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5-106190

COMPTROLLER

GENERAL

WASHINGTON.

THE

D.C.

UNITED

STATES

20548

B-106190

Dear Mr,

Chairman:

We are pleased to submit our annual report of s-d ‘1~aw!!5~~,“~i~~“*,*

significant ~~.2,,ssmN

audit findings

relating

activiti.~s.,,o~~~he.,,~~D~e~~ar~rn~~~

D,efen,se.

‘,~,~~~jc,~“.,.~,.u”,~-“,~,l-,*~~..

I ,./I,

1.7~

Gmilar

report relating to the civil departments

and agencies of the

Government was submitted separately.

In this report we have included items which we believe should be

of interest and use to the Committee

during the appropriations

hearings

for fiscal year 1973. These findings and recommendations

have previously been brought to the attention of responsible

departmental

officials

by means of audit reports.

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

to evaluate the adequacy of corrective

actions taken.

We shall be pleased

may desire.

to furnish

any additional

information

that 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

The Honorable George H. Mahon

1 Chairman,

Committee

on Appropriations

House of Representatives

r( ?d

Contents

PROCUREMENTPRACTICES AND CONTRACTADMINISTRATION

Continuing

problems in implementation

of the

Truth-in-Negotiations

Act

Department of Defense

Problems in settlement

of contractors'

claims

based on Government-caused

delays

Department of the Navy

Feasibility

of application

of "should cost"

concepts in reviews of contractorss

operations

Department of Defense

Feasibility

of obtaining

more competition

emergency procurements

Department of Defense

Need for more expeditious

processing

of contractors'

engineering

change proposals

Department of Defense

Need for clarification

of circumstances

under

which contractors

may acquire equipment for

account of the Government

Department of Defense

DEF'ENSEINDUSTRY PROFIT STUDY

Problems in determining

equitable

profit

objectives

for negotiated

contracts

Department of Defense

PROBLEMSIN ACQUISITION OF PIAJQRWEAPONSYSTEMS

Summary appraisal

of the acquisition

process

Department of Defense

Deep submergence rescue vehicle

Department of the Navy

Drone antisubmarine

helicopters

Department of the Navy

Antisubmarine

warfare directional

low-frequency

analysis

and recording

system

Department of the Navy

Surface ship sonar system

Department of the Navy

Tactical

vehicles

Department of the Army

RESEARCHAND DZVEL0PMEN-T

Duplication

in tactical

reconnaissance

development programs

Department of Defense

Need for closer surveillance

over authorizations

for production

of munitions under development

Department of the Army

Need for closer surveillance

over selection

and

management of basic research projects

Department of the Air Force

SUPPLY MANAGEMENT

Inaccuracy

of inventory

records

Department of the Army

Need to eliminate

low-cost,

low-use items in

supply systems

Department of Defense

Potential

for more effective

use

and redistribution of excess materiel

in Europe

Department of Defense

Retention

of excess inventories

of industrial

materials

at naval shipyards

Department of the Navy

Uneconomical use of air parcel post for

shipment of supplies

Department of Defense

PHASEDOWNOF UNITED STATES MILITARY ACTIVITIES

VIETNAM

Problems encountered

in the phasedown

Department of Defense

MAINTENANCE, REPAIR, AND OVERHAUL

Need to expedite repair of helicopters

Department of the Army

Need to monitor tire-rebuilding

programs

Europe

Department of Defense

ADMINISTRATION OF MANPOWER

MATTERS

Adverse effects

of ceilings

on employment

of civilian

personnel

Page

Department of Defense

Misassignment

of enlisted

personnel

Department of the Army

Need for clarification

of guidance on assignment

of crews to ships under construction

Department of the Navy

Need for a comprehensive alcoholism

control

program for military

personnel

Department of Defense

Inaccuracy

of military

leave records

Department of the Army

Problems in conversion

of National Guard

technician

positions

to Federal positions

Department of Defense

Need for improvement in management of support

forces of the 8th U.S. Army

Department of the Army

MILITARY CONSTRUCTION

Measures needed to ensure compliance with contract specifications

in construction

of military facilities

Department of the Army and Department of

the Navy

Need for improved space criteria

for building

general classrooms

Department of Defense

ACCOUNTING

AND INFOWTIQN SYSTEMS

Inaccuracy

of data for projecting

future requirements for major items of military

equipment

Department of the Army

Lack of uniformity

in cost accsunting

systems

for maintenance

Department of Defense

Better cost accounting needed for operation

and

maintenance of family housing

Department of Defense

Need for improvement in cost accounting

for

training

under the Government Employees

Training

Act

Department of Defense

PotentiaI

savings through transfer

of inventory

accounting

from stock funds to industrial

funds

Department of the Army

DEFENSEINTERNATIONAL

ACTIVITIES

Problems in administration

of the military

assistance

training

program

Department of Defense and Department of

State

OTHERAREASOF' OPERATIONS

Inadequate charges to Communications Satellite

Corporation

for launch services

Department of the Air Force and National.

Aeronautics

and Space Administration

Need for a reevaluation

of the civil

defense

program

Department of the Army

' PROCUREMENT

PRACTICESAND CONTRACT

ADMINISTRATION

CONTINUING

PROBLEMS

IN IMPLEMENTATION

THE TRUTH-IN-NEGOTIATIONS

ACT

Department of Defense

Under the Truth-in-Negotiations

Act of 1962, contractors

are required to submit cost or pricing data in support of

their price proposals and to certify the correctness of

these data, Cost or pricing data are required, generally,

on negotiated contracts not based on adequate price competition, when prices exceed $100,000. The act, together with

the regulations implementing its provisions, has been criticized by industry spokesmen as being inequitable and unduly

GAOreviewed the reasonableness

burdensome on contractors,

of prices negotiated under the act and the problems experienced by contractors and agency officials

in applying the

The review included

act and the implementing regulations.

awarded to 21 contrac35 contracts, valued at $135 million,

tors.

For 18 contracts, valued at $47 million,

negotiated

prices were $1.5 million higher than warranted by the cost

data available to contractors at the time of negotiation.

The overpricing stemmed basically from the same circumstances

which the Truth-in-Negotiations

Act was designed to remedy-contractors'

submissions of incomplete, inaccurate, and

noncurrent data. Little or no overpricing was found in the

GAObrought the

other 17 contracts valued at $88 million.

findings of overpricing to the attention of agency officials

and they took action to obtain price adjustments where appropriate.

GAOfound no serious problems experienced by contractors

and agency officials

in applying the act and the implementing

regulations.

There were two areas, however, which warranted

the attention of the Secretary of Defense. They involved (1)

differences among Government and contractor officials

in their

understanding of the extent of cost data to be submitted and

(2) the reluctance of some subcontractors to furnish cost

data to prime contractors with whom they may be in competition.

(B-39995, Dec. 29, 1970,)

issued to the Congress in October

3.971,

A later

report,

summarized 23 reports

that GAO had issued to agency officials and to contractors

during fiscal

year 1971 on the

pricing

of selected noncompetitive

contracts.

The 23 reports were based on GAO’s review of selected cost elements

included in the prices of 33 contracts,

totaling

$217 million,

negotiated

with 19 contractors

by 13 procurement activities

of the Department of Defense (DOD).

The selection

of contracts

for review was based on indications

that some pricing

Therefore

GAO’s

or contracting

deficiencies

were present.

findings

were not to be construed as applying to all noncompetitive

contracts.

The negotiated

prices for 28 of the 33 contracts

were

about $8.7 million

higher than indicated

by cost or pricing

data available

to the contractors

at the time of negotiations.

No overestimated

costs were found for the five other

contracts

examined.

Factors

contributing

to the overpricing

included:

--Failure

of contractors

to submit to the Government

significant

cost data which became available

after

they had submitted their proposals.

--Failure

of contracting

officers

nificant

data or to have these

Government auditors.

to obtain all sigdata reviewed by

--Inadequacies

in the Government’s

nical evaluations

of contractors’

audits and techproposals.

In view of the relatively

small number and value of

contracts

examined and the selection

of them on the basis of

potential

findings,

general conclusions

could not be drawn as

to the overall

effectiveness

of DOD management of its responsibility

to negotiate

reasonable prices.,

GAO’s findings

inby DOD to

dicated,

however, a need for continued attention

the performance of its personnel involved

in this function.

In its individual

reports

to agency officials,

GAO recommended that they determine the extent to which the Government was legally

entitled

to price adjustmentsunder

the

terms of the contracts.

The responses received

that the officials

have initiated

such action,

Oct. 14, 1971.)

indicate

(E-39995,

- .

Department _of the Navy

GADhad issued to the Congress several reports,

prior years, on the Navy's prodecures in contracting

with

private

industry

for ship construction.

A December 1958 report pointed smt that contractors

had submitted claims for

costs) sustained because of Government-caused

delays, which

were vague and lacked adequate support; that evaluations

the claims by the Navy had been inconclusive;

and that the

claims had been settled without

sufficient

data to show the

damage sustained by the contractors.

Two other reports,

in June and October 1964, pointed

out that a lack of effective

price evaluation

procedures had

resulted

in the negotiation

of unnecessarily

high prices for

work which had been added to the original

contracts

by change

orders.

GAO made a follow-up

review to determine whether

improvements had been made by the Navy.

Claims submitted

in the period April 1965 through

January 1969 by three contractors

(referred

to as contractors

A, B, and C) in the amounts af $114,300,000,

$486,000, and

$1,342,000 were settled

in the amounts of $96,500,000,

$354,000, an $760,000, respectively.

Although the amounts

of the claims were purported

to represent

the additional

costs incurred

by the contractors

because of Governmentcaused interruptions

and delays, the contractors

provided

tangible

evidence of the additional

costs incurred.

the absence of such evidence, the Navy9 in GAO's opinion,

could not adequately evaluate the validity

of the claims.

Following are examples of the rationale

on which the

contractors

based their

eterminations

of additional.costs

attributable

to Government-caused

interruptions

and delays.

--Contractor

A compared the estimated

labor-hours

its origina% price proposal. with the labor-hours

actually

expended and estimated to be expended to

complete the contract.

The contractor

then attributed the increase over the original

estimate,

after an allowance for the increase it judged to

be caused by its

caused delays.

own inefficiencies,

to Government-

--Contractor

B based its claims on judgment factors.,

The contractor's

chief estimator

stated that disruption

claims were based on highly intangible

judgment factors

and, in his opinion,

were impossible

to accurately

detail.

--Contractor

C compared the labor-hours

expended in

earlier

construction

of ships of the same class

with the labor-hours

expended in the follow-on

construction

and, after taking into account the

physical

differences

in the ships, attributed

the

increase to Government-caused

delays.

GAO believes

that, without

information

linking

the

additionalcosts

to actions of the Government, the Government

had insufficient

assurance that the settlements

made were

fair and reasonable,

Therefore

GAO recommended,that

supervisors of shipbuilding

require

contractors

to furnish

evidence relating

the delay and disruptions

to actions

of the

Government and to provide specific

data in support of additional

costs claimed.

GAO found that certain

contractors

used historical

data

and standards in preparing

proposals

for the pricing

of contract

changes other than those arising

from claims,but

the

Navy generally

did not obtain that data.

It relied

on the

personal judgment of its negotiators

and analysts.

GAO

believes

that the Navy would have been in a better position

to evaluate the proposals

and would have had greater assurance as to the reasonableness

of the prices negotiated

had

it obtained the data used by the contractors,

GAO has recommended that the newly implemented !'change

order accounting!'

contract

clause be clarified

to clearly

require

contractors

to segregate their direct

costs on constructive

changes as well as formally

written

changes.

facilitate

the negotiation

of reasonable prices for change

orders, GAO has recommended also that:

--Contractors lacking adequate systems for providing ad

factual basis for proposed prices be encouraged to

improve their systems.

--Historical

cost data and standards be obtained, whenever appropriate, for evaluation and audit.

--The Navy ensure that supervisors of shipbuilding

obtain current evaluations by the Defense Contract

Audit Agency of the estimating systems of contractors

located in their respective geographic areas and

that the evaluations include the bases upon which

proposed prices are developed.

The Navvygenerally concurred in GAO's recommendations

but pointed out that some of thecited problem areas were

susceptible to improvement but not to total and preeise

solution.

It was the Navy's opinion that this was particularly true of any attempt to achieve total, explicit,

and

auditable justification

of all delay and disruption costs.

(B-171096, Apr. 28, 1971.)

FEASIBILITY OF APP'ICATION OF "SHOULD COST"

CONCEPTS

--IN REYIEWS OF CONTRACTORS"OPERATIONS

Department

of Defense

At the request of the Joint Economic Committee, through

its Subcommittee on Economy in Government, GAO made a study

of the feasibility

of applying "should cost" analyses in its

audits and reviews of Government procurement.

The Committee

defined the "should cost" approach as an attempt to determine

the amount that a weapon system or a product ought to cost

given attainable

efficiency

and economy of operation.

In a

report to the Congress on the study (B-159896, May 20, 19701,

GAO concluded that it was feasible,

in auditing

and reviewing contractors'

performance,

to utilize

"should cost" analSubsequently GAO made a trial

application

of the

yses.

"should cost" concepts at plants of four contractors.

At each of the plants,

GAO found areas where the contractors"

operations

could have been improved and cost could

have been reduced through such things as better production

planning and control,

more competition

in subcontracting,

and

greater care to avoid assigning

engineers of higher competence than that required

by the nature of the work to be performed.

Although "should cost" review techniques

are intended

to find out how contractors'

operations

can be improved,

they also lead to disclosure

of areas where Government contracting

or administration

practices

affect

contract

costs

adversely.

GAO noted areas where the Government could have

improved its practices

and reduce costs through consolidation of procurements

and through elimination

of unnecessary

requirements

for packaging and for testing.

GAO brought its findings

and suggestions

for improvements to the attention

of officials

of the contractors

and

the Department of Defense.

Although the potential

for total.

savings which could accrue from the findings

and suggestions

was not readily

measurable in all cases, in those instances

where they were measurable,

GAO estimated

the potential

savings to be almost $6 million

annually.

The Department of

Defense advised GAO that the agencies concerned would look

into the specific

matters noted by GAO at the contractors'

plants.

-a--w...

Because "should COStI" reviews require examinations

into many facets of contractors'

operations

and management

not covered in GAOes statutory

authority

to examine contractors'

records,

GAO suggested that the Congress may wish

to consider expanding GAO's statutory

authority

to enable it

to make effective

"should cast" reviews on an independent

basis.

(B-159896, Feb. 26, 1971.)

FEASI'BILITY OF OBTAININGNORECOMPETITION

IN EMERGENCY

PROCUREMENTS

Department of Defense

During fiscal year 1968 the Department of Defense negotiated about $5.4 billion

of emergency procurement; about

72 percent was negotiated without obtaining competition,

Emergency procurement declined to about $2.5 billion

in fiscal year 1970,but the percentage of noncompetitive procurement remained at about the fiscal year 1968 level.

GAOfound

that many of the noncompetitive procurements might have been

made competitively--at

lower costs and with acceptable time

for delivery.

A report issued to the Congress in March 1971 pointed

out that GAO's review of 54 noncompetitive procurements,

amounting to $33 million,

showed that, for 36, amounting to

$31.5 million,

information was available at the time of the

awards that other suppliers could have delivered items at

lower prices and within the desired periods.

GAOestimated

that,

had competition been obtained, about $3.1 million could

have been saved on 14 of the 36 procurements and that an

amount not readily determinable could have been saved on the

remaining 22 procurements.

itively

GAOhas recommendedthat decisions

in emergencies be based on:

to procure noncompet-

--A determination that the selected supplier can make

delivery a specified number of days, weeks, or months

earlier than other suppliers.

--An estimate of the additional unit cost to result

the proposed noncompetitive procurement.

from

--A statement, from the commander of the activity

needing the item, that the additional cost is justified

by the time saved.

The Deputy Assistant Secretary of Defense (Installations

and Logistics)

stated that there was no need to implement

GAO's recommendations because procurement officials

were already giving great weight to the urgency of need cited by the

requesting activity

and were considering availability

of*

other sources of supply, price factors, and other relevant

matters in decisions to procure without competition.

GAOpointed out that the degree of urgency for emergency

procurements was generally indicated only by reference to a

high-priority

number on the procurement request without support as to urgency of mission, date material was required,

or effect of delay. Little attempt was made to determine

whether the earlier projected delivery date was worth the

additional cost. GAOstated that its findings showed a need

for the recommendedimprovements in awarding emergency procurements. (~-171561, Mr. 25, 1971.)

NEEDE'ORMOREEXPEDITIOUS

PROCESSIbJG

--__

m--s---------_I_ OF

CONTRACTORS'

ENGI1'dEERING

CHANGE

PROPOSALS

-I_--Denartment of Defense

During the course of production of military aircraft,

many engineering changes are made to make the aircraft

safer,

The need for such

more reliable,

or easier to maintain.

changes is usually brought to light.through

test and operaThe

changes

may origition of the units already produced.

nate with either the military service responsible for the

aircraft

or the contractor, but the plans for the changes,

in the form of engineering change proposals, must be approved by the military service before the contractor is authorized to make the changes. A delay in processing a

change proposal can increase the number of aircraft

delivered

are delivered, the

without the change. Once the aircraft

change could be delayed for months or years or never made at

Furthermore it is generally more expensive to make

changes after production.

au-

GAOexamined 547 engineering change proposals, implemented on 11 types of aircraft

in the fiscal years 1967 and

1968, to determine whether extensive delays had occurred in

processing them.

The average time for processing the 547 proposals was

131 days compared with 45 days for routine proposals, 15

days for urgent proposals, and 24 hours for emergency proposals-- time standards established by the Department of Defense. GAOestimated that the additional costs caused by

delays in processing 42 of the proposals could amount to as

much as $3.7 million if all the planned changes were made.

Following are some of the causes of delay.

--Ineffective

monitoring by project

tions by reviewing staffs.

offices

of evalua-

--Insufficient

direction for contractors from the military services as to the kind and extent of data to be

submitted.

--Reliance on a single, overall time standard in lieu

of time standards for each individual organization

concerned in the evaluation.

--Sequential

ganizations

--Duplicate

rather

than conc,urrent reviews by the or-

concerned in an evaluation.

reviews.

--Lengthy processing by groups not under the control

of the group managing the project.

GAOsuggested that the Secretary of Defense designate

a group to establish procedures for effective control of the

processing of engineering change proposals and to monitor

the implementation of the procedures by the military services.

GAOsuggested also specific steps that it believed

would reduce processing time. The Department of Defense

(B-152600, Jan. 20, 1971.)

agreed with the suggestions.

'NEED FOR CLARIFICATION OF CIRCUMSTANCESUNDER WICH

--CONTRACTORSMAY ACQUIRE EQUIPMENT FOR ACCOUNTOF THE

GOVERNMENT

Department

of Defense

Department of Defense regulations

provide that, with

some exceptions,

contractors

furnish

all plant equipment

Equipment so specialized

needed for contract

performance.

that its use is limited

to testing

in the development or

performance

of particular

production

of particular

items,

Such equipservices,

is not considered plant equipment.

ment--known as special test equipment--is

generally

acquired

by contractors

for the account of the Government and ownerGAO's prior work had

ship is retained

by the Government.

indicated

that some plant equipment had been inappropriately

classified

as special test equipment and acquired for the

account of the Government.

GAO's review at plants of five contractors

showed that,

of the equipment acquired for the account of the Government

at a cost of $62 million,

about $12 million

worth should have

been classified

as plant equipment and acquired for the

account of the contractors.

The problem of classification

stems from the Armed

Services Procurement Regulation

which defines special test

equipment as including

"all components of any assemblies of

such equipment."

This definition

permits the acquisition

of plant equipment as special test equipment when it is to

be included in a group of test equipment items assembled for

a specific

use.

GAO has recommended that the Secretary

Defense:

--Revise

the definition

of special test equipment in

the Armed Services Procurement Regulation

and other

pertinent

Department of Defense regulations

to exclude items that are really

plant equipment.

--Require

contracting

officers

to review proposals

for

special test equipment to ensure that plant equipment is not included.

The Department of DeZense concurred in the findings and

advised GAQ that the Armed Services Procurement Regulation

was being revised to limit the conditions whereby the Government would take title to special tooling and test equipment

and to distinguish this type of equipment from plant equipment in the initial

procurement phase. With respect to the

second recomrslendation, these revisions will also require

that qualified Government industrial

specialists

review

contractors'

listings

of special tooling and test equipment

proposed for acquisition to ensure that plant equipment is

not included.

(B-140389, Apr. 9, 1971.)

DEFENSE INDUSTRY-- PRQFIT ._-I_

STUDY

PROBLEMS

IN DETE-RMINING

EQUITABLEPROFIT

OBJECTIVESFORNEGOTIATED

CONTRACTS

DeparZm~t

Defense

The Armed Forces Appropriation Authorization Act for

fiscal year 1970 directed GAOto study profits earned on

negotiated contracts and subcontracts entered into by the

Department of Defense, the National Aeronautics and Space

Administration,

and the Coast Guard. Contracts of the Atomic

Energy Commission to meet requirements of the Department of

Defense were also included.

Profit before Federal income taxes9 measured as a perlower on defense work

centage of sales, was significantly

than on comparable commercial work for 74 large defense contractors included in GAO's study. The profits of these 74

contractors for the 4-year period of 1966 through 1969 averaged4.3percent of sales on defense work and 9.9 percent of

sales on comparable commercial work. When profit was considered as a percentage of the total capital investment-total liabilities

and equity but exclusive of Government capital--used

in generating the sales, the difference narrowed

to 11.2 percent for defense sales and 14 percent for commercial sales. Further, when profit was considered as a percentage of equity capital investment of stockholders, there

was little

difference between the rates of return.

The major factor causing comparability of the rates of

return on contractors'

capital investment for defense and

commercial work was the substantial amount of capital provided by the Government in the form of progress payments,

cost reimbursements, equipment, and facilities.

This reduced the contractors" capital investment required for defense work.

GAO,also reviewed 146 negotiated defense contracts to

see whether it was practical to develop investment data on

individual

contracts and to see whether any wide range in

profits existed.

The review showed that data on cost,

profit,

and invested capital could be developed on individual contracts and that profit rates ranged widely in defense

The average rates of return for individual con- '

contracts.

tracts were substantially

higher than the average annual

profit rates developed from the questionnaires GAOsubmitted

to the 74 large defense contractors.

The 146 contracts

reviewed0 however, cannot be considered as a representative

sample.

Under current procedures for negotiation of profit for

defense contracts, little

consideration is given to the

amount of capital investment required from the contractor

to perform the work. Frofit objectives are developed as a

percentage of the anticipated costs. As a result, inequities can and do arise between contractors when differing

proportions of their capital are required to perform the

work. Further, by relating profits to costs, contractors

in noncompetitive situations are not provided with positive

incentives to make investments in equipment that would increase efficiency and result in reduced costs, especially

Under the current

where follow-on contracts are involved.

system of negotiating contract prices, such investments tend

to lower, rather than increase, profits in the long run.

Other factors, however, such as whether the program will be

continued, could be overriding considerations affecting contractors" decisions concerning investments in equipment.

GAObelieves that, in determining profit objectives

for negotiated contracts where effective competition is

lacking, consideration should be given to capital requirements as well as to such factors as risk, complexity of the

work, and other management and performance factors.

Where

capital requirements of contractors are insignificant,

such

as in many service-type contracts or contracts for the operation of Government-owned plants, profit objectives would

continue to be developed primarily through consideration of

the other factors.

The system adopted should be used, if

applicable, by all Government agencies to simplify industry

participation.

GAOdid not consider that legislation

was required to

establish uniform guidelines.

GAOrecommendedthat the Office of Management and Budget take the lead in the development of uniform, Government-wide guidelines for determining

profit objectives in negotiation of Government contracts

and that the guidelines emphasize consideration of the total

amount pf capital

required by a contractor

when appropriate,

where effective

price competition

is lacking.

On June 11, 1971, the Industry

Advisory Council Subcommittee on Contract Financing issued a report recommending

that the Department of Defense adopt a profit

policy which

is, in part, based on contractor

capital

investment.

July 17, 1971, the Deputy Secretary

of Defense issued a memorandum to the Assistant

Secretaries

of Defense (Comptroller

and Installations

and Logistics)

indicating

his support of

the profit

based on capital

investment

concept and requested

the submission of a comprehensive profit

policy proposal by

(B-159896,

Mar.

17,

1971.)

December 1, 1971.

FRQHEEMS

IN AAUXSITIBN

OF MAJORWEAPON

SYSTEMS

I--.--.._-__----------..----_----ZUMMARY

AH??UXL OF

PWQCESS

v THE

."I ACQJ.JISITION

-p--v-

of I!efense

-w~rtment

---The acquisition of major weapons has required a Large

investment in recent years and has involved substantial

long-term c0mmitments of future expenditures.

This has impacted heavily on the resources available for other national

Because of deep concern in the Congoals and priorities.

gress and because of evidence of serious weaknesses in the

weapon systems acquisition process9 GAOundertook to provide the Congress and the Department of Defense with a continuing series of appraisals of those factors most closely

related to effective performance in procuring major weapons,

The first such appraisal covered 67 major weapons in

the current acquisition programs of the Army, the Navy, and

the Air Force. A report on the appraisal, issued to the

Congress in March 1971, included a classified

supplement

containing summaries of G.A08sevaluations of the individual

weapons. In transmitting the report GAOadvised the recipients that more detailed studies of each of the weapons had

been prepared and would be provided upon request,

GAOdrew the following

conclusions from its appraisal.

--Over the last several months, the Office of the Secretary of Defense and the military services have been

engaged in a substantial effort to identify and solve

problems that have adversely affected the acquisition

of major weapon systems in terms of compromised perf ormance$ delayed availability,

and increased costs.

Generally the newer weapon procurements are following

a slower development pace9 and procurement practices

are more conservative than those of earlier periods,

Because many of the current programs are in early

stages of acquisition,

evidence of the results of

changed concepts is not yet available to adequately

assess them, but the outlook is brighter.

--The identification

of need for a weapon system and

the relative priority

ts be assigned to its

development are fundamental problems in acquisition

of weapon systems. Initial

decisions as to which

weapon system will be developed and the priority

its development is made by any one of the military

services but the Department of Defense has no organized method by which such proposals can be measured

against the Department's total needs. Such a method

is now under development, but it is in its infancy.

--In recent months the Office of the Secretary of Defense and the military

services have paid extensive

attention to the persistent problems of defining

performance characteristics

of weapon systems and of

determining the technical feasibility

of achieving

that performance, There are many encouraging signs

that these problems are being abated. Extensive efforts are being applied-- early in the weapon development process-- to identifying

areas with high design

risks and to constructing and testing the hardware

itself to demonstrate the feasibility

of high-risk

components before proceeding with further development,

--In the preparation of and attention given to costeffectiveness determinations, there was a wide range

of quality.

This variation has lessened the value of

these studies to the entire acquisition process.

--One of the most important unresolved problems in the

management of major acquisitions

is the problem

of organization,

The essence of the problem appears

to be attempts ts combine the specialized roles of

major weapon systems acquisition management into more

or less traditional

military commandstructures,

Because of this, there usually are a large number of

organizations not directly involved which can only

negatively influence the project.

There should be a

direct relationship

between the missions for which

weapon systems requirements are determined, eegcp

strategic deterrent, land warfare, ocean control,

structure needed to acetc., and the organizational

quire them. Such an arrangement would facilitate

grouping related weapon systems in packages of common mission and would permit putting together an acquisition organization of appropriate size and stature to handle these matters.

On 61 weapon systems where complete cost data were.

available, estimates on amounts needed to develop and produce these systems had increased some $33.4 billion,

About

represented

one third of this increase, or $9,5 billion,

the difference between the estimates prepared when the systems were first approved for development (the planning estimates) and the updated estimates prepared when the systems

were about to be placed under development contracts,

The

$23.9

billion,

was

due

remainder of the increase,

changes in quantities to be acquired and to a combination of

such things as engineering changes, revisions to estimates,

and provisions for increased cost due to economic inflation.

GAOhas recommendedthat the Secretary of Defense:

--Make every effort to develop and perfect a

Department-wide method--now in its early stages of

development-- to be followed by all military services

for determining two things:

first,

what weapon systems are needed in relation to the Department's misof each should be

sions; second, what the priority

in relation to other systems and their missions.

--Establish guidelines and standards for the preparation and utilization

of cost-effectiveness

studies.

These guidelines should require that studies be updated and reviewed as part of the decision process

when major changes in cost and/or performance require

revised schedules for funding commitments.

--Place greater decisionmaking authority for each major

acquisition

in a single organization within the service concerned, with more direct control over the operations of weapon systems programs and with sufficient status to overcome organizational

conflict between weapon system managers and the traditional

functional. organization.

--Ensure that each selected acquisition report (1) contain a summary statement regarding the overall acceptability

of the weapon for its mission, (2) recognize the relationships

of other weapon systems complementary to the subject systems, and (3) reflect the

current status of program accomplishment.

The Director, Defense Research and Engineering, expressed general concurrence in these recommendations E

(B-163058, Mar. 18, 1971.)

DEEPSUBMERGENCE

RESCUEVEHICLE

Department

of the Navy

The deep submergence rescue vehicle

is a small submersible craft designed to rescue personnel from a disabled submarine.

The development cost and time for the rescue vehicle

far exceeded original

estimates.

GAO made a review to determine the causes.

The estimated cost for the rescue vehicle program increased by more than 1,100 percent between 1964 and 1969-from $36.5 million

for a E-vehicle

system and 1 year of

operation

to $463 million

for a six-vehicle

system.

The

estimated

development and introduction

period increased from

4 to 10 years.

In addition,

costs of support equipment increased because of changes made in the design of the vehicle

which necessitated

a redesign of support craft

and some of

the supporting

equipment,

The Navy advised that it had initiated

a costeffectiveness

study in response to an earlier

report to the

Congress (B-167325, Feb. 20, 1970) in which GAO pointed out

that the increased effectiveness

to be obtained from producing four more vehicles,

in addition

to the two already on

order, would be small in relation

to their cost.

In December 1970, following

the 'study, the Navy reduced the program

to the two rescue vehicles

already ordered at an estimated

cost of $199.4 million.

GAO believes that a substantial

portion

of the cost

growth and program stretch-out

occurred because

--the original

estimates,

made by a Deep Submergence

Systems Review Group established

by the Secretary

the Navy, were low and were made without

sufficient

design, preliminary

development,

and testing

and

--changes were made in the vehicle

design to increase

its capabilities

beyond those stated in the formal

requirement

document for the vehicle.

The design changes in the vehicle

included an increase in"the

operating

depth to almost three times the depth at which

rescue of submarine personnel was possible

in rescue capacity

from 14 to 24 survivers.

and an increase

The Navy management system includes many controls.

require

formal

approval

top-level

mandoes not, however,

agement of major changes increasing

the capabilities

of a

developmental

system beyond those called for in the formal

requirement

document.

GAO found no thorough and welldocumented analysis of consideration

given in the decisionmaking process to the effects

the changes would have on detime-velopment cost and

which were considerable--or

to the

measurement of the benefits

obtainable

from the increased

capabilities

against the increased program costs.

To provide more effective

control

over development projects and over significant

increases in development cost and

time, GAO has recommended to the Secretary

of the Navy that

he require

that:

A sufficient

body of design, experimental

development

work, and subsystem testing

be done before promulgation of an end-item system requirement

document and

thus establish

a sound factual

basis for authorizing

full-scale

development.

--Analyses

be made of the impact on program cost and

time schedules of proposed changes designed to increase the capabilities

of equipment beyond the required level.

--Advance approval of top-level

management be obtained

for all changes which are designed to increase the

capabilities

of the equipment beyond requirements

and

which significantly

affect

program cost and time

schedules.

The Navy considered

the management objectives

implicit

in the recommendations to be generally

s'ound but did not cite

any actions to be taken.

The Navy pointed out that, after

initiation

of the rescue vehicle program, the Department of

Defense established

new methods to improve the management of

major acquisition

programs which would correct

the problems

that we reported.

'The new methods should help to ensure more participation

by top management in the acquisition

process,

GA8 believes,

that

still

necessary

revise

Navy

regulahowever,

(B-167325, June 3, 1971.)

tions.

gepartment --.-.-..'

of the Navy

Through June 36, 1969, the Navy spent over a quarter

of a billion dollars for the development and acquisition of

the drone antisubmarine helicopter weapon system. This

system, designed for the delivery of torpedoes by drone

helicopters,

operates from surface ships for the purpose of

attacking and destroying enemy submarines. The system provided the Navy with a capability it did not have previously;

however, the system suffered from a high rate of loss of

the drone helicopters-- of the 750 purchased, 362 had been

lost through April 1969.

In a report issued to the Congress in December 1970,

GAOconcluded that the difficulties

experienced with the

systa resulted, in large part, from producing the hekicopters before they were fully developed and tested.

Modifications of some of the ships from which the helicopters were

to operate were completed while the helicopters were still

under development. This, together with the capability that

the helicopter was expected to provide, created strong pressure on the Navy and the contractor to expedite development

and delivery.

The concurrent development and production of major

weapon systems by the Navy were discussed in an earlier report to the Congress. (&163058, Nov. 19, 1970.) In that

report CA0 recommendedthat the Navy revise its instruction

relating to concurrent development and production to provide for the submission of meaningful data to the Assistant

Secretaries who make concurrency decisions.

GAOrecommended

also that the Naval Audit Service give consideration to making regularly scheduled audits of the practice of concurrent

development and production.

The Navy agreed, in general.

(B-3160877, Bet, 31, 1970.1

‘4

ANTISUBMARINE

WARFARE

DIRECTIONALLOW-FREQUENCY

&LYSIS ANDRECORDING

SYSTEM

Department of the Navy

The directional

low-frequency analysis and recording

system (DIFAR) is regarded as critical

to the proper operation of the Navy's latest land- and carrier-based means of

detecting, classifying,

localizing,

and attacking enemy submarines. It is intended as the principal antisubmarine

sensing means in the P-3C, the latest version of the landbased P-3 patrol aircraft.

Older versions of the P-3 and

other aircraft

are to be retrofitted

with DIFAR. The expected costs of procuring P-3C aircraft,

which will depend

upon DIFAR for achievement of the antisubmarine warfare role,

will be about $2.6 billion.

A total of about $50.2 million

had been expended in the development, test, and evaluation

of DIFAR, and it was estimated by the Navy that the total

program costs would be in the hundreds of millions.

In a report issued to the Congress in June 1971, GAO

stated that the Navyawardedcontracts in April 1968 for the

production of DIFAR for deployment before satisfactory

testing to determine its suitability

for use in an operational environment and despite available evidence which

indicated that its performance would not acceptably meet

requirements.

A production contract was awarded for a more complex

system (DIFAR II) which had not been successfully tested

prior to award even though a less complex system (DIFAR I>

had failed testing.

GAObelieves that neither system was

ready for large-scale production at the time the production

contracts were awarded.

To preclude the production of developmental equipment

which has not yet demonstrated its ability

to meet prescribed objectives, GAOrecommendedthat Navy instructions

be revised to require that:

--The approval for production prior to completion of

development and testing be contingent, as a minimum,

on the equipment satisfactorily

passing a suitable

technical evaluation test by the responsible testing

agency.

--The

equipment

design

tested be the same as the de-

sign to be produced.

GAOrecommendedalso to the Secretary of the Navy that:

--DIFAR be thoroughly proven in the P-3C aircraft

to installation

in other aircraft.

prior

--The Chief of Naval Operations have adequate information on which to base his decision for producing

an unproven item for deployment by requiring that the

request for authority to produce include a comparison

of the design performance requirements with the performance actually achieved as the result of testing.

The Assistant Secretary of the Navy (Financial Management) stated that the Navy agreed with the intent of the

recommendations but did not state that specific actions

would be taken with regard to the recommendations.

(~-160877, June 4, 1971.)

SURFACE SHIP SONAR SYSTEM

Department

of the Navy

In a report

issued to the Congress in March 1971, GAO

stated that the Navy began procurement of the m/s@-26

surface ship sonar system before completion of initial

development and testing.

.As a result,

the system underwent continued redesign and modification

to correct

numerous equipment deficiencies

and to incorporate

features

to improve

The cost to develop the system, which was estiperformance.

mated in May 1960 to be about $12 million,

increased to an

estimated

$101 million

by 1970; costs of production

units

increased;

and delivery

of production

units was often later

With the possible exception

than originally

scheduled.

the most current models of the system, performance was below

expectations.

In an earlier

report to the Congress of the Navy's

large-scale

production

of major weapons before completion

of development and testing

(B-163058, Nov. 19, 19701, GAO

had recommended that the Navy revise its instruction

relating

to concurrent

development and production

to provide for the

submission of meaningful

data to the Assistant

Secretaries

who make concurrency

decisions

and that the Naval Audit Service give consideration

to making regularly

scheduled audits

of the practice

of concurrent

development and production.

The Navy agreed, in general,

with these recommendations.

(B-160877, Mar, 9, 1971.)

--TACTICAL VEHICLES

Department

of the Army

The Army Tank-Automotive

Command is responsible

to the

Army Materiel

Command for the development and procurement of

tactical

wheeled and tracked vehicles.

During fi seal year

1970 a total

of $35.5 million

was programmed by the Army

Tank-Automotive

Command for functions

relating

to research

and development of vehicles,

and the Command awarded contracts

valued at $545.7 million

for tactical

vehicle production.

Previous studies by GAO and by the Army Audit Agency

revealed management weaknesses.

Recommendations for improvement had been made as a result

of the studies.

GAO made a follow-up

review and found that problems

tinued despite organizational

and procedural

changes.

con-

To improve the management of the tactical

vehicles

development program, GAO has recommended that the Army ensure

that

--requirements

documents specifying,

in accordance with

existing

regulations,

the desired characteristics

the vehicles

to be developed are prepared,

thoroughly

analyzed,

and approved at the Department level before

any full-scale

development efforts

are initiated;

--approved

requirements

documents clearly

set forth

valid and realistically

attainable

requirements,

based

upon prior exploratory

and experimental

work, to permit full-scale

development and production

within

the

designated

time frame;

--coordination

and communication between the developing

and using agencies are improved to preclude the need

for significant

deviations

from, or later

waiver or relaxation

of, design or performan’ce characteristics

deemed essential

by the user;

--mass production

of vehicles

is authorized

only after

the vehicles

have demonstrated

the capabilities

meet the essential

characteristics

established

and

after

the prospective

user has pronounced them

suitable,

production;

thereby

and

minimizing

costly

changes during

--management places greater

emphasis on the timely dissemination of complete and current

data to decisionmaking agencies and, to the extent possible,

maintains

continuity

of participants

from one meeting to the

next throughout

the development project

to promote

stability.

The Assistant

Secretary

of the Army (Research and Development) agreed, in general,

with these recommendations

and

cited the actions

taken.

These actions

included:

--Army regulations

were changed to require

an in-process

review that will

show proof that advanced development

is progressing

satisfactorily,

or that the degree of

risk is known and is acceptable

to the Army, prior

continuing

development.

--Army regulations

were changed to require

information

to obtain authorization

for

tion.

more detailed

mass produc-

--Continuity

was being maintained

at the review meetings

by project

managers’ deputies,

and other high-level

project

management members, and the in-process

reviews

were strengthened

by requiring

voting members to comment on the minutes of meetings within

30 days.

GAO believes

that adequate implementation

of these actions and continuing

management attention

should improve the

Army’s management of its tactical

vehicles

development program.

(B-133256, Jan. 27, 1971.)

RESEARCH

AND DEVELQPMENT

DUPLICATIONIN TACTICAL~ECONNAISSANCE

DEVELCPMENT

PROGRAMS

Department of Defense

The report issued on this subject is classified

ttSecret.tt (B-171801, Mar. 29, 1971.)

s NEEDFORCLOSERSURVEILLANCE

OVER

*/_IIp

&JTHORIZATIQNS

FOR PRODUCTION

MUNITIQNSUNDERDEVELOPMENT

Department of the Army

GAOreviewed the procedures and practices of the Army

in authorizing production, purchase, and field use of developmental munitions.

The review was limited to a specific

round of howitzer ammunition because GAOwas informed that

the procedures followed were representative of the procedures in managing other developmental munitions.

Production and operational use of materiel prior to

completing development and testing is referred to as concurrent development and production or concurrency.

The concurrency of Army munitions is authorized by a "Limited ProductionBV (LP) classification,

Items so classified

are to be

used only for the urgent requirement they are intended to

fulfill.

The howitzer ammunition had been authorized as LP for

1 year, to fill an urgent requirement for close-range,

direct-fire

capability

in Southeast Asia. The item was

still

in limited production 3-l/2 years later, although authorization

from higher echelons had not been obtained.

The rate of use in Southeast Asia was far lower than had

been anticipated but production was continued and resulted

in an excess stock position.

GAOproposed that the Army improve its overall

ment of munitions development by

manage-

--reviewing all 'Umited Production" munitions to determine whether similar problems warranting correction existed;

--enforcing its regulation requiring that "Limited

Production" items be used only for the specific,

urgent requirement for which purchases were approved;

--complying with its requirements for periodic justification by the developing agency, and approval by the

Army General Staff, of the need to renew a "Limited

Production" authorization;

and

--monitoring the use of developmental items purchased

for the other services.

The Assistant Secretary of Defense agreed with the

first three proposals and stated that action had been

taken to (1) issue revised regulations strengthening and

clarifying

procedures for managing "Limited Production"

items and (2) restrict

the amounts budgeted for procurement of such items. Also the Army reduced funding for procurement of "Limited Production" items from $220 million in

fiscal year 1969 to $10 million in fiscal year 1971.

The Assistant Secretary did not agree with GAQ's proposal that the Army monitor the use of developmental items

purchased for the other services.

He stated that the Army

had a monitoring responsibility

only when a safety risk

The new Army Regulation 71-6, dated Januwas involved.

ary 1, 1970, however, does not mention this responsibility.

Therefore GAOrecommendedthat the Secretary of the Army

revise Army Regulation 71-6 to reflect the responsibility

of the Army to maintain cognizance of the use of developmental items in instances involving potential safety risk.

(B-169675, Dec. 7, 1970.)

NEEDFORCLOSERSVRVEILLANCE

OVEJ?

SELECTION

ANDMANAGEMENT

OF BASIC RESEARCH

PROJECTS

Department of the Air Force

GAO sought to evaluate the practices

followed

by the

Air Force Office of Scientific

Research (OSR) in selecting,

managing, and using the results

of research projects,

the time of the review, OSR was supporting

about 1,200 projects, costing about $285 million,

most of which had been

proposed and were being performed by university

researchers,

Federal policy

is that the National

Science Foundation

will provide support for general-purpose

research.

Other

Federal agencies should support basic research only in areas

closely related

to their missions.

This policy is set forth

in an Executive order as well as a Department of Defense

directive.

Guidelines

for applying this policy were not

provided,

however,

OSR interpreted

this policy broadly when selecting

projects to be funded,

Also it did not prepare written

justification showing the basis for supporting

the projects.

Although

many of the projects

appeared to be closely

to the

Air Force mission,

some did not,

Support of research not

closely

to the Air Force mission reduces the effectiveness

of its basic research program since fewer dollars

are available

for closely

research.

Immediately

after GAO's evaluation

the Air Force reviewed all current

projects

in OSR as part of a Defense-wide

study following

enactment of the 1970 Defense Procurement

Authorization

Act.

This act contained a provision

forbidding

the use of 1970 funds for research projects

which did not

have a direct

and apparent relationship

to a specific

military function

or operation.

On the basis of its review,

the

Air Force disqualified

115 OSR projects--lo

percent of the

active projects --because of insufficient

relevance.

GAO found that OSR was not obtaining

maximum benefit

from its basic research program because certain

procedures

were not consistently

followed,

--Surveillance

over ongoing research projects

was not

adequate to ensure that researchers

did not deviate

from negotiated

budgets or from negotiated

budgets

or from the agreed-upon time that the principal

investigator

would devote to the project.

--Procedures

for ensuring that all required

scientific

reports were being received were not consistently

followed;

some reports were not obtained at all and

others were obtained only after long delays.

--Procedures

not fully

for disseminating

effective,

research

results

were

GAO suggested that the Department of Defense issue

guidelines

limiting

defense funding to projects

which were

clearly

relevant

to assigned missions,

Consideration

should

be given to the most appropriate

agency to support the research in view of the missions and research performed by

other organizations

--military

and civilian,

Government and

private.

Instructions

should be issued requiring

the need

for each contract

to be clearly

established

in writing.

GAO

also made a number of suggestions

for improving management

The

Air

Force

took

actions

which were responsive

procedures.

to GAO's suggestions.

(~-170801, Jan. 29, 1971.)

SUPPLY MANAGEMENT

INACCURACY OF INVENTCRY

-_- RECORDS

Department

of the Army

After a GAO report on inventory

controls

in the Department of Defense, issued to the Congress in 1967, the Department prescribed

new procedures to improve the accuracy of

GAO reviewed the Army inventory

procerecorded inventories.

dures in the continental

United States and in Europe to

determine the effectiveness

of the new procedures,

Although the Army was attempting

to schedule and take

physical

inventories

on a regular basis and its depots appeared to be doing a good job, significant

improvement in

the accuracy of inventory

records had not been achieved.

The Army's inventories

of about $3 billion

in the continental

United States required

adjustments

amounting to $830 million

in 1969 to reflect

quantities

based on physical

counts-downward adjustments

of $439 million

for inventory

that did

not exist and upward adjustments

of $391 million

for inventory

the Army did not know it had,

The $830 million

represented

an adjustment

ratio

of 27.7 percent compared with the ratio

of 23.5 percent GAO had found in 1966.

The Army's inventories

of about $1.1 billion

in Europe

required

even greater adjustments

in 1969: downward adjustments of $648 million

and upward adjustments

of $768 million

for a total

of $1.4 billion.

These adjustments

exceeded the

average inventory

value by about $300 million.

Accuracy of records was not improved because the Army

had underestimated

the magnitude of the task.

The manpower

and automatic data processing

equipment provided for the

task had been inadequate and had not been effectively

applied.

GAO made a series of recommendations designed to

strengthen

procedures

and to improve accuracy of the Army's

inventory

records.

The Army generally

agreed with GAO's

findings

and conclusions

and initiated

action on each of

the recommendations.

The Army"s actions,

if effectively

implemented and pursued on a continuing

basis, should bring

about substantial

improvement in accuracy of the inventory

records,

(B-146828, Feb. 26, 1971.)

NEED TO ELIMINATE LOW-COST, LOW-USE

ITEMS IN SUPPLY SYSTEMS

.Department

of Defense

In a report issued to the Congress in October 1967, GAO

pointed out that substantial

savings could be achieved by

eliminating

some 1.2 million

low-cost,

low-use items from

The Department of

the Department of Defense supply system.

Defense agreed and cited a program undertaken

for that purpose.

GAO's follow-up

to evaluate the effectiveness

of the

program showed that there were still

as many as 900,000 lowcost items in the supply system that were seldom, if ever,

needed.

It has been estimated

that the annual carrying

cost

of inventories

is from 20 to 25 percent of the value of the

inventories.

GAO has proposed that

its program for elimination

by ensuring that:

the Department of Defense improve

of items from the supply system

--Stock retention

policies

of inventory

management

organizations

do not restrict

the systematic

identification

and elimination

of low-cost

inactive

items.

--inactive

items are promptly eliminated

unless there

are valid future needs that cannot be met readily

and economically

by purchase or fabrication

stocks as needed.

--Provision

is made for periodic

identification

and elimination

of low-cost,

slow-moving items

that can be obtained readily

and economically

by purchase or fabrication

as needed.

--All

inventory

management organizations

program a high priority.

give

the

The Acting Assistant

Secretary

of Defense (Installations and Logistics)

agreed, in general, with the findings

He reported a number of corrective

actions,

and proposals.

unneeded

taken or planned, which GAO believes will eliminate

stocks in the supply system if carried

out effectively.

(~-133118, Mar. 31, 1971.)

POTENTIALFORMOREEFFECTIVEUSEAND REDISTRIBUTION

OF EXCESSMATERIELIN EUROPE'

Department of Defense

To obtain maximumuse of the materiel in the European

theater, the Department of Defense established a special

program, conducted by the Materiel Asset Redistribution

of excess materiel

Center, Europe, to promote redistribution

GAO

reviewed the

among the military services in Europe.

program to evaluate its adequacy and effectiveness.

From inception of the program in July 1967 through

October 1969, about $199 million worth of excess materiel

was reported to the Center and about $20 million worth was

Not all the Navy organizations, however,

redistributed.

and none of the Air Force contractors in Europe had reported their excesses to the Center, nor had they used the

Center as a possible source of supply for their requireby Navy orments. GAOestimated that full participation

ganizations and Air Force contractors in Europe could have

resulted in additional redistribution

of $684,000 worth of

excess materiel in the 12-month period ended December 1,

1969, and comparable amounts in subsequent years.

CA0 has found that:

--Excesses were released by the Center for disposal

after the period of screening against requirements-generally 90 days from the time the excesses were

first reported-- even though some of the items had a

potential for redistribution

and were in fact needed

shortly after they were released for disposal.

--Substitute

and interchangeable excesses were not

considered for redistribution

even though computer

equipment capacity had been provided to include information on such items and an audit in 1968 by the

Office of the Secretary of Defense indicated that

use of substitute and interchangeable excesses would

have increased redistribution

by about $1.5 million

in the 15-month period covered in the audit.

--Excesses redistributed

to Army requisitioners

to meet permissive overstockage may have deprived

organizations with a more urgent need and resulted,

in some instances, in the subsequent reporting of

the same stocks as excess.

GAOhas recommendedthat the Secretary of Defense:

--Require full participation

in this program by the

military

services and contractors.

--Reevaluate the screening cycle to prevent premature

disposal of needed items.

--Require the resolicitation

of organizations, whose

excesses were recently released and are subsequently

needed, to determine whether the excesses are still

available for redistribution.

--Ensure that the program for considering substitute

and interchangeable items is carried out as previously recommendedby the Department of Defense audit.

--Establish procedures to hold requisitions

for permissive overstockage in abeyance so, if requisitions

for current operating stockage are received during

the screening period, they can be filled first.

The Department of Defense generally concurred in GAO's

conclusions and recommendations. (B-140389, Feb. 3, 1971.)

RETENTIONOF EXCESSINVENTCX?IES

INDUSTRIALl!+fATE'i~S -_u-...."

AT NAG SHIR~DS

Department of the Navy

GAO's review at four of the 10 naval. shipyards showed

that about 30 percent of the inventories of industrial

materials at the four yards were excess to their needs, The

excess material--valued

at about $17 million--had

not been

reported to the naval supply system for redistribution

for disposal; the shipyards did not have an adequate program

for identifying

excess material,

GAOestimated that disposal

of the excesses at the four yards would eliminate holding

costs of about $3,4 million annually.

Much of the accumulation of the excess material resulted from the ordering of material far in advance of actual need and from the establishent

of stock levels on the

basis of inaccurate demand and use data.

GAOnoted also that the yards were not making maximum

use of Navy procedures to reduce the cost of requisitioning

high-use, low-value items, These procedures provide for

re&isitioning

of such items in bulk, and placing them in

bins in the work areas9 rather than requisitioning

them in

small quantities as needed. Elimination of unnecessary

requisitioning

at the four yards could reduce costs by about

$1.3 million annually,

Internal audits and studies at shipyards had identified

similar

conditions but the recommendedcorrective measures

had not been fully implemented,

In response to GAOQssuggestions for improvement, the

Navy stated that inventories at the 10 naval shipyards had

been reduced by about $28 million in the period January

through Septaber 1970--the trend was continuing--and cited

a number of related actions taken or planned to

--improve requisitioning

--develop

--establish

tory,

of material,

revised stocking criteria,

guidelines

for placing material

in inven-

--dispose of excess material and set up annual inventory and reporting requirements, and

--increase to $10 the unit value of material

be bulk issued.

which may

The Navy stated also that the Inspector General would provide surveillance of the implementation of audit report recommendations. (B-125057, May 28, 1971.)

UNECONCMICAL

USE OF'AIR PARCFL'POST

FORSHIPMENTOF SUPPLIESDepartment of Defense

r-Supply depots of the military services were using air

parcel post more than necessary because local controls had

not been established, in all cases, to ensure selection of

the most economical, yet timely; methods of shipment, Use

of alternative

methods could save about $520,000 annually

at three of the seven installations

included in GAO's review. About $450,000 is being saved annually at two other

installations

as a result of adoption of controls that GAO

recommended.

Alternatives

to air parcel post include Navy and Air

Force, contractor-operated,

domestic cargo airlift

systems;

special types of lower cost airlift

postal services to overseas areas; and surface transportation.

The Army monitors

official

mail addressed to overseas activities

to select the

least costly mode of transportation

by which the mail will

reach its destinations within delivery requirements.

fiscal year 1969 this program reduced mailing costs by over

$5.4 million.

GAObelieves that the savings could have been

much larger if the monitoring program had covered all parcels

being sent overseas through the military postal system.

GAOhas recommendedthat:

--The Secretary of Defense see that procedures at military supply installations

are revised to ensure consideration of all acceptable means of delivery and

selection of the least costly means that will permit

delivery in the required time.

--The Navy adopt a mail-monitoring program at the Navy

fleet post offices to select the least costly means

of sending official

mail overseas.

--The Department of Defense issue policy guidance, similar to that of the Army, requiring all military services and other Government activities

using the military postal system to indicate delivery dates or

“42

similar

cilitate

ways.

information on supply parcels so as to fathe screening process at the postal gate-

The Department of Defense agreed with the first two

recommendations and stated that the third recommendation-requirement that delivery dates be indicated on supply parcels--would be considered in connection with its special review of the military mail concepts, operations, and procedures. (B-157476, May 6, 1971.)

PHASEDOWN

OF UNITED STATES

MILITARY ACTIVITIES IN VIETNAM

PROBLEMS

IQKOUNTERED

IN THE PHASEDOWN

Department of Defense

Between June 8, 1969, and April 15, 1970, the U.S.

forces

in Vietnam

were reduced from 538,000 to 425,500

troops as a part of the phasedown of U.S. military activities in Vietnam. These reductions were made in three

steps-- over periods of 3 to 4 months for each step--by redeploying military units or placing them in an inactive status, by reassigning individuals,

and by curtailing

replacements scheduled to be sent to Vietnam. The military services met each of the directed troop reduction schedules despite the relatively

short time provided.

The phasedown of

the large quantities of supplies and equipment was, and continues to be, a more formidable task.

GAOreviewed the policies and procedures being applied

in the phasedown to identify problems being encountered-particularly

in the logistics area--and to bring the problems promptly to the attention of the responsible military

commandersand the Secretary of Defense while the phasedown

was contfnuing.

The review was directed primarily to matters connected with the third,step--a

reduction of 50,000

troops completed April 15, 1970.

The circumstances made it difficult

for organizations

in Vietnam, subordtnate to the commandheadquarters of the

services, to prepare for efficient

reductions of military

activities.

They could not be provided with specific information as to size and time of force reductions until announced by the President.

Further, they were placed in the

position of having to continue their assigned missions until

a few days prior to reassignment of personnel and turn-in of

equipment. In many cases detailed procedures for withdrawal

had to be improvised even as the withdrawal was taking

place. Notwithstanding these constraints,

the Department of

Defense and the military services were making a concerted

effort to account for and control the arms, equipment, and

materiel which became excess as the phasedown proceeded,

The constraints contributed to a variety sf problems

requiring attention of military commandsin Vietnam and

Washington, including the Office of the Secretary of Defense,

--There was a need for greater coordination among the

three military

services in supplying the needs of the

Vietnamese Armed Forces, Lack of uniform procedures

resulted in some cases in equipment needed by the

Vietnamese being shipped back to the United States.

--There were problems in returning Army equipment to

the United States because of a backllog of equipment

which required cleaning (to meet standards of the

U.S. Public Health Service and the Department of Agriculture

for treatment and processing of materiel

being returned to the United States) and a shortage

of facilities

for cleaning.

--There were problems in returning Air Force materiel

to the United States because of a lack of people

qualified to pack and crate the materiel.

GAOalso observed the following

provement might be possible,

situations

where im-

--Because of ineffective

screening, Army repair parts

and components were issued to the Vietnamese Army,

although needed by U.S. military services in Vietnam,

or shipped out of Vietnam,

although needed by the

Vietnamese Army.

--The logistical

reporting and accounting system did

not provide accurate, complete, or timely data.

--The procedures for cancellation of requisitions

for

supplies, not needed because of force reductions,

were not adequate.

--The Army had a significant

backlog of unserviceable

equipment in Vietnam because of limited maintenance

capabilities.

There may also be a need to strengthen control over

transfers to the Vietnamese of such facilities

as buildings,

airfields,

and water purification

plants,

they are capable of using and maintaining

to ensure that*

them,

GAOhas suggested that the Secretary of Defense:

--Review existing plans of the military services for

anticipated withdrawals to ensure that the plans provide for withdrawals on a unit-by-unit

basis.

--Establish uniform procedures and criteria

(1) for the

transfer of excess materiel to the Vietnamese Armed

Forces and (2) to ensure that all excess materiel in

Vietnam is considered in fulfilling

requirements of

the Vietnamese.

--Reduce the backlog of equipment awaiting

for return to the United States.

preparation

The Assistant Secretary of Defense (Installations

and

Logistics) stated that the military departments concurred

generally in the conclusions and suggestions and cited the

GAObelieves

recent actions to implement the suggestions,

that the actions, if consistently applied, will improve the

conditions which existed in the early stages of the phasedown. (B-171579, Mar. 15, 1971.)

GAO's follow-up review of phasedown actions through

December 1970 showed that considerable progress had been

made to ensure an orderly phasedown and effective redistribution of equipment and materiel and to cope with problems

Following is a swnmary

identified

in GAO's earlier report.

of. GAO's observations in the follow-up review.

Disposition of departing units' equipment--In the

earlier phasedown segments, there was a lack of coordination

among the services in transferring

equipment from one United

States service to other than its counterpart service in the

Vietnamese Armed Forces, e.g., from the United States Air

Force to the Vietnamese Marines. Procedures were established to correct this.

As one result, about $2.9 million

worth of materiel was transferred -from the United States

Harines to various Vietnamese services.

Also procedures for

controlling

transfer of equipment among Army units had been

* strengthened and resulted in cancellation of requisitions

for equipment valued at about $5.1 million,

Other actions taken to cope with the problems of disposing of equipment included:

--Revision of unnecessarily restrictive

criteria

as to

the condition of equipment eligible

for transfer to

the Vietnamese and a resultant reduction in need to

ship equipment from the United States.

--Substantial

completion of programs for a more accurate identification

of Vietnamese requirements for

turned-in equipment,

--Implementation of mechanized procedures by the Air

Force for screening available equipment against Vietnamese requirements.

--Emphasis by the Air Force that, consistent with the

deployment priorities

of units returning to the

United States, the units not take along their equipment, parts, and supplies without first considering

the in-country requirements for the materiel.

--Action by the Army to avoid undue backlogs of

turned-in equipment awaiting maintenance and to permit its timely disposal.

Redistribution

of excess equipment and materiel--Improvements have been made in the system for redistributing

excess equipment and materiel in Vietnam to organizations

with requirements for them. Redistribution

to meet the requirements-- especially those of the Vietnamese--had not been

as effective as possible.

The following problems were identified by GAOand by other audit organizations.

--Until July 1970 there were no procedures for submission of Vietnamese Army requisitions

through United

States Army supply channels for screening against incountry materiel, although this screening was technically feasible.

----

--Even after these July 1970 procedures were estab- *

lished, requisitions

for equipment for the Vietnamese, originated in the United States by the International Logistics Center, Army Materiel Cormnand,under

the approved military assistance program, were still

not being screened against excess materiel available

at depots in Vietnam. The Army has since issued new

guidance which provides for the use of the depot excesses to meet the requirements of the Vietnamese.

--Until November 1970 the Vietnamese were not allowed

to requisition

their funded requirements from the

large volume of excess materiel reported to the Pacific CommandUtilization

and Redistribution

Agency.

Adiustment of supply flow--Many effective actions were

taken to adjust stock levels in response to decreasing redecrease

quirements. This was reflected in a significant

GAO

noted,

however,

that

further imin the stockage level.

provements could be made and brought problem areas to the

As a result:

attention of management for correction.

--The Army and Marines canceled a greater number of

requisitions

of departing units and thus further reduced the quantities of unneeded materiel being

shipped to Vietnam,

--The Army is blocking more effectively

the processing

of requisitions

of units scheduled for phaseout.

Property disposal operations--GAO limited its review

efforts in the area of property disposal to avoid duplicating the work being performed by the Army Audit Agency. The

Agency concluded in its report on this work that the Army

had exerted a strong effort to develop means of disposing

of excess personal property.

All the problem areas presented in GAO's report were

brought to the attention of local managementand were discussed with appropriate officials

in the Department of Defense and the military services.

In each instance prompt

corrective action was taken or promised. Therefore GAOincluded no specific recommendations in its report.

(B-171579, Aug. 9, 1971.)

MAINTENANCE, REPAIR,_AND OVERKAUL

---NEED TO EXPEDITE REPAIR OF HELICOPTERS

Department

of the Army

Because of large quantities of helicopters,

engines,

and components awaiting repair at the Army Aeronautical Bepot Maintenance Center and the unusual military need for the

equipment, GAOreviewed the Army's helicopter maintenance

program.

The backlog of equipment awaiting repair had increased

substantially

during the 18-month period preceding January 31, 1970, because of increased military operations and

insufficient

use of maintenance capabilities,

At that date

200 helicopters,

valued at about $63 million,

and large

quantities of engines and components with an original cost

of about $88 million, were awaiting repair and overhaul.

At the same time the Army had on order,, or was planning to

buy, about 1,700 helicopters and large quantities of engines

and components.

In a report issued to the Congress in December 1970,

GAOconcluded that the Army could attain the same or increased availability

of helicopters at less cost by expanding its maintenance program and by reducing or stretching

out its procurement program. The Army had sufficient

physical plant and equipment available to expand its maintenance

program. Additional funding was needed, however, for personnel costs involved in establishing a second work shift

and, if necessary, a third shift.

GAOproposed that the Army:

--Reappraise its maintenance program to take full advantage of both in-house and contractor maintenance

capabilities

to reduce the backlogs of aircraft,

engines, and components awaiting averhaul.

--Review the supply status of aircraft,

engines, and

major components to reevaluate both the need for

those on order and their delivery schedules.

The Army agreed with these recommendations and stated

that overhaul programs had been or would be increased and

that procurement requirements

for some of the new items had

Subsequently

the

Army reduced its planned

been reduced.

procurement of helicopter

engines and components by about

(B-146888, Dec. 7, 1970.)

$113 million.

NEEDTO MONITORTIRE-REBUILDINGPROGRAMS

IN EUROPE

Department

of Defense

In a report issued to the Congress in January 1971,

GAO estimated

that about $1 million

could have been saved

in Europe during fiscal

year 1969 if the motor vehicle

tirerebuilding

programs of the Army and Air Force had been more

effective.

Significant

quantities

of used tires

that could

have been rebuilt

were sold to scrap dealers at nominal

prices.

Neither the Army nor the Air Force had surveillance

systems to monitor the programs,

GAO has suggested to the Secretary

programs could be improved by:

of Defense that

the

--Inspection

of tires

on vehicles

during vehicle maintenance to ensure removal at the required

time for

rebuilding.

--Inspection,

periodically,

of condemned tires

in disposal yards to ensure that tires which can be rebuilt

and used are not scrapped.

--Initiation

of operational

standards and a reporting

system that would measure the performance sf the

tire-rebuilding

program at each base.

The Department of Defense concurred in these suggestions,

The Department stated that a program similar

to one instituted

for aircraft

tires would be initiated,

(B-159200, Jan. 8,

1971.)

ADMINISTRATION OF MANPOWER

MATTERS

ADVERSEEFFECTS OF CEILINGS ON

EMPLOYMENTOF CIVILIAN PERSONNEL

Department

of Defense

Before fiscal

year 1969 civilian

personnel ceilings

for the executive

departments and agencies generally

were

established

on the basis of annual budgets and were administered by the Bureau of the Budget (now the Office of ManageOn June 28, 1968, the Congress enacted

ment and Budget).

the Revenue and Expenditure

Control Act of 1968 which imposed restrictions

on hiring

of civilian

employees,

These

restrictions

superseded the ceiling

system previously

imposed by the Bureau of the Budget.

On July 22, 1969, the

restrictions

on hiring

imposed by the act were repealed and

the earlier

ceiling

system imposed by the Bureau of the Budget was reinstated.

GAO reviewed the effect

of the personnel

ceilings

and hiring

restrictions

on management of civilian

personnel,

In GAO's opinion,

personnel ceilings

or hiring

restrictions,

whether imposed by statute

or by the Office of Management and Budget, do not provide the most effective

management control

over civilian

personnel.

They tend to be

--arbitrarily

applied because of the difficulty

making them fit program requirements;

--inflexible

because they do not allow for

skills

as needed in changed programs;

--uneconomical

when they permit

grams through use of overtime

and

changes in

accomplishment

of prolabor at premium pay;

--ineffective

in controlling

expenditures

since, as an

alternative,programs

may be accomplished through contracting

with firms or institutions

for personal services.

GAO believes

that personnel levels can be better

through budget and program planning procedures,

controlled

GAO proposed that the Director

of the Office of Management and Budget permit departments and agencies to accomplish their programs without

restrictions

on numbers of

personnel-- being limited

only by the availability

of funds.

In December 1970 the Director

agreed to eliminate

employment

ceilings

in the Department of Defense for a l-year

trial

GAO recommended that the Secretary

of Defense esperiod.

tablish

a centralized

group of officials

to assess the effectiveness

of fiscal

and program constraints

on employment

levels during the test period.

GAO suggested also to the Secretary

of Defense that

substantial

improvements in the management of total personnel resources could be achieved through continuous

evaluation by officials

independent of the component organizations

of the Department of Defense.

GAO proposed that he establish

a group of high-level

officials,

responsible

to him, for

continuing

and objective

evaluation

of missions,

programs,

and activities

of the component organizations

within

the

Department.

The Department of Defense did not consider that

establishment

of such a group would significantly

improve

its existing

review process and pointed out that virtually

every level of management was making maximum effort

achieve savings necessary to meet budget reductions.

(B-165959, Apr. 30, 1971,)

HISASSIGNMENT

OF ENLISTEDPERSONNEL

DeDartment of the Armv

At the time of GAO@sreview of the use of Army enlisted

personnel, there were about a million trained enlisted personnel assigned to Army units-- divided about equally between

continental U.S. installations

and overseas installations.

GAOfound that about 10 percent of the personnel at the four

continental U.S. installations

included in the review were

assigned to duties for which they had not been trained.

Information obtained in other reviews at overseas installations

showed that the rate overseas was even higher,

GAOrecognized that personnel turbulence--the

number of

men entering and leaving the Army and the number being assigned and reassigned-- has increased significantly

in recent

years and has added to the problems of personnel management.

The Army needs a personnel management system capable of

coping with the varying degrees of turbulence.

The existing

system, with some revisions and adequate enforcement, may

afford the Army the potentialfor

effective personnel management* But the adequacy of the system could not be evaluated because the Army failed to strengthen and enforce it

and continued to circumvent it.

Some of the problems in personnel management stemmed

from inaccuracies in the data accumulated under the Army's

personnel statistical

and accounting system. Others resulted from practices which circumvented the normal operation of the personnel management system. These practices

included ""bulk filling"

of requisitions

for personnel (assignment of personnel in groups rather than on the basis of

the requisitioned

skills and skill levels of the individuals) and mandatory levies (a practice, outside the normal

requisitioning

procedures, which directs installations

transfer personnel to fill vacancies at ,other installations).

GAOhas recommendedthat the Army:

--Enforce existing personnel management policies and

procedures at all levels of commandand refrain from

initiating

at headquarters

level such actions

and mandatory levies.

"bulk filling"

--Strengthen

existing

personnel management policies

and procedures rather than introduce

new programs or

changes which add to reporting

requirements

and complicate

the operation

of the system.

--Give priority

attention

to the manpower requirements

for the personnel. management career field

and stabilize the tours of such personnel as soon as practicable.

The Department of the Army agreed with the general

thrust of GAO's report and stated that increased attention

to the personnel management area had been programmed by the

Army Audit Agency. ~(~-146890, Nay 6, 1971.~

NEEDFORCLARIFLCATIQN

--- OF GUIDANCEON

ASSIGNrvfENT

OF CREWS

-----TO SHIPS UNDER

CONSTRUCTION

Department

of the Navy

The Navy assigns nucleus or skeleton crews, for temporary duty periods up to 6 months, to ships uilder construction to ensure delivery

of ships with trained,

wellorganized crews.

Over 2,800 enlisted

men, representing

more than 980 man-years and casting about $6.2 million,

had

been assigned to temporary duty as nucleus crews for 43

ships during the P2-month period ended July 31, 1970.

GAO's review of crew assignments

ships showed that:

for

five

of these

--The number of personnel assigned was based on personal

judgment and precedent rather than on actual need.

--Grew members were sent to construction

sites before

they were needed and were assigned to perform tasks

that already were the responsibility

of other Navy

organizations.

--The Navy had not evaluated work requirements

to determine the type of personnel that should be included in a nucleus crew,

--The system for obtaining

information

nucleus crews was inadequate.

on the use of

In January 1978 the Navy approved a pilot

program to

place a fleet

introduction

team on permanent shore duty at

ship-construction

sites to perform many of the tasks being

performed by nucleus crews.

This program represents

significant

departure

from traditional

manning practices

for newly constructed

ships.

GAO has recommended that

the Secretary

of the Navy:

--Determine

the essential

should perform,

functions

nucleus

that

crews

' --Evaluate the composition and duration

needed to perform the functions.

of manpower

---Assign to nucleus crews only the rates and ratings

for the man-months needed.

--Establish procedures which will provide for a continual evaluation of nucleus crew needs, including the

requirement that prospective commanding officers recommend needed changes to nucleus crew authorizations

in their monthly ships' progress reports.

--Monitor the actions taken by the Navy to make certain

that valuable manpower resources are used efficiently.

The Navy concurred in these recommendations and initiated actions to implement them. (~-172632, Aug. 9, 1971. >

.,.

NEED FOR A COMPREHENSIVEALCOHOLISM

CONTROLPROGRAMFOR MILITARY PERSONNEL

Department

of Defense

GAO made a review of alcoholism

among military

personnel at the request of the Chairman, Subcommittee on Alcoholism and Narcotics,

Senate Committee on Labor and Public WelIn a report on an earlier

study concerning Federal

fare.

civilian

employees (B-164031, Sept. 28, 19701, also made at

the request of the Chairman, GAO pointed out that the Government could realize

estimated annual savings of $135 million

to $280 million

from an alcoholism

program for civilian

employees,

assuming prevalence rates of alcoholism

ranging

from 4 percent to 8 percent.

The Department of Defense (DOD) has no complete, reliable data that show the extent of alcoholism

in the Armed

Forces.

Although the incidence of alcoholism

in the military population

may be no greater than that of the civilian

population,

it could be a more serious problem because of

the frequently

dangerous and critical

duties involved.

Substantial

savings, as well as humanitarian

benefits,

can be realized

from the establishment

of a comprehensive

alcoholism

control

program for military

personnel.

For each

l-percent

reduction

in the incidence of alcoholism,

the

potential

gross savings could be about $24 million

annually.

If the incidence

is comparable to the estimated average

5 percent in the civilian

work force,

then the potential

annual gross savings could amount to about $120 million.

Factors which could encourage the incidence of alcoholism among military

personnel include social climate,

family

separations,

low cost and ready availability

of alcoholic

beverages, and boredom.

Factors which could discourage the

development of alcoholism

include military

discipline

and

standards and the lower average age of the military

personnel.

Negative attitudes

and punitive

statutes

and regulations have hidden the problem.

The military

alcoholic

has

little

incentive

to come forward to seek help.

0 No DOD-wide alcoholism

prevention

and rehabilitation

program ekisted for military

personnel,

nor were there any

guidelines

specifying

procedures to be followed

in treating

the'treatment

given to the military

althem. As a result

Alcoholism rehabilitacoholic at many bases was limited.

established

tion programs, however, had been formally

some military

installations

and DOD recently

established

task force to study all aspects of alcohol abuse among military personnel.

GAO has recommended that the Secretary

tablish

a comprehensive alcoholism

control

personnel

which

would

provide

that:

tary

of Defense esprogram for mili- -

--Alcoholism

be recognized

as a disease which is treatable rather than-as misconduct which is punishable.

--Educational

programs be established

to inform personnel of the dangers of the abusive use of alcohol.

--Rehabilitative

nel having

measures be made available

alcoholism

problems.

--A study be made to determine more precisely

dence of alcoholism

and problem drinking,

to personthe inci-

DOD agreed with the last three of these four points.

With respect to the first

point-- that alcoholism

be recognized

as a disease rather than misconduct--DOD

pointed out that

disease is equated with physical

disability

which is comIt would prefer to recognize alcoholism

as a conpensable.

dition,

rather than a disease, which is preventable

and

treatable

through the application

of enlightened

attitudes

and techniques.

GAO recognized

that certain

statutes

and regulations

affecting

military

compensation hold alcoholism

to be misconduct.

But as GAO stated earlier,

these statutes

and regulations

have resulted

in hiding the alcoholism

problem.

If they are not modified,

there is little

assurance that this

condition

will be corrected.

Title V, section 501, of Public

Law 9.2-129, amending the Military

Selective

Service Act, requires the Secretary

of Defense to make such recommendations

for additional

legislation

as are necessary to deal with the

problem of drug and alcohol*dependence.

GAO believes

that

the Secretary's

recommendations properly

should include

proposals to deal with the problems of recognizing

alcoholThese

problems

include

those

involving

ism as a disease,

and related benefits.

pay, retirement,

(Report to the Chairman, Subcommittee on Alcoholism

and Narcotics,

Senate Committee on Labor and Public Welfare,

B-164031, Nov. 2, 1971.)

INACCURACY__-OF MILITARY

TEAVE RECORDS

---“.-.A--*.“-..

1-Qefir tment ---of the--.--Army

Inaccurate

accounting

for military

leave in the Army has

been a continuing

problem and has been the subject of a number of GAO’s earlier

reports.

The weaknesses in accounting

for leave have persi.sted

despite

the adoption of additional

procedures

and controls

by the Army.

Military

personnel are

paid for the unused leave at the time they are separated from

military

service I Inaccurate

balances of unused leave have

been a major factor

contributing

to improper payments by the

Army to its military

personnel.

In April

1971 GA0 issued a

report

to the Congress on its current

review of the problem.

On the basis of the incidence

of the errors

GAQ found

in the follow-up

review,

estimated

annual overpayments of

about $23 million

and underpayments of about $3 million

could

result.

This was a conservative

estimate.

The ultimate

improper payments could be at considerably

higher rates of pay

because of subsequent longevity

and statutory

pay increases

and promotions m GAO estimated

that,

should the military

personnel choose to use their erroneous leave balances rather

than receive payment at the time of separation,

a net loss

of about 4,600 man-years of manpower availability

could result*

The following

dence of errors.

conditions

contributed

to the high

inci-

--Prescribed

records were not used to establish

servicemen arrived

at installations

and leave

while in travel

status was not charged.

dates

taken

--Leave taken in connection

with intrapost

transfers

(leave taken between completion

of training

and reassignment to another unit at the same installation)

was

incorrectly

treated

as routine

delay en route.

--Attendance

recording

records

leave.

were not used as the source

--Inadequate

supervision

the work

pay clerks.

for

--Little

or no internal

internal

review staffs

GAO recommended that

audit of leave either

or by the Army Audit

the Secretary

by local

Agen.cy.

of the Army:

--Direct

that local internal

review staffs

be increased

and that they and the Army Audit Agency regularly

conduct reviews of pay and allowances with emphasis on

military

leave.

--Order

a study of the Army’s leave practices

to ensure

that the leave data input to the military

pay system

will be more accurate.

--Direct

that travel

orders be endorsed by appropriate

officials

to show dates of arrival

and departure

all military

locations

to which the individuals

traveled, including

intermediate

points,

and that these

endorsements be used with the travel

voucher to compute the chargeable leave.

The Army generally

concurred in the findings

and conWith

clusions

and accepted the first

two recommendations.

respect

to the third recommendation,

the Army expressed doubt

that endorsement of travel

orders would reduce the error rate

significantly.

<B-125037, Apr. 2, 1971.)

PROf3LEMS

IN CONVERSION

OF NATION& GUARD

TECHNICIANPOSITIONSTO FEDERALPOSITIONS

Department of Defense

The National Guard Technicians Act of 1968 converted

Army and Air National Guard technicians from State to Federal

employee status, effective January 1, 1969. One of the

principal purposes of the legislation

was to provide an adequate and uniform retirement and fringe benefit program.

National Guard technicians are civilian

employees whose

employment generally requires them to be members of the

*Guard also. Prior to the conversion they were considered

employees of the States although their salaries were paid

out of Federal funds.

As stated in its report issued to the Congress in April

1971, GAO's review of the records of over 1,QOQtechnicians

selected at random in 12 States showed that, in general, the

conversion had been carried out in accordance with the act

and implementing regulations and instructions.

With few

exceptions the grades, rates of compensation, leave balances,

and annual leave accrual categories recorded at the time of

conversion were proper. There were many discrepancies, however, in data pertaining to service prior to conversion,

attributable

primarily to clerical errors, omission of data,

and misinterpretation

of instructions.

The erroneous data

had no significant

effect on the status of the technicians

at the time of conversion and generally will not have any

significant

effect as long as they are employed by the Federal Government. But the errors could have an effect on the

technicians' retirement rights and benefits and the related

cost to the Government.

GAOrecommended that the Secretary of Defense require

the National. Guard Bureau, in cooperation with the States,

to review the personnel records of al.1 technicians converted

to Federal employee status to ensure the accuracy of the data

recorded. The Assistant Secretary of Defense agreed, in

general.

Three of the 12 St at es had separate personnel offices

for the Army National Guard and the Air National Guard.

(The other nine had, or were planning to have, consolidated

Consolidation

offers the advantages of

personnel offices,)

uniformity

operations,

and possible

centralized

authority,

GAO was subsequently

informed

savings in personnel costs,

by the Department of Defense that the personnel offices

all the States had been consolidated

by the end of calendar

year 1970.

Under the act of 1968, many of the technicians

elected

to be covered by the Federal civil

service retirement

system. There is a question as to the status of those Federal

contributions

remaining in the State systems which are not

committed to pay retirement

benefits

to such technicians.

The Senate Committee on Armed Services requested the DeparL

ment of Defense to resolve this matter with the States.

The Department assigned this responsibility

to the National

Guard Bureau,

(B-20748, Apr. 29, 1971.)

NEED FOR IMPROVEMENT

IN MANAGEMENTOF

-UPPORT FORCESOF THE 8th U.S. ARM?Ikgartment

of the Army

GAO reviewed manpower procedures and practices

concerning support forces of the 8th U.S. Army in Korea and found

that decisions

resulting

in changed manpower needs of individual units were controlled

by a ceiling

for military

personnel rather

than justification

of the need for specific

positions.

GAO also found a need for Army headquarters

and

the 8th Army to improve their practices

for requesting

and

assigning military

personnel.

With better management there could be a reduction

in the

number of military

personnel assigned to the 8th Army and an

increase in the readiness of individual

units.

The Army has advised GAO that manpower accounting

and

requisitioning

procedures in the 8th Army have been revised

and that the Army will continue to emphasize the correction

of deficiencies

noted.

(Report to the Chairman, House Committee on Appropriations,

B-132990, Apr. 12, 1971.)

MILITARY CONSTRUCTION

MFASURES

NEEDED TO ENSURECOMPLIANCE

-WITH CONTRACTSPEC_I_FICATIONSIN C~flSTRUCTIQN OF MILITARY FACILITIES

Department

of the Army and

of GNavy

The Army Corps of Engineers and the Naval Facilities

Engineering

Command, agents for the Department of Defense for

construction

of military

facilities,

need to strengthen

their

procedures and practices

for inspecting

construction

so that

military

projects

will be constructed

as contracts

specify.

A number of military

facilities

accepted by the Government as completed were not built

in compliance with contract

specifications.

As a result,

the facilities

were not fully

satisfactory

for their intended use and/or the Government had

to spend additional

time and effort

having deficiencies

corrected.

GAO recommended that the Secretaries

Navy have the two construction

agencies:

--Systematically

monitor their

ment of contractors!

quality

of the Army and the

field offices'

enforcecontrol

programs.

--Review their field offices'

inspection

reporting

correct

those not in compliance with

practices,

agency regulations,

and implement a system for prompt

communication of inspection

findings

from the field

offices

to the construction

management levels.

--Improve

the Army's training

and establish

such programs

programs for

in the Navy.

inspectors

--Perform

more comprehensive reviews of field offices'

implementation

of agency procedures for inspection

and supervision

of military

construction.

GAO recommended also that the Secretary

of Defense take

action to ensure that the two construction

agencies exchange

information

and coordinate

activities

in areas of mutual interest regarding

construction

quality

assurance.

The Department of Defense agreed with these recommendations and in June 1971 advised GAG of the Eolllowing corrective actions

taken or planned by the two construction

agencies .

--Regulations

regarding

the implementation

of contractor

quality

control

systems have been revised and headquarters

personnel are conducting

systematic

reviews

and visits

to monitor field

office

implementation.

--Regulations

have been issued setting

forth

requirements for inspection

reporting

and for the monitoring

of such reporting

by management levels.

--Improved

training

programs are to be initiated.

For

the

Army

expanding

and

adapting

fiscal

year 1972,

its courses and procedures

to also accommodate Navy

inspection

personnel.

--Significant

time is now devoted by Army personnel

field

visits

to review the implementation

of agency

procedures

for inspection

and supervision

of military

construction.

Periodic

on-site

reviews of such procedure s are to be made by Navy personnel.

GAO was advised that the two agencies had been coordinating their operations

and that the Office

of the Secretary

of Defense would stimulate

and expand, if possible,

such mutual beneficial

cooperation.

(B-171496, Apr. 16, 1971.)

NEED FOR IMPROVED SPACE CRITERIA

-F--w-EXJILDING~NERAL CLASSROOMS

Department

of Defense

The use of criteria

established

by the military

departments for planning space requirements

for genera.1 academic

classrooms can result

in the construction

of excessive classroom space,

Space allowances of 15 to 18 square feet for each student were used widely in planning and constructing

general

emit classrooms in civilian

colleges and universities.

Army regulations,

however, allow up to 35 square feet and

Navy regulations

allow 30 square feet for each student for

such classrooms.

Neither department has issued instructions

for applying information

on planned student load and training curriculums

to these criteria

in determining

the number

and sizes of classrooms to be built,

At several Army and Navy installations,

classrooms

which provided about 18 square feet of space for each student had been constructed.

These classrooms were considered

adequate by local officials.

Air Force instructions

allow 12 square feet of general

academic classroom space for each student included in the

total

student load.

In determining

the number and sizes of

individual

classrooms,

however, there is no requirement

that

consideration

be given to the number of students to be seated

in class at any one time or to the expected number of hours

classroom instruction,

Thus unless aI students attend

classes simultaneously,

the criterion

will result

in providing more than 12 square feet of space for each student.

This criterion

had been followed

in constructing

classrooms at Lackland Air Force Base, Texas:

Excessive classroom space costing about $300,000 had been constructed

but

has since been converted to other uses.

GAO recommended that the Secretary

of Defense see that

improved space-planning

criteria

be developed for general

academic classrooms.

Such criteria

should (1) provide reasonably uniform spac:e allowances for each student and (2)

' rec&ire that the number of classrooms constructed

be based

on efficient

scheduling

and classroom'use.

GAO recomsnended

also that the mil.itary

departments review their classroom

construction

projects

to determine if it would be feasible

to reduce or eliminate

proposed construction.

The Department of Defense agreed with these recommendations and in October 1971 advised GAO that it had developed

the recommended uniform criteria

for use by the military

departments for planning general academic classrooms.

The new

criteria

require

(1) consideration

of curriculums,

class

sizes, and class schedules in determining

the number and

sizes of classrooms and (2) use of standard square feet

allowances for each student in the classrooms.

GAO was also advised that the military

departments were

continuing

reviews of general academic projects

to ensure

(Report to the

compliance with the new uniform criteria.

Secretary

of Defense, B-133316, Sept. 13, 1971.1

AWXINTING II-AND INFORMATION SYSTEMS

.._a

INACCURACY QF DATA FOR PROJECTING FUTURE-IREWMENTS

. ..-FOR MAJOR ITEMS OF MILITARY EQUIPMENT

Department

of the Army

The Army relies

on twd computerized

management information systems for information

as to (1) its major equipment

needs for aircraft,

combat vehicles,

tactical

and support

vehicles , communications

and electronic

equipment, missiles,

and weapons and (2) equipment of these types already on hand.

GAO tested the accuracy of these two systems since information derived from them must be dependable for the Army to

make accurate and timely decisions

for budget preparation

and procurement requests.

,".

GAO found significant

weaknesses in both information

systems.

As a result

of inadequate data, the validity

fiscal

year 1970 budget and procurement actions was highly

Unless there is significant

improvement,

questionable.

equipment imbalances may affect

seriously

the Army's ability

to perform its mission effectively.

Inaccuracy

in data on equipment needs resulted

from

lack of adequate controls

to ensure that all pertinent

data

were considered.

For example:

--Some valid equipment requirements

for entire

Army units were excluded from the system's

computations.

--Requirements

were included

not need the equipment.

for

units

that

--Requirements

were included

for deactivation.

for

units

scheduled

--Some requirements

were considered

more than once.

--Some activities

were not revising

their

requirements

to reflect

current needs.

did

equipment

--Changes to requirements

of time to process for

Army commands.

took an inordinate

length

approval through the various

.Inaccuracy

in data on equipment on hand resulted

For example:

weaknesses in reporting.

--Army units did not report

in their possession,

--Quantities

of equipment

system and not reported

--Acceptable

substitute

as available

assets.

accurately

were "lost"

at all.

equipment

from

the equipment

in the Army

was not reported

At one depot GAO faund that 100 cargo trucks,

valued at $1.5

million,

had been in storage for almost a year b,ut had not

been included in the Army's computations

of available

equipBecause of questionable

validity

of the data, some

ment,

inventory

managers refused to use the equipment data derived

Instead,

the inventory

managers

from the information

system,

,used data, also of questionable

validity,

that they had developed through estimates

or personal knowledge,

GAO has recommended that

the Army:

--Establish

a procedure to ensure that all appropriate

data are considered

in determining

equipment needs,

--See that processing

of changes to equipment

zations is accelerated.

authori-

--Require

internal

auditors

to validate

equipment

requirements

periodically

and to review the accuracy

of units'

reports of equipment on hand.

--Continue

with the plan to revise the asset information system through the reporting

of major items

of equipment by serial

numbers.

--Direct

that procedures

equipment on hand will

be revised so that all major

be included in asset reports.

The Army concurred in the recommeIIdations and stated

that it had taken, and would continue to take, corrective

action against the problems cited in our report.

GAO

believes that the Army's actions--completed,

begun, or

(B-163074,

June 8, 1971.1

planned-- should bring improvements.

&ACK OF UNIFORMITYIN

COSTACCOUNTING

SYSTEBGFOEMAINTENANCE

-.-1

Department

of Defense

The Department of Defense spends about $7 billion a year

for depot-level maintenance operations--the

major overhaulGAO

reviewed the

ing or reb,uilding of military equipment,

cost accounting systems for depot-level maintenance of aircraft engines.

The cost accounting systems differed amoplgthe three

services, and among installations

within each service, making impossible any meaningful comparisons between facilities

performing similar work. For example:

--The Army and Navy used job order systems but in

different ways; the Air Force ,used an entirely

different

system-- me based on hours of work.

--All three services had a procedure for determining

cost of "gexchangematerial"--a

charge for rebuilt

parts taken from stock less an allowance for the

unserviceable parts returned to stock in exchange;

however, the Army ,used a substantially

different

formula from that of the Navy and Air Force for

determining the allowance for the unserviceable

parts returned.

--Fuel, used in considerable quantities for testing

overhauled engines, was treated as a direct material

cost by the Navy and an indirect cost by the Army

and Air Force,

--Fringe benefits, such as annual and sick leave and

Government contributions

to Life and health insurance and to retirement, were treated as indirect

cost by the Air Force and an integral part of labor

cost by the Army and Navy.

GAOproposed that the Secretary of Defense issue instructions that would ensure that the cost accounting systems

provide complete, comparable , and accurate information on

the operations and accomplishments of depot-level maintenance.

The Department of Defense agreed that there were inconsis-,

tencies in cost reporting

and that there were some areas requiring more explicit

instructions;

however, the Department

believed that a more strict

compliance with existing

directives and instructions

would generally

ensure the desired

,uniformity

in cost information.

(B-159797, Feb. 2, 1971.)

.BETTERCOSTACCQUNTING

NEEDEDFOR

OPERATION

ANDMAINTENANCE

FAMILY HOUSING

Department

of Defense

Operation and maintenance of military

family housing

cost about $400 million

in fiscal

year 1970, The accounting

system for accumulating

these costs provides

information

the annual cost of operating

and maintaining

different

types

of housing units,'

The cost figures

are distorted,

however,

because widely dissimilar

units varying

in age, size, type

of construction,

and condition

are grouped and the differences

in cost are thereby averaged out.

The usefulness

of the cost data is further

eroded by

doubt as to the reliability

of the data.

Costs recorded at

14 installations

were found to be inaccurate

and incomplete

in a number of cases.

Further,

little

or no use was made

of the collected

costs at most installtitions

reviewed.

Despite inadequacies

in the cost data, it

apparent that many housing units are no longer

to operate and maintain and should be replaced.

GAOhas recommended that

the Secretary

is readily

economical

of Defense:

--Consider

reclassifying

housing into new categories

for cost accounting purposes--taking

into account

age, size, typ e of construction,

and condition

units --to provide cost data that are more nearly comparable and more useful for cost management and for

reference

in setting

standards for the future.

--Issue

more comprehensive directions

to ensure greater

uniformi-&y

in recording

and reporting

costs of operation and maintenance throughout

the armed services.

--Provide

the Congress, in the annual construction

authorization

requests,

with a plan for the phased,

orderly

replacement

of family housing units no longer

economical to operate and maintain.

DOD agreed that reclassifying

housing for more meaningful comparison of cost data would be useful but said that

establishing

a larger number of categories

would increase

the work load and would not offer benefits

commensurate with

the added cost.

GAO pointed out that DOD had not determined

the cost of operating

the existing

cost accounting

system

nor the additional

cost of an expanded system and recommended

that DOD make such a determination.

DOD agreed

stated that its

a request would

tion to replace

priorities

were

with the second and third proposals and

instructions

were being clarified

and that

be presented to the Congress for authorizauneconomical housing as soon as more urgent

met.

In view of the indefinite

nature of DOD's intent

present a plan for replacement of uneconomical housing, GAO

suggested that the Congress may wish to consider:

--Requesting

housing.

DOD to present

an inventory

of uneconomical

--The merits of authorizing

current expenditures

replacement of uneconomical housing to achieve

savings in operation

and maintenance costs.

(B-159797,

July

2, 1971.)

for

future

N&D FOR IWROVEMXNT IN COST ACCOUNTING

FOR TRAINING UNDER THE GOVERNMENT

EMPLOYEESTRAINING ACT

Department

of Defense

The Government Employees Training

Act provides for

Government-sponsored

programs to supplement and extend selfeducation,

self-improvement,

and self-training

by employees.

House Report 329, issued June 1, 1967, identified

problems

in employee training

in the Government and recommended certain improvements,

GAO reviewed the employee training

program at 14 installations

of the Department of Defense to

see what had been done in response to the recommendations,

The weaknesses identified

in 1967 regarding

training

costs continued to exist within

the Department of Defense

during fiscal

year 1970. The military

departments and agencies of the Department of Defense did not have adequate accounting systems for determining

and reporting

accvrate

costs of training

and not all of the training

costs were

being identified

in the cost accounting

systems.

Tnformation reported

to the Congress in the annual training

reports

tended to give a distorted

picture

of the training

programs

that were being operated under the act because cost of internal training,

which represents

more than 75 percent of the

total. costs, was not reported,

Also trainee

salaries

were

not reported as a training

cost.

GAO believes

that training

cost is the most significant

cost element in the Federal

training

program and that it should be reported.

The costs shown in the annual training

reports were not

obtained from the accounting

system but from various source

documents.

In most cases the source documents either were

not available

fsr GAO's review or could not be reconciled

with the reports.

Instructions

issued by the military

services and the

Defense Supply Agency for determfning

training

needs and

developing

training

plans generally

appeared adequate but

had not been effectively

implemented at most of the installations GAO visited,

Training

selection

procedures were generally

fairly

applied but there was Ifttle

indication

of a

systematic

method of selection

at some of the installations.

To correct these and other weaknesses observed in the

training program, GAOhas recommendedthat the Secretary of

Defense:

--Consider identifying

training costs in the accounting system to make these data available to managers

at all levels,

--Ensure that the Department of Defense Instruction

1430.5, prescribing policies and standards for conis properly implemented.

ducting training,

--Ensure that adequate procedures and management controls are established for recording completed training in the personnel files.

--Promote increased emphasis on surveillance of training activities

by the use of management review

groups, including internal auditors.

GAOhas recommendedalso that the Civil

Service Commis-

sion:

--Provide leadership in recommending or establishing

a uniform costing system for triining

items to ensure that costs are comparable.

--Provide more frequent inspections of the training

activities

at military departments and agencies of

the Department of Defense.

The Department of Defense and the Civil Service Commission agreed, in general, with the findings and cited corrective actions which appeared to be responsive to the conditions

(B-70896, May 25, 1971.)

cited in GAO"s report.

POTENTIALSAVINGSTHROUGH

TRANSFER

INVElNTORY

ACCOU~,TING

FROMSTOCKFUNDS

TO INDUSTRIALFUNDS

Department af the Army

The Army's Aberdeen Proving Ground was maintaining an

industrial

fund accounting system and a stock fund accounting

system which resulted in duplication of certain accounting

functions and records. GAOconcluded that the industrial

fund could be used as the principal accounting means to

finance and account for inventories being controlled by the

Elimination

stock fund and to process related transactions,

of the stock fund accounting system would simplify accounting procedures and would result in:

--Annual savings of almost $100,000 in personnel costs.

A reduction of about 45 hours a month in computer

processing time.

--A potential

effort.

reduction

in keypunch and verification

Aberdeen officials

concurred in GAO's conclusion and stated

that the changeover would not involve any significant

costs

or problems.

GAOrecommended that the Secretary of Defense direct

the Secretary of the Army to eliminate the stock fund accounting system at Aberdeen and to place the inventories owned

by the stock fund under the control of the industrial

fund.

Because the industrial

fund-stock fund arrangement at Aberdeen was typical of installation

organization at many military installations,

GAOrecommended also that the Secretary

of Defense determine the installations

at which it would be

practicable for industrial

funds to finance and control

inventories and take action to eliminate unneeded stock fund

accounting systems,

The Department of Defense agreed with the objectives of

these recommendations but believed that the recommended financial procedure was not in accordance with the provisions

of 10 U.S.C. 2208 which authorized working capital funds.

G&Is review of the legislative

history

of these provisions

indicated

that the recommendations were not contrary

to the

intent of 10 U.S.C. 2208. Therefore GAO suggested that the

Department of Defense reconsider

its position

and implement

the recommendations.

(B-159797, July 30, 1971.)

. .

‘,

DEFENSEIKERNATIONhL ACTIVITIES

PROBLEMIN ADMINISTRATION

OF THE

MILITARY ASSISTAl%%TRAININGPROGRAM

Department of Defense and

Department of State

At the request of the Chairman, Senate Cmrnittee on

Foreign Relations, GAQperformed a detailed review of the

military

assistance training program in 10 recipient countries.

In recent years the total fmds provided for training foreign military

personnel under the military assistance

and service-funded programs have averaged about $74 million

a year.

In assessing the training against

the military

requirements and resources of recipient countries, GAOobserved

that some of the training was unnecessary or not of high

priority.

For example, in Iran nearly one fourth of the

$155,000 for 1970 Navy training was spent for postgraduate

courses for four men. In two other countries training was

given at a cost of about $525,000 that was unrelated to

equipment on hand.

GAOalso noted that inadequate consideration was given

by the U.S. military

advisors of the recipient countries'

capabilities

to provide training from their own resources

and that no formal effort was made by the advisors to correlate the military

assistance or service-faded

training programs with other U.S. Government training programs.

Finally, in the selection of foreign students being

trained, GAOfound that the U.S. advisors did not take the

necessary steps to ensure that a sufficient

number of qualified candidates were nominated, screened, and tested in time

so that they would be available to attend scheduled training

courses e As a result, some courses had to be canceled or

deferred and, in other cases, marginally qualified and unlified personnel entered the training program.

GAOconcluded that it was difficult

degree U.S. military assistance training

effectiveness of forces in the recipient

to assess to what

had increased the

countries included

in its review. The difficulty

arose frcxn the Pack of established measure~lent criteria

and a system for periodically

evaluating the training program.

GAOsuggested that a reexamination of the overall program, for which substantial costs were being incurred for

training, was warranted and recommendedthe following alternatives for consid,eratiow : (1) concentrating more effort

by U.S. advisors on planning, programming, administering,

and

supervising the training programs to achieve effective managfzlnerlt Or (2) reducing the size of the training program so

that it could be effectively

managed with presently authorized staffs.

also that the Committees of the Congress

might wish to consider the desirability

of enacting legislaticm requiring the Secretary of Defense to establish a measurement system to assist in determining the effectiveness

of expenditures for tltae military assistance training program.

GAO suggeste

ant of State commented on the report by

letter dated April et B 71, and generally agreed with the

information contained in the report.

The Department of Defense commented on the report by

letter dated &YLy 13, 1971, and, in general9 took a negative

view of the info ation in the report.

For example, the

Department stated that:

'The valid but limited criticisms

that resulted

from this review of military

assistance training

will be only of limited assistance in the manen% of the training programs" QH63582,

Peb. 16, 1971G.>

OTHER AREAS OF OPERATIONS

INADEQUATE CHARGESTO COMMUNICATIONS

SATELLITE CORPORATIONFOR LAUNCH SERVICES

Department ofathe Air Force and

National

Aeronautics

and Space Administration_

The Communications Satellite

Corporation

(Cornsat) and

the National

Aeronautics

and Space Administration

(NASA)

entered into agreements whereby NASA would supply launch services to place commercial communications

satellites

in orbit.

These satellites

are sponsored by the International

Telecommunications

Satellite

Consortium (Intelsat),

a consortium of 80 nations dedicated to improving global communications.

Comsat, as the largest

investor

in the consortium,

acts as its manager,

Some of the services that NASA agreed to furnish

actually

are provided by the Air Force and are billed

to Comsat

through NASA, At the request of Senator Mike Gravel, GAO

evaluated the Air Force charges to Comsat. GAO did not evaluate the NASA charges to Comsat.

On the basis of GAO's computation

of the charges, the

Air Force did not charge Comsat for about $6.1 million

launch services costs through fiscal

year 1969. About

$3.1 million

of this amount was not attributed

to Comsat

launches by the Air Force mainly because of deficiencies

accounting procedures of the Air Force.

Another $3 million

was attributed

to Comsat launches by the Air Force but was

not charged because of an agreement between NASA and the

Department of Defense to exclude certain

costs.

Because the parties

have agreed upon the method used

to determine costs chargeable to Comsat for the Intelsat

II, and III series of launches, no legal basis existed for

changing the method.

For the Intelsat

IV series of launches,

a new agreement was reached.

Although this agreement is

essentially

the same as before,

it does provide

that the*

method used to determine costs-may be changed through negotiation.

GAObelieves that, since Comsat is now a going concern

and a profitmaking enterprise, charges to Comsat for theIntelsat IV series of launches and for future launches should

be determined on a full-user-charges

basis. This would be

in accord with the following

statement made by the President

on this situation in May 1966.

"When the Federal Government provides special services for special groups, it is both good economics

and good government to charge fees for these services --good economics because user charges make

possible an efficient

allocation of resources

among alternative programs; good government because user charges ensure equitable treatment of

the general taxpayer."

The Air Force was in general agreement with GAO's views.

The Department of State believes, however, that it would be

detrimental to the foreign policy interests of the United

States to change the basis of billing

to Comsat for the

Intelsat IV launches.

GAOrecommendedthat the Air Force determine costs of

Intelsat IV and future launches on a full-user-charges

basis,

including depreciation, and that NASAnegotiate with Comsat

to use such costs in its billings.

The Air Force and NASA

stated that a review was in progress to reexamine the entire

billing process.

GAOrecommendedalso that the Secretary of Defense require the Air Force to determine the actual costs incurred

for Intelsat III launches in accordance with the method that

had been agreed upon and that the Administrator of NASAbill

Comsat on this basis, including the unbilled costs of approximately $31,000 GAOidentified

as being chargeable to

Comsat under the agreed-upon method. (~-168707, Oct. 8,

1971.)

!:EEti FORA REEVAILJAI'ION

OF THE

CIVIL DEFENSEPROGRAM

Department of the Ihrrnx

In 1961 the civil defense program of the United States

was revitalized

and was directed toward providing protection

for millions of people against radioactive fallout in the

event of a nuclear attack.

A long-range program was recommended by the President to identify existing fallout shelters

and to provide new ones and the Office of Civil Defense was

created in the Office of the Scretary of Defense, In 1964.

responsibility

for civil defense, together with the Office

of Civil Defense, was transferred to the Department of the

Army a

The principal goal of the current civil defense program-the development of a nationwide fallout shelter system--is

complemented by related program elements, such as warning

and detection,

There are, however, no programs (other than

research) aimed at protecting people against chemical or biological weapons or the direct effects of nuclear explosions,

such as blast, heat, and shock.

According to the Department of Defense, present fallout shelters would save 18 millian to 30 million lives which

otherwise would be lost in the event of a nuclear attack.

Alternative

combinations of additional fallout and blast

protection,

ranging in costs from $4QOmillion to $8 billion

for fiscal years 1970 to 1975, could save additional millions

of lives.

Appropriations for civil defense, howeverp have

decreased.

Office of Civil Defense data indicate that, if current

programs continue at present levels, up to one half of the

population still will lack standard fallout protection in

1975. Futhermore available protection is dispersed unevenly.

In major cities 2.5 fall.out shelter spaces are available for

each person, compared with less than 0.4 of a space for each

person in areas outside major cities,

The Office of Civil Defense has not used information

regarding likely targets of an enemy (targeting assumptions)

in setting priorities

for developing fallout shelters.

has followed a policy which generally treats all locations

'as being equally vulnerable.

In the light of the limited

funding of this program, this is not a realistic

approach,

The Office of Civil Defense lacks the authority and

funds to finance or subsidize the construction of shelter

spaces. The Office can only identify,

license, mark, and

stock available spaces, The Office has established a minimum level of protection which must be met if the shelter is

to be licensed, marked, and stocked by the Office.

Where

shelters of this level are not available, however, many

lives could be saved and injuries could be reduced by use of

the best protection available even though it is below the

standard. The Community Shelter Planning program encourages

the use of protected space under the minimum standards, but

these shelters rasrmally are not licensed, marked9 or stocked

by the Office of Civil Defense.

GAOhas recommended that:

--The Secretary of Defense set priorities,

in developing additional fallout shelter protection,

on the basis of targeting assumptions and the best available

predictions of risk, to help ensure that the Limited

financial resources are applied to areas most likely

to need additional protection,

--The Office of Civil Defense stock the best available

shelters regardless of protection rating, pending an

overall assessment af area priorities,

in undertaking

protective measures,

--The Secretary of Defense (1) provide additional. justification to the Congress concerning the part which

civil. defense plays in the overall national security

posture and (2) give consideration to whether higher

priority

should be given to marking and stocking good

shelter spaces already identified,

in view of the

relatively

low per capita cost of the protection which

these shelters provide,

The Department of Defense stated that it was aware of

the need to reevaluate the civil defense program and that

broad policy decisions were expected to be made on the basis

of current administration

studies.

The Office of Civil Defense stated that it hoped to extend its efforts for seeking the cooperation of Government departments involved in

providing financial assistance in construction programs for

facilities,

such as urban renewal and housing agency projects, which have the potential of providing vast quantities

of fallout shelter space. It defended the use of the current fallout protection standard as a future planning objective

but stated that the best available concept of shelter

use was being applied in its current operational planning.

In view of (1) the imbalance of fallout protection,

(2) the potential for expanding the protection by using best

available space, and (3) the limited progress of the civil

defense program in meeting its objectives and in view of two

special studies recently made by the administration

pertainGAO

suggested

that

appropriate

commiting to civil defense,

tees of the Congress may wish to review the reports on these

studies for use in any consideration of civil defense requirements.

(B-133209, Oct. 26, 197L>

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.