Air Force do what the other three are doing, maybe the other three should be doing what the Air Force is doing.

Mr. NEWMAN. This could well be.

My point in showing the chart, Congressman, is to indicate the lack of uniformity in these techniques among the services.

Representative CURTIS. Then we can study which one is right. We have about $100 million in these things that we may not need.

Mr. NEWMAN. The model study points out that existing regulations for single manager stock funds for purchases at field installations cause unwarranted duality of control at that level. Any plan of consolidated management for the material reviewed should provide that stock funds extend only to the wholesale level.

In other words, the single managers have a wholesale stock fund. When the services buy from the single managers they reimburse these stock funds. But the services use their own retail stock funds to buy material from the single managers. The material in turn is sold to the consuming activities against appropriated funds.

The group of the model study contends that if the retail stock fund level was eliminated it would not only be more effective, but would also provide a one-time saving to the Government of the assets tied up in these retail stock funds.

INADEQUATE INTEGRATION IN USE OF FACILITIES

Representative CURTIS. Yes, that is what I thought was possible. Mr. NEWMAN. According to the general supplies model study which the Armed Forces Supply Support Center prepared and which is a very objective study, there is considerable duplication in the services' distribution system.

In almost any geographical region in the United States there are several wholesale depots and quasi-wholesale supply points, each primarily engaged in supplying the needs of the services with the same supplies.

For example, in the southeastern area of the country the Army Atlanta General Depot, the Army Memphis General Depot, the Air Force Mobile Depot, the Marines depot at Albany, Ga., and the Navy's four primary stock points, at Charleston, Pensacola, Jacksonville and New Orleans are in the business of supplying their consumer activities with many of the same items.

USE OF THE GENERAL SERVICES ADMINISTRATION

Mr. NEWMAN. The General Services Administration depot system is a reasonably extensive system for support of governmental activities for selected items.

For the range of items stocked, it performs supply support very effectively. The GSA was able to supply 94 percent of its depot items without any delay in fiscal year 1959.

As a result of this performance the military use of the GSA facilities is growing quite rapidly. Both its depot sales and Federal Supply Schedule contracts to the services accounted for about a half billion dollars in fiscal year 1959. This is double the volume of just a few years ago.

You will recall, Mr. Curtis, that as a result of the prodding of the Bonner committee, the Department of Defense made three single procurement assignments to the GSA for office supplies, office furniture, and office equipment. But it took 18 months for the Department of Defense to issue implementing instructions on two of these assignments. On the third it took 8 or 9 months just to issue working guidelines which could have been accomplished in a week. The situation has improved greatly in recent years, particularly in the relationship between the Air Force and the GSA.

However, the individual services currently negotiate separately with the GSA for supply support. This approach fractionates the defense management for the same items and fosters unnecessary duplication in the Department of Defense and in the General Services Administration. The GSA should supply the same items uniformly to all the services.

Of the half a billion dollars of supply support which the GSA is now rendering to the military well over half of that amount is traceable to the Air Force. The GSA is doing it very effectively. In fact, it is doing it so effectively that the GSA is now supplying the same items for the Air Force at the overseas bases as it supplies in this country. My point is that since the GSA is able to provide effective supply support on the common items it is now providing for the Air Force, why should it not likewise provide the same support for the other services.

Representative CURTIS. Yes.

NEED FOR AN INTEGRATED DISTRIBUTION SYSTEM

Mr. NEWMAN. The general supply study group concluded that handtools and administration supplies are a fertile area for consolidated management and can effect economies in the inventory investment by(1) consolidation of requirements;

(2) reduction of stock levels;

(3) prompt utilization of long supply stocks; and

(4) reduction of item range.

Further in the distribution system it can reduce costs at (1) inventory control points, (2) depots, and (3) transportation.

The study group also concluded that there is a need for an integrated distribution system regardless of the number of single managers. It is important that all common-use supplies flow through the same distribution system insofar as possible. Further, apart from the desirability of relying on "systems in being," the Army general depot structure lends itself as a nucleus for a single defensewide distribution system.

Representative CURTIS. Yes. Are you still on distribution?

Mr. NEWMAN. I am about to conclude. I just wanted to add that the study group also urges simplified and uniform supply and funding procedures for all single managers.

Representative CURTIS. On the distribution system, that is one thing in particular that I have been deeply concerned about in the common use items, where they are common with civilian use, which is a little different, but a big area.

What have you got to say about the utilization of our great civilian distribution system by the military?

Why can they not utilize our distribution system instead of setting up a duplicate distribution system for things.

I might illustrate. I remember in the Bonner committee in Europe, right after the Berlin airlift, the Air Force was making complaintssome of the officers-that they could not really rely on the Army for common use items. They said "We needed to have an extra supply of pliers, due to the extra maintenance requirements"-I think it was pliers-what would have happened if we had to rely on the Army because the Army could not give it to us.

I said, "I thought the Berlin airlift was a success."
They said. "It was."

"How did you maintain the planes without the pliers?"

"We had to go out and buy them in the stores in Germany," they said.

I said, "Is it such a terrible thing to have to rely upon the distributive system of the civilian economy if it is a good one?"

In coffee roasting, the point I was making in that was that that didn't matter whether 10 million of our people were in uniform out of 170 million at that time, or whether it was 5 million out of 170 million, the same amount of coffee would be roasted and distributed and drunk.

Therefore, all we needed was the civilian basic distributive system. In fact, if we had the military distribute for the mobilized 10 million and set up on that basis, then when they cut back to the 5 million there would be surplus and unused facilities, warehouses, distributive systems, and so on.

So in these kinds of items, and there are a lot of them, where they are human consumption items it doesn't matter whether they are in uniform or not, we surely can utilize the civilian distributive system. To what extent has the military been using and trying to gear their system around the civilian distributive system?

USING THE CIVILIAN DISTRIBUTIVE SYSTEM

Mr. NEWMAN. Let us talk about coffee. As you had said many times in previous hearings on this subject, the only way to understand the problem is to take one item and follow it through.

Back in 1952 when we studied coffee, we found that in the green bean there was an inventory in the military, as I recall, possibly 150 million pounds of coffee.

Representative CURTIS. I have that figure. They had 193 million pounds and I think the coffee then was 64 cents a pound.

Mr. NEWMAN. That is an investment of over a hundred million dollars on this one item alone. The services claimed that the reason for roasting their own coffee was that it was the only way of assuring quality control.

Representative CURTIS. Yes, I remember.

Mr. NEWMAN. Our survey showed that when the coffee was roasted it was put in hundred pound bags and at many installations we visited roasted coffee was found to be a year old.

As I said, the rationale for the military roasting their own coffee rather than depending on the civilian economy to roast the coffee was quality control. Yet once coffee is roasted and it is not vacuum packed, in a period of 3 or 4 weeks it has lost most of its bouquet and

aroma.

Representative CURTIS. I did not know about that. But I remember when we held hearings in California, I found out that they sold coffee in the Navy commissaries and on the Navy commissary shelves Navy coffee was stocked along with the standard brands. The Navy coffee was cheaper than the standard brands.

Yet the Navy housewife when she had her choice bought the standard brand which cost more. I asked the admiral in charge of coffee roasting, "How does your quality control fit into a picture like that?"

Now, I can see why the Navy wife buying for her husband did not buy the Navy coffee.

Mr. NEWMAN. Yes.

Getting back to your original question, about the use of the commercial distribution system, that is precisely what DOD is doing now with coffee. It has stopped roasting coffee. It is using the commercial distribution system and it makes contracts in various regions with roasters for periodical spot deliveries once a week or once every 2 weeks.

Representative CURTIS. Then, using coffee as an example, the military ought to be moving into more and more areas that are similar to it?

Mr. NEWMAN. It is a fruitful area.

Representative CURTIS. And we can utilize the civilian supply system. I am satisfied this $3 billion in that particular year that they were spending for new warehouse space was a good bit of the unneeded warehouse space we now have.

We were duplicating to a large degree the civilian distribution system for these kinds of civilian type items.

You report here a charge, at least in coffee, but in other areas are they beginning to utilize the civilian distributive system more?

Mr. NEWMAN. I would say that DOD is using the GSA, Federal supply schedule contracts which are direct shipments from the vendors to the using military activities.

Representative CURTIS. Another area and then we will go on so you can finish up. Automobile repairs.

I am now talking about standard automobiles.

The military got into that business to a large degree and were stockpiling spare parts.

As near as I know they are still in the garage business, or are they? Mr. NEWMAN. Within the Government there is a Government competition with business program. The repair of automobiles comes into this particular area. Some of the activities have been closed and some have not, for the reason given that they also repair military vehicles at the same activity.

If you discontinue the automotive part, it would be costing more money, the military contends.

Representative CURTIS. I have heard that and that is to a large degree unsubstantiated, I might state.

Any real study would show that to be unsubstantiated. I might say just for the sake of the record so we do not forget the importance of

the item, it is not just the efficiency we gain in utilizing a system that already exists, warehouses, and so forth, in the private sector, but also I think the efficiency of personnel whose work it is.

When we put a uniform on a person we necessarily are thinking of him in terms of using him for military reasons. He is one of the most costly employees that the Nation can have if we relate, as we should, veterans pensions and programs to the cost of the armed services as we use them.

But beyond that, as a member of the tax-writing committee, I am constantly disturbed at the narrowing tax base. Every time the military runs a laundry or makes paint or warehouses civilian type tires or roasts coffee, they are withdrawing an activity from the tax base that otherwise would help bear all the real military costs.

The whole thing becomes a very grave economic problem and is another reason why the Joint Economic Committee, in my judgment, has been very wise in moving into this area.

FIRST SINGLE MANAGER PLANS ESTABLISHED SINCE 1956

Mr. NEWMAN. I will conclude my remarks, Congressman, by saying again that the first supply system study of the Armed Forces Supply Support Center resulted in an excellent report. The conditions revealed are, I believe, indicative of conditions in all other common-use

areas.

A single manager for administration supplies and handtools was established by the Secretary of Defense and assigned to the Army. At the same time, and here we have the parceling out again, he assigned to the Navy and without a feasibility study, a single managership for hardware, paint, and related items.

These are the first commodity single manager assignments since early in 1956. Every study that has been made since that time in the Department of Defense looking at the single manager plans has concluded this is a step forward. But between May of 1956 and January of 1960 no additional plans were established.

(The material referred to follows:)

Representative CURTIS. There has been a 4-year lapse.
Mr. NEWMAN. Yes.

Representative CURTIS. What was the date of my letter to the Secretary of Defense, Mr. Wilson. I think it was right before the MayJuly 1956 activity.