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COMPTROLLER

GENERAL

WASHINGTON.

THE

D.C.

UNllTEQ

STATES

20148

B- 106190

Dear Mr.

This

Chairman:

is our annual report of

.fiRu&vthe

nse. A similar

report on Federal civil departs was submitted separately.

”

We have included items which we believe should be of interest

and use to the Committee

during the appropriations

hearings for fiscal year 1974. Audit reports have previously

brought these findings

and recommendations

to the attention of departmental

officials.

Some

matters commented on in this report are those on which the Department has indicated that corrective

action either has been or will be

taken, The items have been included, however, in view of their

significance

and of the fact that we have not had an opportunity

evaluate the adequacy of corrective

actions taken.

We shall be pleased to furnish

may desire.

any additional

information

you

We are sending copies of this report to the Department

of Defense and to the military

departments

so that they may be in a

position to answer any inquiries that may be made during the appropriations

hearings with respect to these findings and recommendations.

Sincerely

yours,

Comptroller

General

of the United States ’

c,,

The Honorable George H. Mahon

Chairman,

Committee

on Appropriations

House of Representatives

/i ‘$9

Contents

Page

PROCUREMENT

PRACTICES AND CONTRACTADMINISTlUTION

Problems in avoiding contractors’

claims under

ship construction

contracts

Department of the Navy

Validity

of payments to the contractor

for production of the C-5A aircraft

Department of Defense

Need for a Government-wide

policy on fees allowable under contracts

with not-for-profit

organizations

Department of Defense and other Government

agencies

Problems in acquiring,

installing,

and operating

a communications

system in a theater

of operat ions

Department of Defense

Procurement of defective

ammunition components

Department of the Army

PROBLEMSIN ACQUISITION OF MAJOR WEAPONSYSTEMS

‘Summary appraisal

of the acquisition

process

Department of Defense

Cost-effectiveness

studies

of proposed major

weapon systems

Department of Defense

Tests of major weapon systems and evaluation

test results

Department of Defense

Cost estimates

of major weapon systems

Department of Defense

Faulty potting

compounds in major weapon systems

Department of Defense

Feasibility

of constructing

price indexes for

weapon systems

Department of Defense

RESEARCHAND DEVELOPMENT

Possible duplication

in the separate development

by the services

of aircraft

to provide close

air support of ground troops

Department of Defense

* .

Page

Premature full-scale

development of minor weapon

systems

Department of Defense

Need for long-range

planning for avionics

requirements

Departrnent of the Army

Need for coordinated

efforts

of defense and civil

agencies to convert to civil

uses defense research facilities

no longer needed for defense

purposes

Department of Defense

SUPPLY MANAGEMENT

Unnecessary procurement

of spare parts for initial

support of new aircraft

Department of the Air Force

Need to improve accuracy of requirements

system

for reparable parts

Department of the Air Force

Problems in property

disposal operations

in Vietnam

Department of the Army

OTHER PROPERTYMANAGEMENT

Need for further

improvements in controls

over

Government-owned plant equipment in custody of

contractors

Department of Defense

Naval petroleum and oil shale reserves not capable

of meeting emergency oil needs

Department of the Navy and Department of the

Interior

MAINTENANCE, REPAIR, AND OVERHAUL

Need for balanced repair

and procurement programs

Department of Defense

Need to increase repair of air-to-air

missiles

Department of the Navy

ADMINISTRATION OF MANPOWER

MATTERS

Problems of establishing

requirements

for and

obtaining

maximum utilization

of the professional medical personnel

in the military

services

Deuartment of Defense

’

Page

Extensive

use of military

personnel in civiliantype positions

Department of Defense

Establishment

of duplicate

training

capabilities

Department of the Air Force

Ineffective

review of in-house performance

versus

contractor

performance

of support activities

Department of Defense

Improvements needed in training

and equipping the

Army National

Guard for maintaining

order during

civil

disturbances

Department of the Army

Problems in administering

the drug abuse control

activities

affecting

military

personnel

Department of Defense

ACCOUNTING AND INFORMATION SYSTEMS

‘Better

financial

inventory

accounting

needed

Department of Defense

Increased use of financial

data and an improved

tariff

system needed by the blilitary

Airlift

Command

Department of the Air Force

Incomplete

installation

of the management accounting system for procurement

of equipment and missiles

Department of the Army

DEFENSE INTERNATIONAL ACTIVITIES

Continued intensified

efforts

needed to strenghten

U.S. Government foreign

tax relief

on defense

expenditures

overseas

Department of Defense and Department of State

Need for changes in funding and management of pacification

and development program in Vietnam

Department of Defense, Department of. State,

and Agency for Int.ernational

Development

Opportunity

for savings in providing

war-risk

insurance

for contractor

property

and employees

Department of Defense, Department of State,

and Agency for International

Development

Problems in administration

of the dependent shelter

program in the Republic of Vietnam

Department of Defense

Page

MILITARY READINESS

Need for improvement in readiness

Army Forces

Department of the Army

of Strategic

OTHER AREAS OF OPERATIONS

Potential

savings through better

procedures

for

setting

rents for civilian

occupants of military

family housing

Department of Defense

Opportunities

for further

consolidation

of support

functions

in the Pacific

area

Department of Defense

PROCUREMENTPRACTICES AND CONTRACTADMINISTRATION

PROBLEMSIN AVOIDING CONTRACTORS’CLAIMS

UNDER SHIP CONSTRUCTIONCONTRACTS

Department

of the Navy

Al though contractors

t claims for price increases have

recurred

in Navy shipbuilding

programs, this problem has become more significant

in the last few years because such

claims have increased in both size and percentage of shipbuilding

contracts,

In the past few years, the Navy has received shipbuilders’

claims for price increases

totaling

about $1 billion.

The shipbuilders

claimed that the Government owed them more than the contract

prices because the

Navy failed

to fulfill

its part of the contract

terms.

their claims,

shipbuilders

contended that the Navy:

--Did

not provide

adequate

specifications.

SiTaslate in furnishing

equipment and information

agreed to provide or did not provide them in a usable

condition.

--Imposed more rigid

quality

traditionally

required.

--Made verbal requests

justment

of contract

controls

than had been

for changes in ships

prices.

without

ad-

Certain shipbuilders

(follow

yards that built

additional

ships of a given class) also claimed that plans purchased from

the lead yard-- the shipbuilder

that built

the first

ship of

the class --were defective

and/or not available

when needed

and that,

since the Navy intended that such plans be purchased and used, the Navy shared responsibility

for problems

created by these plans.

To improve its ship procurement

process’es, the Navy has

undertaken the Shipbuilding

and Conversion Improvement Prowhich

includes

several

tasks intended to eliminate

s-am,

minimize claims for price increases

under future

shipbuilding

contracts.

GAO reviewed these tasks and evaluated

their

potential

to eliminate

or minimize claims.

Of the 167 tasks,

26 relate

to the causes of claims.

At least one task concerns each of the major causes of claims mentioned above.

The Navy has also initiated

actions

intended to improve

its overall

acquisition

management.

These improvements are

categorized

as organization,

procurement,

and personnel related,

and most of them have been implemented.

These actions

hold considerable

promise for minimizing

claims,

GAO recommended that the Secretary

of the Navy direct

that specific

plans be devised whenever the lead-yard/followyard procurement

method is used, to insure that the follow

yard is given sufficient

time to review the lead yard’s

plans and to insure that both make every effort

possible

promptly correct

any deficiencies.

The Navy agreed.

GAO suggested that the Congress, in considering

requests

for shipbuilding

authorizations

and funds, inquire

about the

specific

claims prevention

measures the Navy plans to apply

to the ship construction

programs.

(B-133170, Feb. 28, 1972.)

VALIDITY OF PAYME:“TSTO THE CONTRACTOR

FOR PRODUCTION OF THE C-5A AIRCRAFT

Denartment

of Defense

Public Law 91-441 authorized

$200 million

for the C-5;1,

aircraft

program for fiscal

year 1971; Public Law 92-156

authorized

$325.1 million

for the program for fiscal

year

1972.

Both laws provided that (1) payments be made to the

-Lockheed Aircraft

Corporation--through

a special

contractor(2) funds be expended only for reasonable aad

bank account,

allocable

direct

and indirect

costs of the C-5A aircraft

program, and (3) funds not be used to reimburse Lockheed for

bid and proposal costs, independent

intercompany

profits,

research and development costs, similar

unsponsored technical

and amortization

costs.

effort

costs, and depreciation

These

laws required

that GAO audit payments from the special bank

account and submit quarterly

reports

to the Congress.

‘GAO submitted

five reports

to the Congress on its audits

of the payments, totaling

$386 million,

made since the

special bank account was set up in June 1971 through June 30,

1972.

GAO found no payments that were contrary

to these laws.

certain

practices

concerning

the

However, GAO questioned

contractor’s

manpower use, overhead allocation,

and withdrawal of retirement

funds before they were needed.

GAO’s study of labor involved

in assembly operations

showed that costs could be reduced through more efficient

use of manpower.

GAO notified

the contractor

and the Air

The

contractor

advised

that

was establishForce of this.

ing new control

systems; the Air Force said that it was improving its capability

to measure productivity

of the contractor’s

manpower.

Public Laws 91-441 and 92-156 provide that the contractor

not be reimbursed

for bid and proposal costs.

The contractor

excluded the direct

bid and proposal costs (material

and

labor) but included,

and received

reimbursement

for, about

$500,000 of overhead costs which appeared to be allocable

to bid and proposal operations.

GAO asked the Air Force to

state its rationale

for paying such costs.

The Air Force

and the contractor

replied,

and GAO is further

considering

this matter.

Eight banks and trust companies serve as trustees

for

the contractor’s

10 employee retirement

plans.

In 1971 an

average of 14 months elapsed between the contractor’s

receipt of funds from the Government and payment to the

trustees.

Costs incurred but not. yet paid are reimbursable

if otherwise valid.

However, GAO questioned the propriety

of reimbursing

retirement

costs well before the contractor

pays the trustees,

GAO recommended that the Department of

Defense establish

a consistent

policy on this matter.

The

Department of Defense has not yet advised what action it

might take.

(B-162578, Aug. 9, 1971, Nov. 17, 1971, Feb. 18,

1972, May 30, 1972, and Aug. 11, 1972.)

NEED FOR A GOVERNFli‘NT-WIDEPOLICY

ON FEES ALLOWABLEUNDER CONTRACTS

WITH NOT-FOR-PROFIT ORGANIZATIONS

Department of Defense and

other Government agencies In a report

issued in February 1969, GAO advised the

Congress that Federal agencies’

guidelines

for contracting

research work with Government-sponsored

not-for-profit

organizations

should be improved.

The sponsoring

agencies

provide sufficient

work and revenues to insure retention

capabilities

acquired to meet Government needs.

In addition,

Government agencies obligated

about

$260 million

during fiscal

year 1969 for basic and applied

research by nonsponsored not-for-profit

institutions

other

than colleges

and universities.

GAO examined agency policies

and practices

in the rates of fees allowed to these organizations at six Department of Defense offices

and at eight

civil

agency offices

that award significant

amounts of costplus-fixed-fee

research contracts

to not-for-profit

organizations.

GAO also obtained information

from three of the larger

nonsponsored not-for-profit

organizations

on the Government

fees they received.

GAO selected these three organizations

because their

clients

included nearly all Government agencies and because they generally

competed with universities

and other not-for-profit

organizations--both

categories

of testing

and evalua-

tion:

1. Engineering

testing

to demonstrate

physically,

before

a weapon system is accepted for production,

that it

will perform as intended.

2. Acceptance testing

to demonstrate

that the state and

quality

of the system can fulfill

the legal and/or

commercial requirements

agreed to by the seller

and

the buyer.

3. Operational

suitability

testing

to demonstrate

that

personnel,

and the

the weapon system, the operating

tactical

operations

can work together

to accomplish

an established

combat mission.

Tests, properly

performed,

assess risks and provide

test results

to the decisionmaker

at key points in the acquisition

cycle when final

decisions

must be made. A breakdown in performing

any of the testing

steps would lead to a

lack of timely,

accurate,

or complete information,

which undoubtedly would handicap the decisionmaker.

GAO reviewed 13 weapon systems with estimated

total

Systems for which substancosts of more than $46 billion.

Immediately

tial

testing

history

was available

were selected.

DOD was changing its acquisition

poliprior

to this review,

which are basically

sound and in

These new. policies,

ties.

were being applied primarily

various

stages of implementation,

to new systems entering

the acquisition

process.

Test cases

cited in GAO’s re;lort

of current

policies,

therefore

were not

fully

represent:itive

In DOD:

--Practices

used to establish

ally were adequate.

--Most weapon systems

conducting

tests,

testing

objectives

did not have adequate

--Most weapon systems were not tested

timely basis.

gener-

plans

and evaluated

for

on a

--Most test reports

were adequate, but their value was

diminished

because of inadequate test planning and

actual testing.

Some reporting

improvements could be

made.

--Complete

and valid test and evaluation

data was not

available

prior

to those times in the acquisition

cycle when decisions

had to be made.

Each of the three services

has a longstanding

policy

that essentially

requires

the completion

of engineering

testing before production

begins.

The policy has been waived

frequently.

For instance,

the Army has such a policy but

waives it and begins limited

production

when the need is

when the risk is low, and when no other system satisurgent,

fies the requirement,

Most, if not all, major weapons the

Army has procured recently

have been procured under this

waiver.

Similarly,

the Mark 48, the F-111, and a number of

other weapon systems for the Navy and Air Force have entered

production

under waivers.

GAO recommended that,

in implementing

its new testing

and evaluation

policies,

DOD continue

to emphasize the need

for:

--Completion

of appropriate

testing

and evaluation

to key decision points

in the acquisition

cycle.

--Adequate

controls

over waivers.

prior

--Succinct

summary reports

prepared by the testing

agency

for all management levels.

(Interested

management

levels may wish to comment on these summary reports;

to change the

however, they should not be permitted

basic summaries .)

According to the Director

of Defense Research and Engineering,

the implementation

of policies

on weapon system

acquisition

issued by the Office of the Secretary

of Defense

since May 1970 would correct

the deficiencies

in testing

and

evaluation

discussed in this report.

The Director

stated

that these policies

are being implemented but cautioned that

change takes time,

(GAO is reviewing

the new policies,)

He also mentioned that there are many programs which are well

advanced and which cannot be completely

transferred

to the

new testing

policies

at this time due to contracts

or other

binding agreements; however, these programs are being modified

to the extent practical.

(B-163058, Aug. 7, 1972.)

COST ESTIMATES @I MAJOR WEAPONSYSTEMS

Department

of Defense

Realistic

cost estimating

is indispensable

to decisini:making by both the Congress and the military

services?

man:igement when acquiring

a new weapon system.

Data available

47 weapon systems showed cost increases

of $15.6 billion

frcm

early development estimates.

The Department of Defense (909)

attributed

43 percent of this amount, or $6.7 billion,

estimating

changes.

GAO attempted

to identify

those costestimating

factors

that were causing the problem and to suggest how the problem might be solved or abated.

Uniform guidance on cost-estimating

practices

and procedures which would be the basis for formulating

valid,

consistent,

and comparable estimates

throughout

the services

was lacking.

Each service

issued its own guidance, which

ranged from a detailed

estimating

manual to a few general

statements.

Estimators

often ignored guidance.

Cost estimates

for a specific

system frequently

were a

succession of revisions.

Accurate revision

of both the

original

and updated cost estimates

requires

documentation

showing data sources,

assumptions,

methods, and decisions

basic to the estimate.

In virtually

every system GAO reviewed, documentation

supplying

such information

was inaccurate or was lacking.

Among the resulting

difficulties

were:

--Known costs had been excluded

valid justification.

without

adequate

--Historical

cost data used as a basis for computing

estimates

was sometimes invalid,

unreliable,

or unrepresentative.

--Inflation

when it

was not always

was included.

--Understanding

hindered.

and proper

Readily retrievable

base for computing cost

included

or uniformly

use of the estimates

treated

was

cost data which could serve as a

estimates

for new weapon systems

generally

was lacking.

According to officials

within

the

Office of the Secretary

of Defense, there was little

organized effort

to gather actual cost information

systematically,

to insure consistent

treatment

of costs in the data collected

on various weapon systems, or to see whether the cost data

the contractors

reported was accurate and consistent,

Without realism and objectivity

in cost estimating,

estimates

prepared by advocates of weapon systems tend to

be low.

Therefore

persons who are not influenced

by the

military

organization’s

determination

to field

a weapon

system or by the contractor’s

desire to produce the system

should review every weapon system at major decision points

the acquisition

cycle,

GAO recommended that the Secretary

of Defense develop

and implement guidance for consistent

and effective

DOD

cost-estimating

procedures and practices

and that,

in developing this guidance, he consider the criteria

for cost estimating GAO set out in its report,

particularly:

--An adequate

data.

--Treatment

data base of readily

retrievable

cost

of inflation.

--An effective

independent review of cost estimates,

including

judgment by top officials

as to the realism

of the cos% estimates

on which decisions

are based.

--More complete documentation

of cost estimates,

coupled

with a requirement

for an adequate feedback of results,

to provide a basis for comparing costs achieved with

those estimated.

DOD stated

plans :

that

agreed with

GAO’s conclusions.

DOD

‘I*** to provide the necessary guidance to the DOD components,

This would include criteria

to guide those

charged with making estimates

and would establish

procedures

to have cost estimates,

which were preparec’

within

this guidance, available

for use by the Services

In addition,

it would

and the Secretary

of Defense.

provide guidance necessary for the creation

and maintenance of data systems for cost estimates.”

The military

to improve cost

DOD advised,

had taken steps

departments,

(B-163058, July 24, 1972.)

estimating.

FAULTY POTTING COMPOUNDSIN

MAJOR WEAPONSYSTEMS

Department

of Defense

Potting

compounds protect

electrical

connections

and

other components from contaminants,

moisture,

and corrosion,

These compounds, which are installed

as liquids,

harden

After

around the connections

or components to be protected.

prolonged exposure to high heat and humidity,

some potting

compounds revert

to liquids

and leave potted components

unprotected.

Reversion caused a potting

compound used in about 775

active F-4 aircraft

to be replaced at a cost of about

$39 million.

In addition,

1,575 other active F-4s contained

another potting

compound also susceptible

to reversion.

General failure

of this compound is not expected to occur

until

1976, and costs for partial

repair may be limited

a few million

dollars.

GAO estimated

that,

if reversion

occurs earlier

and if total

replacement

is required,

the

cost to replace this compound could reach $85 million.

Additional

millions

have been or may be incurred

For example,

replace compounds used in other weapon systems.

submarines built

by the Mare Island Naval Shipyard in California

during 1961-66 contained a considerable

amount of a

The Department of Defense

reversion-prone

potting

compound.

(DOD) estimated

that it would cost $6 million

to replace it.

GAO attributed

the use of these faulty

potting

compounds

The

compounds

to a lack of Government testing

and evaluation.

were newly developed and were not covered by military

specifications,

Government personnel approved their

use solely on

the basis of recommendations

and test data from the equipment and compound manufacturers,

The data did not identify

One military

the reversion

characteristics

of the compounds.

laboratory,

however, which already was aware that a similar

compound was reversion

prone, was not asked to evaluate

The

use

of military

laboratories

to evaluthese compounds.

ate the acceptability

of materials

and components not covered

by military

specifications

was not required.

Furthermore,

DOD was unable to quickly

disseminate

information

on reversion-prone

compounds to all users.

field

experience and Government testing

confirmed

that

After

these

compounds would revert,

they were still

used in the F-4 aircraft

for several months.

The Air Force is using a reversionprone compound in the F-111 aircraft,

This aircraft’s

system project

office

(which had been notified

by Air Force

laboratory

personnel

of the potential

failure

with this compound) decided to continue

its use.

Because the services

did not effectively

coordinate

efforts

to develop repair

techniques

to remove and replace

one kind of potting

compound in the F-4 aircraft,

repair

costs may have increased.

After

recognizing

the compound’s

reversion

problem, Air Force and Navy activities

concurrently

developed different

repair

techniques.

In fact,

two Navy

activities

used different

techniques.

Concerning the F-4 aircraft’s

difficulties,

which are

inherent

in the approved material

rather than in its use by

the Navy concluded,

and GAO agreed, that

the contractor,

there was no basis for a Government claim against the F-4 contractor.

The Navy, however, was pressing a claim against

the F-4 contractor

concerning

the improper mixing of some

of the compound and subsequently

settled

the claim for about

$25,000.

GAO recommended to the Secretary

insure that:

of Defense

that

--New, untried

materials

not covered by military

specifications

are tested adequately

and that a military

laboratory

approves such newly developed materials,

--The services

disseminate

information

on deficiencies

in materials

and equipment having DOD-wide application obtained through test,

evaluation,

or experience

to other DOD users,

DOD agreed that faulty

potting

compounds resulted

considerable

expense but stated that GAO’s estimate

of this

After discussing

this

cost in the F-4 aircraft

was too high.

matter with DOD officials,

GAO concluded that the estimate

of $39 million

to replace one of the compounds was reasonable.

GAO agreed that the estimate

of $85 million

to replace another

potting

compound in 1,575 additional

F-4 aircraft

could be

reduced if less than total

replacement

was required,

but the

exact amount of replacement

will not be known for several

DOD did not provide an alternative

estimate

of this

years.

cost.

According to DOD, several existing

procedures provided

sufficient

guidance for testing

and evaluating

newly developed

materials

and components and that military

program and project

offices

had access to DOD laboratories

for assistance.

These

procedures basically

were directed

toward testing

by contractors

and did not include criteria

to determine when the

services

should request independent test and evaluation

assistance

from DOD laboratories,

DOD agreed that better

communication

among the services

was needed and that it was revitalizing

an existing

GovernmentIndustry

Data Exchange Program which provided for exchanging

GAO believes

this program’s usefulness

is limited

test data.

because both contractor

and military

participation

is voluntary.

(B-163058, Jan. 5, 1972.)

FEASIBILITY OF CONSTRUCTINGPRICE INDEXES

FOR WEAPONSYSTEMS

Department

of Defense

As a result

of recommendations

made by the Joint Economic Committee, the General Accounting Office

(GAO) reviewed

the feasibility

of constructing

price indexes for weapon sysThe primary need for indexes is for use in evaluating

terns.

the effect

of inflation

on cost overruns.

Inability

to measure inflation

accurately

makes it difficult

for the Congress

to evaluate the effectiveness

of Government’s management in

procuring

weapon systems and to identify

appropriate

remedial

action,

Available

price indexes are unsuitable

because they are

based on purchases other than military

items or because they

do not include a sufficient

cross section of military

items,

Therefore,

GAO studied what would be needed to construct

price indexes for military

weapon systems.

Two types of

indexes were considered:

end-item indexes which show trends

in the prices of entire

systems such as ships or aircraft

and

input indexes which show the prices of labor and materials

used in production,

Specification

change is a fundamental

characteristic

weapon systems, so much so that it is not practicable

construct

end-item indexes.

This is not the case for such

items as Army trucks that do not involve the rapid or numerous changes characteristic

of complex aircraft

and ships.

Sufficient

data was available

to construct

meaningful

input price indexes for labor and materials.

GAO constructed

demonstration

indexes for aircraft,

ships, and electronics

and determined

that:

--Labor price

for virtually

(overhead).

indexes for

all types

direct

pay could

of labor,

direct

be constructed

or indirect

--Material

price indexes could be developed at thk prime

contractor

level for only part of the material

used

because of the specification

change problem.

--To identify

the extent of the price change and the

component of change due to general inflation,

both

contractor

and marketwide price indexes are necessary.

Contractors

participate

in private

areawide and salary

surveys,

and the Bureau of Labor Statistics

(BLS) conducts

various wage and salary surveys as part of its regular programs.

It appears that the BLS surveys could be extended to

defense industries.

The Department of Defense (DOD) and BLS

could best construct

price indexes of the types described.

According to BLS and DOD, additional

resources would be

required

to carry out a program for constructing

the desired

indexes.

Neither

agency stated the estimated

cost.

(B-159896,

Apr. 10, 1972.)

RESEARCH AND DEVELOPMENT

POSSIBLE DUPLICATION IN THE SEPARATE

DEVELOPMENT BY THE SERVICES OF AIRCRAFT

TO PROVIDE CLOSE AIR SUPPORT OF

GROUND TROOPS

Department

Defense

The Army, Navy, Marine

Corps,

and Air Force all participate in close

air support

or reinforcement

of ground troops

by close-in

delivery

of ordnance

from aircraft,

The services

have differed

over the best equipment

to employ,

the tactics

to use, and the priority

of this

type of mission,

Congressional

committees

have reviewed

these differences

and related

problems

from time to time,

but the issues

have been exceedingly

difficult

to resolve.

The Congress

was concerned

that

three different

aircraft

being considered

for close

air support --the

Army’s

AH-56A Cheyenne,

the Marine

Corps’

Harrier,

and the Air Force’s

A-X--might

duplicate

or overlap

in capabilities.

All three

proposed

aircraft

are designed

tical

targets,

such as tanks,

field

fortifications,

troops,

but the aircraft

differ

markedly.

defeat

tacand enemy

--The Cheyenne

a fixed-wing

tail,

has rotary

blades;

wings for

plane;

and a pusher-propeller

lift,

--The Harrier

after

nearly

concept.

is the first

25 years of

airplane,

with

this

vertical-takeoff

experimentation

--The A-X is to be a conventional

the first

fixed-wing

aircraft

tion

to be designed

specifically

port.

fixed-winged

in more than

for close

the

aircraft,

a generaair sup-

A unified

plan covering

total

Department

of Defense (DOD) requirements

for close

air support

had not been prepared.

Ordinarily

such a plan would be the basis

for determining

the total

number of aircraft

and the capabilities

they

would need for close

air support.

Instead

each service

had

independently

planned

and proposed

the sizes

and the tactical

concepts of close-air-support

fleets,

without

considering

each other’s

plans, the quantities

and capabilities

of existor the resources of U.S. allies.

ing aircraft,

A justification

for a new close-air-support

aircraft

would be more convincing

if the services

agreed on available

inventory

aircraft

(their

numbers, accuracy,

payloads,

reand other properties)

and if it could be shown

sponse times,

that there was a gap between these resources

and the combined

services’

needs.

sion

Some factors

hampering effective

and the development of an overall

--Constraints

on the choice

each service can develop.

with the Air Force limits

--Lack of joint military

mission and on which

management of the misplan were:

among weapon systems that

For example, an agreement

the Army to helicopters,

policy

on how to conduct

equipment to use,

the

--Lack of adequate data on whether the weapons now being

considered will perform effectively

under combat conditions

and on certain

human abilities

needed to operate the weapons.

--Equipping,

staffing,

and training

for support missions

usually

are underfinanced

in peacetime in favor of a

service’s

priority

mission.

The more complex support

missions--such

as close air support--which

require

very close coordination

between air and ground troops

are difficult

to mobilize

effectively

when hostilities break out.

It is not known whether the three aircraft

will be more

effective

than existing

aircraft.

The following

capabilities

of the three aircraft

were not tested in a combatlike

environment employing the tactics

planned for each of them:

--Ability

launch

craft.

to find and identify

enemy targets

in time to

weapons before the enemy can fire at the air-

--Survivability

against

a well-equipped

enemy.

--Effectiveness

gets.

--Capability

tie surge

against

typical

close-air-support

rate

for a high, sustained

rate)

in the battle

area.

tar-

of attack

(sor-

Data on proposed target-kill

capabilities

and survivaCost-effectiveness

bility

was inconclusive

and incomplete.

studies on those aircraft

(none had been made on the Harrier)

were :

--Optimistic

tactics,

--Incomplete

aircraft.

in their

assumptions about environments,

and the severity

of enemy defenses.

in comparing

these

--Out of date with current

cost

markedly in the past 2 years.

Another

derway .

cost-effectiveness

study

aircraft

estimates,

with

similar

which

rose

on the Cheyenne was un-

DOD completed an interim

study of the three aircraft

June 1971. According to the Deputy Secretary

of Defense in

would complement

summarizing the study, the proposed aircraft

rather

than duplicate

other aircraft

because each was expected to have exclusive

capabilities

for certain

battle

sitHe

recommended

uations not possessed by existing

aircraft,

that all three aircraft

programs be continued until

operational

testing

could be completed to resolve certain

speciThe list

of uncertainties

fied uncertainties

about each.

but the summary did not inseemed to apply to each aircraft,

dicate that each aircraft

would be evaluated

against the

list.

Although the proposed aircraft

would be tested further,

it was not clear whether they would be compared with

each other and with existing

aircraft

when the operational

test data was available.

The Office

of Defense Research and Engineering

recently

established

a deputy directorship

with direct

access to the

Deputy Secretary

of Defense at certain

critical

milestones

The Deputy

in the acquisition

process of these aircraft.

Director

would do no actual testing

but would advise and

monitor inservice

testing

by the services

and would evaluate

the results.

GAO did not attempt to determine whether the

current

testing

and evaluation

procedures would provide the

necessary independence to insure that there was prompt and

realistic

testing

of weapon systems before large-scaleproduction

commitments were made. However, a powerful

test

and evaluation

authority

was needed in the weapon acquisition

cycle.

In its

report

--Establish

support

budget.

GAO suggested

that

DOD:

the total

DOD requirement

for close-airaircraft

within

the resources provided in the

--Delineate

the singleand joint-service

tasks and subtasks in conducting

close air support and assign authority

and responsibility

for specific

tasks to the

individual

services,

--Develop

and implement,

within

some realistic

deadlines,

joint

close-air-support

policy which would

spell out how military

actions

are to be conducted

and coordinated.

The report also summarized major issues concerning the

three aircraft

which the House and Senate Committees on Appropriations

and Committees on Armed Services might wish to

pursue further

with DOD. [B-173850, Dee, 8, 1971.)

PREMATUREFULL-SCALE DEVELOPMENT

OF MINOR WEAPONSYSTEMS

Department

of Defense

In recent years congressional

attention

has focused on

problems in meeting cost, schedule,

and performance

targets

established

for major weapons,

The Department of Defense

(DOD) has responded by emphasizing the importance

of testing

hardware and other controls

during development.

As noted

by the Blue Ribbon Defense Panel, more money is committed

to the far more numerous minor weapon systems.

These

systems involve less than $50 million

of research and development funds or less than $200 million

of procurement

funds.

Therefore

GAO was particularly

interested

in seeing how

well DOD was managing decisions

to start

full-scale

development on these systems.

The decision

to enter full-scale,

or engineering,

development is considered

crucial

because

it is that final

step before a system enters production

and

the decision

leads inevitably

to large commitments of money.

GAO reviewed 15 Navy programs, mainly those not categorized as major, which had passed through the crucial

decision points and which are now in varying stages of development, production,

or use.

Insufficient

experimental

work had

been performed

for most of the 15 programs before full-scale

development was started.

As a result,

serious technical

problems frequently

occurred during full-scale

development

and caused cost growth,

schedule slippage,

or shortfalls

performance.

This forced the Navy to compromise its plans

for meeting its equipment needs.

Although premature

fullscale development was not the only cause of later

problems,

it appeared to be the most prevalent

cause and the one having the most far-reaching

effect.

The premature initiation

the following

impact on cost,

targets.

of full-scale

development

schedule,

and performance

had

--Development

cost increased

50 percent or more for

six of 10 programs and ranged from 16 to 213 percent,

--In nine of 12 programs,

completion

of full-scale

development had to be extended more than 1 year.

Program slippage

for these systems ranged from 4 to 51

months.

--Serious

technical

problems were evident in nine of

15 programs e Redesign or modifications

had taken

place or were planned for six of the nine because of

technical

problems in areas which had not been proved

feasible

through experimental

testing,

--When cost or schedule limits

were exceeded or when

performance

was significantly

below expectations,

decisionmakers

often were forced into undesirable

compromises--e.g.,

redesigning

or modifying

equipment

at additional

cost, diverting

funds from lower priority

programs,

taking risky shortcuts,

or canceling

or cutting

back development programs.

In addition,

when program delays occur during fullscale development,

risky shortcuts--e.g.,

starting

production while development is in process--are

sometimes taken

to bring completion

dates back in line.

Often,

these shortcuts not only fail

to speed up the program but also usually

add to the development-production

cost,

Pressures to resort

to shortcuts

would be lessened if exposing technical

problems

through experimental

work before full-scale

development is

begun were emphasized more.

Following

are some of the circumstances

under which

full-scale

development was approved prematurely.

--Navy decisionmakers

approved full-scale

development

in some instances

even though development plans indicated that‘ experimental

work had not been completed.

This premature approval was attributed

either

to unwarranted

confidence

that the equipment would perform

as required

or to an expressed urgent need for the

equipment.

--Development

plans for other programs might have misled

the decisionmakers

in that the plans indicated

that

no significant

technical

risks were expected,

--For still

other programs, development plans rationalized erroneously

that risks were low,on the assumption that technical

concepts had been proved on systems in use.

According

to the Director,

Defense Research and En,ineering,

recent changes in DOD and Navy policies

and pr~ccdures had been designed to correct

such defects as those

revealed in GAO’s report by:

--Establishing

the Defense Systems Acquisition

Review

Council to review major programs at key decision

points.

--Introducing

the development

--Increasing

attention

ation responsibilities.

concept

throughout

paper.

DOD to test

and evalu-

--Paying additional

attention

to reducing risks,

before

approval for full-scale

development is granted,

through more emphasis on prototyping

and hardware

development and through testing.

The first

two actions

apply only to major systems and,

if implemented properly,

should lead to improved management

of such systems.

GAO noted that a proposed new directive-DOD Directive

5000.2--would

require

these actions

and Secretary of Defense approval earlier

in the development process

for major systems.

Most systems discussed in GAO’s report,

however, did not meet the DOD dollar

requirement

for such

actions.

With respect to increased

emphasis on testing

and,

evaluation

responsibilities

and other efforts

to reduce

risk,

provided by new DOD Directive

5000.1, the former DOD

Directive

3200.9 appeared to be even stronger

in its emphasis

in its requirements

for,

justifying

on, and more specific

full-scale

development.

Yet sufficient

experimental

work

was not always performed.

DOD Directive

3200.9--in

effect

when full-scale

development decisions

were made for 14 of the 15 systems reviewed-specified

prerequisites

for starting

full-scale

development

and required

that experimental

work be performed

to a degree

sufficient

to demonstrate

that technical

risks did not exist

or had been reasonably

reduced.

In contrast,

new DOD Directive 5000.1 provides merely that “development

risks have

been identified

and solutions

are in hand.”

The recent

actions

should lead to improved management of major weapons

systems; however, this emphasis provided by the new policies

will

not in itself

overcome the problems cited for minor

systems.

GAO recommended that the Secretary

of Defense require

key decisionmakers

to verify

and certify

that sufficient

experimental

work has been completed before they approve

full-scale

development of minor systems or justify

in writGAO also has recommended that the

ing any exceptions.

Secretary

of Defense apply spot checks and other techniques

to insure that the principles

specifically

applicable

major systems are applied also to the far more numerous

and, in total,

more costly minor systems.

Recent legislation

requires

the Secretary

of Defense

to annually report,

beginning in 1973, on operational

testing and evaluation

for each weapon system for which procureThis should assist

in identifying

ment funds are requested.

The

decision

new systems entering

production

prematurely.

to begin full-scale

development,

however, is even more fundamental because it “opens the door” and leads to large commitments of funds.

GAO suggested that the Congress require

from the Secrerequest for fulltary of Defense --along with his initial

systems--a

statement to the

scale development funds for

effect

that

--all

necessary experimental

work has been performed

and the proposed system is ready for full-scale

development or

--authorization

of full-scale

development is essential

even though all prescribed

conditions

have not been

should give the

met, in which case the statement

reasons for the decision and identify

the areas where

(B-163058,

experimental

work has not been completed.

Oct. 6, 1972.)

NEED FOR LONG-RAY7”1E

PLANNING

FOR AVIONICS REQiiiREMENTS

Department

of the Army

Because development problems with the standard lightweight avionics

equipment (SLAE) package affected

airframe

programs, GAO reviewed the SLAE program, which was committed

for use in several new Army aircraft

systems, to determine

the underlying

causes for such program shortcomings.

Military

requirements

established

in May 1960 for the

light observation

helicopter

limited

the weight of the avionics to 100 pounds.

However, Army officials

decided in October 1960 to use existing

equipment which was about 55 perThe Army did not contract

for developing

lightcent heavier.

weight avionics until

1966, about 4 years after contracting

for the helicopter

development.

This delay forced the SLAE

development cycle to be accelerated

and, in GAO’s opinion,

was the primary cause of development and production

problems.

The inadequate planning was caused by the Army’s lack of a

long-range

avionics

planning system to promptly

identify

the

avionics

subsystems needed for its aircraft.

The Army had to push the avionics package into production 9 months before preliminary

design testing

was completed

to meet aircraft

delivery

schedules.

Because SLAE was not

available,

older,

larger,

and heavier avionics ultimately

was installed

in 2,013 helicopters.

The substitution

reduced

the effectiveness

of all 2,013 helicopters,

The schedule

slippages

and design changes to overcome deficiencies

in the

avionics

cost about an additional

$2.4 million,

In December 1966 the Assistant

Chief of Staff for

Force Development directed

that SLAE be installed

in seven

additional

Army aircraft

systems and in all Army aircraft

produced after fiscal

year 1969, even though SLAE had never

been successfully

tested in the light

observation

helicopter

for which it was designed.

A SLAE component also was to be

installed

in five aircraft

systems as second frequency modulation

(FM) transceivers.

These actions were taken without

determining

whether the expected benefits

would outweigh the

expected cost and before testing

SLAE to determine its suitability

for Army use.

SLAE was not installed

in two of the aircraft

systems

because the Army later

determined

that SLAE was not cost effective.

Installing

SLAE in three other aircraft

systems

was canceled because it was unavailable,

but modifications

to one of these aircraft

systems to prepare for installing

SLAE cost about $185,000.

The Army solicited

bids on a second FM transceiver

for

SLAE at an estimated

cost of more than $20 million

without

determining

whether the need justified

the cost.

The Army

did not consider using FM transceivers

already being used in

other Army aircraft.

GAO notified

Army officials

of this,

and they promptly reevaluated

the requirement

and reduced

the planned procurement

about $7 million.

In August 1969 the Commanding General, Army Materiel

Command, decided to transfer

program and fund control

of the

Avionics

Laboratory

from the Electronics

Command to the Aviation Systems Command, but this decision

had not been implemented at the time of GAO’s review.

If the Aviation

Systems

Command is given program and fund control,

it should also be

given command control

over the Avionics

Laboratory

to avoid

the problem of dual control.

GAO recommended that

the Secretary

of the Army:

---Place additional

emphasis on promptly

range avionics

requirements

plans.

preparing

long-

--Prepare

a regulation

which prohibits

committing

incompletely

tested subsystems to additional

systems,

except under extraordinary

conditions.

--Establish

additional

controls

effectiveness

determinations

alternatives

are made before

quired by Army regulations.

to insure that costand analyses of economic

program approval,

as re-

--Initiate

actions

clarifying

responsibility

within

the Army Materiel

Command for .preparing

an economic

analysis

when more than one of its subordinate

commands are directly

involved.

GAO also

recommended that

the Secretary

of Defense:

--Require,

before approving engineering

development of

an aircraft,

that all subsystems needed to fulfill

critical

requirements

of the aircraft

are being dcveloped and have sufficient

leadtime

to insure pra~c’r

interface,

--Establish

procedures

whereby his authorization

is required before committing

a critical

developmental

subsystem to additional

systems unless it is proved

acceptable

by suitable

tests.

The Army agreed that improved long-range

planning was

needed but did not agree with GAO’s conclusions

as to what

caused the SLAE developmental

problems,

It contended that

changing requirements

and unforeseen

technical

difficulties

had caused these problems.

GAO believes

these problems could

have been minimized or avoided had the Army initiated

plans

to develop lightweight

avionics

in 1960.

Although the Army commented that GAO’s recommendations

were sound management practices,

it cited only that it was

preparing

a long-range

avionics

plan.

With respect

to GAO’s

other recommendations,

it stated that:

--Suitable

regulations

were in effect

to control

committing

untested

subsystems to additional

systems.

(The regulations

apply to type classification

materiel;

however, they do not preclude committing

incompletely

tested subsystems to additional

systems,)

--Cost-effectiveness

determinations

and economic analyses were required,

and cost analyses had been conducted to the appropriate

degree.

(These determinations and analyses had not been prepared and additional

controls

were needed to insure their

preparation,

GAO found,)

--The regulation

requiring

economic analyses was clear

regarding

which activity

prepared these analyses,

this case, the Army Materiel

Command. (The command’s implementing

regulation

does not clearly

indicate which subordinate

command should prepare the

analyses when more than one subordinate

command is

involved.)

The Office

of the Secretary

of Defense disagreed with

GAO’s recommendation

that engineering

development not be approved unless all critical

subsystems were under development

with sufficient

leadtime

to insure proper interface.

According to the Office,

SLAE was not committed to additional

systems before testing

and that therefore

the recommendation was not appropriate.

GAO disagreed,

The plan to install

SLAE in additional

aircraft

was included in the Five

Year Avionics

Requirements

Plan used as the basis for procuring avionics

and for modifying

aircraft

to accept new

avionics.

GAO suggested that the Congress be informed by the Secretary

of Defense when critical

subsystems still

being developed are committed to additional

systems, because such

commitments could adversely

affect

the performance

of such

systems and the combat effectiveness

of the Armed Forces.

(B-174248, Dec. 28, 1971.)

NEED FOR COORDINATED EFFORTS OF DEFENSE AND

CIVIL AGENCIES Tfl CONVERTTO CIVIL USES

DEFENSERESEARCHFACILITIES NO LONGER NEEDED

FOR DEFENSE PURPOSES

Department

of Defense

Because attempts

to convert military

facilities

from defense and space use to civil

uses have been only partially

successful,

GAO reviewed the Army’s efforts

to transfer

research facilities

a.t Fort Detrick,

Maryland,

to Federal civil

These

unique

and

valuable

facilities

became availagencies.

able when the President

decided to eliminate

the country”s

biological

warfare program.

The Army made a substantial

effort

to convert

the research facilities

to civil,

scientific,

or medical purposes,

but it encountered

problems which one agency acting alone

could not control,

Problems encountered,

often interrelated,

included,

--Size

--Finding

cility.

--Lack

of the research

facility

an agency willing

of plans

and available

and its

work force,

to be landlord

funds

for

the fa-

by prospective

--Reluctance

of prospective

users to be associated

a former biological

warfare

center,

users,

with

The availability

of the facilities

and its personnel

was made known in January 1970.

Recognized scientific

authorities

reported

that the specialized

facilities

and the

scientific

personnel,

while still

intact

as a group, be given

a national

mission commensurate with their

potential,

such

as finding

a cure for cancer.

In June 1970 the Deputy Secretary

of D’efense reported

an apparent accord that the facilities

would be transferred

to the Department of Health,

Education,

and Welfare’(HEW),

HEW had requested;

however, actual agreement was not reached.

HEW was still

considering

using some of the facilities

months later but had no firm plan.

Part of HEW’s interest

depended on the Army’s acting as landlord,

The Army Surgeon

General was interested

in some of the facilities

and was

willing

to be a host, but at the time he had not indicated

Finally,

in October 1971, the

the extent of his needs.

President

announced that Fort Detrick would become the focal point for the National

Cancer Institute’s

crusade against

cancer D

The Army attempted to retain

as many of the 1,800 persons employed at Fort Detrick

as possible.

Despite the

Army’s efforts,

however, fewer than 600--primarily

support

at the time of GAO’s review.

personnel --remained

The Depart ment of Agriculture

took over one research facility

employing 20 people, and plans are for the Army Surgeon General to

retain

some of the remaining personnel.

Most of the unique

scientific

and professional

staff

formerly

employed at Fort

Detrick,

however, are no longer available.

It would benefit

the Government to have a coordination

point such as Office of Management and Budget COMB), with

assistance

from the Office of Science and Technology and

the General Services Administration

(GSA), between the prospective users and the offerors.

Prompt action should be taken to close facilities

longer needed.

When a facility

has unique features

to the Nation,

the Director,

OMB, should:

valuable

-=-Coordinate the efforts

of defense and civil

agencies

in converting

and transferring

national

resources.

--Consider

favorably

requests for additional

funds

which enable an existing

facility

to remain operat ional.

This would keep the work force intact

until

potential

users’ plans are more fully

developed,

--Designate

a host agency, such,as GSA, when several

agencies would use a large facility

but no single

agency would be willing

to assume responsibility.

According to OMB, which coordinated

the response for

the executive

branch, matters to be decided in the succeeding months made it impossible

to comment definitively

GAO’s positions

and recommendations.

The President’s

Advisory Council on Management Improvcment agreed that it would be advantageous to coordinate

planning and timely decisions

between the prospective

user:<

of surplus facilities

and the offerors.

It further

stated

that OMB, with advice from the Office

of Science and Techlio,Service Commission, could certainl;?ogy, GSA, and the Civil

serve that function.

(B-160140, Feb. 16, 1972.)

SUPPLY MANAGEMENT

UNNECESSARYPROCUREMENT

OF SPARE PARTS

FOR INITIAL SUPPORTOF NEWAIRCRAFT

Department

of the Air

Force

The Air Force spends hundreds of millions

of dollars

annually

to obtain spare parts needed to support new airThis support,

known as

craft

during initial

operation.

includes spares and repair parts ranginitial

‘provisioning,

ing from bolts and resistors

costing pennies to wing assemblies and electronic

modules costing

thousands of dollars.

GAO selected

the F-111 aircraft

for evaluating

the policies

and procedures

under which initial

provisioning

was carried

out because the program was well underway at the time the

review began,

The Air Force spent too much too soon to buy many F-111

spare parts which were not needed during the initial

support

and which may never be needed and may subsequently

This

occurred

because

management

system

which

scrapped.

assumed deliveries

of the aircraft

would be made on schedule

and which was not sufficiently

flexible

to permit timely

The sys tern

changes in the program for initial

provisioning.

committed the Air Force to buy large quantities

of spare

parts for aircraft

which may not be delivered

or which may

be delivered

long after

originally

scheduled.

Furthermore,

because of numerous changes in design which invariably

occur

in developing

and producing military

aircraft,

many spare

The lack of flexibility

parts rapidly

become-obsolete,

the initial

provisioning

program for the F-111 aircraft

resulted in:

--Buying about $116 million

worth of spare parts before

Spare parts worth $9.6 million‘had

they were needed,

already been declared excess.

--Buying substantial

times even though

showed that there

quantities

of spare parts several

data available

to the Air Force

was no current ‘need for these parts.

These problems were compounded because the Air Force had

committed itself

early in the program to buy all the spares

at a markup from the prime contractor

rather

than directly

from the manufacturers.

The Air Force had not evaluated

the trade-off

between the markup and the value of the servAccording

to a GAO

ice provided by the prime contractor.

the markup was about $56 million

on $291 million

estimate,

worth of spare parts manufactured

by subcontractors.

In response to GAO’s recommendations,

generally

concurred,

the Air Force said:

--It

would revise its

determining

materiel

initial

provisioning

in which

policies

and guidelines

for

requirements

to emphasize that

applied to short-term

deliveries,

--It

would provide a schedule

projected

aircraft

deliveries

slippages were forecast.

showing realistic

to the user when

--Air

Force activities

which computed requirements

had

been instructed

to adjust estimated

demand rates as

appropriate

for new items and the Department of Defense had studied this matter.

--Actions

were currently

being evaluated which should

permit expanding competitive

procurements

from other

than the prime contractor

and a new system would be

developed and tested.

--Current

weapon systems audits and those planned

the Air Force Audit Agency would evaluate

basic

visioning

concepts,

policies,

and practices.

(B-133396,

Jan.

31, 1972.)

pro-

NEED TO IMPROVE ACCURACYOF REQUIREMENTS

SYSTEMFOR REPARABLEPARTS

Department

of the Air

Force

The Air Force has a highly complex computerized

system

for determining

requirements

for reparable

parts.

The system furnishes

data on about 150,000 items--primarily

aeronautical

parts--with

an inventory

value of $7.1 billion.

Costs for procurements

and repair

programs for these items

exceeded $900 million

in fiscal

year 1970.

According to GAO’s review of requirements

computations

for 110 items selected on a statistical-sampling

basis,

widespread errors

in key data elements had caused inaccurate

requirements

in 59 percent of the computations.

Requirements

for some items were misstated

by $2.5 million,

and availablity

of assets was misstated

by $2.2 million.

Using statistical

sampling GAO estimated

that,

of the

73,000 computations

for items showing such requirements

a need to buy or repair,

43,000 were inaccurate.

GAO could

not accurately

estimate

the total

dollar

effect

of these

inaccurate

requirements

but the extent of errors

and the

amount of funds involved

for the items sampled indicated

that

it could be substantial.

Errors

occurred

because

--data

is not checked for accuracy

due to managers t heavy workloads,

--good sources are not readily

the data needed,

--policies

and procedures

--personnel

operations

are not trained

before

available

are ambiguous

thoroughly

is used

for

some of

or unclear,

and

in the system’s

The requirements

system is scheduled to be absorbed into

a new highly sophisticated

logistics

system called the Advanced Logistics

System.

GAO is concerned that invalid

data will

be carried

into the new system and will minimize

expected benefits.

data

GAO recommended that,

to improve the reliability

for the present requirements

system, the Air Force

--strengthen

errors,

procedures

for

finding

and correcting

--provide

reliable

sources of information

for requirements workers so that they can check data more easily,

--accelerate

training

programs,

--reduce

the amount of invalid

data transferred

into

the Advanced Logistics

System data banks, and

--consider

reducing

this requirements

having low use.

the number of items

system by eliminating

managed under

those items

Also, because of the large number of errors

in the system reviewed,

the Air Force Audit Agency should test the

reliability

of data in other systems which the Advanced Logistics

System will use and should report

the results

such tests to management for correction.

The Air Force agreed, in general,

with these recommendations and cited corrective

actions were underway or planned.

(B-146874, Sept. 13, 1972.)

PROBLEMSIN PROPERTYDISPOSAL OPERATIONS

IN VIETNAM

Denartment

of the Armv

During fiscal

years 1969-71, property

disposal

activities in Vietnam processed $1.7 billion

worth of materiel,

of which $300 million

worth was usable and the remainder was

scrap.

The volume for fiscal

year 1971 was $117 million

worth of usable property

and $194 million

worth of scrap.

The Army has had difficulty

safeguarding

and accounting

for the materiel

being turned in for disposal,

and large

quantities

of usable materiel

have been written

off the

In fiscal

year

records because they could not be located.

1971, the three disposal activities

wrote off about $18.3

million

worth of such materiel.

Substantial

additional

materiel

was missing,

according

to GAO tests.

There were two

principal

reasons for the control

problems in the disposal

yards--divided

program management and lack of qualified

personnel.

Also, disposal

activities

have not always reported

materiel

to the Defense Logistics

Service Center (DLSC)‘,

for

worldwide

screening.

Such screening

though required,

has resulted

in significant

redistributions.

Materiel

which has been screened is offered

for sale to

Despite restrictions

a wide range of potential

purchasers.

imposed by the Vietnamese Government, reasonable

efforts

were being made to market property

competitively;

however,

at one disposal

activity,

revenue from the sale of scrap

could be increased by $1.2 million

annually

if scrap was

segregated before being sold,

GAO discussed these problems with local

Army staff

officials

who agreed, in general,

ings and with the need for some correction.

management and

with the find-

recommended to the Secretary

of Defense that (1) emphasis be given to improving the control

over materiel

disposal

yards p (2) plans be developed to insure that qualified

property

disposal personnel

are available

for any

future

needs p (3) action be taken to insure that all property

GAO

disposal

activities

report usable property

to DLSC, and

(4) procedures be implemented to require

all units to segregate scrap before it is turned in to property

disposal

yards.

The Army concurred

in GAO’s recommendations

and reported various

responsive

actions.

(B-163746, June 13,

1972 .)

OTHER PROPERTYMANAGEMENT

NEED FOR FURTHER IMPROVEMENTSIN CONTROLS

OVER GOVERNMENT-OWNED

PLANT EQUIPMENT IN

CUSTODYOF CONTRACTORS

Denartment

of Defense

In a report

to the Congress in November 1967, GAO pointed

out that there was a need for improved controls

over

Government-owned property

in contractors’

plants.

Subsequent internal

reviews by the Department of Defense (DOD)

have shown this situation

still

exists.

GAO’s latest

review was directed

chiefly

toward DOD

management of a major part of such property--plant

equipment-to examine the causes of the problems.

Some progress has

been made toward the DOD goal of generally

requiring

contractors

to furnish

all equipment needed for Government contracts.

DOD-furnished

plant equipment in the possession of

contractors

had decreased from $4.6 billion

worth in

December 1967 to $4.1 billion

worth in June 1971.

In March 1970 the military

services

and the Defense

Supply Agency were directed

by the Office

of the Secretary

of Defense to require

contractors

to submit plans to phase

The Deputy

out their

use of Government-owned facilities.

Secretary

of Defense, however, has permitted

deferment of

these plans at contractor

plants where mobilization

base

requirements

are’being

developed and where the phaseout

would be contrary

to the Government’s

interest

or would

DOD expects

create an economic hardship

for the contractor.

to receive plans from about 647 contractors

by March 1973.

As of December 31, 19 71,’ 187 plans had been approved.

As a result

of a GAO review,

the. results

of which were

reported

to the Congress in April 1971, DOD had stated in

October 1970 that the Armed Services Procurement Regulation

(ASPR) would be revised to stop the practice

of furnishing

general-purpose

test equipment--i.e.,

plant equipment--as

special

test equipment to contractors

e But on March 15, 1972,

DOD informed GAO that it had decided not to implement the

proposed revision,

48.

In its

latest

review

GAO also

found

that:

--DOD is rebuilding

existing

equipment at contractors’

plants without

a need evaluation.

The Air Force has

spent about $200,000 to refurbish

equipment for which

future

use is questionable.

--The reuse potential

of Government-owned industrial

plant equipment has not been fully

realized

because

of weaknesses in the procedures

for reporting

unneeded

equipment to the Defense Industrial

Plant Equipment

Center for screening and redistribution.

At 13

contractors

t plants visited,

327 equipment items costing $11.4 million

had not been reported

to the Center

but were idle,

had little

use, or were used mostly

for commercial work.

The Center identified

78 of these

$1.7 million,

which, had they been

items, costing

might

have

been

used

to fill

equipment rereported,

quirements

at other locations.

--Some contractors

use Government equipment for commercial work without

obtaining

the approval required

advance of actual use.

--The use of available

machine time rather

than actual

machine time is not always appropriate

for measuring

commercial use because it is possible

for machines

to be used solely or predominantly

for commercial

work without

exceeding the 25-percent

limitation

normally

permitted

when such use is approved.

--DOD regulations

permit considerable

flexibility

computing rent for commercial use of equipment.

The

lack of a uniform method of computing the credit

for

Government use has resulted

in inequities

to the

Government and to the contractors.

--Under the Air Force heavy-hammer program, five contractors

have been permitted

to use about $20 million

worth of Government-owned plant equipment under nonstandard leases which permit unlimited

commercial

use at rental

rates significantly

lower than the rates

provided

in ASPR for the same classes of equipment.

These terms were granted because it was thought

there was only a small commercial market for the

items produced with the equipment.

At one contractor's

plant,

however, 80 percent of recorded sales of items

produced using such equipment were not under Government contract.

GAO recommended that

the Secretary

--Reemphasize

the DOD program

of Government-owned facilities

for

of Defense:

phasing out the use

by contractors.

--Revise

the definition

of special

test

exclude general-purpose

equipment.

--Strictly

apply to

ment the criteria

tractors.

the rebuilding

for furnishing

equipment

of existing

equipequipment to con-

--Revise

the regulations

to require

contractors

to maintain use records for individual

machines making up

for instance

75 percent,

some minimum portion,

the acquisition

cost of Government-owned industrial

GAO estimated

that including

only

plant equipment.

those items having the highest acquisition

cost might

require

such records for only 25 percent of the maThe records should show the amount of Governchines.

ment use and commercial use.

--Revise

the regulations

to require

that the commercialuse factor

be based on actual machine time rather

than on available

time.

--Remind contract

administrators

of the need to (1) monitor use of Government-owned plant equipment,

(2) identify

unauthorized‘use

of equipment,

and (3) incorporate

regulation

changes promptly

into facilities

contracts

to insure contractual

coverage.of

DOD policies

concerning industrial

plant equipment.

--Revise ASPR to provide clear criteria

and reporting

unneeded equipment',

for

identifying

--Revise ASPR to establish

a uniform and equitable

method

of computing rent.

To the extent practicable,

this

should be done on a machine-by-machine

basis with the

credit

for rent-free

(Government)

use applied to each

machine in its ratio

chine hours of use.

of Government

use to total

ma-

According

to the Assistant

Secretary

of Defense (InstalDOD had progressed

significantly

lations

and Logistics),

both in phasing out the use of Government-owned equipment by

contractors

and in managing the remaining such equipment.

emphasis on enforcing

existing

poliIn his view, increased

cies rather

than on issuing new or revised regulations

will

provide the necessary improvements.

As a matter for consideration

by the Congress, existing

legislation

does not permit the direct

sale of equipment

through negotiation

with holding contractors

unless certain

conditions

are met.

DOD officials

feel that enactment of

House bill

13792, which permits

the direct

sale of equipment

to holding contractors,

would help DOD phase out the use of

Government-owned equipment at contractors’

plants.

GAO endorsed similar

legislation,

proposed in previous

years, and

agreed with the intent

of House bill

13792.

(B-140389,

Aug. 29, 1972.)

NAVAL PETROLEUMAND OIL SHALE RESERVESNOT

CAPABLE OF MEETING EMERGENCYOIL NEEDS

Department

Denartment

of the Navy and

of the Interior

Executive

orders issued between 1912 and 1924 established

four Naval Petroleum Reserves and three Naval Oil Shale Reserves to provide oil for Navy ships,

The purpose of the

Reserves,

as later

stated by law, is to maintain

petroleum

resources

in a standby production

until

needed for national

defense.

The Office

of Naval Petroleum and Oil Shale Reserves (ONPR) has defined an event requiring

oil for national

defense as any crisis

determined by the Congress, such as

an armed conflict,

which would reduce or eliminate

oil imports or overseas military

fuel purchases.

According to

ONPR officials,

the usefulness

of the Reserves depends on

their

ability

to substitute

for such losses.

Therefore,

the

Navy must be able to:

--Produce significant

quantities

serves on short notice.

of oil

from the Re-

--Preserve

the oil in the ground until

needed by restricting

production

to the minimum necessary to maintain the fields

in a state of readiness.

The Naval Petroleum Reserves capability

of producing

oil for emergency needs has not been fully

developed.

Petroleum Reserve No. 1, the only Reserve for which an operational

readiness

requirement

has been established,

does not

have adequate facilities

to meet this requirement

due to

lack of funds,,

The ability

of the other Petroleum Reserves

to produce oil for emergency needs on short notice is negligible.

Without additional

development,

which could take

up to 10 years and could cost more th,an $2 billion,

the Reserves could supply only a very small portion.of

the oil

that the Navy believes

might be needed in an emergency.

addition,

oil imports are expected to increase sharply by

the mid-1980s and it does not appear that the Reserves could

substitute

totally

for them, even if developed fully.

The Navy has had to produce oil from Petroleum Reserves

Nos. 1, 2, and 3 in excess of the minimum amount considered

necessary to maintain

the fields

in a state of readiness.

Excess production

has been necessary,

in part,

to prevent

drainage

of oil from the Reserves by adjacent

commercial

wells,

many of which are on Federal

land administered

the Department

of the Interior.

Also lands adjacent

Petroleum

Reserve No. 4 on the Alaskan

North Slope have been

and development

of commercial

wells

may

leased commercially,

force the Navy into offset

production

to prevent

drainage.

Legislation

the Congress is considering

could directly

affect

the mission

and usefulness

of the Naval Petroleum

Reone

bill

proposes

production

and

sale

serves.

For example,

of oil from Petroleum

Reserve No. 1 to cover the costs of

terminating

certain

offshore

oil

leases in the Santa Barbara

Channel and of exploring

Petroleum

Reserve No. 4,

Such production

would reduce substantially

the recoverable

resources

whose producin one of Reserve No. l’s major oil deposits,

tion facilities

comprise

the bulk of the Reserve’s

operational

readiness

capability.

The present

state

of the Reserves and the extensive

oil production

which would be required

to comply with the

proposed

legislation

was not consistent

with the intent

the legislation

which established

the Reserves

(10 U.S.C.

7421-7438).

GAO therefore

recommended that the Secretary

the Navy, with the approval

of the President

--determine

how much oil the Reserves should be able

to produce and how soon the oil should be available

to meet national

defense needs and

--submit

to the Congress

ing and conserving

the

a plan for

Reserves.

adequately

develop-

The Navy concurred

in GAO’s findings

and stated

would submit to the Congress a proposal

for developing

the

Reserves.

to the Navy, the current

Five

However, according

Year Defense Plan contains

no provision

for such a program.

The Navy also said it would work jointly

with Interior

resolve

any potential

leasing

and drainage

problems

Petroleum

Reserve No. 4.

Interior

agreed that the extent

to which the Reserves

should be explored

should be determined

but suggested

that

such exploration

be limited

to Petroleum

Reserves Nos. 1 and

(B-66927,

Oct. 5, 1972.)

MAINTENANCE,

REPAIR,

AND OVERHAUL

NEED FOR BALANCED REPAIR AND

PROCUREMENT PROGRAMS

Department

of Defense

GAO reviewed

certain

repair

programs in each of the

military

services

to determine

whether

the most economical

mix of buying and repairing

was used.

In the Navy, the Air

Force,

and the Marine Corps there were only a few insignificant

instances

when materiel

was procured

while similar

In the Army, there also were only

items were not repaired.

a few instances

but some involved

substantial

amounts.

In April

1971 there were about 980 armored personnel

carriers

(M113Als)

to be repaired

at Army depots in the

The Army Tank Automotive

Command (TACOM)

United

States.

originally

scheduled

454 vehicles

for repair

in fiscal

year

1971 but only 42 were actually

approved for repair

because

TACOM had not been provided

enough operation

and maintenance

During fiscal

year 1971, however,

TACOM spent about

funds.

$34 million

to buy 1,125 armored personnel

carriers.

It costs about $12,000 to overhaul

an M113Al and about

$31,000 to buy a new vehicle.

Thus, while

the 412 vehicles

not included

in the fiscal

year 1971 repair

program could

have been repaired

for about $4.9 million,

it cost about

$12.8 million

to buy new ones.

ment

A similar

condition

existed

in the

Command for five

items of equipment

Army Mobility

GAO reviewed.

Equip-

GAO recommended that.the

Army establish

procedures

identify

situations

in which repair

programs are not sufficiently

funded but procurements

of new,items

are scheduled.

In those cases,

funds should be transferred

from the procurement

to the operations

and maintenance

appropriation

create balanced

repair

and procurement

programs.

The Army generally

agreed with GAO’s recommendations

and published

guidelines

which restrict

procurement

principal

items when an unfunded repair requirement

exists.

The Army applied these guidelines

when it prepared its fiscal year 1973 budget and reduced planned procurements

$159.9 million

with a corresponding

increase in overhaul

programs of only $28.7 million.

(B-146888, Jan. 6, 1972.)

NEED TO INCREASE REPAIR OF

AIR-TO-AIR MISSILES

Department

of the Navy

The Navy placed too little

emphasis on repairing

Sparrow

and Sidewinder missiles

in fiscal

year 1971,

New ones were

ordered and funds were requested to procure additional

missiles in fiscal

year 1972 while the number needing repair

increased.

The Navy’s readiness goal was not met and the

Navy’s capability

for air-to-air

combat was impaired.

Since repair

takes less time and costs less, GAO suggested that additional

funds be provided to repair

Sparrow

and Sidewinder missiles

in fiscal

year 1972 by transferring

funds from other repair programs or reprograming

new missile

procurement

funds.

The Navy replied

that it would consider this in its

midyear budget review but, because of contract

commitments

and other factors,

it was undesirable

to curtail

production

of new missiles

programed for procurement

in fiscal

year

1972.

GAO accepted the Navy’s position

but recommended that,

if a similar

situation

occurs in fiscal

year 1973, the Navy

act earlier

to transfer

procurement

funds to the operation

and maintenance appropriation

to fund a larger

repair program.

(B-132995, Apr. 25, 1972.)

ADMI’NISTMTION OF MANPOWER

MATTERS

PROBLEMSOF ESTABLISHING REQUIREh4ENTSFOR

AND OBTAINING MAXIMUM UTILIZATION OF THE

PROFESSIONALMEDICAL PERSONNELIN THE

MILITARY SERVICES

Department

of Defense

The services

spend more than $2 billion

annually

for

health care for servicemen and their

dependents.

?1ore than

200,000 medical personnel,

of whom more than 33,090 are professionals,

provide this care.

Because of congressional

concern with the national

shortage of physicians,

dentists,

and

nurses, GAO reviewed the services’

use of their

professional

medical resources.

Many medical officers

were being used to

fill

staff

and administrative

positions

in the various Washington headquarters

and intermediate

commands where, in many

cases, their professional

abilities

were being used only part

time.

Also there was no uniform method of establishing

manpower requirements

for medical personnel

in the services.

Imbalances existed

in the number of medical professionals

authorized

and assigned in each service

and in certain

medical

specialties.

Although the military

departments

said that retention

rates of medical personnel were a serious problem,

they had not set goals for the numbers and types of experienced professionals

that should be retained,

The services

had independently

studied these and other health care problems but, in most cases, no coordinated

effort

had been made

to solve mutual problems.

GAO recommendations

to the Secretary

of Defense concerning use of medical personnel

as administrators

included:

--Assigning

nonmedical personnel

to staff

administrative

and management positions

at the headquarters

levels

and using professionals

as consultants

for making medical decisions.

--Placing

degrees

hospital

Medical Service Corps officers

with master’s

in hospital

administration

in positions

administrators,

--Expanding

assistants

Regarding

the Department

the paraprofessional

programs for physician

and ancillary

and support personnel.

manpower requirements,

of Defense:

GAO recommended that

--Develop

and direct

the use of uniform staffing

criteria

for fixed medical facilities,

supported by

workload-related

standards

consistently

applied by all

the services,

--Develop a system for assigning

a regional

or an area basis.

medical

specialists

--Direct

the services

to identify

and justify

professional medical personnel requirements

and to develop

retention

goals and career programs.

Other recommendations to the Department of Defense included implementing

recent contractors’

recommendations

improve productivity

of dental health personnel and instituting controls

over studies of medical problems shared by all

the services

to minimize overlapping

and duplication.

DOD generally

agreed with GAO’s findings,

conclusions,

To implement these recommendations

DOD

and recommendations.

is:

--Studying

alternate

arrangements,

including

recommended, for medical staff

organization

partmental

level.

the one GAO

at the de-

--Proceeding

with a Z-year test under which filedical

Service Corps officers

trained

as health service administrators

will

serve as commanders of four small

treatment

facilities,

--Training

military

corpsmen as physician

assistants

and

training

nurses in certain

clinical

specialties

to increase the physician

productivity.

--Considering

establishing

a system under which military

regardless

of service affiliamedical specialists,

tion, will be used on a regional

or an area basis.

--Developing

a plan to establish

effective

in-house or contract

studies of medical

shared by the military

departments.

controls

problems

for

DOD also recognizes

the need to develop and use uniform

staffing

criteria

for fixed medical facilities.

(B-169556,

Dec. 16, 1971.)

EXTENSIVE USE OF MILITARY PERSONNEL

IN CIVILIAN-TYPE POSITIONS

Department

of Defense

Department of Defense (DOD) policy requires

that civilians will

be used to fill

all positions

not requiring

military personnel

for reasons of law, training,

security,

discipline,

rotation,

combat readiness,

or a need for a military

background to successfully

perform assigned duties.

If this

policy

is followed,

the military

departments

should be able

to maximize the use of military

personnel

in military

positions and thereby hold military

manpower requirements

to the

minimum needed to safeguard the national

security,

This, in

turn, would aid in achieving

an all-volunteer

force,

GAO

reviewed assignment practices

within

the services

to determine whether this policy was being implemented.

At the military

installations

where GAO made the review, military

personnel were being used extensively

civilian-type

positions,

contrary

to DOD policy,

Although

the services

recognized the benefits

and importance

of carrying out the policy,

it had not been followed

consistently

because, according to installation

commanders, of budgetary

restrictions

and civilian

personnel ceilings.

In GAO’s opinion a major contributing

cause was the military

departments’

failure

to determine the type and number of positions

which

should be filled

by military

personnel and which by civilians.

Until military

department headquarters

make these determinations

and provide implementing

guidelines

to subordinate commands

“-

it is likely

that installation

commanders will

tinue to make subjective

decisions

concerning

ments and

conassign-

--realistic

estimates

of the numbers of military

and civilian

personnel required

to fulfill

the departments’

missions cannot be included in future budget requests.

Since military

and civilian

personnel

costs are funded

in separate appropriations,

it is not reasonable to expect

the Congress to appropriate

funds for these personnel on a

basis consistent’with

DOD’s policy

unless the budget requests

are based on estimates

prepared within

the framework of that

_ policy,

Moreover,

since the Office

of P/Ianagement and Budget

usually

establishes

civilian

personnel

ceilings,

DOD must

provide that agency with realistic

eitimates

of the number

of military

positions

that can be converted to civilian

positions and with convincing

justification

of the number of

positions

needed to accomplish its mission.

GAO recommended to the Secretary

of Defense that he require the military

departments

to review personnel

requirements and to determine whether the positions

should b\: filled

by military

or civilian

personnel,

Review findings

s1.ould

be formalized

in specific

guidelines

for subordinate

commands

and installations.

Personnel survey teams, which periodically evaluate the management and use of personnel

at Inilktary installations,

should review compliance with the LIOD

policy and guidelines,

GAO also recommended that,

if the Congress wished to

permit early action on the substitution

of civilians

for an

equivalent

or greater

number of military

personnel,

DOP be

authorized

to transfer

funds from fiscal

year 1973 military

personnel

appropriations

to the appropriation

from which civilians

are compensated,

Such transfer

authority

was subs{?quently included in Public Law 92-570, which made available,

without

prior

reprograming

approval,

$25 million

for the

specific

purpose of converting

military

positions

to civilian positions.

The act also provided

that additional

amounts

of the general transfer

authority

could be used for this purpose, if required,

DOD did not agree that lack of staffing

guidance at the

installation

level was a major restriction

to full

application of the policy

on the use of civilians.

DOD did agree

that authority

for a transfer

of funds between appropriations

would facilitate

initiation

of a civilianization

program in

fiscal

year 1973 but stated that approval

for such a program

was contingent

upon the results

of a civilianization

study,

substantially

along the lines recommended in GAO’s report,

which was then underway.

(B-146890, Mar. 20, 1972.)

ESTABLISHMENTOF DUPLICATE

TRAININ’G’

,-“--. CAPABILITIES

Department

“~-4,

of the Air

Force

Department of Defense (DOD) directives

provide that

(1) the t.raining

facilities

of a military

department be used

to the m.aximum extent in meeting the requirements

of the

other military

services

and (2) duplication

be eliminated

avoided when practicable

and when economically

and efficiently

warrantf:,d,

The Air Force recently

discontinued

using six

common-sk$lls

training

courses offered

by other services

and

had established

similar

courses of its own, This was done

even t’.lough the Air Force considered

the training

provided

by the other services

to be adequate and the one-time costs

of establishing

the new courses would be nearly $2 million

and annual recurring

costs would be at least $23,000.

the

Air

Force

established

addition

to t.lose six courses,

three other courses formerly

conducted by other services,

approlj.ed the establishment

of eight others,

and was considering ‘;hree more.

In the report

to the Secretary

of Defense on this matt.er, GAO stated that the costs versus the benefits.

expected

to be received by DOD aa a whole should be weighed fully

before establishing

ths new training

courses,

since they dupliGAO recommended,

cated training

available

from other services.

therefore,

that the Secretary

of Defense direct

the Air Force

and

to advise him, on a priority

basis, of the specifics

rationale

for establishing

any new training

courses being

provided by other services.

DQD, commenting on the report,

stated that the Air Force

According to DOD, a selective

had been required

ta do this.

review of common training

would be undertaken

during fiscal

year 1973 which would cover not only cost effectiveness

but

quality

of instruction,

the relationship

of instruction

new tasks to be performed as a result

of changing job strucl

the facilities

necessary to accommodate fluctuating

tures,

and the effect

of new equipment upon

training

requirements,

the curriculum.

The military

departments

would be requested

to scrutinize

carefully

any major contemplated

deviations

from the common-training

concept and to reach more frequent

accords among themselves

in accommodating new instructional

and student management requirements.

(B-175773, May 23,

1972.)

INEFFECTIVE REVIEW OF IN-HOUSE

PERFORMANCE

VERSUS CONTRACTOR

PERFORMANCEOF SUPPORTACTIVITIES

Department

of Defense

The Department of Defense (DOD) spends about $6.3 billion annually to provide military

installations

with commercial and industrial

services

and products,

such as grounds

and building

maintenance,

food service,

transportation,

and

ammunition.

About 82 percent of these expenditures

are for

products

and services

produced by Government employees.

The

Office

of Management and Budget requires

that these products

and services

be obtained from private

contractors

unless an

in-house source of supply is necessitated

by economy, military readiness,

or certain

other exceptions.

An agency review of each in-house commercial or industrial

activity

required

at least once every 3 years to insure that its continuance is justified.

The reviews should include cost

studies when in-house performance

is based on economy,

GAO reported

to the Congress that the reviews by the

military

departments

of in-house commercial and industrial

activities

were not effective

because they were not performed

in the manner required.

Except in a few cases where cost

studies had been made, there were no factual

explanations

included in the review reports

supporting

local recommendations

that in-house performance

of activities

be continued.

The

few cost studies made showed that savings could be realized

by converting

activities

from existing

in-house performance

to contract

performance

or vice versa.

These studies,

GAO

believes,

indicate

significant

potential

savings in activities

not yet reviewed.

Although the services

should have completed the first

3-year cycle of reviews by June 30, 1968,

they were all far behind schedule.

As of June 1971 many

activities

had not been reviewed at all.

Although it is required that all activities

subject

to review be included on

an inventory

list,

certain

activities

subject to review were

not on the lists,

while others,

for which reviews were not

mandatory , were included.

In addition,

Army installations

had begun new in-house activities

without

first

obtaining

required

department-level

approval,

GAO recommended to the Secretary

of Defense a number of

improvements for managing the activities

discussed in the

DOD has advised GAO that it has implemented

report.

the recommendations by revising

pertinent

directives

instructions

which will

recognize

--unsupported

in-house

--the need for

and

guidelines

--the

requirement

for

most of

and

justifications,

to insure

new start

complete

inventories,

approval.

DOD also advised GAO that it had conducted a special

training

course for top officials

throughout

the country to increase

management awareness and improve technical

know-how in reviewing the activities

as required.

(B-158685, Mar. 17,

1972.)

IMPROVEMENTSNEEDED IN TRAINING AND

EQUIPPING THE ARMY NATIONAL GUARD FOR

MAINTAINING ORDER DURING CIVIL DISTURBANCES

Department

of the Army

Between January 1965 and October 1971, Army National

Guard units were used in 260 instances

to assist

local and

State police in maintaining

order during urban riots

and

campus demonstrations.

Two Presidential

commissions established during this period (Kerner and Scranton Commissions)

criticized

the Guard’s performance

during certain

disorders

and recommended that riot

control

training

of guardsmen be

improved and expanded.

GAO reviewed the program of training

for civil

disturbance

control

given to guardsmen to determine

the effectiveness

of changes made in response to lessons

learned from the disorders

and the suggestions

made by the

Commissions.

.Since the 1967 Detroit

riot,

the Army and the Guard have

acted to improve civil

disturbance

control

training

and to

more adequately

equip personnel.

The amount of training

compared favorably

with that given local police civil

disturbance units.

Guard officials

and most guardsmen GAO

questioned

believed themselves adequately

trained.

A recent

policy change, however, discontinued

the .requirement

for

mandatory refresher

training

and permits

unit commanders to

determine how much refresher

training,

if any, will be given

their

guardsmen.

Consequently,

some units may not receive

adequate training.

Regarding equipment,

guardsmen now have

better

physical

protection

than before,

but equipment options

are needed to bridge the gap between riot batons and rifles.

GAO recommended that

the Secretary

of Defense

--require

appropriate

refresher

training

for all National

Guard units with a civil

disturbance

control

mission,

--establish

maintain

an evaluation

system to insure that

disorder

control

capabilities,

and

--require

the Army to continue research

field

training

in the use of, special

munitions.

units

on, and provide

equipment and

Department of Defense and National

Guard Bureau officials

advised that consideration

would be given to GAO’s recommendations.

(B-160779, Sept. 8, 1972.)

PROBLEMSIN ADMINISTERING THE

DRUG ABUSE CONTROLACTIVITIES

AFFECTING MILITARY PERSONNEL

Department

of Defense

The Congress and the President

have identified

drug

abuse as one of the most serious problems facing both the

civilian

and military

segments of American society.

Recognizing the high level of concern by Government and the American

people, GAO reviewed the programs of the Department of Defense (DOD) and individual

military

services

to control

and

reduce drug abuse by military

personnel.

DOD has actively

cooperated with other Federal and local

Government agencies primarily

responsible

for enforcing

laws

against illegal

trafficking

and use of drugs, both in the

United States and abroad.

Intensification

of enforcement

activities,

however, may have contributed

significantly

the. replacement of marihuana use by use of more dangerous

drugs which are not as easily detected,

The military

services

were conducting

a wide variety

educational

activities

to combat drug abuse; however, without

a good definition

of the nature and extent of the problem

and having no valid means of measuring the benefits

accruing

from the various activities,

DOD had no assurance that the

services’

drug education programs were effective.

Urinalysis

has

identifying

heroin,

However, because of

used, the incidence

indicate

the overall

been a highly successful

technique

barbiturate,

and amphetamine users.

technological

limitations

of tests being

rates being reported

did not accura.tely

extent of drug use.

Implementation

of DOD exemption programs,

offering

assistance

to servicemen who volunteered

for treatment

of their

drug problems,

was relatively

complex and confusing,

Frequent

changes in these programs contributed

to this confusion,

engendered considerable

distrust,

and adversely

affected

the

programs 1 credibility,

GAO found.

There were indications

that DOD experienced

greater

success in medical detoxification

and treatment

of drug

abusers than in their

rehabilitation,

Rehabilitation

programs had very limited

success, if the number of servicemen returned

to normal duty is used as a criterion.

GAO recommended that DOD develop a system to provide a

basis for evaluating

its educational,

treatment,

and rehabilitation

activities

relating

to the drug abuse control

program.

DOD generally

agreed with GAO’s observations

and concurred

commenting

the

report,

however,

in the recommendation.

DOD noted that the Drug Abuse Control Program had been in

its initial

stages at the time of GAO’s review.

Significant

progress has been made since the time frame covered by the

report,

DOD stated,

with positive

programs being implemented

to control

the drug abuse problem.

(B-164031(2),

Aug. 11,

1972.)

ACCOUNTINGAND INFORMATION SYSTEMS

BETTER FINANCIAL INVENTORY ACCOUNTING NEEDED

Department

of Defense

The Congress, in numerous laws, and the Comptroller

Geuin prescribing

accounting

principles

and standards,

eral,

have long required

that all Federal agencies have adequate

property

accounting

records in both quantities

and dollars.

However, none of the Department of Defense (DOD) operational

financial

inventory

accounting

systems GAO reviewed had the

financial

controls

necessary to improve the accuracy of inventory data used for making management decisions.

In all systems reviewed,

the financial

records merely

reflected

inventory

transaction

data--receipt

and issuance

of items --as recorded in quantity

records.

Consequently,

incorrect

quantity

data resulted

in incorrect

financial

data.

There was no comparison of quantity

record data and related

financial

data before the data was recorded in the financial

record.

Thus, there was no assurance that the quantities

paid for agreed with the quantities

entered in the detailed

stock records and, subsequently,

in the financial

record.

All the military

services

and the Defense Supply Agency

(DSA) have plans in various

stages of implementation

that

will

change their

logistics

and accounting

systems.

Although

the proposed system changes do promise varying

degrees of improved inventory

control,

only DSA’s and the Army’s changes

appear to include the types of financial

controls

GAO believes

necessary,

Both the Navy and Air Force have indicated

that their,

new systems will not incorporate

such financial

controls.

The Navy maintains

that such controls

can be added after

the

new systems are implemented.

The Air Force believes

that its

new system should be implemented and evaluated before it considers using such financial

controls.

DOD agreed generally

with GAO that both financial

and

item inventory

controls

can and should be improved.

The DSA

system and the one the Army is developing

will have such

financial

controls,

DOD believes,

GAO recommended that

the controls

incorporated

similar

controls

are built

other services , preferably

techniques

should include:

the Secretary

of Defense evaluate

in the DSA system and insure that

into the proposed systems of the

Such

during the design stages.

--The comparison of quantity

financial

data,

record

data

--System controls

and procedures

to insure

research and correction

of discrepancies

in the comparison process.

--Periodic

comparison of financial

record totals

as an overall

test

(B-146828,

May 17, 1972.)

and related

the timely

occurring

and quantitative

of reliability.

INCREASED USE OF FINANCIAL DATA AND

AN IMPROVED TARIFF SYSTEMNEEDED BY

THE MILITARY AIRLIFT COMMAND

Department

of the Air

Force

The Military

Airlift

Command (MAC), Department of the

Air Furce, provides

air transportation

for all military

and

certain

civilian

agencies.

An industrial

fund system is

used whereby MAC is paid by its customers for a significant

part of the expenses it incurs.

The tariff

rates established

(one for passengers and

one for cargo) to reimburse the fund did not differentiate

services

and decisions

regarding

between high- and low-cost

the initiation,

expansion,

and continuation

of services

were

made without

considering

financial

data.

GAO concluded

that

the Air

Force

should:

--Establish

a tariff

system in which the rates charged

more closely approximate

the cost of providing

the

services.

--Consider

costs and associated

revenues, as well as

military

requirements,

in deciding whether services

should be initiated,

expanded, or continued.

--Use the industrial

fund to disclose

the cost consequences of decisions,

rather

than merely as a financing device.

GAO recommended that (1) available

financial

data be

compiled by identifiable

operational

segments for use in airlift

services

management, (2) the Air Force make a study to

determine the feasibility

of devising and implementing

tariff

system in which rates more closely

approximate

the

cost of services,

and (3) the DOD directive

governing industrial

funds be revised

to show more clearly

the objectives

of industrial

funds to achieve better

management.

On August

Armed Services

2, 1972, the Subcommittee on Transportation,

Committee, House of Representatives,

held

hearings at which a GAO official

testified,

to insure that

MAC was taking effective

and timely action to correct

the

shortcomings

pointed out in the GAO report.

At the hearings DOD officials

outlined

the action initiated

to revise

the MAC tariff

system so that rates more closely

approximate the cost of providing

the service and other corrective

action taken pursuant to GAO recommendations.

(B-133025,

Jan, 5, 1972.)

INCOMPLETE INSTALLATION OF THE MANAGEMENT

ACCOUNTING SYSTEMFOR PROCUREMENT

EQUIPMENT AND MISSILES

Department

of the Army

The Army’s management accounting

system for the procurement of equipment and missiles

is potentially

a valuable

management tool but, after

7 years of effort,

the system had

not been fully

implemented.

Moreover) data produced by the

partially

installed

system was not reliable

and management

had to use data produced by complementary systems.

The inability

to implement the system on a timely basis was due to:

--Failure

by the Army to make an adequate study

determine the size and complexity

of the task

plementing

the system at each location.

of im-

--Lack of sufficient,manpower

essing equipment.

proc-

--Delays by the contractor

work to the satisfaction

and automatic

in completing

of the Army.

--Lack of adequate supervision

system implementation.

and control

data

the contract

over

the

GAO proposed that the Army provide the resources

and

controls

needed to insure that the system is implemented and

operable at the earliest

practicable

date and strengthen

its

control

over future

system implementations.

The Army has

taken action to comply with the GAO proposals.

(B-163074,

Feb. 18, 1972.)

DEFENSE INTERNATIONAL ACTIVITIES

CONTINUED INTENSIFIED EFFORTSNEEDED TO

STRENGTHENU.S. GOVERNMENT

FOREIGN

TAX RELIEF ON DEFENSEEXPENDITURESOVERSEAS

Department

of Defense and Department

of State

In January 1970 GAO issued a report

to the Congress entitled

“Questionable

Payment of Taxes to Other Governments

on U.S. Defense Activities

Overseas” in which GAO recommended

that the Secretaries

of State and Defense jointly

develop

and promulgate

specific

guidelines

that will

define the U.S.

tax exemption policy,

clearly

establish

the responsibilities

and provide for an adequate

of the concerned U.S. agencies,

management system to operate an effective

tax relief

program.

GAO issued a followup

report

in January 1972, informing

the Congress of the progress being made to strengthen

the

U.S. Government foreign

tax relief

program on defense expenditures

overseas.

GAO noted that the Departments of

State and Defense had taken commendable steps to strengthen

the management and administrative

procedures concerning

the

U.S. foreign tax relief

program and were pursuing a unified

course of action to minimize the payment of foreign

taxes

on U.S. defense expenditures

overseas.

Despite these improvements,

GAO noted that three countries

in particular,

Thailand,

Vietnam, and Italy,

presented

continuing

problems in the foreign

tax relief

program on

defense expenditures

overseas.

The United

agreements with

States did not have satisfactory

tax relief

the Governments of Thailand or Vietnam.

Although the Thai Government in 1972 granted a l-year

exemption from customs duties and taxes for milk ingredients

to save $250,000,

imported by the U.S. Government, estimated

these were not permanent measures and tax relief

on bakery

products remained to be considered

in the light

of a needed

overall

tax relief

agreement with Thailand.

State advised that the U.S. Government had not yet

negotiated

with’Thailand

an overall

formal or informal

agreement for exemption from customs duties,

taxes, and other

charges of U.S. defense expenditures

in that country.

also advised that the American Embassy was continuing

informal talks with Thai officials

and, if satisfactory

results

were not obtained in the near future,

State might need to

press for formal diplomatic

negotiations.

As of August

1972, negotiation

results

had been disappointing.

With regard to Vietnam, State commented that,

until

the future pattern

0f.U.S.

Government expenditures

had been

assessed, any effort

to enter into

negotiations

would be

counterproductive,

In its January 1970 report,

GAO discussed instances

which contractors

had excluded taxes from their

contract

prices but, because of a breakdown in administrative

procedures, had been unable to obtain tax relief

from the Italian

Government despite the fact that the United States had an

agreement with it (Dunn-Vanoni Agreement) which stipulated

that the Italian

Government would assume the burden of taxes

on U.S. defense expenditures

in Italy.

In January 1972 GAO

reported

that two contractors

had filed

appeals with the

Armed Services Contract

Appeal Board for reimbursement

the foreign

taxes pai.d by them.

In the event of an adverse

judgment by the Board, these contractors

will be free to

bring suit against the U.S. Government.

The exact amount of

potential

contractor

claims is unknown, but it has been

estimated

in excess of $l,OOO,OOO.

State noted that the validity

of the agreement on reimbursing Italian

contractors

for registration

and certain

taxes had been confirmed to the American Embassy in Rome by

the Italian

Ministry

of Foreign Affairs.

The agreement was

being tested in the Italian

courts.

Legislation

was pending

in the Chamber of Deputies to permit implementation

of the

agreement.

The American Ambassador had personally

interceded with the Italian

Government to bring about a prompt

solution.

GAO recognizes

that this is a very complex problem

which, in some cases, involves

negotiations

with foreign

governments.

However, GAO believes

that efforts

to reach

satisfactory

tax agreements and administrative

arrangements

with foreign

governments should be intensified

to eliminate

as rapidly

as possible

the continued U.S. payment of foreign

taxes on defense activities

overseas.

(B-133267, Jan. 6,

1972.)

NEED FOR CHANGESIN FUNDING

AND MANAGEMENT

OF PACIFICATION

AND DEVELOPMENTPROGRAMIN VIETNAM

Department of Defense, Department of-- State,

and Agency for International

Development

GAO reported

to the Congress suggestions

for changes in

U.S. funding and management of pacification

and development

The U.S. Government, to coordinate

programs in Vietnam,

established

in 1967 the Civil

management of these programs,

Operations

for Rural Development Support (CORDS) organization

to administer

these programs.

GAO found that CORDShad not

established

financial

control

nor had it been given responsibility

for financial

stewardship

over more than .$2.1 billion

provided by the U.S. in direct

support of these programs.

CORDSreceives

funds from the Department of Defense

(DOD), the Agency for International

Development (AID), and

The contributing

agencies procure most

other U.S. agencies.

of the equipment and commodities used in CORDSprograms and

provide the U.S. personnel to oversee the programs.

Neither

CORDSnor DOD had developed a system for CORDS

programs that would provide sufficient

data to budget the

assistance

required by these programs or to measure the

GAO believed

that

amounts of assistance

already provided.

this information

was not known partly

because of the use of

the military

assistance

service funded system which also

provided funding for assistance

to the Vietnamese Armed Forces,

GAO concluded that the justification

presented to Congress

in 1966, based on conditions

at that time, for merging military assistance

appropriations

for Vietnam into the regular

appropriations

of DOD might no longer be valid.

Financial

controls

over other programs administered

CORDSwere loose.

GAO found that (I) about $360 million

U.S. owned or controll.ed

local currency had been obligated

for CORDSprograms with limited

U.S. say over how the money

would be spent and (2) controls

over the commodities provided

for war victims

were not established;

large quantities

food had spoiled,

unneeded items had been purchased but not

used for long periods,

and items had been diverted

to ineligible recipients’.

GAO concluded that,

in view of these observations

and

with the emphases on Vietnamization

and withdrawal

of U.S.

military

personnel who make up the majority

of U.S, ;prsonnel

assigned to CORDS, it might be appropriate

to reexamine the

justification

and rationale

for continuing

CORDS.

GAO recommended that Defense, State,

and AID review the

need to retain

CORDS. GAO also recommended that improvements

be made in the management and financial

controls

of the pacification

and development programs.

GAO suggested that the Congress might wish to reexamine

the need to continue funding the major portion

of the pacification and development programs in Vietnam from regular

DOD

appropriations.

By appropriating

these funds as military

assistance

under the Foreign Assistance

Act, the Congress

would have more meaningful

program and cost data on aid to

Vietnam and could exercise more control

over the amounts of

assistance

to be provided and the purposes for which the

aid’will

be used.

GAO did not obtain formal agency comments; however, it

discussed the substance of the report with appropriate

officials

of Defense, State,

and AID.

Those officials

agreed

generally

with the facts in the report but they believed

to be overly critical

in tone.

They believed that the report failed

to recognize sufficiently

the war environment

or that CORDS activities

were Vietnamese programs administered

by the Vietnam Government.

(B-159451, July 18, 1972.)

OPPORTUNITY FOR SAVINGS IN

PROVIDING WAR-RISK INSURANCE FOR

CONTRACTORPROPERTYAND EMPLOYEES

Department of Defense, Department of State,

and Agency for International

Develonment

The Department of Defense (DOD) and the Agency for International

Development (AID) generally

reimbursed Government contractors

for the cost of insurance purchased to provide protection

against war hazards to their property

and

employees.

The General Accounting Office

(GAO) found that the

cost of this war-risk

insurance to the U.S. Government substantially

exceeded the losses experienced by its contractors.

This was true for insurance purchased for contractor-owned

vessels,

contractor

employees, and third-country

nationals.

GAO observed that the Military

Sealift

Command and the

Defense Fuel Supply Center, a unit in the Defense Supply

Agency, had followed

a practice

of reimbursing

contractors

for premiums paid for commercial war-risk

coverage on vessels and crews.

Savings (excess of cost over losses) of

$16.2 million

could have been realized

over the 3-year period

covered by the report

if these DOD agencies had followed

the

Government’s long-standing

policy of self-insurance.

was GAO’s opinion that significant

savings could be expected

if these agencies adopted a self-insurance

policy for future

years.

‘

GAO also found that DOD and AID had reimbursed contractors for commercial war-risk

insurance to provide contractor

employees with supplemental

coverage for war-hazard

death

or injury.

The coverage provided lump-sum benefits

in addition to the workmen’s compensation type of benefits

provided

under the Defense Base Act and the War Hazards Compensation

Act.

The cost of such insurance exceeded the losses incurred

by $2.7 million

over the 3-year period reviewed.

AID and two military

commands have continued

to reimburse contractors

in Vietnam for war-risk

insurance coverage

of third-country

nationals

(citizens

of countries

other than

the United States and Vietnam) employed by the contractors

even though a program of self-insurance

generally

adopted by

DOD for such employees has offered

substantial

savings.

and/or

GAO therefore

recommended that

the Secretary

of Defense:

--Establish

a plan

owned vessels.

the Secretary

of self-insurance

--Seek legislation

to authorize

ments to contractor

employees

or injury.

for

of State

contractor-

lump-sum benefit

payfor war-hazard

death

--Discontinue

reimbursing

contractors

for the cost of

supplemental

war-risk

insurance and, in the interim,

reopen negotiations

on the present policy

to bring

the administrative

costs, brokers’

commissions,

and

profit

under Government audit.

--Seek authority

from the Congress to self-insure

for war-risk

losses incurred

by third-country

nationals

under AID contracts

and issue instructions

to all DOD

procurement

activities

to provide for self-insurance

of third-country

nationals

as authorized

by Defense

Procurement Circular

64.

Except for the matter of third-country

nationals,

DUD

generally

disagreed with those recommendations directed

toward promoting

the concept of Government self-insurance,

DOD advised that their

studies of these matters concluded

that it would be impractical

to implement an exclusive

selfinsurance program and that the financial

problems involved

in self-insurance

were such that adoption of self-insurance

was not recommended,

Also, since contractor

recruitment

Southeast Asia was past its peak, it did not appear feasible

to pursue legislation

to permit the payment of lump-sum

benefits.

AID, in responding for the

that savings might be available

stated that administrative

cost

problems would preclude it from

program.

Secretary

of State, agreed

through self-insurance

but

and other administrative

undertaking

a self-insurance

GAO believes

that savings from a self-insurance

program

warrant the additional

administrative

burden.

In GAO’s opinion, the policy of self-insurance

by the Government should be

broadened to cover all programs,

even when in a period of decline,

because the self-insurance

concept offers

an inherent

savings to the U.S. Government in all but the most unique

situation%,

(B-172699, Nov. 9, 1971.)

PROBLEMSIN ADMINISTRATION OF THE

DEPENDENTSHELTER PROGRAMIN THE

REPUBLIC OF VIETNAM

Department

of Defense

Under a program designated as the Dependent Shelter

Program, housing for the families

of personnel in the Republic of Vietnam Armed Forces is being constructed

at or near

Vietnamese military

installations

to raise troop morale and

The program was begun jointly

reduce desertion

rates.

the United States Government and the Vietnamese Government

U.S. participation

in the program is expected to

in 1966.

GAO recontinue until

1975 and to cost about $37 million,

viewed this high-priority

Department of Defense (DOD) undertaking to determine the progress made in achieving

program

objectives

and the manner in which the program was being

managed.

DOD was unable to provide GAO with definitive

data

showing whether progress was being made in achieving

program

Program

implementation

was

inadequately

planned

objectives.

These cirand management was fragmented and ineffective.

cumstances had contributed,

and, unless corrected,

would

to a number of problems affecting

continue to contribute,

These problems related

overall

program performance.

--improper

--poor

computation

construction

--construction

--inadequate

and

of housing

requirements,

quality,

delays,

controls

over program

--insufficient

use and inadequate

pleted housing.

costs

and materials,

maintenance

of com-

During GAO’s visits

to various installations

throughU.S.

officials

stated

that

major

difficulty

out Vietnam,

they had encountered had been a lack of Vietnamese interest

in the program.,

Also, GAO found no evidence that any DOD

or military

department

internal

review group had reviewed

In GAO’s opinion,

had such reviews

the program.

problems could have been identified

and corrected

earlier.

been made,

much

GAO recommended that the Secretary

of Defense have data

developed that could be used in evaluating

progress made in

achieving program objectives

and that, upon receipt

of this

data, he determine the need to continue or redirect

the program before substantial

additional

U.S. funds were expended,

If he decided that the program should continue,

either

along

existing

lines or in new directions,

positive

action should

be taken to overcome the problems our report identified

and

periodic

review of the program would be necessary,

Tn commenting on the report,

DOD generally

agreed with GAO’s findings and indicated

that actions were being taken on the

recommendations.

(B-159451, Feb, 17, 1972,)

MILITARY READINESS

NEED FOR IMPROVEMENTIN READINESS

OF STRATEGIC ARMY FORCES

Department

of the Armv

GAO reviewed the Strategic

Army Forces (STRAF), composed

of 4-l/3 divisions

that are to be constantly

available

support national

commitments, and found that it would be

difficult

for STRAF units to deploy quickly

because many are

not combat ready,

Considerable

maintenance would be required

to make the essential

combat and combat support equipment

fully

ready.

In the units GAO reviewed more than one-third

of such equipment could not perform their primary missions,

Battalion

and division

supplies to promptly repair

sions reviewed:

levels did not have adequate

equipment.

In the three divi-

--No stock was available

for

authorized

repair parts,

--Requisitions

promptly.

for

repair

--No followup

requisitions.

actions

about

parts

were being

25 percent

of the

were not being prepared

taken

on unfilled

Other factors

beyond the divisions’

control,

such as

lack

qualified

personnel,

and

high turnover

of personnel,

funding restrictions

, prevented them from achieving

and maintaining

a high state of readiness.

Readiness reports

did not always contain accurate information

to permit command officials

at division

levels and

at the higher echelons to adequately

evaluate divisions’

readiness.

Since the divisions’

manpower problems are not likely

to be remedied in the near future,

GAO recommended that the

Army consider alternatives

to protect

its substantial

investment in STRAF equipment and consider whether restructuring

STRAF would help.

The criteria

used in preparing

readiness reports

should be revised,

and the divisions

should more closely

supervise requisitions.

The Army generally

concurred in GAO’s evaluations

and

many of its suggestions

and recommendations.

It did not

analyze, however, the costs or benefits

of alternatives

to protect

equipment or to restructure

STRAF. GAO recommended that the Army study such matters.

(B-146896,

May 8, 1972.)

OTHER AREAS OF OPERATIONS

POTENTIAL SAVINGS THROUGHBETTER PROCEDURES

FOR SETTING RENTS FOR,CIVILIAN OCCUPANTS

OF MILITARY FAMILY HOUSING

Department

of Defense

GAO wanted to know if Department of Defense (DOD) policies and practices

for rental

of family housing to about

4,200 civilian

employees were resulting

in fair rental

payments to the Government and compliance with legislation

and

administrative

regulations.

GAO wanted to consider also the

feasibility

of an alternative

to the appraisal

method of adjusting

rental

rates which would simplify

procedures,

economize operations,

and make rates more equitable.

The Office of Management and Budget (OMB) prescribes

the principles

and procedures for establishing

rents for

quarters

leased to Government employees,

Generally,

these

are established

through fee appraisal

with appraisals

adjusted every 3 years,

The rent should be based on prevailing rates for comparable housing or, if such housing is not

present in the area, the reasonable amount of income a prop‘erty should produce with respect to its fair market value.

The Government lost an estimated

$1.6 million

in income

because of unauthorized

downward adjustments

in rents,

unauthorized

utility

charges, and delays in establishing

and

implementing

rates.

This loss is continuing

in some cases,

The losses occurred primarily

because of lack of control

at both the Washington and local levels to insure that rental

rates are properly

established

and implemented promptly.

Additionally,

regulations

are equivocal

in certain

respects

and have been interpreted

differently

by various people.

The method of implementing

and adjusting

rental

rates

through appraisal

is too complicated.

GAO believes

the

Consumer Price Index of the Bureau of Labor Statistics,

Department of Labor, could be used to annually adjust rental

rates for military-owned

housing.

GAO suggested

that:

--The Secretary

of the Navy have rents at the Naval

Weapons Center, China Lake, California,

and the rents

and utility

charges at the Naval Ammunition Depot,

Hawthorne, Nevada, reexamined.

--The Secretary

of Defense, along with the Director,

OMB, consider revising

OMB Circular

No. A-45 to clarify (1) what kind of adjustments,

if any, may be made

to basic shelter

rents once such rents have been

computed on the basis of comparable private

housing

and (2) what factors

should be considered

in computing utility

charges.

--The Secretary

of Defense provide for closer control

over the establishment

of rents and utility

charges

to insure that they are in accord with A-45 and are

periodically

revised and put into effect

promptly.

--To eliminate

the need for a triennial

appraisal

and

the problems in adjusting

rental

rates,

the Secretary

of Defense, in conjunction

with OMB, test the Consumer

Price Index as a basis for annually

adjusting

rental

rates for military-owned

housing.

DOD agreed that the rents at China Lake and the rents

and utility

charges at Hawthorne should be reexamined and

said the Navy had directed

such a reexamination.

The Navy

has implemented corrective

action;

for example, the utility

rates at China Lake have been revised upward resulting

additional

revenue to the Government of $107,500 per year.

Regarding revision

of Circular

A-45, OMB felt

the

problem lies in DOD’s implementation

of it rather

than in

its wording.

OMB said it will consider modifying

A-45 to

provide additional

guidance in computing utility

charges,

DOD agreed to participate

in tests of the Consumer

Price Index.

OMB endorsed the GAO suggestion

and said it

had begun informal

discussions

with interested

agencies

concerning

the tests,

GAO asked the Secretary

the Director,

ONB, to advise

(B-157391, Oct. 5, 1972,)

of Defense, in conjunction

it of the test results.

withy

OPPORTUNITIES FOR FURTHER CONSOLIDATION OF

SUPPORTFUNCTIONS IN THE PACIFIC AREA

Department

of Defense

It is Department of Defense (DOD) policy

to reduce costs

by having one military

service perform support functions

for

the rest.

In its report on DOD operations,

the Blue Ribbon

Defense Panel concluded that effectiveness,

efficiency,

and

economy could be improved through increased sharing of

logistics

functions,

The Pacific

accomplishments.

to reduce costs

ample:

Command had numerous interservice

support

However , it overlooked many opportunities

by consolidating

common services.

For ex-

--The Army and Air Force both had laundry and drycleaning facilities

within

22 miles of each other in the

The Army’s more modern

Kanto Plains,

Japan, area.

plant was operating

at less than one-third

capacity

while the Air Force’s plant was also operating

less than full

capacity.

After

GAO’s review the Air

Force plant was closed in December 1971 with annual

savings estimated

to be as much as $750,000.

--The Army, Navy, and Air Force each maintain a general

hospital

in the Tokyo, Japan, area within

30 miles of

each other.

The Army hospital

had an occupancy rate

during the 6-month period ended May 31, 1971, of only

68 percent with a lower rate expected in the future

because DOD had stopped evacuating

patients

from

Southeast Asia to Japan.

To convert the Army hospital

in Tokyo to a dispensary

would save about $2 million

a year.

During GAO’s review,

the size of the Army

hospital

was reduced and DOD promised to consider converting

it to a dispensary

as soon as the situation

in Southeast Asia permits.

GAO suggested

--Establish

ter-service

that

the Secretary

a full-time

staff

support program

of Defense:

for administering

an inin the Pacific

Command.

--Develop procedures

to insure that the unified

command ,

knows about, and adequately considers,

all potential

interservice

support opportunities.

--Clarify

or revise Joint Chiefs of Staff directives

to provide clear-cut

authority

for a unified

command

to direct

interservice

arrangements when it would be

economical and when the military

missions of the

services would not be compromised.

DOD cited several

interservice

support.

actions underway that would enhance

(B-160683, May 11, 1972.)

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.