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which would have required the President to submit recommendations for a central supply organization reporting to the Secretary of Defense. That amendment was not accepted by the Congress but the matter was considered in connection with the Department of Defense Reorganization Act of 1958. As a result, section 202 (c) (6) of the National Security Act was enacted. That amendment does not require establishment of a "fourth service" but 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."

In view of the new authority contained in section 202(c) (6) of the National Security Act, further action by legislation or reorganization plan does not appear necessary at this time. We would not favor action to establish a "fourth service" on a mandatory basis, at least until existing arrangements for unified procurement of common-use supplies have been thoroughly tested. The "fourth service" concept would create another agency to deal in common-use supplies, paralleling in part the responsibilities of the General Services Administration. It would establish another organizational layer without eliminating the supply structures in the military services which would still be responsible for the bulk of military procurement not considered common use. The separate statement which you submitted with the Hoover Commission's Report on Business Organization in the Department of Defense contained similar conclusions. You may recall that when the Hoover Commission's report was published, you included a separate statement objecting to the recommendations for a central supply service and concluded that "the suggestions for establishing a 'fourth service of supply' * * are not new. They have been proposed and rejected on several previous occasions. In my opinion, they should be rejected again" (p. 104 of the report).

Progress is being made in accomplishing unified procurement and inventory control of common-use supplies. There is unified procurement and supply management for all subsistence, textiles, clothing, petroleum, and medical supplies. Extension to other areas is under study. The volume of common-use supplies furnished to the military services by the General Services Administration is steadily increasing until the quantity furnished this year will be more than double the volume handled in 1955 when the Hoover Commission prepared its report.

While I would like to see greater progress, we believe the current efforts, including the single manager system and related arrangements are in the right direction and that we should work for the fastest possible accomplishment of these measures. Further action now by legislation or reorganization plan appears unnecessary.

Sincerely yours,

MAURICE H. STANS, Director.

FEBRUARY 21, 1959.

Hon. MAURICE H. STANS,

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

DEAR MR. STANS: On May 28, 1957, Director Brundage appeared before a subcommittee of the Committee on Government Operations to press for the extension of the Reorganization Act of 1949, as amended.

At that time I had some doubt that the Bureau's request for the extension of the act on the basis of urgent need was warranted since little action had been taken in important areas under the existing legislation.

Please refer to my statement and Mr. Brundage's on pages 15-16 of the hearings H.R. 6711 above referred to. Specifically, I said:

"Mr. BROWN. We have that trouble on the Hill, both among ourselves and with our constituents.

"As a perfect example of what I am talking about, I would like to see some sort of reorganization plan set up here that would go further toward actually unifying the military services. We have not gone so far, under the Unification Act. Certainly I would like to see a plan submitted that would provide for central procurement, for at least common-use items in the Defense Department, and perhaps in other parts of the Government-a matter we have had before this committee and a situation which we have found not to be good. There is too much separate buying and bidding against each other.

"The Hoover Commission, incidentally, has recommended better procurement procedures for the armed services. Every bit of evidence the Commission has had points to the need, and I think much has come before this committee in the past, to indicate great savings could be made for the benefit of the taxpayers through centralized purchasing.

"Mr. BRUNDAGE. That is right. It is one of the big problems that we are working on.

"Mr. BROWN. The procurement field is where the money is spent, you know." As you know, I sponsored both Hoover Commissions in the House, served on both Commissions, and helped prepare numerous reports of both groups, after careful study, which showed conclusively that the big area for saving in the Government is in more unification in supply and related matters in the Department of Defense. Certainly, Mr. Director, you must be aware of the stocks in the services that are valued at nearly $50 billions in the supply systems inventories only. And a glance at the breakdown of inventories held by the many services should be enough evidence for the Bureau which is striving for a balanced budget, as am I, to go to work.

However, I fail to find in the 1960 budget or actions under the Reorganization Act, anything to support the statement of your predecessor that, "It is one of the big problems that we are working on."

Since this subject is sure to be raised if there is ever another request for extension of the Reorganization Act, and because it is most important at this time, I would appreciate a full explanation from you as to what has been done or is planned in this matter.

Sincerely yours,

CLARENCE J. BROWN,

Member of Congress, Seventh Ohio District.

ASSISTANT SECRETARY OF DEFENSE,

SUPPLY AND LOGISTICS, Washington, D.C., July 27, 1954.

Hon. R. WALTER RIEHLMAN,

Chairman of the Military Operations Subcommittee,
Committee on Government Operations,
House of Representatives.

DEAR MR. RIEHLMAN: Through our conversations in the past and through appreciation of what has been accomplished by you and your committee, I have recognized your sincere interest and the efforts you have made to provide guidance for the development of a comprehensive program for correcting deficiencies in supply and stock management practices of the military departments As a result of this fact, I feel it is appropriate to advise you at this time of the course of action which we have developed in this area.

We are greatly encouraged by the progress made in the field of supply and logistics to assure the accomplishment of the most effective and economical administration and management of the respective military supply systems. To permit you to evaluate our program objectives, it is necessary to discuss some of the history and background which resulted in the development of our current program. Specifically, I have reference to the concept which provided for separate supply systems studies in the area of common-use-type items of supply. These studies were carried on under the jurisdiction of the former Munitions Board. They were based on the premise that by combining like inventories of all military stocks, economies in the total inventory held by the Department of Defense would result. Further, that different types of items of supply required different organizations and methods of receipt, storage, and issue of supply. In the method of approach, these studies were made for the services rather than by them for the purpose of insuring that "unification" of supply systems would thus be achieved. In general, it was then thought that centralization of supply-management functions by commodity segments would result in economy by such centralization.

The formulation of such premises under which the studies were conducted did not, however, take into consideration the basic principles governing military supply support. It did not give recognition to the basic fact that each military supply system is maintained solely to provide supplies as needed by the tactical 51686-60-33

force that they were called upon to support, and that such tactical force—Army, Navy, Marines, and Air Force-must develop its own requirements; further, that these requirements must be provided for at all times.

When engaged in operations, the tactical commander cannot rely solely on resources which his service cannot control. He can rely on support of other services only to the extent that such support is available.

Taking due cognizance of the philosophy and approach established by these earlier supply-systems studies and by giving recognition to the basic principles governing military supply support, an ad hoc committee on supply systems studies was established by this Office with representation by the three top military supply managers and representatives of the Office of the Secretary of Defense; specifically, the Directorate of Storage, Distribution, and Disposal. The mission of this committee was to reevaluate the supply-systems studies of medical-dental subsistence and automotive materiel for the purpose of determining those recommendations which had already been adopted by the military departments, those which could be adopted, or those which could not be adopted in the form contained in the separate supply-systems studies.

The committee arrived at several basic conclusions. Primarily, the supplysystems studies, if all had been completed and implemented, would have established far more diversification in organization, methods, and forms than now exists.

Secondly, the combining of stocks of similar supply classes in a single but separate distributive system would not reduce the total volume of requirements of the four military services.

Thirdly, the use of stock funds within each service facilitates cross supply support and permits the use of judgment in total quantities to be on hand to support the service affected since the stock-fund manager is responsible commandwise to that service.

Fourthly, and of equal importance, is recognition of the fact that the original studies recommended jointly administered systems, each basically different. If the 14 studies had been carried out as planned, there would likely be 14 different and separate systems where 4 now exist. Because of the joint-management concept of the proposed systems there would be no agency except the Office of the Secretary of Defense to administer them. If the Office of the Secretary of Defense administered them, the responsiveness of the three military departments would be lost. Thus, the departments would not be separately administered, as required by statute, and the Office of the Secretary of Defense would become an operating agency and yet not tactically responsible for tactical operations. This would be a violation of fundamental military doctrine of proven worth.

The Alameda test was also a subject considered by the ad hoc committee. It is believed that this test has been much misunderstood. At a depot on the west coast, it had been decided to position all stocks for the Pacific coast and the Far East, regardless of whether it was necessary or advantageous. The total stock remained under control of the services represented. Total stocks for each service were established by each service and, as a result, there was no reduction of stock. This test resulted, for example, in backhauling from Alameda to the Naval Supply Center, Oakland, for all Navy ships. In the warehousing area, the criteria established were inflexible and often, where good supply management decision dictated delivery to user direct from producer, such action was set aside and delivery made to the central warehousing point.

The final and unanimous report of the ad hoc committee recognized the operational deficiency disclosed by the supply systems studies and approved the implementation of the original study recommendations which were directly concerned with operating deficiencies. It recommended that those recommendations included in the studies which required the establishment of separate distribution systems for different commodity types, each different from one another, be disapproved. Finally, it recommended that no further studies using the commodity segment approach be made.

The original study recommendations covering subsistence, medical-dental, and automotive equipment totaled 147. Of these, 104 have been implemented or await implementation, indicating that the substantive value of the studies has been gained. However, it must be clearly recognized that the large number of recommendations indicated as already implemented by the military supply systems is not a direct result of the Munitions Board studies. Many of the features that were the subject of the recommendations were actually in effect prior to the conclusion of these studies and others were effected in the normal course of improving inventory management.

The continued existence of the supply systems study project precluded the treatment of basic supply problems across the board. Our present programs, now well established and advanced, require that basic supply policies applicable to all supply areas be developed and published; that receipt, storage, and issue of supply, subject to control of the service owning the supplies, be treated as a common function within each service, and the utmost standardization which is practicable and desirable be achieved in this area. Further, real economies in total volume of inventories will be achieved by shortening the length and volume of the pipeline; by storing high turnover items near the point of consumption and not at each stage in the pipeline; by improving (speedier) transportation; by use of financial data pertaining to inventories; by improving valid and accurate records upon which requirements and procurement are based.

Since the establishment of the Office of the Secretary of Defense we now for the first time have within the Department of Defense a constructive and comprehensive program governing the military supply systems mutually established and unanimously supported. It is under the immediate direction and administration of Mr. Albert B. Drake, my Director of Storage, Distribution, and Disposal. Mr. Drake is singularly qualified. He is the founder and former president of the Lehigh Warehouse & Transportation Co., Inc., of Newark, N.J. He is experienced and well grounded in handling all phases of storage and distribution of many different types of materiel produced and utilized by our national industrial companies. This has fitted him exceptionally well as Director of this allimportant component of the Office of the Assistant Secretary of Defense (Supply and Logistics). He also founded in 1945, and served as president until 1949, the firm of Drake, Startzman, Sheahan, Barclay, Inc., materials handling and warehousing consultants. During World War II he gained broad experience in the field of military supply systems as Director of Depot Operations, Army Forces, Western Pacific, and as Director of the Storage Division, Army Services Forces.

Under Mr. Drake's immediate supervision and coordination, the top military supply managers-Maj. Gen. G. W. Mundy, USAF, Rear Adm. Murrey L. Royar, SC, USN, and Brig. Gen A. T. McNamara, USA-meet regularly and for the first time have succeeded in burying service interests and developing among themselves a fine operating climate within which the remaining and much more important logistics problems are now being studied and solved objectively in the common good.

For your information, I am enclosing concrete evidence of the progress being made and which I am confident will continue to be made toward achieving the most effective and economical administration and management of the military supply systems. The program speaks for itself. In addition to the "Statement of Programs," there are included copies of four directives, some already issued and others soon to be published. These directives are entitled, "Inventory Management," which establishes basic Department of Defense policy for the management of inventories of materiel; "Materiel Pipeline-Military Supply System," which prescribed the Department of Defense policies governing the requirements for, determination, establishment, and administration of the elements in the complete materiel pipeline of the military supply systems; "Administration of Mobilization Reserve Stocks," which prescribes Department of Defense policies governing the administration of mobilization reserve stocks by the military departments and other military agencies with specific reference to retention, storage, and care and preservation of all material available or to become available for application against the Mobilization Reserve Materiel Requirement; "Management of Materiel in Long Supply," which establishes policies and criteria governing the management throughout the Department of Defense of materiel in long supply.

The "Statement of Programs" has received the full concurrence of the military departments and all elements of my Office. The fundamental difference between the new approach used in this program and that previously established by the supply-systems project is that a commodity approach only solves commodity problems whereas the functional approach covers all problems inclusive of the commodity treatment.

Please be assured of my appreciation of your interest and cooperation in these vital matters.

Sincerely,

T. P. PIKE.

[News Release]

DEPARTMENT OF DEFENSE,
OFFICE OF PUBLIC INFORMATION,
Washington, D.C., November 23, 1954.

ARMY ALAMEDA MEDICAL DEPOT TRANSFERS TO NAVY; MEDICAL TEST CEASES

The proposed transfer of facilities at the Alameda Medical Depot from the Army to the Navy, pending congressional approval by the Armed Services Committees, was announced today by the Department of Defense. Arrangements for the transfer are underway, Thomas P. Pike, Assistant Secretary of Defense (Supply and Logistics), said, and it is planned that it will be accomplished prior to July 1, 1955.

The depot contains 1,178,000 square feet of warehouse space, and existing medical supplies in storage will be issued or transferred prior to the transfer of the depot. The Navy will utilize the installation to augment the storage facilities of the adjoining naval air station. It is not now known how many of the civilian employees currently employed by Army will be required by the Navy. However, in accordance with civil-service regulations, civilian employees will be offered opportunities for employment by the Army at Sharpe General Depot and by the Navy at Alameda, as required.

Mr. Pike also announced the discontinuance of the medical supply test, which has been in operation at the Army's Alameda Medical Depot, Alameda, Calif., since April 1952. The test was an experiment to determine the feasibility of distributing and storing medical supplies for all three military departments through one regional distribution point for the support of the services in that

area.

The test is being discontinued, Mr. Pike stated, only after a thorough analysis and evaluation of the factors involved in this military supply support area. Its results, he said, have materially assisted the Department of Defense to develop a comprehensive program for eliminating unnecessary duplication and overlapping in supply and stock management practices of the military departments.

Experience gained from the Alameda medical-supply test, Mr. Pike said, has clearly demonstrated the efficiency and economy attendant with the utilization of military items of supply on a cross-servicing basis by all military services, regardless of the ownership of the stock. This principle forms an important part of the Department of Defense program.

The Alameda Cold Storage Plant, of the Oakland Quartermaster Market Center, and the 6022d ASU, Central Dental Laboratory, will continue as tenants of the Navy at the installation as will the 49th Infantry Division, National Guard. Common storage and issue functions performed at the Alameda Depot have proven satisfactory to the Army and Air Force, and are being transferred intact to the Army's Sharpe General Depot, Lathrop, Calif. Factors and conditions set up for the test made the operation uneconomical for the Navy. The Navy's storage and issue functions and the partial stock of medical supplies involved will be returned to the Navy Supply Center at Oakland, Calif.

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