improve original estimates is as successful as it has been
in the control of time, an important, powerful, money-saving
management tool will have been forged for the use of both
Government and industry.
Some specific benefits
The principal value of PERT, both time and cost, is as an
aid to improved management. It helps the manager by pro-
viding timely information which assists him in making im-
portant decisions. The manager himself must take the re-
sponsibility and credit for making decisions. Nevertheless,
some illustrations of how PERT has been strikingly useful to
managers are included below:
Navy.-Has reported an early demonstration of the
benefits of PERT/Cost. A contractor reported an $850,000
cost overrun and requested additional funding. By use
of PERT/Cost techniques, it was possible to prune out
$250,000 of nonessential work and classify $435,000 of
the reported overrun as change in contract scope subject
to negotiation in which additional savings might be made.
Army.-Has found the networking and scheduling as-
pects of PERT most useful, especially in construction
projects. In one typical case, contractor personnel were
scheduled to depart shortly for an isolated Pacific isle
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
to install radar equipment. A routine PERT analysis
indicated that installation of the shielding for the radar
room was falling behind. The construction contractor
was promptly notified to order the shielding and depar-
ture of the radar installation personnel was delayed one
month, thereby minimizing schedule slipp~.ge and pre-
venting an estimated $100,000''of extra expense in paying
idle contractor personnel.
Air Force.-The scheduling benefits from PERT are illus-
trated in the C-141 program,' the development of a sub-
sonic aircraft. Three contractors all thought they were
doing their job in the propulsion area as scheduled and
they were complying with the terms of their separate
contracts in all respects. When their respective efforts
were integrated on an overall network, it became appar-
ent that the propulsion system would be delayed 36
weeks. Network analysis soon discovered the principal
problem, that one contractor ,was waiting for receipt of
a production engine from a second contractor before pro-
ceeding with design of the engine covering. A metal
mockup engine was supplied and constant monitoring of
the interdependent effort required by all three contractors
reduced the delay from 36 to 8 weeks, representing a
substantial reduction in costs.
NASA.-PERT was used by the National Aeronautics
and Space Administration to '',help prepare a feasible ap-
proach for a manned lunar landing. It was discovered
that the critical item, whose delay would cause most
harm to the project schedule, was the acquisition of
land for, and construction of, launching sites. This re-
sulted in an early approval to expand the Atlantic
Missile Range.
NASA also uses PERT on'some of its contracts. In
one such case, a major contractor requested overtime
authorization on a number of specific tasks. PERT re-
ports permitted the NASA Project Manager to discover
that some of the tasks had already been completed and
the remainder were in areas where there was no need for
rush work. The request was denied.
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
AEC.-Besides using PERT for controlling research
and development projects and construction work, the
Atomic Energy Commission has applied the technique to
other kinds of problems. One such application is at the
National Reactor Testing Station in Idaho. Through
PERT the shut down times on 2 different test reactors were
reduced from 10 to 15 percent, saving an estimated $3,000
every 4 weeks on one reactor, and $14,500 every 6 weeks
on the other. In addition, better management control,
improved quality of workmanship, better utilization of
manpower, and a reduction in radiation exposure of crafts-
men is achieved. Another unique use of PERT was in
planning and administering the transfer of the Los
Alamos, N. Mex. community from Government to private
ownership. Still another unusual use is for the mainte-
nance work on the huge gaseous diffusion plants at Oak
Ridge, Tenn.
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
STATISTICS REPORTING AND USE
The Government regularly collects and publishes many
statistics. The purpose of doing so is twofold: (1) to keep
track of progress and problems in many sectors of our national
life, so that Government policy-making can take account of
the country's needs; and (2) to make available to farmers,
businessmen, economists, teachers, public health specialists,
and other citizens the information they need to do a better
job in their own work.
Reducing the Reporting Burden
In collecting data, it behooves .''Government agencies to
minimize the reporting burden imposed on the individuals,
firms, and institutions who respond'i and to avoid unnecessary
duplication of effort. Accordingly,, more and more attention
is being given to designing surveys to satisfy the statistical
needs of more than one agency. The National Science Foun-
dation, for example, included in a mail survey of scientists
questions of interest to the Bureau of Labor Statistics, Office
of Education, National Institutes of Health, and the Veterans
Administration. The Bureau of ' Old-Age and Survivors
Insurance added to a survey it was making questions proposed
by the Veterans Administration. Incorporating the VA's
questions added 3 months to the time necessary to complete
the survey and increased the cost by, about 25%. But a sepa-
rate inquiry by the VA to get the information it needed would
have meant an increase of perhaps 1000,/0.
In the Defense Department, progress has been made in easing
the burden of statistical reporting, both for Department offices
and private contractors. After new criteria for statistical
reporting were established, 123 recurring reporting require-
ments of the Office of the Secretary of Defense were reviewed.
To date, it has been decided to retain 83, cancel 9, and simplify
48
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
or eliminate 15 in the future. Decisions on 16 others are
pending. Meanwhile, 5 large-scale reports totaling 20 sec-
tions submitted by manufacturers have been consolidated into
a single standard reporting system of 4 sections known as the
Defense Contractors Planning Report. It will be used by all
three military services.
The Advisory Council on Federal Reports
Development of a high degree of cooperation between
business and Government in the conduct of the Government's
information. and statistics gathering program has been achieved
through the Advisory Council on Federal Reports, which
advises the Bureau of the Budget. It provides a channel for
obtaining information and advice about business record-
keeping practices and the drafting of questionnaires, defini-
tions, and instructions so that they will be interpreted the
same way by everyone and so that accurate information can
be supplied quickly with a minimum of burden. But the
payoff is more than these intangibles. In a recent case in-
volving a Census Bureau survey of the origin of exports,
industry representatives estimated that they were saved $5
million in the cost of filing the reports as a result of changes
which they recommended and which the Bureau accepted.
Getting More Out of Statistics
Increased attention is being given to deriving statistical
byproducts from information on hand. The Internal Revenue
Service has compiled several highly useful statistical series
from data on income tax returns. It recently began publish-
ing, for instance, an annual statistical profile of the financial
position of unincorporated businesses, with considerable break-
down by industries. Extraction of information on tax returns
also has yielded highly significant data on the age, type, and
cost of production facilities in the United States.
The Census Bureau has developed plans for making signifi-
cant analyses of the structure and growth of U.S. manufac-
turing industries without collecting additional information.
This will be done by utilizing individual plant reports which
have been collected over a period of years, principally in the
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
Annual Surveys of Manufactures and in the Census of Manu-
factures taken every 5 years. These provide infcrmation on
key items such as employment, man-hours, payrDll, cost of
materials consumed, use of energy'; and fuel, capital invest-
ment, depreciation, value of production, and value added by
manufacture. Up to now the reports have simply been tabu-
lated to present cross sectional snapshots of various industries.
Now data covering each plant are being assembled for the
period 1954 to 1961. This will make it possible to analyze
trends, changes over time for individual plants, and differences
between plants and between industries. Such analyses promise
to shed much more light on what is happening to the growth
and structure of industries, and how growth occurs, than has
been obtained previously. Needless to say, the job of assem-
bling and utilizing such a great mass of data on hand is greatly
facilitated by the use of automatic data processing equipment.
Indeed, the job would not have been feasible at all using older,
tabulating machinery.
Testing a New Census Approach
Sometimes it costs money to save money. It may even be
uncertain that the initial outlay will pay dividends. But the
risk is worth it where the payoff would be much greater than
the initial outlay. A case in point is the Census Bureau's
proposed test to determine the feasibility of establishing an
address register for a major part of the population. Such a
register would permit the 1970 census of the population to be
conducted primarily by mail. The cost of the test is estimated
at $1.5 million. The saving that would be realized if the
1970 census could be and were conducted largely by mail is
projected at $15 million.
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
MANAGEMENT OF FIELD ACTIVITIES
Nine-tenths of all Federal personnel are located outside
Washington-elsewhere in the United States and in foreign
lands. This is a vast establishment. It requires effective or-
ganization and management and speedy communication be-
tween headquarters and field levels. Lacking these-and they
are not always present-there may be a failure to explain
effectively to thousands of points in the field new policies and
program goals determined in Washington.
To close the communication gap as much as possible, to
make Federal employees everywhere more responsive to direc-
tions from Washington, to improve service to the public and
to realize all possible economies, there was begun in 1961 a
review of field operating and management problems. It was
undertaken by a task force of officials from the White House,
the Civil Service Commission, and the Bureau of the Budget.
These representatives held conferences with field officials in
cities throughout the country. This led to the issuance by
the President on November 13, 1961, of a memorandum to
department and agency heads calling for: (1) improved man-
agement and direction of Federal offices in the field; (2) creation
of interagency working groups, or Federal executive boards,
in important Federal field centers, such as Chicago and Atlanta;
and (3) critical appraisal by agency chiefs in Washington and
their field officials of field management procedures.
Field Boards of Federal Executives
Federal executive boards have been established in 11 cities
and a twelfth is being organized in Kansas City. Each board
is composed of high-ranking officials of each department and
agency in the board's metropolitan area. The boards strive
for closer coordination of field activities, bringing together
the heads of some 550 Federal field establishments.
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
The boards are actively engaged in reviewing co:-ninon man-
agement problems which might be approached on a joint basis
in the field. Already, improved knowledge and coordination
of field activities can be noted. The boards have facilitated
the interagency placement of employees who are surplus to
one agency, they have fostered cooperative talent searches in
the colleges and universities, and they are pooling experience
and resources to achieve increased management electiveness.
As an example, the Philadelphia executive board is assisting
the Bureau of the Budget in a pilot', project to develop a plan
for interagency use of existing electronic data processing equip-
ment in the area. The other boards are now exploring the
possibility for the joint use of such'; equipment in their areas.
The boards also have helped expedite implementation of new
Government-wide programs. For example, the boards have
actively supported the program for Equal Employment Oppor-
tunity through sponsoring workshops, conducting hiring sur-
veys, and explaining reporting requirements. They have put
their efforts behind the work of the President's Commission on
the Status of Women. Similarly, the boards have helped
Federal managers develop an understanding of the new pro-
grams on Employee-Management Cooperation and Equal Op-
portunity in Housing.
The field boards hold promise as effective vehicles for
marshaling the joint resources of the many department and
agency activities outside of Washington. This, together with
increased concern by the headquarters of the departments and
agencies for improved field organization, operation, and com-
munication should result in a more cohesive and responsive
Federal structure.
Appraisal of Field Organization and Management
In response to the President's November 1961 memorandum,
the Bureau of the Budget issued guidelines for an appraisal by
each agency of its field organization and management. In
some agencies such analysis already had been begun. In
some others the President's directive provided the impetus.
Among the more significant results in the past few years have
been major reorganization of the 'Post Office Department's
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
regional offices; changes in the structure of the Civil Service
Commission, with a resulting reduction in staff in the past
8 years from 3,000 to 2,500, although workload increased;
basic reorganizations in the Department of the Army and the
Veterans Administration; the establishment of the Defense
Supply Agency; a movement by the Federal Aviation Agency
to give more responsibility and authority to its regional
administrators, with streamlined operations as the primary
goal.
During the month of August 1961 a reorganization of the
Atomic Energy Commission was accomplished. The lines
of communication throughout AEC were shortened, allowing
key program personnel to spend more time on technical
problems rather than administrative detail, and program
direction was strengthened. Another action of the reor-
ganization was the establishment of a focal point of control
at AEC headquarters over six multiprogram laboratories in
the field. This structure provides for more direct headquarters
consultation, supervision, review, and coordination of labora-
tory research programs.
Another major appraisal of field organization is that com-
pleted last December by the Internal Revenue Service. It
resulted in plans to make fundamental changes in the structure
of field activities. Consolidations, streamlining of overhead
operations, and better arrangement of functional responsibili-
ties are involved.
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
REGULATORY ADMINISTRATION
In the past few years, the Federal, regulatory agencies have
achieved major advances in streamlining their procedures and
speeding up their handling of cases. These improvements
are of incalculable benefit to industry and the public. As
prescribed by Congress, the regulatory agencies' duties reach
into many vital sectors of the American economy--passenger
and freight transport on the surface and the air, broadcast-
ing, competitive business practices including advertising, the
sale of natural gas and electricity, protection of the invest-
ing public, and protecting business, labor, and consumers
from unfair or deceptive practices;. Wise and expeditious
decisions by public bodies can make a major contribution to
efficient management of business, the welfare of labor, higher
productivity, increased investment and, in total effect, pro-
moting the Nation's economic growth.
For these reasons, concern within and outside of the Gov-
ernment had been mounting in the late 1950's over the build-up
of backlogs of pending cases in someagencies and the increases
in time it took to dispose of these cases. Efforts to solve
these problems were begun under former President Eisenhower
and have been intensified by the' present Administration.
The results have been substantial and gratifying.
Under new authority granted through acts of Congress
and Presidential reorganization plans and by their own efforts
to improve administration, the regulatory agencies have de-
vised highly effective methods for speeding up their handling
of the public's business and shrinking the backlogs of pend-
ing cases. Administrative proceedings have been shortened,
saving companies, unions, and public bodies which come
before the agencies countless dollars in legal fees and travel
expenses.
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
Rules of Conduct Strengthened
Among some of the noteworthy accomplishments, the Fed-
eral Trade Commission in July 1961 strengthened its prohibi-
tions against ex parte, or private, communications between
persons involved in a case and commissioners or staff mem-
bers who might decide the case. The Administrative Confer-
ence of the United States, created by the President in 1961,
approved last year a code of behavior governing ex parte
contacts by persons outside an agency. The Conference rec-
ommended that each agency adopt regulations putting the
principles of the code into effect. The Federal Home Loan
Bank Board has done so. The Securities and Exchange Com-
mission is studying comments on a set of rules it proposed
in January 1963. Certain agencies are in the process of
developing new rules.
Backlogs Reduced
The Federal Power Commission has made significant prog-
ress in reducing a backlog which, when this Administration
took office, the President found ''incredible.'' For example,
as of July 1, 1961, the Commission had pending 116 natural
gas pipeline rate cases. They involved potential refunds to
consumers of $1 billion collected from natural gas rate increases
put into effect by pipeline companies pending final approval
by the Federal Power Commission. Under the law, a pipe-
line company may put higher rates into effect if the Commis-
sion has not acted on its application for increase within 30
days. If the Commission later disapproves or reduces the
increases, refunds must be made to customers. By January 1,
1963, the Commission had disposed of 85 cases, had ordered
refunds of $350 million and had reduced rates by $62 million
a year. Counting new cases received, the Commission's back-
log of pipeline rate cases is down to 48. This achievement was
made possible by the settlement program established by the
Commission which emphasizes disposition of cases through
conference rather than lengthy formal proceedings. Commis-
sion policy requires that settlements be consistent with results
that might be expected from the lengthier, more formal process
of adjudication. The fact that the ratio of refunds to cases
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
decided actually increased during the past 6 months indicates
that the settlement policy is effective and does not compromise
protection of the public interest. The consumer has benefited
and the pipeline companies now have firm balance sheets and
a more reliable basis for sound financial management.
Another agency which has been troubled by a growing back-
log of cases which was becoming unwieldy was the National
Labor Relations Board. Among its more importart duties are
holding representation elections, in which workers vote on
whether they want a particular union to bargain for them,
and investigating and ruling on charges of unfair labor prac-
tices. As the number of election petitions and charges filed
with the agency grew, and as speedier handling in field offices
moved more of them to the Board itself for decision, it became
apparent that basic procedural changes were essential to keep
the Board members from being inundated by a continually
increasing backlog of pending cases',. A few figures illustrate
the rising tide of cases which temporarily engulfed the Board:
Year
Cases pending
Board decision
1958
.............................................
421
1959
............................. ............... .
609
1960
............................................
852
1961
............................................
1,009
1962
............................................
488
The dramatic reduction in 1962 is ''attributable to delegation
by the Board, effective May 15, 1961, to its regional directors
of authority to decide contested representation cases, subject
to limited Board review on request.. In 1962, regional direc-
tors decided some 2,000 contested representation cases. In
80% of the cases, no Board review was sought. The time
required to issue a formal decision on a petition for a represen-
tation election was reduced from more than So days to 43 days.
With fewer representation cases on its calendar, the Board was
able to whittle down the backlog of unfair labor practice cases.
Meanwhile, a new emphasis by the General Counsel of the
National Labor Relations Board on voluntary settlement of
disputes which had led to filing of unfair labor practice charges
was bearing fruit. As more of these cases were resolved
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
voluntarily by the parties, the number referred for hearing and
Board decision was cut back. The proportion of unfair
labor practice charges resolved through voluntary settlement
rose to 770/0 in 1962 as against 73% in 1961. The new em-
phasis on voluntary settlement has saved the Government
about $5,400,000 in litigation costs and saved labor and
management unknown sums. Through other management
advances the time required for agency consideration of and
decision on unfair labor practice charges, which were not
settled voluntarily, also has been shortened from an average
of 467 days in 1958 to 327 in 1963.
Delegations of Authority
Other agencies have speeded up disposition of cases and
relieved commissioners of handling less important matters
through delegation of authority.
Under a Presidential reorganization plan approved by the
Congress in 1961, the Civil Aeronautics Board has delegated
to hearing examiners the responsibility for making the agency
decision in all domestic cases, subject to discretionary review
by the Board members. If the recent experience under this
system continues, the members eventually will be relieved
of about 35 domestic cases a year-or 50% of the domestic
economic caseload-on which they otherwise probably would
have to hear oral arguments, read briefs, and render decisions.
The Board also has delegated to its staff for decision 54 other
types of matters which do not require formal hearings. Re-
vision of CAB rules has freed certificated air carriers from
having to apply for Board permission for such routine matters
as trans-Atlantic charter flights during the tourist season.
In all, the agency estimates it and the industry will be relieved
of more than 700 applications and filings a year.
The Federal Communications Commission, under 1961
amendments to the Communications Act, created a review
board last August. It was authorized to review certain types
of initial decisions by hearing examiners and to decide many
interlocutory matters. Review board actions eventually may
relieve the Commission of 50 to 75% of its workload growing
out of formal hearings, thereby enabling the Commissioners
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
? ? ?
BEFORE ESTABLISHING REVIEW BOARDS-1961
TOTAL NUMBER OF CASES DECIDED HANDLING TIME
BY COMMISSIONERS
MONTHS
AFTER ESTABLISHING EMPLOYEES REVIEW BOARDS-1962
COMMISSIONERS DECIDE
1737 CASES-76%
EMPLOYEES REVIEW BOARDS DECIDE
523 CASES-23%
2 MONTHS
to devote more time to consideration of the important and
difficult policy questions confronting them.
Under legislation enacted in 1961, the Interstate Commerce
Commission has delegated to three-man employee boards
responsibility for deciding or reviewing initial decisions of
hearing examiners in certain types of adversary cases. Use
of the boards has cut the time required for a decision from
5 months to slightly more than 2 months. Appeals from the
Board's decision to three-man panels of Commissioners have
been filed in only 18% of the cases. In 907 of these, the
boards were upheld. The Commission has freed itself from
considering an additional 700 cases a year by limiting the
right of appeal in adversary cases decided by panels to cases
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
involving issues of general transportation significance. More
effective use of the Commission's staff is also being achieved
by a new practice of not rewriting initial decisions upheld
on review. As a result, in 1962 the final disposition of 567
cases was accelerated.
New Management Controls
The Interstate Commerce Commission also has speeded up
its handling of cases before it by use of an automated manage-
ment control system. This system enables management to
expedite lagging cases and also pinpoints the need for pro-
cedural improvements. For example, after criteria for judging
requests for postponement of hearings had been tightened, one
bureau of ICC reduced its time for processing cases by 18.3%.
Although the number of new cases received in 1962 was 140/0
greater than in 1960, the number of cases pending was reduced
from 5,099 on January 1, 1961, to 4,711 at the end of 1962.
The average time for completing action on a case also dropped
from 9.1 months in 1960 to 7.1 months in 1962. Effective
January 1963, the control system was expanded to provide
information about time lags at 14 key processing steps. This
expansion will enable management to achieve still greater
benefits.
The Federal Trade Commission has intensified and speeded
up its enforcement efforts. In seeking to stop unlawful
business practices it is emphasizing an industrywide approach,
as distinguished from action against individual firms. In
June 1962, the Commission.also began issuing binding advisory
opinions to businessmen who requested them, enabling the
businessmen to know in advance whether a particular course
of action would violate any of the laws enforced by the
Commission.
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
FUTURE DEVELOPMENTS
The task of improving management, increasing productivity,
and cutting costs is never finished. Research and study
seeking the development of new and, better management tools
is one of the important avenues of future progress. Below
are listed some of the areas where innovative research will be
emphasized in the next few years.
Automatic Data Processing
The initial business-type uses of automatic data processing
equipment generally were for administrative operations such
as preparing payrolls and accounting records. More and
more we are learning to use this equipment to help accomplish
the main mission of the agencies. Examples of some of the
uses that are being developed include processing the mail,
regulating transportation, and forecasting the weather.
Another trend that is being encouraged is the automation of
information at the source or as close to the source as possible.
This activity embraces, for example, devices that automatically
measure and transmit to a computer the level and speed of
river flow and machines that read 'typewriting and make it
available to the computer without human intervention.
Still another problem of significance being actively studied is
the automatic storage and retrieval of information ranging
from research in science to applications for patents.
Planning
As a consequence of the increasing complexity of Govern-
ment, the development and use of long-range plans are be-
coming increasingly necessary in formulating and coordinating
Federal programs, in foreseeing the full consequences of
contemplated actions, and in preserving flexibility. Govern-
ment agencies are making a determined effort to realize the
Approved For Release 2003/01/29 : CIA-RDP80B01676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
potential for improved management inherent in long-range
planning. In increasing numbers, agencies are studying the
problems of defining goals, developing proper courses of action
for attaining them, and preparing and executing budgets in
terms of basic program decisions.
Productivity Measurement
Though productivity has increased dramatically in a number
of agencies, we cannot state what the productivity trend has
been for the Government as a whole; satisfactory ways to
measure productivity changes in many sectors of the Govern-
ment have not yet been developed. The Bureau of the Budget,
in cooperation with a group of agencies, is now engaged in
intensive research to develop suitable productivity measures
for Government agencies.
These measures will relate the volume of goods or services
produced to the amount of manpower and other resources
used in producing them. The measures may then be used as
an overall index of efficiency as well as in planning, budgeting,
and control.
Work Design
A great deal of scientific effort has been expended to design
work so as to achieve maximum efficiency. Most of this
effort has been devoted to the application of engineering
principles to work. There are indications that manpower
utilization may be enhanced by designing work so as to give
greater consideration to the characteristics of the human
beings who are to perform it. A number of Government
agencies are preparing to cooperate with the Bureau of the
Budget in testing and measuring several new approaches to the
design of work.
Industrial Management
A group of agencies have joined together to seek out, create,
and apply new techniques of industrial management. Under
the guidance of this group studies are being made to apply the
Line-of-Balance technique (a management device now used for
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
 Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3
controlling the scheduling of repetitive operations) to the
control of costs. Success in this effort would provide a modern
management tool in controlling both production schedules and
cost.
The President has pledged that, through increasing efficiency
in management and operation, any necessary expansion in
Federal employment will be held proportionately lower than
the increase in the Federal workload required to serve the
Nation. Building on the momentum of the strong efforts
now under way, as highlighted in this report, special emphasis
towards that objective will be given in the next 2 years to-
? management of property and supply activities,
? management and use of ADP equipment,
? strengthening measures to hold down the growth of
Federal employment,
*introducing and extending systematic means of measur-
ing organizational productivity, workloads, and work
performance,
*comprehensive planning as a ';basis for formulating and
evaluating agency programs and budgets.
U.S. GOVERNMENT PRINTING OFFICE:1963
For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington 25, D.C. - Price 25 cents
Approved For Release 2003/01/29 : CIA-RDP80BO1676R002800080003-3