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This is the essence of unity in the Armed Forces. That unity must also extend to the procurement and administration of all the costly material and paraphernalia of modern warfare. It was the hope and expectation of all of us who had worked to achieved the passage of the National Defense Act of 1947, that this kind of unity was in the making.

"This has not proved to be the case. Such unity as we have achieved is too much form and too little substance. We have continued with a loose way of operating that wastes time, money and talent with equal generosity. With three services, in place of the former two, still going their separate ways and with an overall defense staff frequently unable to enforce corrective action, the end result has been not to remove duplication but to replace it with triplication. “All this must be brought to as swift an end as possible. Neither our security nor our solvency can permit such a way of conducting the crucial business of national defense.

"Our task, however, goes still further than this. We must critically review the political policies governing our military program; and we must review that military program itself in all its significant details. To this end I now make two major proposals.

"The first is this: At the earliest possible date next year, the new administration should create a commission of the most capable civilians in our land to restudy the operations of our Department of Defense. These men and women should, of course, be specifically qualified for their tasks. They should, I believe, be drawn from both parties, so that all matters of national security may clearly be placed beyond party politics. These men and women should be assisted by the ablest officers available from all services-Air Force, Army, Navy, and the Marine Corps."

I was surprised and shocked to learn of the dissolution of the Alameda medical supply test and a reversion to the old system. I could not imagine why one medical supply system was not established under one stock fund to serve the entire military or even the whole Government. I cannot understand why the clear intent of Congress is ignored and superseded by the subjective philosophies and regulations of DOD officials.

It should be noted that the law, the National Security Act as permanently amended by the O'Mahoney amendment and as specifically interpreted in Senate Report No. 1861 stated, "Under the new system, it should be impossible for two competing facilities to be set up (or to continue to exist) in the same area for the same purpose as determined by the Secretary of Defense. *** Special attention should be given to the procurement, production, distribution, warehousing, maintenance, and issue of common-use items such as clothing, food, medical supplies, and building materials, to minimize stocks, handling, transportation, and related supply management activities. Wherever possible such items and the method of handling them will be made uniform throughout the Department of Defense to facilitate such integration."

I have carefully read Assistant Secretary T. P. Pike's Supply and Logistics, DN letter of July 27, 1954, relative to current supply philosophy. Needless to say, this philosophy is the opposite of that stated by Secretary Lovett's directive of July 17, 1951. It is also in my opinion a direct contradiction of the intent of the law. Certainly it violates the fine statements of President Eisenhower. Furthermore, the issuance of this statement of policy before Messrs. Pike, Higgins, and Drake reviewed and evaluated the test in early November, condemned it in advance.

It is my understanding that it will cost from $700,000 to $1 million to move the stocks and personnel, and make the other changes required to break up the central operation. If you have a more accurate cost I should like to have it detailed. In view of the above, I hope that you will personally look into this pilot subject which can be of such basic importance to our economy and to our defense. I may add that it is my intention to take this matter on a continuing basis to the Congress and to the public.

Sincerely,

THOMAS B. CURTIS.

EXECUTIVE OFFICE OF THE PRESIDENT,
OFFICE OF THE DIRECTOR, BUREAU OF THE BUDGET,
Washington, D.C., July 16, 1959.

Hon. JOHN W. MCCORMACK,
House of Representatives,
Washington, D.C.

DEAR MR. MCCORMACK: I appreciate very much your letter of July 13, enclosing Assistant Secretary McGuire's report on progress and plans in the supply and logistics field.

You may be sure that we will review these statements carefully. I have a strong feeling that there is considerable opportunity for improvement in the way we go at these matters.

With kind regards, I am,
Sincerely,

MAURICE H. STANS.

HOUSE OF REPRESENTATIVES,
OFFICE OF THE MAJORITY LEADER,
Washington D.C., July 13, 1959.

Hon. MAURICE STANS,

Director, Bureau of the Budget,

Washington, D.C.

DEAR MR. STANS: I enclose a copy of a letter I have received from Assistant Secretary of Defense, the Honorable Perkins McGuire, together with a copy of his letter to Senator Douglas and a copy of a memorandum therein, together with a copy of a letter I have sent to Assistant Secretary McGuire.

I think that Assistant Secretary McGuire is to be highly complimented in trying to bring about efficiency and economy, particularly in his jurisdiction. However, I know that obstacles have been thrown in his way in the past and while he has made headway, it is only under the most difficult conditions.

I know that great headway could be made if the provisions of my amendment to the 1958 National Security Act were effectively implemented. This would bring about greater efficiency in procurement and services and also produce savings of tremendous sums of money, which savings could be utilized for a greater defense.

I know in talking with you several weeks ago that you were commencing then to have an appreciation of the opportunity of improvement in management in the Department of Defense.

I suggest you study, very carefully, the enclosures I received from Assistant Secretary McGuire and that the Bureau of the Budget cooperate as fully as possible with him in his efforts to economize in the fields of procurement and services.

With kind regards, I am,
Sincerely yours,

JOHN W. McCORMACK, Majority Leader.

Hon. JOHN W. MCCORMACK,
House of Representatives,
Washington, D.C.

EXECUTIVE OFFICE OF THE PRESIDENT,

BUREAU OF THE BUDGET, Washington, D.C., May 19, 1959.

MY DEAR MR. MCCORMACK: Thank you for your letter of May 6, calling attention to the fact that the McCormack amendment not only authorizes centralized management of common-use items of supply but also authorizes the Secretary of Defense to take appropriate action with respect to other supply problems.

We recognize that the McCormack amendment is closely related to the points raised by Congressman Brown in his thoughtful letter of February 21, to which we are giving a great deal of attention.

Sincerely yours,

MAURICE H. STANS, Director.

Hon. MAURICE STANS,

HOUSE OF REPRESENTATIVES,
OFFICE OF THE MAJORITY LEADER,
Washington, D.C., May 21, 1959.

Director, Bureau of the Budget,

Washington, D.C.

DEAR MR. STANS: I am in receipt of your letter of May 19, 1959, concerning the McCormack amendment to the Department of Defense Reorganization Act of 1958 and its implementation.

I shall appreciate receiving detailed information as to your program as your studies progress. There is widespread interest in this subject both in the Congress and throughout the country, and I shall place this exchange of correspondence in the Congressional Record and give your response the same forum unless you believe there are reasons for not so doing.

Sincerely yours,

JOHN W. MCCORMACK, Majority Leader.

Hon. MAURICE H. STANS,

Director, Bureau of the Budget,
Washington, D.C.

HOUSE OF REPRESENTATIVES,
OFFICE OF THE MAJORITY LEADER,
Washington, D.C., May 6, 1959.

DEAR MR. STANS: Congressman Clarence J. Brown has kindly furnished me a copy of your letter of March 17, 1959, which was in response to his letter of February 21, 1959, concerning the possibility of improved management with respect to supply and service activities in the Department of Defense.

I note that you make reference to the so-called McCormack amendment to the Department of Defense Reorganization Act of 1958 (sec. 202(c) (6)) and state that the amendment "authorizes the Secretary of Defense to centralize the procurement of common use items whenever he determines that such action would be advantageous to the Government in terms of effectiveness, economy, or efficiency.'

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While the above statement is correct I wish to call to your attention the fact that the amendment which I introduced authorizes the Secretary of Defense to take effective action with respect to "any supply or service activity common to more than one military department by a single agency or such other organizational entities as he deems appropriate."

I bring this matter to your attention since there are a number of service activities in addition to common supply activities which, in the opinion of a great many people including myself, should be thoroughly studied and appropriate action taken thereon to bring about more economy, effectiveness, and efficiency in their operation.

In this connection I refer you to the statement I made on the floor of the House when the Department of Defense Reorganization Act was considered. (See Congressional Record of June 12, 1958, p. 9927.)

Sincerely yours,

JOHN W. MCCORMACK, Majority Leader.

REPORTED SAVINGS IN THE DEPARTMENT OF DEFENSE SUPPLY SYSTEMS Extension of Remarks of Hon. John W. McCormack of Massachusetts in the House of Representatives, Wednesday, March 25, 1959

Mr. McCORMACK. Mr. Speaker, on February 18, 1959, I placed in the Congressional Record (p. 1235) a letter which I had addressed to Hon. Neil H. McElroy, Secretary of Defense concerning conflicting testimony from officials in the Department of Defense as to the effectiveness, efficiency, and economy of the so-called single manager plans for common supply in the services.

In my extension, I am placing a reply which Secretary McElroy authorized the Honorable Perkins McGuire, Assistant Secretary of Defense Supply and Logistics-to send to me. The letter follows:

ASSISTANT SECRETARY OF DEFENSE,
Washington, D.C., March 10, 1959.

Hon. JOHN W. MCCORMACK,

Majority Leader,

House of Representatives.

DEAR JOHN: The Secretary of Defense has requested me to reply to your letter of February 16, 1959, concerning the effectiveness, economy, and efficiency of the single manager plan.

I agree that sufficient time has now elapsed to permit a factual evaluation of the single manager program and such an evaluation is in process at present. We are examining the single manager program not only from the viewpoint of its efficiency and economy in peacetime, but also to reassure ourselves as to the mobilization and wartime capabilities of the system.

It is impossible to assess precisely the extent to which savings made through the reduction of inventories and operating expenses are directly derived from the single manager concept as compared to other improvement programs. However, our studies indicate that in the commodity fields presently covered by single management encouraging economies are being effected. For example, in the subsistence, medical, and clothing and textile commodities, we have been able to effect a reduction of about 600 personnel at an estimated annual payroll cost of $3 million. Through the development of integrated distribution patterns, wholesale stocks of single manager commodities have been withdrawn from 55 of the storage locations previously occupied. Associated with this streamlining of the distribution systems, the single managers have been able to reduce the amount of wholesale storage space devoted to these commodities by 4 million square feet. By consolidation of inspection and test facilities, they are realizing, in addition, a net annual savings of $2,280,000. During the 2 years of single manager operations in these same commodities, actual sales have amounted to $1,956,451,000 compared to procurement of $1,868,815,000. The excess of sales over procurement has been reflected in the increased cash position of the single managers and has, in turn, contributed significantly to reductions in new obligating authority in the President's budget as a result of transfer actions.

While we do not consider these economies to be spectacular, we believe that they are indicative of steady progress. Perhaps the most promising potential economies associated with the single manager concept arise from opportunities it provides for eliminating concurrent buying and selling and for diminishing back-hauls and cross-hauls through integrated distribution operations. Although they are not precisely measurable, it is reasonable to conclude that economies from these sources have been achieved. During the initial phases of single manager operations these economies may have been offset to an extent by expenses related to adjustment to new distribution patterns, but once adjustments to desired distribution patterns have been completed, significant economies should be possible on a continuing basis.

We have established criteria for determining additional commodities amendable to the single manager technique and have presently in progress a study to determine the feasibility of establishing a single manager for general supplies. Your apprehension regarding the difficulties involved in embracing the operations of two single managers within a single depot is not warranted on the basis of our experience to date. At present we have as many as three single manager systems representing two services operating out of a common storage location with very encouraging results.

We do not, of course, regard the single manager program as a panacea. We view it simply as one element of a comprehensive program for the improvement of supply management of our inventories. Such a comprehensive program which integrates supply management and financial management improvements is in operation and is producing positive results. During fiscal year 1958, supply system inventories of the Department of Defense decreased by almost $3 billion in value.

The tremendous book value of total personal property holdings of the Department of Defense which, as you point out in your letter, aggregates $120 billion as of June 30, 1958, must be of continuous concern to all of us. For a full appreciation of the character of our inventory and the purposes for which it is held certain facts should be enumerated and evaluated.

Of the total personal property investment of the Department, over $50 billion or more than 40 percent is represented by the book value of whole aircraft and

ships. Another $17 billion or about 14 percent is invested in tanks, other tactical vehicles, production equipment, and operating equipment of all kinds. An additional $42 billion or 35 percent is invested in technical repair parts, components, and assemblies which are required to support the peacetime operation and wartime readiness of our combat equipment. The balance of the investment which approximates 11 percent consists of equipments and supplies which have reached the end of a useful economical or military life span and are in the process of disposal, or is invested in general consumable supplies such as fuel, clothing, food, and medical stocks. The character of this investment reflects the needs and the missions of the Defense Department.

The value of the personal property investiment on our books is, in general, expressed in acquisition cost. Over 70 percent of the investment is in a used condition with no consideration given, in terms of book value, to the age or condition of the investment. For example, the active and reserve fleets of the Navy are included at cost in the total investment value as the active and reserve aircraft of all services. As you know, in commercial practice such equipments are depreciated in value each year in accordance with the projected useful lifespan and the net book value at any time reflects a realistic appraisal of the net investment. This is not the practice in the Government. The stated book price of our investment is not a true measure of the current value of military personal property. Equipment which we are in the process of disposing of as scrap because of its age and condition is still carried at acquisition cost on our books. The foregoing explanation is provided for a better understanding of the overall problem of improving management of personal property inventories. Within this framework we concur completely that overlapping, duplication and wasteful practices cannot be tolerated and positive steps are being taken to eliminate unnecessary duplication and waste. Recently, the Armed Forces Supply Support Center has been organized. The establishment of this center pulled together in one organization the management of the functions of cataloging standarization, material utilization and a capability of dealing aggressively with interservice supply problems. Other steps are being taken, such as consolidation of surplus sales offices, bringing together several retail supply system offices of the services at one location, and making available for transfer among the military Departments, without reimbursement, assets of the military services above approved peacetime and mobilization reserve levels. The latter policy conforms with previous discussions between you and Secretary McGuire.

We are preparing a detailed statement of our progress and plans concerning the implementation of section 202(c)(6) of the Department of Defense Reorganization Act of 1958. We will be pleased to furnish you a copy of this statement. We feel that you will be particularly gratified to note the improvements that are being made.

Sincerely,

PERKINS MCGUIRE,

Assistant Secretary of Defense (Supply and Logistics).

Hon. NEIL H. MCELROY,
Secretary of Defense,

U.S. SENATE,

COMMITTEE ON ARMED SERVICES,

February 18, 1959.

Washington, D.C.

DEAR MR. SECRETARY: I note with interest the letter to you of February 16, from Hon. John McCormack, majority leader.

You know of my conviction about the importance of further unifying the Department of Defense, creating a defense structure which expresses progress in this nuclear space age, as against tradition.

With that in mind, I would appreciate your sending me a copy of your reply to the majority leader.

With best wishes,

Sincerely,

STUART SYMINGTON.

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