FIXED PRICE VERSUS COST REIMBURSEMENT CONTRACTS Fixed price contracts decreased slightly to 78.9 percent in fiscal year 1967. Notable progress has been made in the use of fixed price. contracts during the past several fiscal years. Since fiscal year 1961 the increase has been 21 percent. TABLE 12.-NET VALUE OF MILITARY PROCUREMENT ACTIONS, BY TYPE OF CONTRACT PRICING PROVISIONS, 1 FISCAL YEARS 1952-67 1 Includes Army, Navy, and Air Force, but excludes Armed Services Petroleum Purchasing Agency. Beginning Jan. 1, 1957, data for the Military Petroleum Supply Agency, the successor to ASPPA, are included. Includes oversea procurement except for Army prior to fiscal year 1958. Excludes intragovernmental procurement. Excludes procurement actions less than $10,000 in value. Also excludes some Navy letters of intent (on which pricing provisions had not been determined) during fiscal year 1952. Source: "Military Prime Contract Awards and Subcontract Payments or Commitments, July 1966-June 1967," Office of the Secretary of Defense. UTILIZATION OF MILITARY STOCKS From fiscal year 1958 through fiscal year 1966 the amount of intraservice and interservice utilization rose steadily from $213 to $1,859 million. During fiscal year 1967, the total was $1,540 million, a reduction of approximately $300 million, which is attributed to the fiscal year 1966 reutilization of spares from the Air Force missile phaseout programs. TABLE 13.-UTILIZATION OF DOD ASSETS, FISCAL YEARS 1958-67 DISPOSITION OF DOD SURPLUS STOCKS The volume of disposal of surplus DOD personal property has declined about 32 percent from fiscal year 1958 to fiscal year 1967 (table 14) while the percent of total gross proceeds to the total acquisition cost has declined from 3.38 to 2.88 percent and the percent of proceeds to acquisition cost (other than scrap and salvage) has increased almost 14 percent (table 15). Meanwhile the cost of sales have more than trebled as a percent of gross proceeds from fiscal year 1958 to fiscal year 1967 (table 16). TABLE 14.-TOTAL DISPOSITIONS (AT ACQUISITION COST) OF DOD SURPLUS PERSONAL PROPERTY, FISCAL YEARS 1958-67 Utilized by other Govern ment agencies and MAP. Abandoned or destroyed.. Expended to scrap----- Total dispositions..... 168.0 361.0 141.0 349.0 271.0 188.0 194 395 604 628 74.0 117 129 114 64 233.0 273 282 285 231 891.6 980 975 2804 3917 2,537.8 3,818 2,983 2,614 2,146 2,465.8 2,789.2 2,356.4 1,771.3 1,236. 2 5,911.0 8,141.0 6,589.0 6,791.0 4,061.0 3,941.0 5,399 4,769 4,421 3,936 1 Exclusive of DOD interservice transfers. 2 Includes sale of $86,000,000 of missile phaseout property. 3 Includes sale of $290,000,000 of missile phaseout property. TABLE 15.-PROCEEDS FROM DISPOSAL SALES OF SURPLUS PERSONAL PROPERTY BY THE MILITARY DEPARTMENTS, FISCAL YEARS 1958-67 TABLE 16.-COSTS OF DISPOSAL SALES OF SURPLUS PROPERTY BY THE MILITARY DEPARTMENTS, FISCAL YEARS APPENDIX 1 DEPARTMENT OF DEFENSE COST REDUCTION PROGRAM-YEAREND FISCAL YEAR 1967 REPORT [Memorandum for the Secretary of Defense] WASHINGTON, D.C., October 11, 1967. Subject: DOD cost reduction program, fiscal year 1967 yearend status report. The DOD cost reduction program entered a new phase in fiscal year 1967. Upon completion of the intially established 5-year cost reduction program at the end of fiscal year 1966, the program was revised to report and measure the effects of new, improved, or intensified management actions on an annual basis. This change resulted in the establishment of new criteria for determining what type of actions qualify for reporting and in the decision to measure all savings on the basis of a "before" and "after" cost comparison of the effect of an individual management improvement action. Although these decisions simplified the basic system they have placed added emphasis on the importance of having good cost data available at the level where an action is initiated. The ability to react quickly to these and other changes have proven to be true tests of the substance of the program. As in the past years, yearend results have exceeded original expectations. Savings realized in fiscal year 1967 exceeded the goal of $872 million by $180 million for a total of $1,052 million. The 3-year effects of fiscal year 1967 actions amount to $2,059 million, well in excess of the goal of $1,502 million. In view of the revised system and the expected learning curve associated with its implementation these results are indeed surprising. It is apparent that the DOD cost reduction program remains a live, dynamic influence on the management practices utilized in the Department of Defense today. THOMAS D. MORRIS, Assistant Secretary of Defense (Installations and Logistics). 35 I.A.6. Industrial production base.. I.B.1. Utilization of long supply and excess inventory-equipment and supplies. I.B.2. Utilization of idle industrial plant equipment.. I.C. Value engineering I.D. Inventory item reduction. 50 BUYING AT THE LOWEST SOUND PRICE II.A. Shift from noncompetitive to competitive procurement_ II.C. Multiyear procurement _ _ III.C.1. Improving telecommunication management_ REDUCING OPERATING COSTS III.A. Terminating unnecessary operations_ III.C.3. Equipment maintenance management. III.C.4. Noncombat vehicles management_. III.C.5. Decreasing use of contractor services_ III.C.8. Packaging, preserving, and packing- MILITARY ASSISTANCE PROGRAM IV. Military assistance program (MAP). Summary of savings from 1967 actions by DOD component_ Summary by realized savings by appropriation__. Disposition of realized savings.. Summary of authorized manpower savings eliminated/transferred___ |