B-106790
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I
B-106790
COMPTROLLER
GENERAL
WASHINGTOM,
OF
THE
D.C.
UbdlTED
STATES
20548
B-106190
The Honorable George H, Mahon
Chairman, Committee on Appropriations
(1 House of Representatives
4
Dear Mr.
i
J”
1’71 :
Chairman:
This is our annual report
in the Department of Defense.
civil
departments
and agencies
of significant
audit findings
A similar
report
on Federal
was submitted
separately.
We have included
items which we believe
should be of interest
and use to the Committee during the appropriations
hearhave previously
ings for fiscal
year 1975. Audit reports
brought these findings
and recommendations
to the attention
of
departmental
officials.
Some matters
commented on in this report are those on which the Department has indicated
that corrective
action either
has been or will
be taken.
The items
have been included,
however 2 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
you may desire,
to furnish
any additional
information
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 0
Sincerely
yours,
Comptroller
General
of the United States
(
Contents
Page
PROCUREMENTPRACTICES AND CONTRACTADMINISTRATION
Need to keep the Congress informed and to apply
appropriate
criteria
in decisions
on long-term
leasing
Department of the Navy
Improvement needed in use of formal
procedures
for procurement
Department of Defense and civil
1
1
1
advertising
agencies
5
5
Potential
cost reductions
through improvement
in contractors
t industrial
operations
Department of Defense
7
7
Potential
savings through procurement
on life
cycle costing
Department of Defense
8
8
based
Improvement needed in management of contracting
for studies and disseminating
results
of
studies
Department of the Army
Need for a policy
requiring
contracts
foreign
firms to be priced in local
Department of Defense
with
currency
Validity
of payments to the contractor
production
of the C-5A aircraft
Department of Defense
for
10
10
12
12
14
14
Need for contracting
officers
reports
more effectively
Department of Defense
to act on audit
Ways to reduce administrative
ing negotiated
contracts
Department of Defense
costs
15
15
of award-
ACQUISITION OF MAJOR WEAPONSAND OTHER SYSTEMS
Problems in naval ship construction
programs
Department of the Navy
17
17
19
19
19
Page
Problems in controlling
cost
weapon sys terns
Department of Defense
growth
of major
21
21
Need to clarify
policy
on inflation
as a factor
in cost estimates
of proposed Programs
Department of Defense and civil
agencies
RESEARCHAND DEVELOPMENT
Coordination
needed among Government agencies
to insure maximum sharing of technology
Department of Defense and civil
agencies
Development and use of flight
simulators
reduce cost of military
flight
training
Department of Defense
24
24
26
26
26
could
28
28
Problems in development of the SAM-D surfaceto-air
missile
Department of the Army
30
30
Development of in-flight
escape systems for
helicopters
could reduce fatalities
and severe
injuries
Department of Defense
32
32
Improvement needed in development
computer models
Department of Defense
35
35
and use of
SUPPLY MANAGEMENT
Economies available
through improved
of Navy shipboard inventories
Department of the Navy
Savings, attainable
by revising
criteria
Department of Defense
d
38
management
38
38
packaging
Requirements for modular electronic
for aircraft
could be reduced
Department of the Air Force
40
40
equipment
41
41
Page
MAINTENANCE, REPAIR, AND OVERHAUL
Little
progress in acting on opportunities
for
significant
savings by consolidating
real
property
maintenance organizations
Department of Defense
Potential
for greater consolidation
maintenance workloads
Department of Defense
43
43
43
of
45
45
!
Need for improvement in industrial
management
Departments of the Army and Navy
46
46
Ih
Need for more realistic
projections
of funding
requirements
for ship overhaul programs
Department of the Navy
48
48
ADMINISTRATION OF MANPOWERMATTERS
Problems in meeting military
manpower needs in
the all-volunteer
force
Department of Defense
51
51
Improvements needed to increase effectiveness
of the Government Employee.9 Incentive
Awards Program
Department of Defense
54
54
Inconsistent
policies
in administering
bility
retirements
Department of Defense
57
57
Enlisted
aide programs require
Department of Defense
disa-
modification
Need for centralized
management control
closed-circuit
television
for training
education
Department of Defense
Improvements needed in administration
management of technical
training
Department of the Navy
51
58
58
of
and
59
59
and
60
60
Page
Administration
of the Reserve Officers
Corps program should be coordinated
Department of Defense
Training
61
61
Further
improvement needed in assisting
military personnel
in finding
adequate housing
near bases
Department of Defense
62
62
Construction
of lodging facilities
quate consideration
of availability
cial motels
Department of Defense
64
64
without
adeof commer-
DEFENSE INTERNATIONAL ACTIVITIES
Need for tighter
control
over U.S. commitments
to other nations
Department of Defense and Department of
State
Desirability
of improved reporting
on U.S. contributions
to NATO
Department of Defense and Department of
State
Payments for phantom troops in the Cambodian
military
forces
Department of Defense and Department of
State
OTHER AREAS OF OPERATION
Potential
for reduction
of communication
costs
through centralized
management of multiplex
sys terns
Department of Defense and civil
agencies
66
66
66
67
67
68
68
70
70
70
Government not equitably
compensated by telephone companies for use of its equipment to
serve public pay telephones
Department of Defense and civil
agencies
73
73
Opportunities
for reducing the cost
ing and operating
health facilities
Department of Defense and civil
75
75
of constructagencies
’
Page
Not all costs of public affairs
are considered
in application
tion on such costs
Department of Defense
activities
of the limita-
Need for Federal agencies to improve solid-waste
management practices
Department of Defense and civil
agencies
,
MILITARY READINESS
I
Need for improvement in readiness
Force in Europe
Department of the Air Force
78
78
80
80
82
of the Air
82
82
.
‘.
PROCUREMENTPRACTICES AND CONTRACTADMINISTRATION
NEED TO KEEP THE CONGRESSINFORMED AND TO APPLY
APPROPRIATE CRITERIA IN DECISIONS ON LONG-TERM
LEASING
Department
of the fiavy
The Navy uses tankers to transport
fuel for itself
and
for the other military
services.
Part of the tanker fleet
consists
of 14 Government--owned T-2 tankers built
during the
costs
1940s m Navy studies concluded that transportation
would be reduced by replacing
the 14 old tankers with 9 new
ones.
The Navy entered into a long-term
(ZO-year)
leasing
arrangement on June 20, 1972, by having private
interests
obtain the funds to finance the construction
of
the tankers
with Navy’s guarantee that it would lease them.
GAO made a review to determine
(1) whether the Navy’s
action was the more economical method to meet its needs,
(2) whether or not the Congress had an opportunity
to consider the wisdom of the transaction
before the formal commitment to spend future
funds, and (3) whether review and
approval by the Congress should be required
for future
transactions
of this type.
A March 23, 1972, decision
of the Comptroller
General
on the legality
of this leasing arrangement
stated that GAO
could no,t say the transaction
resulted
in purchase of an
asset, for which funds are required
to be authorized
and
appropriated
by the Congress, because the Navy never obtains
actual title
to the tankers,
GAO said it had no leg?1 objection
to the transaction
but that,
in view of the program9s
magn i tude 9 it would seem appropriate
to inform the House and
Senate Committees on Armed Services and Appropriations
of
Navy plans before going forward.
Navy officials
advised
GAO that they gave informal
rather
than formal notification
to selected
committee staff
members.
If the tankers were purchased,
total
Government payments would be made during a 3-year construction
period.
By leasing,
total
payments are spread over a 20-year period
with no payments due until
the tankers
are ready for use.
Determining
whether leasing
is more economical than purchasing
depends on the discount
into today’s value.
rate
used to co.zvert
future
dollars
The Navy’s lease-versus-purchase
analysis
used the
criteria
established
in Department of Defense (DOD) Instruction 7041.3.
This inst&ction
requires
a lo-percent
discount rate which represents
an estimate
of the average return on private
investment
before taxes and after
inflation.
The source cited in this instruction
is the Office
of Management and Budget (OMBJ Circular
A-94.
Circular
A-94 prescribes
the discount
rate for evaluating Government decisions
concerning
the initiation,
renewal,
or expansion of programs or projects.
However, A-94 states
that its provisions
do not apply to the evaluation
of
Government decisions
concerning
the acquisition
of commercialtype services
and that guidance for making such decisions
is contained
in Circular
A-76.
OMB Circular
A-76 criteria
for valuing money is the yieid on long-term
Department of
the Treasury borrowing rate.
This rate,
at the time the
transaction
was entered into, was about 6 percent.
A comparison of the effects
on Government costs if
(1) no present-value
discount
is used, (2) a lo-percent
discount is used (A-94 criteria),
and (3) a 6-percent
discount
is used (A-76 criteria)
shows the following:
little
$178.1 million
more to lease
ent value discount;
with
$10.4 million
less
discount;
to lease
at lo-percent
$29.6 million
more to lease
discount.
at 6-percent
At a discount
difference
no pres-
rate of about 8-3/4 percent,
there
between leasing and purchasing.
is
By leasing
instead of purchasing,
the Navy was not required to obtain specific
congressional
authorization
and
The Navy told GAO that it preferred
to purchase
approval.
new tankers but that it had been unsuccessful
in obtaining
procurement
funds in prior
yea.rs and, therefore,
considered
leasing as its only viable
alternative.
However, future
2
Government payments under this lease transaction
will
more
than double the amount that would have been paid if direct
congressional
approval had been received and the tankers
had been purchased.
Although leasing
is recognized
as a proper means of
the magnitude of the funds involved
in
acquiring
asseti,
this transaction
clearly
warranted
congressional
input to
the decis ionmaking process.
GAO’recommended that the Secretary
of Defense revise
DOD instructions
to provide for application
of the guidelines set ,forth
in Circular
A-76 in evaluating
long-term
leasing of assets,
such as ships e GAO also recommended that,
to improve congressional
awareness of future
build and
the
Secretary
of
Defense
should
assist
the
charter
programs p
Congress by
‘,
--providing
it
of acquisition
with information
on the proposed method
(long-term
leasgng or purchasing);
congressional
committees
- -providing
B to appropriate
a detail.ed
cost analysis
showing full
impact on
future
budgets when long-term
leasing
is proposed;
and
o
--requiring
analyses of long-term
leasing arrangements
to be made on a total-cost-to-the-Government
basis,
“including
direct
effects
of delayed payments of income taxes.
DOD and the Navy generally
accepted GAOPs recommendations for improving congressional
review of future
buildand-character
programs 0 DOD assured GAO that formal presentations
would be given to key congressional
oversight
committees D
The Navy did not concur, however9 in GAO’s treatment
of deferred
taxes because it believes
that the value of deferred payment of income taxes should not be recognized
as
Q cost.
DOD did not concur with GAO’s recommendation
that
DOD instructions
be revised
to provide for application
of
3
the guidelines
set forth
in OMB Circular
A-76
long-term
leasing of assets such as ships.
in evaluating
Since the Navy’s program is similar
to Government prothe
Congress
should evaluate
grams for leasing buildings,
the need for legislation
similar
to Public Law 92-313 of
June 16, 1972.
That law amended the Public Buildings
Act
of 1959 to require
congressional
approval of all leases
It also requires
that a
greater
than $500,000 a year.
prospectus
containing
details
of the transaction
be provided
Similar
legislation
may be appropriate
to the Congress.
for long-term
leasing of’such assets as ships.
Because the
Navy’s program can be considered as setting
a precedent
(the Navy is considering
acquiring
other types of vessels,
such as dry-cargo
ships, in this manner), legislation
could
be an effective
tool to insure congressional
oversight
of
(B-174839, Aug. 15, 1973.)
future
long-term-leasing
programs.
4
t
IMPROVEMENTNEEDED IN USE OF FORMAL
ADVERTISING PROCEDURESFOR PROCUREMENT
Department
of Defense
and civil,
agencies
GAO reviewed procedures
and practices
of DOD, the General
Services Administration
(GSA), and the Tennessee Valley
Authority
(TVA) in using formal advertising
for bids in order
to (1) identify
problems that limit
competition
and increase
costs to the Government and (2) offer
suggestions
to the
agencies for more effective
and less costly use of this
method of procurement.
GAO examined 138 contracts,
awarded under formal advertising
procedures
by 8 procurement
offices
of these agencies,
and found that 8,956 suppliers
had been solicited
but that
only 8 percent of them had submitted
bids.
Fifty-three
contracts
were awarded on the basis of three or fewer bids.
Causes of the low response follow.
--Bidders
lists
were based on broad
and did not reveal the relatively
o,f bidding for a specific
item.
--Previous
bidders
categories
of items
few sources capable
were not regularly
solicited.
--Advertising
in the Commerce Business
timely,
and the published
description
or services
required
was insufficient
Daily was not
of supplies
to elicit
bids.
--The causes for the low number of bids were not evaluated to increase competition
for future
procurements.
--Restrictive
specifications
were used repeatedly.
--The complexity
from bidding.
--Bidders
--Bids
or purchase
of invitations
were given
were rejected
discouraged
insufficient
because
descriptions
time
of minor
suppliers
to bid.
discrepancies.
Administrative
costs of formal advertising
include costs
of maintaining
lists
of bidders;
preparing
and mailing
invitations;
and receiving,
recording,
and analyzing
bids.
5
Opportunities
because:
for
reducing
these
costs
--41 percent more invitations
pared for distribution
than
were evident
for bid (IFBs)
were used.
were pre-
--About 50 percent of the pages in the IFBs were standard contract
provisions
which were repeated from one
solicitation
to another.
these
could
--Furnishing
more than two copies
firms solicited
was unnecessary.
of the
IFB to the
--92 percent
not result
mailed
to firms
of the solicitations
in bids.
GAO believes
that,
if its suggestions
for
conditions
are adopted, DOD and the civil
save several million
dollars
annually.
did
correcting
agencies
GAO recommended that DOD and GSA, the major agencies
responsible
for procurement policy,
instruct
procurement
offices
and agencies to:
--Establish
a program in each procurement
office
to
selectively
review the extent of competition
achieved
under formal advertising
and take aggressive
action
to stimulate
competition
where it appears to be restricted.
--Establish
a work simplification
program in each procurement agency to (1) solicit
only previous
bidders
or suppliers
and firms that request IFBs, (2) simplify
and shorten IFBs, and (3) reevaluate
the requirements
for distributing
IFBs.
After
the report was issued to the Congress, the Office
of Management and Budget asked GSA to immediately
undertake
a review of the unresolved
issues and determine
how best to
proceed with appropriate
implementation
of the suggestions
and recommendations.
GSA advised GAO that it was initiating
action
in cooperation with DOD to insure that formal advertising
policy
of
executive
agencies provides
for maximum effective
use of the
technique.
(B-176418, Aug. 14, 1973.)
6
6
’
POTENTIAL COST REDUCTIONS THROUGHIMPROVEMENT
IN CONTRACTORS?INDUSTRIAL OPERATIONS
Denartment
of Defense
GAO reviewed industrial
operations
at the plants of
three aircraft
engine manufacturers
performing
a substantial
amount of work for DOD. Industrial
engineering
and financial
management principles
were applied
in these reviews to identify
conditions
which were increasing
the cost of contract
performance(and
to bring those conditions
to the attention
of the contractor
or Government officials
for appropriate
action.
There were areas at plants
of each of the contractors
where the contractors
V operations
could be improved and costs
could be reduced through such things as (1) more effective
programs for establishing,
maintaining,
and using labor
standards
for measuring labor efficiency,
(2) strengthened
production
control
systems for scheduling,
coordinating,
and
controlling
manufacturing
operations,
(3) elimination
of excessive inspection
and testing
of material,
parts,
and assembled products,
(4) greater
efficiency
in plant layout and
plant use, (5) improved programs for maintenance,
modernization,
and replacement
of equipment,
and (6) relaxation
of
the military
services 1 stringent
packaging requirements
for
spare parts and assembled products
destined
for domestic
rather
than overseas delivery
and use,
Suggestions
for improving these conditions
were brought
to the IFattention
of the contractors
and of the cognizant
procurement and contract
administration
organizations
of DOD.
The results
of GAO’s efforts
will be especially
useful to
the Government’s procurement
and contract
administration
personnel
who will
be dealing with these contractors
in the
future o
Some of the suggested improvements will require
time to
implement and some will
require
further
study by the contractors
to determine
the most feasible
approach.
Consequently,
GAO was unable to quantify
the savings which could
result
from the suggestions.
GAO believes,
however, that
the savings would significantly
exceed the cost to implement
the improvements.
(B-159896, June 26, 1973.)
POTENTIAL SAVINGS THROUGH
PROCUREMENT
BASED ON LIFE CYCLE COSTING
Denartment
of Defense
Life cycle costing
is a procurement
technique which
takes into account not only the price of an item but also
its useful life
and the cost of maintaining
it during the
When
competitive
prices
are
being
evaluated,
useful life.
this technique often reveals
that a lower price is not nece’sarily
more advant%geous in terms of overall
cost,
In
1965 DOD began a program to test this concept and in 1970
issued implementing
guidelines.
Although the concept has
been widely accepted by DOD’s engineering
and procurement
at only five or six procuremanagers, it has been successful
ment activities
which have used it aggressively.
GAO evaluated the life
cycle costing
technique
to determine
its potential
in DOD for broader application
in awarding procurement
contracts
for subsystems and components.
From inception
of the test program in 1965 to the time
of GAO’s review,
contracts
had been awarded on the basis of
life
cycle costing for only 64 procurements--43
of which had
The Air Force reported
that
been awarded by the Air Force.
the 43 procurements
at a cost of about $20 million
resulted
in overall
savings of about $25 million.
The limited
application
of the concept was attributable
the Armed Services
to insufficient
emphasis by DOD. Neither
Procurement Regulation
nor the Defense Procurement Circulars-the primary means of disseminating
policy and direction
to
procurement personnel
and to contractors--had
provided
It is unlikely
guidance on the life
cycle costing
technique.
that the benefits
and lessons learned from the test program
can be widely used in DOD unless high-level
interest
is expressed and coordination,
communication,
and training
are
improved.
GAO recommended that
the Secretary
of Defense:
--Emphasize more vigorously
the importance
of an effective test program for the life
cycle costing
technique
and provide coverage in the Armed’ Services Procurement
Regulation.
8
--Expand the test program to provide
that,
where appropriate I the competition
for prime contracts
include
consideration
of contractors9
plans to use life
cycle
costing
in awarding subcontracts
I)
--Expand the test program to include,
where appropriate,
noncompetitive
procurements
by requiring
the submission
of proposals
offering
different
levels of reliability
and maintainability
and providing
for evaluations
on a
life
cycle costing basis.
--Place the prime responsibility
for life
cycle
on the engineering
and requirements
personnel
provide for coordination
with the procurement
--Establish
scheduled
dates for
costing
and
personnel.
goals for systematically
reviewing
items
for procurement
to identify
potential
candiapplication
of life
cycle costing.
The Office
of the Secretary
of Defense agreed generally
with these findings,
conclusions,
and recommendations
and
informed GAO of the specific
steps it was taking to implement
the recommendations.
(B-178214, May. 21, 1973.)
9
IMPROVEMENTNEEDED IN MANAGEMENT
OF
CONTRACTING FOR STUDIES AND DISSEMINATING
RESULTS OF STUDIES
Department
of the Army
DOD and the military
services
contract
with public and
private
organizations
to make studies
that will
assist
them
GAO selected
in reaching decisions
or solving problems.
17 Army contract
studies
for review to determine
adequacy of
the Army’s control
over its contract
study program.
costing
about $1.4 million,
Eight of the 17 studies,
It was
either
were of limited
usefulness
or were not used.
not determinable
from available
records whether the remaining
costing
about $4.1 million,
met their
objecnine studies)
tives satisfactorily
or were used as intended.
The Army evaluated
each contractor’s
performance
after
completion
or termination
of a contract;
however, it did not
make a similar
evaluation
of its own performance
in planning
Because of the intangible
nature
and monitoring
the studies.
of the subject matter of the studies,
high turnover
of personnel involved in contract
administration,
and lack of evaluation by the Army of its own performance,
GAO was unable to
determine the effectiveness
of the Army’s control
over the
studies
or to positively
determine causes of unsatisfactory
study results.
Some factors
contributing
to unsuccessful
study efforts
were the Army’s failure
to (1) review the lessons learned on
the subject
through previous
studies,
(2) state the study
.assumptions used to guide the contractual
effort,
(3) prescribe clearly
the duties and responsibilities
of the study
advisory
group assigned to provide technikal
advice and
assistance,
and (4) provide the technical
expertise
to plan
In
addition,
there
was
some
conflict
and monitor the study.
between directives
and regulations
relating
to distribution
of study results
and related
information,
GAO recommended to the Secretary
of the Army that existing regulations
be revised and new procedures
be established
to require:
--An evaluation
of management’s performance
after
the
completion
or termination
of each study contract.
10
--The advisory
group to meet early enough to (1) assist
in meeting all prescribed
requirements
for planning
a
contract
study and (2) determine whether it is capable
of monitoring
the contractorss
performance
in accordance with the plan.
--The distribution
of contract
studies to the Defense
Documentation
Center regardless
of their
outcome or
funding e For unsatisfactory
or incomplete
studies,
a
summary of lessons learned should be prepared and disseminated with the results
of, the study.
GAO also recommended to the Secretary
of Defense that he
consider ) in conjunction
with the Secretary
of the Army,
phasing out the Army’s data bank of studies and analyses as
the Defense Documentation
Center obtains the data needed to
function
as the central
repository
for such information.
DOD generally
concurred in these recommendations
and
reported
that the Army was considering
revising
its regulations along the lines recommended.
(B-177372, Dec. 11,
1972.)
11
NEED FOR A POLICY REQUIRING CONTRACTSWITH
FOREIGN FIRMS TO BE PRICED IN LOCAL CURRENCY
Department
of Defense
The kind of currency used in pricing
contracts
with
foreign
firms (the dollar,
the currency
of the contractor’s
country,
or a combination
of the two currencies)
is of little
importance when the rate of exchange is stable.
It becomes
important
when the exchange rate has a history
of significant fluctutation
or is expected to change during the contract
period.
Foreign contractors)
when paid in dollars,
generally
convert them to local currency
to pay local obligations.
In a period of exchange-rate
fluctuation,
the dollars they receive may be worth more or less in local currency
than was anticipated
when the contractors
were priced.
When
bidding
for dollar-priced
contracts,
foreign
contracts
may
increase or decrease their prices depending on the anticipated gain or loss from exchange-rate
fluctuations
during
the contract
period.
GAO examined contracts
at DOD procurement
offices
overseas and in the United States to find out whether existing
DOD policies
and practices
adequately
protect
the U.S. Government and foreign
contractors
when currency
fluctuations
occur.
Contracts
in countries
where the Department of the
Treasury held excess currency or near excess currency were
not examined because the Armed Services Procurement Regulation adequately
implements the Government’s policy
that
U.S.-owned foreign
currency be used when feasible.
DOD has not formulated
a uniform policy
for determining
whether contracts
with foreign
firms should be priced in
local currency or dollars.
The determination
is left
to the
discretion
of the contracting
officers.
Because of this,
a
number of different
practices
exist,
sometimes within
the
same country.
Pricing
contracts
in dollars
has resulted
to both the United States and the contractors.
in inequities
For example:
--In Korea, contractors
have benefited
or will benefit
by about c5.2 million,
on the contracts
GAO reviewed,
because Korean currency
(won) depreciated
in value
relative
to the dollar.
12
--In Japan, contractors
could lose as much as $4 million
on open, dollar-priced
contracts
as a result
of the
August 1971 devaluation
of the dollar.
--In Europe, contractors
could lose about $1.6 million
und.er dollar-priced
contracts
for fiscal
year 1972
milk requirements.
The contracts
were awarded only
days before the value of the dollar
dropped in Europe.
I
GAO believes
that the need for DOD policy
guidance is
I critical
because of uncertainty
in the internaltional
monetary
market m GAO recommended that the Secretary
of Defense establish a policy
requiring
that foreign
contracts
be priced in
local currency unless there is a compelling
reason to use
dollars 9 such as a requirement
in the contract
for signifiJustification
for
cant purchases in the United States.
pricing
in dollars
should be approved at a level above the
A less preferable
alternative
would be
contracting
officer.
to price the contracts
in dollars
subject
to provisions
for
appropriate
price adjustment
if the exchange rate fluctuates
significantly
during the contract
period,
DOD said that,
as a result
of the interest
generated by
a
study
of
the
matter
has
been
initiated
at a
the report,
number of foreign
procurement
offices,
and at the conclusion
of this study,
it will be determined whether a change in
policy
is warranted.
(B-14.6749, July 6> 1973.)
13
VALIDITY OF PAYMENTSTO THE CONTRACTOR
FOR PRODUCTI'ONOF THE C-SA .AIRCRAFT
Denartment
of Defense
Each of the Public Laws 91-441, 92-156, and 92-436,
which authorized
funding for the C-5A aircraft
program for
provided
fiscal
years 1971, 1972, and 1973, respectively,
that payments be made to the contractor--Lockheed
Aircraft
The laws
Corporation-throughout
a special bank account.
also placed restrictions
on the costs for which payments
could be made from the special bank account and required
GAO
to audit the payments and submit quarterly
reports
to the
Congress.
$565.6 million,
made
GAO audited payments, totaling
since the special bank account was set up in June 1971
through June 30, 1973, and submitted
nine quarterly
reports
to the Congress.
No payments were found to be contrary
to
the applicable
laws.
GAO questioned,
however, the propriety
of payments to the contractor
for contributions
to employees’
retirement
funds, which had been made well before the contractor
made payments to the retirement
fund trustees.
Although costs incurred
but not yet paid are reimbursable if otherwise
valid,
the payments received
from the Government were held by the contractor
for an average of about
14 months before payment to the retirement
fund trustees.
In response to our recommendation,
the Department of Defense
took action to avoid making such payments significantly
in
advance of need,
Defense Procurement Circular
114, issued in
July 1973, provides
that,
unless contractors’
contributions
to retirement
funds are made within
30 days of the end of a
quarter,
they are not eligible
for reimbursement
until
actually paid,
(B-162578, Nov. 29, 1372, Mar. 9, 1973, May 17,
1973, and Aug. 10, 1973.)
14
,I
NEED FOR CONTRACTING OFFICERS TO ACT
ON AUDIT ‘REPORTSMORE EFFECTIVELY
Denartment
of Defense
GAO reviewed the actions taken by the contracting
officials
on the Defense Contract Audit Agency (DCAA) reports
which recommended price reductions
under the Truth-InNegotiations
Act because contractors
had submitted
defective
data at the time of negotiations.
The objective
of the
review was to find out (1) whether DCAA reports were providing contracting
officers
the information
needed to reduce
contract
prices,
(2) why the contracting
officers
had determined in some instances
that they did not have a basis to
reduce contract
prices in the amounts recommended by DCAA,
and (3) whether prompt action was being taken on DCAA
reports,
A report on the review,
submitted
to the Secretary
Defense, stated that of 177 reports reviewed:
of
--DCAA had recommended reductions
of $46 million
but
contracting
officials
had concluded there was defective pricing
of only $21 million,
--For $19 million
of the remaining $25 million,
tracting
officials
disagreed with DCAA that
tors had submitted
defective
data.
concontrac-
--For 66 million
of the remaining $25 million,
contracting officials
agreed that defective
data had been submitted. but the Government did not have a right
to
reduce contract
prices,
--As of June 30, 1972, DCAA reports
on 893 contracts,
or 68 percent of those reported,
had not been settled.
GAO recommended the following
Defense:
to the Secretary
of
--Insure
that contracting
officers
provide adequate
documentation
of the cost or pricing
data submitted
by and certified
to by contractors.
--Require
officer
higher level approval when the contracting
does not accept DCAA recommendations
on either
1
the grounds that pertinent
cost or pricing
data had
been disclosed
to him during contract
negotiations
or
the grounds that he was aware of the correct
cost or
pricing
data at that time.
--Establish
time standards
for procurment
offices
to
review DCAA reports,
evaluate
the recommendations,
and
take the action appropriate
in the circumstances.
--Require
closely
officers.
DCAA to review its proposed reports
more
before they are issued to contracting
In reply,
DOD stated that the regulations
are adequate
and that settlements
have been orderly.
GAO will
continue to
monitor these settlements.
(B-159724, Mar. 22, 1973.)
16
.
.
WAYS TO REDUCEADMINISTRATIVE COSTS
OF AWARDINGNEGOTIATED CONTRACTS
Department
of Defense
DOD can reduce the administrative
costs of its
negotiated
procurements
of parts and components without
sacrificing
adequate competition,
reasonable prices,
or other
goals of the Congress.
These other goals are reflected
in
such laws and programs as the small business programs;
the
labor surplus area program; the Buy American Act; the equal
employment opportunity
programs;
and the procurement-related
labor laws) such as the Walsh-Healey Public Contracts
Act
and the Service Contract
Act,
Millions
of dollars
in administrative
saved annual ly + For example :
costs
could
be
--DOD can save about $900,000 annually by shortening
its solicitation
documents and by requiring
the Navy
and the Defense Supply Agency to use only two copies
of the solicitation
document in each solicitation
package e
--DOD can realize
substantial
annual
ing fewer solicitation
packages m
savings
by prepar-
--DODvs ceiling
for simplified
procurment
procedures
is
limited
to procurements
under $2 9SflO, If the ceiling
were raised to $10,000 for negotiated
and formally
advertised
procurements,
administrative
costs up to
$30 million
annually might be avoided at procurement
centers e
--DOD could save about $150,000 annually
if the
requirement
for preparing
certain
determinations
findings
were repealed.
and
Some of the needed improvements to effect
these savings
can be made administratively
by DOD; others will
require
congressional
action,
GAO recommended that DOD:
--Encourage
throughout
greater
use of master solicitations
DOD and, where it is not feasible,
17
give
centers ,greater
latitude
to incorporate
reference
when this action would benefit
merit.
--Require
procurement
of the solicitation
package.
clauses by
the Govern-
centers to include only two copies
document in each solicitation
In response, DOD pointed out that it had already granted
the services permission
to use master solicitations
on a
trial
basis and to incorporate
many clauses in contracts
by
DOD said that it was considering
changes permitreference.
ting incorporation,
by reference,
of additional
clauses,
DOD also said that it
solicitation
provisions,
and notices.
was considering
whether procurement
centers should include
only two copies of the solicitation
document in each solicitation
package.
Because DOD’s procurement system is tied to legislation,
certain
administrative
costs cannot be reduced without
conThe Commission on Government Procurement
gressional
action.
has recognized that changes are needed and has recommended
Since GAO’s study
appropriate
legislation
to the Congress.
also indicated
a need for the changes recommended by the Commission,
GAO recommended that the Congress enact legislation:
--Authorizing
petitive,
agencies to solicit
proposals
from a comrather than a maximum, number of sources.
--Raising
the ceiling
price of procurements
simplified
procurement procedures,
subject
to
--Repealing
the requirement
that contracting
officers
prepare determinations
and findings
for certain
procurements.
(B-168450, Sept. 17, 1973.)
18
ACQUISITION OF MAJOR WEAPONSAND OTHER SYSTEMS
PROBLEMSIN NAVAL SHIP CONSTRUCTIONPROGRAMS
Department
of the Navy
GAO reviewed the status of two of the Navy’s largest
shipbuilding
programs,
the general-purpose
amphibious assault ship (LHA) and the DD-963 antisubmarine
destroyer
(both
under contracts
with the same shipbuilder)
9 because production problems had been encountered
in the shipyard where the
construction
work was being performed.
The shipyard was new. There is little
doubt that both
the shipbuilder
and the Navy grossly underestimated
the problems the shipbuilder
faced in (1) starting
a new shipyard,
(2) assembling an adequate work force,
(3) introducing
new,
untried
ship construction
techniques,
and (4) locating
the
ship design organizational
unit 2,000 miles away from the
construction
site.
The LHA was the first
and the DD-963 was the second Navy
shipbuilding
program undertaken by the shipbuilder
in the
yard.
These programs were intended to be carried
out nearly
consecutively.
However, slippages
in the LHA construction
schedule resulted
in unintended
concurrent
construction.
This further
aggravated
the problems.
Other aggravating
factors were the high turnover
of executives
and key personnel
of the shipbuilder
and the unusual provisions
in the contracts.
The Navy, for the first
time in its award of ship construction
contracts,
contractually
assigned to the shipbuilder
almost
complete responsibility
for decisions
in program execution
and complete responsibility
for ship design.
At the time of GAO’s review,
the shipbuilder’s
cost estimates for the LHAs were more than the ceiling
price allowed
under the contract,
and delivery
had been delayed more than
2 years.
The cost and construction
schedule of the DD-963s
had not changed significantly
since June 1970, when the contract was awarded.
Congressional
concern was expressed,
however, in deliberations
on the fiscal
year 1973 budget when the
Congress denied authorization
and funding of another block of
7 DD-963s--17
through 23 of the 30-ship program.
19
i
In fiscal
year 1974, the Congress authorized
and funded
these 7 ships and long-lead&time
items for the remaining
The Congress also provided $165 mil7 ships-- 24 through 30.
lion to cover cost growth on the LHA program.
(B-163058,
July 26, 1973.)
20
PROBLEMSIN CONTROLLING COST GROWTH
OF MAJOR WEAPONSYSTEMS
Desartment
of Defense
At the request of the House Committee on Armed’ Services,
GAO made a special
review of the cost growth of major weapon
A
report
on
the review noted that most new weapon
systems.
systems are intended to replace obsolete systems performing
The military
services,
however,
the same type of missions.
constantly
‘demand that the performance
and capabilities
of
the new systems exceed those of the systems to be replaced.
their
cost.
Comparing the latest
This, of course, increases
generation
of eight major weapons showed that the cost of a
successor system was between two and six times greater
than
Other
significant
factors
contribthat of its predecessor.
uting to cost growth were (1) optimistically
low initial
estimates
of costs on the part of competing contractors
and of
the military
services,
(2) revisions
in contract
specifications as to quantities,
scope, time schedules,
and engineering, and (3) inflation.
Various actions have been proposed or are being tried
to
develop new policies
and management techniques
to bring about
They are aimed at three key objectives:
improvements.
(11
making the right
decision
at the outset on what to develop
(2) learning
the lessons offered
by
and for w’hat purpose,
past schedule slippages,
cost overruns,
and disappointing
performances of the weapons in the field,
and (3) strengthening
the overall
management of the systems acquisition
process.
GAO recommended that action
strengthened
in these 13 areas:
be taken,
continued,
or
1.
Obtain Office
of the Secretary
of Defense, service,
and congressional
agreement on the basic operational
need, the fundamental
weapon system characteristics,
and the expected level of resources
to
be allocated
to that need.
2.
Strengthen
the staff
tary of Defense with
analyses of missions
support to provide
the Secrecomprehensive
and objective
and weapons requirements.
21
3.
Extend the span of congressional
authorizations
least 1 year in advance of the upcoming budget
at
year.
4.
Strengthen
congressional
reviews of weapons budgets
by first
considering
and approving budget totals
for major missions.
This review will
be based on
consideration
of the overall
needs of the various
military
missions.
5.
Avoid concurrent
adhere to orderly
evaluation.
6.
Stress austerity
in development,
small design teams,
freedom to innovate,
and maximum competition
in the
design phase with clear separation
of development
and production,
Encourage continuous
development
of subsystems.
7.
Adopt contracting
practices
and Governmentcontractor
relationships
which will
encourage
most effective
team performance.
development and production
and
and sequential
design, test,
and
the
8.
Continue to improve the Government’s
capability
to
develop cost estimates
covering
the development
phase, as well as the production
phase, of new systerns,
9.
Emphasize life
cycle costing
to gain better
perspectives on proposed new systems and to strengthen
cost-effectiveness
analysis.
f
10.
Continue the current,
strong emphasis on upgrading
the competence, stature,
and tenure of program
managers and procurement
specialists.
11.
Continue to emphasize operational
test and evaluation by establishing
in each military
department
an organization
independent
of the developer and
the user,
The senior DOD official
in these activities
should report
to the Secretary
of Defense or
to his deputy.
22
.
.
12.
One of the deputy secretaries
assume the responsibility
for
system acquisition.
13.
Improve the planning
for maintaining
ment and production
base.
(B-163058,
1973.)
23
of Defense should
mission analysis
and
the developMar. 26,
t
NEED TO CLARIFY POLICY ON INFLATION AS
A FACTOR IN COST ESTIMATES OF PROPOSED
PROGRAMS
Department
of Defense and civil
agencies
Inflation
is defined as a persistent
and appreciable
rise in the general level or average of prices for labor and
material e When an agency requests the Congress to authorize
and appropriate
funds for a program, realistic
cost estimates,
including
inflation,
are needed to be considered
in deliberThe Office
of Management
ations on the merits of the program.
and Budget (OMB) has a long-established
policy
that excludes
allowances
for future
price increases from budget requests
presented
to the Congress.
Inflation
has little
effect
on
programs for which funds are budgeted and obligated
for a
programs, however, OMB’s policy
single year D For long-term
may result
in approval of programs by the Congress on the basis of incomplete
information.
GAO examined the methods by which
consider
inflation
in estimating
costs
and disclose
them to the Congress.
Government agencies
of long-term
programs
Some agencies included allowances for inflation
in their
budget requests
despite the OMB policy.
The allowances were
and
the
Congress
did not receive
not so identified,
however,
budget estimates
prepared on a consistent
basis.
Also, agencies frequently
prepared cost estimates
for internal
use-in contrast
to the cost estimates
submitted
to the Congresswhich included allowances for inflation.
In 1969, DOD requested authority
from OMB to provide for
inflation
in its cost estimates
for major weapon systems and
other large projects.
The request was denied.
DOD then instructed
the military
services
to prepare two estimates--one
excluding
inflation
for OMB use and one including
inflation
for DOD use.
In response to DOD’s later
request,
OMB modified its policy with respect to 1972 and 1973 fiscal
year
budget estimates
for major weapon systems and major construction.
GAO suggested to the Director,
OMB, that cost estimates
for long-term
programs include an estimate
for inflation
and
that the estimate
be presented
to the Congress as supplemental
24
,
data.
OMB did not agree.
OMB believes
that including
inflaeven on the suggested supplementary
bation in cost estimates,
sis, would tend to increase Government procurement
costs o
OMB has sound reasons for not desiring
to include inflation in the formal Federal budget.
However, to assess and
the Congress should have inauthorize
long- term programs,
as
realistically
as possible,
the total
formation
showing,
Agencies should have estimates
for
expected program costs.
inflation
available
to submit to appropriate
congressional
committees for their
use when the programs are under consideration.
(B-176873, Dec. 14, 1972.)
25
RESEARCHAND DEVELOPMENT
COORDINATION NEEDEDAMONGGOVERNMENT
AGENCIES TO INSURE MAXIMUM SHARING
OF TECHNOLOGY
Department
of Defense
and civil
agencies
GAO sought to identify
ways by which DOD and Federal
civil
agencies can share and put to greater
use the Government’s technological
resources
to solve sociological
problems in such areas as transportation,
law enforcement,
environmental
protection,
education,
housing,
and urban develThe contribution
which DOD can make becomes clear
opment.
upon realizing
that DOD spends about $8 billion
a year in
research and development-- nearly half the Federal research
and development budget- - involving
virtually
every scientific
and technical
field.
This sharing process is called technology
transfer.
It
means that technology
developed for a particular
purpose may
be adapted and applied to fill
a different
need.
Transfer
methods may be:
1.
Passive-- collecting,
technical
documents
tial users.
processing,
and distributing
and data on request of poten-
2.
Active-- personal liaison
between developers
of
technology and its potential
users, frequently
aided by a third-party
transfer
agent.
The transfer
process is complex, particularly
where the developer and potential
user do not have similar
technical
backgrounds and where the commonality of problems is not obvious,
In a report
submitted
to the Congress in December 1972,
CA0 pointed out that DOD’s efforts
are primarily
passive.
Active participation
has been inhibited
by the lack of policy
guidance and the question
of whether DOD funds may be expended for other than mission-related
research.
In the absence of a national
policy and of guidelines
which clearly
define the responsibility
of all agencies to encourage technology transfer,
civil
agencies differ
widely in the extent
that they seek and use DOD technology.
26
GAO recommended that the Secretary
of Defense establish
policy and procedures
to encourage active
transfer
of DOD
technology
to civil
agencies.
GAO also recommended that the
Director,
Office
of Management and Budget:
--Establish
a Government-wide
policy
for technology
transfer
and issue guidelines
for formal active transfer efforts.
--Provide
for a small technology
transfer
team as a
pilot
effort
to assist
Federal agencies in matching
technological
resources
with their
needs in solving
pressing
national
problems.
The Secretary
of Defense has issued a policy
statement
endorsing nondefense work in DOD laboratories,
subject
to
certain
specified
considerations.
The policy
statement
is
an essential
first
step; guidelines
to put the policy
into
effect
still
are needed.
The Office
of Management and Budget said that it had
long been the Government’s policy
to encourage technology
transfer
and cited steps being taken in this regard but did
not agree to provide written
guidelines
for active transfer
efforts
by Federal agencies.
(B-175132, Dec. 29, 1972.)
27
DEVELOPMENT
AND USE OF FLIGHT SIMULATORS
COULDREDUCECOST
OF MILITARY FLIGHT TRAINING
Department
of Defense
GAO reviewed commercial atid military
uses of simulators
for flight
training
to find out if greater
use of simulators
in DOD would reduce costs of flight
training
without
weakPilot
training
programs of the Air
ening pilot
proficiency.
Force and the Navy were reviewed because these services
fly
the most fixed-wing
aircraft.
The Air Force and the Navy fly about 8.4 million
hours
Hourly operating
costs
a year, much of which is for training.
for fuel,
maintenance,
and spare parts range from less than
$50 for light
trainers
and utility
aircraft
to more than
$1,500 for combat aircraft.
Advancements in technology
are continually
improving
flight
simulators’
ability
to duplicate
the operating
characteristics
of flying
and flight
environment.
Commercial
airlines
have taken advantage of breakthroughs
in simulator
technology
and have replaced various phases of flight
training with training
in improved simulators.
The military
services have not always availed themselves of the advanced technology partly
because of the operational
requirements
and
priorities
of the Southeast Asia conflict.
Air Force and Navy studies
completed in 1972 projected
that, with better
simulators
and improved training
techniques, flight
time at basic pilot
training
schools could be
reduced in the mid-1980s by about 46 to 49 percent,
depending on the type of aircraft
involved.
The extent that simulator
training
can replace flight
training
in combat aircraft
used in intermediate
training
and operational
squadrons
is not known. However, substantial
savings are likely.
A
’
25-percent
reduction
of flight
training
in such aircraft
would save about $455 million
annually;
a 50-percent
reduction would save about $910 million
annually.
The range of potential
savings is necessarily
broad because under the current
state of the art in simulator
technology there is no basis for accurately
estimating
the amount
of flight
training
future
simulator
use can replace.
However) with the development of more sophisticated
visual
28
simulators p the range of actual flight
characteristics
and maneuvering which can be accurately
duplicated
by simulators
should increase and should permit more replacement
of flight
training
in aircraft.
The military
services
have recently
taken several steps
to increase simulator
development and use for pilot
training
which GAO believes
are constructive.
However, continuing
emphasis will
be necessary for several years.
This will
require current
research and development funds to be spent to
achieve future
long-term
benefits.
Accordingly,
GAO recommended that the Secretary
of Defense require
the Navy and
the Air Force to:
’
2
/
--Put a higher priority
on developing
improved simulatoss which can replace maximum amounts of flight
training.
--Insure
that development and use of adequate simulators
are integral
parts of acquisition
or modification
programs for sophisticated
aircraft.
I
--Use simulators
as much as possible
to reach and maintain desired proficiency,
including
the establishment
of simulator
grading methods which will
provide a more
accurate
evaluation
of pilot
proficiency.
The Assistant
Secretary
of Defense (Manpower and Reserve
Affairs)
agreed fully
with the recommendations
and stated
that:
--DOD understands
the need to explore alternatives
traditional
flight
training
programs.
to
--Advance simulators
have been delivered,
have been
placed on order,
or are under development for the
latest
weapon systems in the inventory.
--Indepth
studies will
be made to objectively
individual
performance,
learning
transfer,
related
to this training
approach,
determine
and costs
GAO plans to evaluate the effectiveness
of these
in future
reviews.
(B-157905, Aug. 9, 1973.)
29
actions
1
1
YROBLEMSIN DEVELOPMENTOF THE SAM-D
SURFACE-TO-AIR MISSILE
Department
of the Army
The Chairman, Research and Development Subcommittee,
Senate Committee on Armed Services,
asked GAO to review the
SAM-D surface-to-air
missile
system which was in the developA report on the review, submitted
to the Congress
ment stage.
t'SECRET"tl The following
is an unin May 1973, is classified
classified
summary of the report.
/
The Army is developing
the SAM-D to replace the Improved
HAWKand Nike Hercules systems.
The Department of Defense
justifies
the replacement
on the basis that the SAM-D will be
more cost effective.
Comparing the SAM-D with the Improved
HAWK shows that:
--A single Improved HAWK radar can scan a greater area
than a single SAM-D radar.
The Army is studying ways
to ,increase the SAM-D radar coverage and ways to increase radar survivability
against enemy antiradiation
missiles.
--Reloading
times for the SAM-D are significantly
longer
than for the Improved HAWK. However, an Improved HAWK
battery
is easier to overwhelm than a single SAM-D
fire section,
since the Improved HAWK can engage fewer
targets concurrently
than can the SAM-D.
--The SAM-D can track a significantly
greater
targets
than can the Improved HAWK.
number of
--The SAM-D has a longer range, a higher altitude
capability,
and a faster
firing
rate than the Improved
HAWK.
--The Army expects to use fewer personnel to deploy the .
SAM-D than are needed for deployment of the Improved
HAWK.
On the basis of these findings
Congress may want to consider:
GAO suggested
--What assumptions were made justifying
that
greater engagement capability
would offset
reloading
time,
30
that
the
the SAM-D's
its slower
--Why the Army used its own assessment of enemy threat
rather
than that of the Defense Intelligence
Agency
and whether a new analysis
should be made that would
include consideration
of all support and systems that
would be available,
including
ground and air,
to
counter the threat
beyond 1980.
--Whether the Army has left
its forces and the assets
it is to protect
vulnerable
to attack by developing
a
system, the SAM-D, that has a limited
radar coverage.
--Whether
the SAM-D, or any other air defense system for
that matter,
can survive
or be effective
in an environment where antiradiation
missiles
are used.
--Whether
the Army is still
assured.about
the prospects
of being able to operate the SAM-D with fewer personnel and attain
simplified
maintenance
in view of
changes in quantities
to be acquired and changes in
performance
characteristics.
--Whether
the decisions
to defer testing
of critical
and guidance
components, such as the warhead-fuzing
subsystems,
until
a considerable
expenditure
of funds
has been made is justified
in view of past experience.
--Whether the current
trend of rising
costs on the SAM-D
program can be curtailed
and whether continued
rising
costs would impact on the capabilities
and quantities
of fire
sections
acquired.
--Whether a new cost-effectiveness
study is warranted
in view of the changes made to the SAM-D performance
characteristics,
quantities,
and additional
changes
contemplated,
as well as the product improvement program on the Improved HAWK.
Another matter that the Congress may wish to examine
relates
to the Mutual and Balanced Force Reduction Program
presently
under negotiation.
Since the need for the SAM-D
is partly
predicated
on the army’s assumption that its forces
reduction
in the size of these
in Europe will
be increased,
forces and the Warsaw Pact Forces could impact significantly
on the quantities
of SAM-D fire
sections
needed in that area.
(B-163058, May 7, 1973.)
31
DEVELOPMENTOF IN-FLIGHT ESCAPE SYSTEMS
FOR HELICOPTERS COULD REDUCE
FATALITIES AND SEVERE INJURIES
Department
of Defense
Navy-sponsored
studies
show that most helicopter
fatalities
result
from uncontrolled
descents which, in turn,
result in crashes -causing structural
failures
and fires.
The
studies
show also that in-flight
escape systems could prevent over 40 percent of these fatalities.
Other proposed
survivability
features
could further
reduce fatalities.
The Navy has studied such escape systems since 1962.
the most, has conHowever, the Army, which uses helicopters
centrated
on reducing injuries
and fatalities
by developing
and installing
energy-absorbing
seats to reduce impact forces
and crashworthy
fuel tanks to prevent fires.
Although the
Army’s system is important,
it offers
protection
to crew
members and passengers only when impact forces are low.
From September 1967 to September 1972, 210 Army and 10
Marine Corps Cobra pilots
were killed
in Vietnam.
A Navy
anaiysis
indicated
that in-flight
escape systems could have
prevented 6 out of every 10 Cobra pilot
deaths.
In March 1972 the Navy obtained $500,000 to begin developing individual-type
escape systems for Cobra helicopters.
The Army is helping to fund this development effort.
Although the Army agrees that an in-flight
escape system is desirable
for its new advanced attack helicopter,
its current
design requirements
do not provide for such a system.
GAO
believes
that the development of an in-flight
escape system
should be emphasized to insure its availability
for this
helicopter.
The Navy has deemphasized developing
and testing
a
capsule-type
in-flight
escape system for larger
troop transport helicopters
primarily
because of additional
weight involved.
GAO recognizes
that
tems for cargo-passenger
and constraints
regarding
available
technology
for
development of in-flight
escape syshelicopters
may pose severe problems
weight and complexity.
However,
capsule-type
in-flight
escape systems
32
Therefore
has been demonstrated.
sible system for the troop-carrying
continued.
GAO recommended that
effort
to develop a feahelicopters
should be
the Army:
--Emphasize and give priority
to developing
an in-flight
escape system for the advanced attack helicopter.
--Monitor
the current
development of the escape system
for the Cobra helicopter
to determine whether the concept could be applied to the design of the advanced attack helicopter.
--Reevaluate
the design requirements
for the advanced
attack helicopter
to insure that it will
be capable
of accepting
an in-flight
escape system when it becomes available.
GAO further
recommended that effort
to develop a feasible solution
to provide an in-flight
escape capability
for
the larger
cargo-passenger
helicopters
be continued.
DOD said it would continue
efforts
to increase
the effectiveness
of escape systems but disagreed
that emergency
in-flight
escape systems should be included in helicopters
now being developed or planned for development.
DOD contended that an in-flight
escape system had not been ‘vdemonstrated
to be the most effective
method of improving
flight
safety,
considering
both human life
values and dollar
costs.“’
GAO believes
that DOD is not adequately
considering
costs of not having emergency in-flight
escape systems:
the
--Trained
and experienced
aviators
and other trained
military
personnel
are killed.
Army and Navy estimates of the initial
cost of training
each helicopter
pilot
range from $20;000 to $100,000.
--Death
benefits
must be paid.
--New pilots
must be trained.
--Helicopter
readiness
pilot
and crew morale
is adversely
affected.
33
as well
as military
GAO recognizes
that it may be expensive to develop,
install,
and maintain
an in-flight
escape system but believes
that the potential
decrease in the number of fatalities
and
severe injuries
warrants
further
consideration.
(B-177166,
June 12, 1973.)
34
IMPROVEMENTNEEDED IN DEVELOPMENT
e AND USE OF COMPUTERMODELS
Department
of Defense
A substantial
part of the. cost of conducting
computer
and
analytical
studies
was
represimulations,
war games,
sented by the development and operation
of models used in
these activities
e A model is a documented set of rules,
methodologies,
techniques,
procedures,
mathematical
formulas,
and logic designed to simulate
or approximate
selected
elements and/or functions
of reality
that are deemed essential
to the particular
situation
or system being studied.
Modeling is one of the principal
tools the operations
research and systems analysis
community uses to simulate,
“game, I1 or study complex problems or situations
involving
(1) technical
performance
of equipment or systems,
(2) polities,
strategies,
and tactics,
and (3) force structures,
including the determination
of optimum size and appropriate
mixes of personnel and weapons.
Its purpose is to provide
decisionmakers
with results
that should present objective
and statistically
reliable
bases for decisions
in these areas.
GAO reviewed
in DOD.
the development
and use of computer
models
Numerous models have been developed in DOD over the past
10 years to cover a broad spectrum of simulated war, defense,
and military
problems.
GAO obtained data on 132 models
which represented
a fairly
complete picture
of the modeling
activity
throughout
DOD. Some observations
derived from
analyzing
the data were:
--Development
of models was about equally
tween contractor
and in-house activities.
divided
be-
--Reported
costs of building
104 models totaled
$28,805,500,
and the average model cost was about
$276,900.
The cost of individual
models ranged from
about $1,200 to $3 million,
--Building
a model is generally
a lengthy undertaking.
The average reported
development time was 18 months;
some models were under development for as long as
7 years.
35
--Many models were related
and formed the basis for
to previously
developed
follow-on
models.
ones
--Independent
checks were not made to insure the accuracy, timeliness,
consistency,
and overall
quality
of
the data used in about one-third
of the models.
--Technical,
doctrinal,
and force-structure
evaluations
were the principal
stated purposes for building
models; models were then used to answer specific
questions and to study operational
problems in five major
areas : logistics
operations,
ground combat, nuclear
and naval warfare.
exchange, air warfare,
There were indications
that uncertainties
may not be
adequately
considered
in the studies
employing a computer
model and that DOD decisionmakers
frequently
may not be made
aware of the uncertainties
inherent
in the study results.
The proper.use
of study results
requires
that the relevant
qualifications
reflecting
the inherent
uncertainty
be presented to the decisionmaker
along with the results.
If a
decisionmaker
is to be enlightened
and is to receive full
benefit
from a study, he should be fully
informed of the limitations
and uncertainties
and how they were treated,
the
range of assumptions that were made, as well as other qualifying factors
that influenced
the study results
and conclusions.
GAO recognized
the efforts
within
DOD to improve the
use of computer modeling and simulation
techniques
in studies
and analyses programs.
The review indicated,
however, that
additional
emphasis was needed in this area.
Accordingly,
GAO recommended that the Secretary
of Defense:
--Formally
adopt, as DOD policy,
guidelines
for reporting study results
similar
to those of the Operations
Research Society of America.
--Establish
a requirement
for periodic,
independent
technical
reviews of computer models to insure continued improvement in their development and employment
as well as in the studies
in which they are used.
36
DOD endorsed the general concepts indicated
in the recomputer modeling
port; namely, that the.use of large-scale
to assist
decisionmaking
must be accompanied by continued
review of these models, and that principles,
such as those
outlined
by thd Operations
Research Society of America,
As for establishing
more formal guideshould be followed.
lines,
DOD was of the opinion that adequate guidelines
are
present in existing
directives
and manuals and that extend(B-163074,
ing reporting
requirements
was unnecessary.
May 3, 1973.)
37
SUPPLY MANAGEMENT
ECONOMIESAVAILABLE THROUGHIMPROVED
MANAGEMENTOF NAVY SHIPBOARD INVENTORIES
Department
of the Navy
During fiscal
year 1970 budget hearings,
the Defense
Subcommittee,
House Committee on Appropriations,
expressed
concern over the Navy’s request for $740 million
to buy repair parts and supplies needed to fill
the operating
requirements of its ships in view of the estimated
$1 billion
inventory of such items already on board the ships,
GAO made
this review to determine if the Navy was making maximum use
of available
repair parts and supplies
and to evaluate the
adequacy of its system for managing shipboard inventories.
GAO found (1) an estimated
$5.8 million
worth of excess
inventories
were loaded on 57 new ships because of delays in
applying an improved supply support concept to these ships,
(2) excess repair parts valued at $2.3 million
were accumulated at two private
shipyards because outfitting
inventories
for 14 ships were purchased before firm requirements
were
established,
(3) millions
of dollars
worth of excess outfitting
inventories
were held at private
shipyards
for periods of up to 5 years, and (4) at one Navy shipyard over
1,000 usable items were removed from ships being modernized
and were unnecessarily
disposed of and replaced with new
items,
GAO also found that the Navy does not have an adequate
system for promptly identifying
and redistributing
excess
repair parts and supplies, aboard ships in the .operating
fleet
which are needed by other ships.
As a result,
an estimated
$59 million
worth of excess inventories
are accumulated
aboard Navy ships during the 3nyear period between supply
overhauls.
GAO estimated that between $11 million
worth and
$29 million
worth could be used to support other ships.
GAO further
found an estimated
$100 million
worth of
idle inventories
on inactive
ships and at inactive
ship
maintenance facilities.
Although the Navy is using some of
38
these inventories
to support active ships,
as $20 million
worth could be used without
mobilizatitin
readiness
of inactive
ships.
GAO recommended that
that:
the Secretary
possibly
impairing
as much
the
of the Navy insure
--Eleven
ships scheduled for delivery
after
September 1,
1973, be outfitted
with revised,
rather
than conventional , allowances of hull a mechanical,
and electrical
repair parts.
--Inventories
taken off ships undergoing shipyard work
be used where possible
to resupply
the same ships
undergoing
concurrent
work at the same shipyard.
--A system is established
to provide for prompt identification
and redistribution
of inventory
excesses
on board active ships.
’
--The need for strict
compliance with prescribed
shipboard procedures
for recordkeeping
and requisitioning
material
is emphasized.
--The Navy’s
on inactive
policy
concerning
ships’ is furt,her
the use of inventories
revised,
The Navy agreed with the intent
of GAOfs recommendations
but did not, in some case, agree with the method of implemenThe Navy cited a number of actions which had been
tation.
taken or which were being taken, that should,
if properly
carried
out, bring about many of the needed improvements.,
The navy disagreed with GAO’s estimate
of the amount of excesses, particularly
aboard ships in the operating
fleet.
They estimated
actual excesses to be about one-fourth
as large
as GAO projected.
After discussing
this matter with Navy officials,
GAO concluded that its estimate
of $59 million,
while imprecise,
was reasonable and represented
a fair
indication
of the significance
of this problem,
(B-125057,
Apr. 9, 1973.)
39
SAVINGS ATTAINABLE BY REVISING
PACKAGING CRITERIA
Department
of Defense
At the outset of the U.S. buildup in Vietnais, fast
logistical
response was strained
severely
because facilities
there were too meager to handle vast quantities
of supplies.
Many supplies
could not survive
the rigors
of transportation,
outdoor storage in a hostile
environment,
and multiple
and
rough handling.
Great material
losses were sustained,
To correct
this
situation,
stringent
and costly packaging criteria
were
specified
across the board, regardless
of destination.
Many of those stringent
criteria
continue in effect
although conditions
giving rise to them have changed significantly,
As a result,
DOD is spending millions
of dollars
a year for packaging it doesn’t need,
In addition,
bidders
and contractors
are required
to wade through voluminous
standards , specifications,
and guidelines
which are repetitious,
redundant,
or not applicable.
Contractors
whose own commercial packaging often
that specified
are further
confronted
by inconsistent
of packaging required by different
DOD buyers.
equals
methods
GAO recommended that the Secretary
of Defense discontinue blanket assignment of packaging levels for “protection
against the most severe conditions
known or anticipated;”
determine the suitability
of commercial packaging and make
greater
use of it where it meets minimum Government requirements ; and closely monitor the progress
of the U.S. Army
Materiel
Command Packaging,
Storage, and Containerization
Center--DOD’s
focal point for developing
and monitoring
the
packaging program- -and reaffirm
its authority
to carry out
its intended objectives,
DOD, concurring
in the report’s
objective,
considers
that actions have been taken or are part of an ongoing program to carry out the intent
of the recommendations.
Its
guidance to various DOD elements has been revised and expanded to incorporate
some of GAO’s recommendations.
(B-157476, May 21, 1973.)
40
REQUIREMENTSFOR MODULARELECTRONIC
EQUIPMENT FOR AIRCRAFT COULD BE REDUCED
Department
of the Air. Force
The Air Force has invested billions
of dollars
in
electronic
equipment used in aircraft
(avionics).
For exthe
avionics
and
spare
parts
for
its
F-111D
aircraft
ample)
alone have cost more than $900 million.
A significant
development in the field of electronics
has been the introduction
of modular design; under this
concept many expensive “black boxes” making up an avionics
system contain plug-in-type
components known as modules.
The principal
advantages
of modular
design
are:
--Avionics
units or black boxes can be rapidly
replaced
in aircraft
on the flight
line,
so the time aircraft
are out of service is minimized.
--Most black boxes can be repaired rapidly
time can be taken to repair modules.
and more
Because avionics are becoming more and more costly,
investment in less expensive spare modules, rather than in more
expensive spare black boxes, means substantial
savings,
GAO found that the Air Force could have substantially
reduced its requirements
for avionics
spares for the A-7D
and the F/FB-111 if its management personnel had used more
realistic
estimates
in determining
the requirements.
The
estimates
used did not recognize all the advantages of modular design.
For example, estimates were based on the premise that:
--Repairing
actually
black boxes would
being experienced.
take more time
--More black boxes modules were being
repair
facilities.
sent
than was
to depot
The second premise was the result
of a management reporting
system which did not routinely
show actual repair cycle time.
As a result,
expensive black boxes rather than less expensive
41
modules continued
to be bought; many black boxes were
awaiting repair
because of the lack of subcomponents and
maintenance capabilities
to repair
them,
The Air Force is considering
modular design for other
types of equipment in its inventory,
In view of-the
significance of the problem, GAO made several suggestions
to the
Secretary
of the Air Force to insure that the maximum benefits
were achieved from the modular concept,
DOD generally
agreed with GAO’s suggestions,
and said
GAO’s information,
provided during the review,
had proven
useful to Air Force logistics
planning and had resulted
in
improved management.
The Air Force reduced requirements
for
items for F/FB-111 and A-7D aircraft
by $79 million.
More
importantly,
the Air Force has begun preventing
a recurrence
of the matters discussed in the report,
(B-133396, July 3,
1973.)
42
MAINTENANCEp REPAIR, AND OVERHAUL
LITTLE PROGRESSIN ACTING ON OPPORTUNITIES
FOR SIGNIFICANT SAVINGS BY CONSOLIDATING
REAL PROPERTYMAINTENANCEORGANIZATIONS
Department
of Defense
In 1968 GAO reported potential
annual savings of
$3.4 million
by consolidating
real property
maintenance
organizations
on Oahu, Hawaii, and in the Norfolk,
Virginia,
area.
DOD,
which
spends
$3
billion
yearly
on
real
property
.
maintenance,
p romised to consider consolidation
at those
locations
and elsewhere.
GAO reviewed DOD progress in
carrying
out the 1968 recommendations
because of the increasing costs, concern with high Federal budgets, and need
for managing the military
establishment
more efficiently.
In the 4 years since GAO’s last review, almost no
consolidation
had taken place m DOD made studies at 25
locations,
including
Oahu and Norfolk.
Most of these did
not seriously
consider consolidation.
Instead of considering the feasibility
of consolidation,
.the Interdepartmental
Committees making the studies emphasized the joint
use of
equipment and increased use of and/or consolidation
of
contracts.
-.,Some savings have been reported.
The effectiveness of the committees was reduced because:
--Many members represented
maintenance organizations
that would be affected
by consolidation.
--Informal
guidance from committee members in Washington, in conflict
with the original
intent
of the
“studies,
advised the Interdepartmental
Committees not
to be concerned with the feasibility
of consolidation.
Although efforts
to date have merit,
potential
savings
from consolidation
seem far larger than those attained.
Some of the above studies and other studies have identified
various locations
where consolidation
would be economical,
Benefits
of consolidation
are demonstrated
by Navy experience
For
example,
three
locations
with Public Works Centers.
where centers have been serving installations
in their
vicinity
for 6 years report annual savings of $1 million.
Some Navy Public Works Centers, however, are underused
43
because individual
installations
are not required
to use them
but, instead,
maintain
their
own duplicative
maintenance force.
GAO recommended that the Secretary
of Defense should have
maintenance organizations
consolidated
where studies
indicate
consolidation
would be economical.
GAO also recommended that
the Secretary
of the Navy should require,
where feasible,
that all naval activities
within
a reasonable distance
of a
Public Wor,ks Center use it fully.
DOD said that interservice
support agreements have been
most effective
in consolidating
real property
maintenance
The
use
of
such
agreements
has
resulted
in savings
activities.
by avoiding unnecessary duplication
of functions
and by increasing
the use of consolidated
contracts.
Although stressing
limitations
that must be overcome in complete organizational
consolidation,
DOD said that such consolidation
was its ulti;
mate goal.
DOD also said the Navy is improving use of Public
Works Centers.
Revised guidance issued by DOD in March 1972
is an initial
step toward consolidating
maintenance organizations wherever practical.
GAO plans to look into the implementation
of this guidance and the effectiveness
of DOD’s
continuing
efforts
in this area.
(B-164217, Dec. 12, 1972.)
44
.
*POTENTIAL FOR GREATERCONSOLIDATION
OF MAINTENANCEWORKLOADS
Department
of Defense
In a report
issued to the Congress, we disclosed
problems
concerning
the effectiveness
of interservice
maintenance programs of the military
services.
We found that each of the
military
services
has overemphasized
developing
its own inhouse depot maintenance capability
instead of trying
to
Although existing
policy
use other services’
existing
ones.
encourages interservicing,
the services
have circumvented
the spirit
and intent
of this policy.
Consequently,
they have
extensively
duplicated,
and thus, underused maintenance capacities.
The Secretary
of Defense has not been able to effeccontinued use of their
own maintively
control
the services’
tenance capabilities
because they have claimed a need to
maintain
mission-essential
equipment in their
own facilities.
GAO recommended that the Secretary
of Defense form a
plan to realign
the management of depot-level
maintenance.
This plan should consider the following
alternatives:
(1)
establishing
an independent
agency, similar
to the Defense
for the depot-level
SUPPlY Agency 3 to assume responsibility
maintenances
of all commonly used equipment items or (2)
assigning
a single manager to be responsible
for maintenance
of specific
classes of items.
DOD agreed to consider
implementing our recommendation
for a single manager responsible
for maintenance of specific
classes of items.
(B-178736,
July 6, 1973.)
45
NEED FOR IMPROVEMENT
IN INDUSTRIAL MANAGEMENT
Denartments
of the Army and Navy
In 1971, GAO advised the Congress that industrial
management reviews can effectively
identify
ways a Government
contractorfs
costs can be reduced and that it would be practicable
for GAO to undertake
such reviews.
GAO conducted reviews at the Naval Air Rework Facility,
Alameda, California,
and the Army Aeronautical
Depot Maintenance Center, Corpus Christi,
Texas, and identified
opportunities
for improving overall
industrial
operations
with
related
savings which could amount to several million
dollars
a year.
Some areas identified
were common to both installations :
--Converting
idle time of the production
allow each depot to absorb substantially
without
increasing
the workforce.
workforce
would
more work
--Improving
the work measurement systems and labor
standards programs would improve workload scheduling
and production
control,
thus enhancing total
productivity
of both installations.
--Recording
machine usage would assist management in
decisions
regarding
retention,
redistribution,
and
acquisition
of equipment,
as well as form a realistic
basis for preventive
maintenance programs e
--Repair
costs could be reduced through more systematic
decisionmaking
regarding
repair
parts which could be
purchased more economically
than the present practice
of making or repairing
the parts.
--Inventory
quantities
economies
of parts
can be achieved by reducing large
accumulated in maintenance shops.
In addition
to the potential
savings these areas indicate) improvements in DOD industrial
activities
play an
important
role in the level of operational
readiness
of
For
example,
the
Alameda
respective
military
forces.
report
states that average repair
time for critically
needed
aircraft
components during fiscal
year 1971 was 57.8 calendar
46
the stalradard time by 35.8 days.
that 26 additional
aircraft
would have been fully
if the repair
standard had been met.
days 9 exceeding
GAO estimated
operational
Each facility
began implementing
suggested corrective
actions during the reviews,
GAO recommended that DOD plan
periodic
industrial
management reviews of its industrial
facilities.
DOD told GAO that it was exploring
the feasibility
of
making such reviews but believed the types of, studies
GAO
performed were already being done through internal
audit,
management reviews.
Inspector
General, and other functional
(B-133014, July 3, 1973.)
47
NEED FOR MORE REALISTIC PROJECTIONS OF
FUNDING REQUIREMENTSFOR SHIP OVERHAULPROGRAMS
Department
of the Navy
Fiscal years 1972 and 1973 were characterized
by substantial
changes in the Navy’s ship overhaul program.
Although the Navy received all the funds they requested in
these years, fewer ships were overhauled than originally
planned.
Because of this, your Committee directed
that
GAO review the Navy’s ship overhaul and repair programs for
1972 and 1973.
GAO found that the Navy did not anticipate,
and therefore did not budget for, the substantial
increase in the
cost of overhaul work in Navy shipyards.
Actual ship overhaul costs were 27 percent higher in 1972 than original
As of March, the 1973 ship overhaul costs were
estimates.
about 20 percent higher than original
estimates.
Because overhaul costs were higher than available
funds, the Navy had to defer planned overhaul work.
The
original
1972 overhaul schedule of 139 ships was reduced
to 102 ships, and the 1973 overhaul schedule of 95 ships
was reduced to 84.
Budget requests were based on overhaul-experience
in
fiscal
years 1969 and 1970.
Cost estimates
were developed
from (1) forecasts
of the amount of repair that ships would
need when they entered overhaul in 1972 and 1973, expressed
as direct
labor man-days
and (2) projections
of man-day
rates and material
costs in those years.
The procedures
needed for overhaul
used to forecast
the number of man-days
t
were not accurate because:
the man-days
--Generally,
were understated.
--Some planned
--Labor
required
work was not’ included
and material
costs
for
overhaul
in the estimates.
were allocated
arbitrarily.
--Prior
overhaul costs, which were incomplete,
used to estimate future work.
48
work
were
.
\
Also, projections
Qf man- ay rates in Navy
shipyards
were substantially
understat
Shipyard repair
costs)
expressed as a cost per man- ays increased
from $69 in 1969
to $109 in 1973--an increase of almost 60 percent,
Most of
the $40 increase,
about $28 a man-day, is attributable
to
wage and salary increases
for direct
and indirect
employees,
The remainder)
about $12 a man-day, is attributable
to increased overhead costs.
,
Various factors
contributed
to the overhead cost increase, but the most significant
factor
was reduced employment at the shipyards.
Employment dropped from about 90,000
in 1969 to an estimated
67,000 at the end of 1973--a decrease
of about 25 percent.
The increased
cost for overhauls
in 1972 and 1973 revised the outlook for ship maintenance.
Although the Navy
originally
anticipated
that only one ship’s overhaul would
be overdue at the end of 1972, 21 ships with overhaul costs
of $87 million
were overdue by June 30, 1972.
Because this
backlog carried
over into 1973 and because overhaul costs
increased,
the number of ships overdue for overhaul has
further
increased.
The Navy projects
that 33 ships, with
an estimated
overhaul cost of $233.4 million,
will
be overdue at the end of 1973.
This undoubtedly
will
affect
the
plans for ship overhauls
in 1974 and future
years.
Furthermore, the full
impact of the Vietnam operation
on overhaul
costs may not have been totally
realized
or provided
for
in the 1974 overhaul program.
The Navy has changed its procedures
for estimating
thk
work needed when ships are overhauled.
These new procedures)
which appear to be improvements,
were used to prepare the
1974 overhaul program.
The Navy continues
to be faced with high costs for
repair work in its shipyards.
Additional
pay raises can be
expected in the future
as well as increased material
costs.
The most significant
cost influence
is the low use of
If shipyard
the Navy shipyards
in terms of their
capacity.
capacity
is expressed as a function
of shipyard employment
the 10 existing
shipyards
are operating
at about
levels,
75 percent
of their
1969 levels.
Since overhead costs have
not dropped proportionately
to the use, the overhead cost
per unit of production
has increased.
49
The Navy has several
--Close selected
ing yards.
options
shipyards
--Emphasize improving
of its shipyards.
to control
and increase
efficiency
costs.
use of remain-
and cost
effectiveness
--Reduce fleet
size by inactivating
older ships
less reliability
and high maintenance costs.
with
The closures of two shipyards,
recently
announced,
Although we did not specifically
should help this situation.
review the effect
of these closures,
ship overhaul and repair workloads at those yards can eventually
be redistrib(B-133170,
uted to increase the use of other shipyards.
June 7, 1973.)
50
ADMINISTFUTIQNOF MANPOWER
MATTERS
PROBLEMS
IN MEETINGMILITARY MANPOWER
NEEDSIN THE ALL-VOLUNTEER
FORCE
Department
of Defense
As July 1, 1973, drew near, the Congress was faced
essentially
with three choices in legislating
the future
method of obtaining
men and women to serve in the Armed
Forces : (1) let the existing
draft
authority
expire and rely
entirely
on volunteers,
(2) extend the existing
draft
system, or (3) rely on an all-volunteer
force but enact some
form of standby draft
authority.
GAO’s report
to the Congress sought answers to some of the major issues associated
with putting
the volunteer
system into operation.
The report
stated that obtaining
and retaining
sufficient officers,
except those in health professions,
did not
appear to be a problem.
there
appeared
to
be
less
However,
optimism about the services’
ability
to obtain a sufficient
number of qualified
enlisted
personnel.
On the basis of the
experience with true volunteers
and quality
services I prior
goals,
it appeared that there would be a shortfall
of between
11,000 and 83,000 new enlistments
in fiscal
year 1974, compared with a total
requirement
of 354,000.
The shortfall
would occur primarily
in the Army and the Marine Corps and
to a small degree in the Navy.
To avoid these shortfalls,
the services
could accept
more men with below average mental qualifications
(Category IV) and more enlistees
who had not graduated from high
school.
According
to DOD officials,
service quality
goals
had been set at levels difficult
to attain
and were unrealis tically
high.
The Army and the Navy had achieved their
high school graduate goals with true volunteers
in only
1 month since January 1970; the Marine Corps’ goal had not
been achieved at all during that period.
The Air Force, on
the other hand, had no difficulty
in maintaining
quality,
In its report,
GAO illustrated
the importance of obtaining the desired quality
of enlistees
by stating
that the
services
had imbalances in skills
resulting
from a combination of (1) insufficient
men of required
aptitude
and school
preference
and (2) inadequate retention
of men in desired
51
that over one=-half of the skill
skills I GAO reported
categories
in the Army and Marine Corps were either
overmanned or undermanned by more than 20 percent at June 30,
1972, and that filling
school seats for technical
occupations
would be difficult
because true volunteers
tended to have
less education and lower test scores than draft-motivated
volunteers 0 The report
also stated that a 20-percent
shortfall would occur in the Army’s combat arms enlistments
in
fiscal
year 1974 and that the Office
of the Secretary
of Defense had forecast
that, without
special
incentive
pay, there
would be physician
shortages beginning
in fiscal
year 1975
and perhaps sooner.
The report
identified
several alternatives
to using
male volunteers
to fill
military
requirements.
These included increasing
the use of military
women and converting
military
positions
to civilian
positions.
With respect to the Reserve and National
Guard, which
would be the initial
and primary sources for increasing
the
Active Forces in any future
emergency, GAO pointed out that
DOD was predicting
that,
at June 30, 1974, these forces
would be 97,000 below their mobilization
objective
level of
971,000.
GAO reported
that DOD programs for the all-volunteer
force contributed
about 23 percent of the increased manpower
costs occurring
since 1968.
The Office
of the Secretary
of
Defense’s Project Volunteer
costs budgeted for fiscal
year
1974 were about $3.192 billion.
GAO estimated
that as much
as $1 billion
of additional
costs related
to the allvolunteer
force were incurred
annually but were not specifically identified
for all-volunteer
purposes.
GAO expressed
the view that,
if force levels need to be increased
in the
future,
the cost of volunteers
may increase sharply.
The report raised several questions
the Congress and/or its committees might
with DOD:
that
wish
minimum quality
GAO believed
to explore
1.
What are realistic
each service?
2.
What is the probable force level of minimum quality
that could be supported without
using the draft?
52
standards
for
3.
Should some form of standby
enacted?
induction
4.
Should some type of draft be required
cians after fiscal
year 1974?
for
physi-
5.
Should some type of draft
serve components?
for
the Re-
6.
Will the Uniformed
come the foregoing
1973.)
be required
authority
Services Special Pay Act overproblems?
(B-177952, May 2,
53
be
IMPROVEMENTSNEEDED TO INCREASE
EFFECTIVENESS OF THE GOVERNMENT
EMPLOYEES’ INCENTIVE AWARDSPROGRAM
Department
of Defense
GAO reviewed the Government Employees t Incentive
Awards
Program to determine whether cash performance
awards (lumpsum special achievement awards and quality
increases)
and
cash suggestion
awards had been effectively
encouraging
employees to help improve Government operations.
Of the more
than 1,900 randomly selected
employees responding
to a GAO
questionnaire,
56 percent indicated
that the program had not
motivated
them to do a better
job.
During fiscal
year 1972,
Government agencies granted over $16 million
for 91,161 special achievement awards, $4.6 million
for 56,606 employee
and 42,570 quality
increases
having an estisuggestions,
mated first-year
cost of $17 million.
Since these increases
are reflected
in subsequent years’ pay, these awards will
eventually
cost the Government much more.
The Civil
Service Commission reported
measurable benefits
of $315 million
related
to special achievements
and
adopted suggestions.
Related benefits
were not determined
for quality
increases.
GAO’s review was made in 10 civilian
partments
and agencies,
which represented
the Federal Government, and in the Civil
GAO found that:
--Cash
performance
and Defense dea cross section
of
Service Commission.
awards had been used inconsistently.
--There was no clear distinction
between the criteria
for granting
a special achievement award and a quality
increase,
although the latter
is much more expensive.
--Many employees were not
granted.
told
why specific
awards were
--About one-fourth
of Federal civilian
employees are not
eligible
for the quality
increase award because of restrictions
in Commission regulations.
54
--The Commission does not officially
creases in the program although
tacted treated
them as incentive
include quality
the agencies conawards.
in-
GAO found that employee participation
in the suggestion
award portion
of the program could be increased by actively
promoting
and publicizing
this portion
and by processing
sugFurther,
GAO found that the Commission’s
gestions
promptly.
annual report
on the incentive
awards program did not present
a complete picture
because it did not include the substantial
costs of quality
increases
and program administration
and may
have significantly
overstated
measurable benefits e Also,
neither
the Commission,nor
the agencies had made reviews of
sufficient
frequency
or depth to identify
problems in the
program.
GAO recommended that
mission:
the Chairman,
Civil
Service
Com-
--Establish
criteria
limiting
cash performance
awards
to employees whose performance
has clearly
improved
Government operations.
--Revise
standards to clearly
distinguish
between
level of performance
needed to receive a special
achievement award or a quality
increase
so that
ity increases
will be relatively
more difficult
obtain.
--Emphasize the importance
informed of the specific
of keeping employees
reasons for awards.
the
qualto
well
--Include
quality
increases
as part of the Incentive
Awards Program and consider creating
a comparable
value award for employees who are now ineligible
for
quality
increases.
--Insure
that agencies promote and publicize
the program and that suggestions
are processed promptly.
--Increase
the usefulness
of the Commission’s
annual report by including
quality
increase and administration
costs and by improving
the accuracy of reported
benefits
and costs.
55
--Make reviews and evaluations
necessary’to
program strengths
and weaknesses,
identify
The Commission said that GAO’s report
presented a clear
and accurate
perspective
on the Incentive
Awards Program and
that it believed
GAO’s conclusions
and recommendations were
As a result,
the Commission said it had taken,
constructive.
corrective
actions
and will
fully
or planned to take, certain
discuss with agencies the approaches to be taken to deal with
the problems GAO identified.
(B-166802, Nov. 1, 1973.)
56
INCONSISTENT POLICIES IN ADMINISTERING
DISABILITY RETIREMENTS
Deuar tment
of Defense
After
reviewing
military
disability
retirements,
GAO
reported
to the Secretary
of Defense that inconsistent
policies and practices
of the military
departments
might be resulting
in undue costs to the Government as well as inequitable treatment
of disabled service members.
During the review it was noted that excessive time was elapsing
between
the date Army and Air Force members were declared medically
unfit
for active service
and the effective
date of their
retirements.
For the Z-month period sampled, GAO estimated
that the Army and Air Force could have saved between
$825,000 and $1,845,000 by processing
disability
retirements
as expeditiously
as the Navy and Marine Corps.
The report
included recommendations
directed
at overcoming this problem.
GAO also noted significant
variances
among the services
in the ratios
of permanent to temporary disability
retirements, and it appeared that consolidating
the disability
processing
functions
of the four military
departments
would
eliminate
some of the inconsistencies
discussed above.
GAO
suggested that DOD consider
these two matters
in a study of
military
disability
retirement
that was then underway.
DOD generally
agreed with GAO’s findings
and indicated
that its recommendations
were being implemented.
The actions
taken on the recommendations
to expedite
the processing
of
disability
retirements
should result
in annual savings to the
Government of about $8 million.
(B-168308, Mar. 19, 1973.)
57
ENLISTED AIDE PROGRAMSREQUIRE MODIFICATION
Department
of Defense
GAO reported
to the Congress the results
of a review of
the enlisted
aide program of the military
services.
The review was made at the request of Senator William Proxmire.
as of December 1972, 1,722 enlisted
men
GAO reported
that,
were assigned as aides to 860 admirals
and generals and 110
Navy captains.
The remaining 457 admirals
and generals were
not assigned enlisted
aides.
Tasks performed by enlisted
aides were generally
those associated
with domestic servants.
Personnel costs of the enlisted
aide program for fiscal
year
1973 were about $21.3 million;
training
costs were about
In requesting
that the review be made, Senator
$360,000.
Proxmire asked GAO to clarify
the statutory
and budgetary
justification
for the programs and to determine
the nature
and propriety
of tasks assigned to enlisted
aides, which the
report
provided.
The Secretary
of Defense informed GAO that the report
resulted
in several changes in the program.
Major changes
included a 28-percent
reduction
in the number of enlisted
aides and the closing
of training
schools for aides.
These
changes should result
in annual savings of more than
$6.2 million.
(B-177516, Apr. 18, 1973.)
58
NEED FOR CENTRALIZED MANAGEMENT
CONTROL OF CLOSED-CIRCUIT TELEVISION
FOR TRAINING AND EDUCATION
Department
of Defense
At the end of the fiscal
year 1972, the Army, Navy, and
Air Force were using closed-circuit
television
equipment,
costing about $27.3 million,
for education
and training
purposes.
The personnel costs associated
with operating
and
maintaining
the equipment were estimated
to be about
$8.1 million.
GAO’s report
to the Secretary
of Defense highlighted
the importance
of effective
coordinated
or centralized management control
over those highly
specialized,
costly
resources.
The report
stated
that:
1.
Most studios
GAO visited
did not have catalogs
of
television
video tapes produced by other services,
and tapes usable by several services
generally
were produced independently
by each service.
2.
The services
were individually
testing
different
types of new audiovisual
equipment for similar
education
and training
applications
although it
would appear likely
that the services’
joint
testing of new equipment would result
in reduced costs.
3.
Each military
service had incurred
significant
investment and costs in operating
its own closedcircuit
television
studios,
although
(1) some
studios were in close proximity
to one another and
were not being fully
used and (2) the specializedskilled
operating
personnel were in short supply.
GAO made several recommendations
to have DOD provide
more aggressive
centralized
direction
over the services’
use
of television
equipment in meeting training
needs.
DOD officials
generally
agreed with the facts and recommendations
presented
in the report.
(B-177350, Nov. 29, 1972.)
59
IMPROVEMENTSNEEDED IN ADMINISTRATION AND
MANAGEMENTOF TECHNICAL TRAINING
Denartment
of the Navy
GAO’s report
to the Secretary
of the Navy discussed the
findings
of a review made at selected
naval facilities
to
assess the Navy’s administration
and management of technical
About $550 million
was spent during fiscal
year
training.
1973 in the Navy technical
training
activities.
GAO reported that differences
in the interpretation
of instructions
governing determination
of instructor
requirements,
as well
as the lack of management review at the training
locations
resulted
in both overstatements
and understatements
visited,
in Navy training
instructor
requirement
submissions.
GAO
also,found
that the Navy had not established
a formal system
which would provide for collecting,
assessing,
and disseminating information
needed to insure the adequacy of technical
training.
In addition,
the report
stated that,
in the absence of a standardized
instructor
training
policy,
instructors could spend as much as 30 percent of their
tours of duty
observing
classroom presentations
of experienced
teachers,
thereby increasing
the overall
stated requirements
for instructors.
After being apprised of these findings,
Navy officials
initiated
action to deal with most of the problem
areas discussed in GAO’s report.
(B-175773, June 14, 1973.)
60
‘ADMINISTRATION OF THE
RESERVEOFFICERS TRAINING CORPS PROGRAM
SHOULD BE COORDINATED
Deuartment
of Defense
GAO reported
to the Secretary
of Defense the results
of
its review of the management of the ROTC program administered
by each military
service.
The senior ROTC program, in which
72,500 students were enrolled
during the 1972-73 school year
and which prepares selected
college students
for commissions
in the military
services,
cost an estimated
$155 million
during fiscal
year 1973.
The junior
ROTC program, in which
140,000 high school students
were enrolled
during the school
year and which fosters
national
pride and provides
these
students with a knowledge of military
subjects,
cost about
$16 million
during the fiscal
year.
The report
stated that increased
services
was needed because:
coordination
among the
--Some senior ROTC units do not meet DOD’s prescribed
officer
production
requirements.
--Services
fail
to uniformly
apply statutory
restrictions for establishing
and maintaining
junior
ROTC
units.
--Enrollments
in the senior
ROTC program
are declining.
--Ratios
of staff
to enrolled
students
in the senior
program vary because the services
have separate staffing criteria.
--Some applicants
for ROTC scholarships
examinations
by more than one service.
--Program
dents,
dropouts
--Services
porting.
lack
cause a loss
complete
Agency officials
generally
vised that remedial
action
Feb. 28, 1973.)
receive
of
investment
and uniform
program
physical
in stu-
cost
re-
agreed with GAO’s findings
and adwould be taken.
(B-146947,
61
/
FURTHER IMPROVEMENTNEEDED IN
ASSISTING MILITARY PERSONNELIN
FINDING ADEQUATEHOUSING NEAR BASES
Department
of Defense
1967 DOD established
Housing Referral
Offices
(HROs) at military
bases to promote its policy of relying
on
nearby communities as a primary source of family housing for
military
personnel 0 HROs were to assist military
personnel,
as well as DOD civilian
employees, in locating
adequate,
suitable,
economical)
and nondiscriminatory
offbase housing
near their
duty stations * In this initial
review of the
program, GAO sought to learn how effectively
HROs were
achieving
their purposes 0
In July
GAO found that,
although required
to do so, many incoming military
personnel were not reporting
to base HROs.
This precluded HROs from providing
valuable
centralized
information
on availability
of onbase housing and the type and
cost of available
private
housing.
GAO also found that at some bases, reports’prepared
from
HRO records were not prompt, accurate,
reliable,
or complete.
Therefore,
it was not feasible
for GAO or agency officials
to
evaluate HROs’ effectiveness.
Although reported
cases of racial
discrimination
in offbase housing were few, GAO found several
instances
where
house hunters felt
they had been rejected
because of race but
did not lodge a formal complaint
for a variety
of reasons.
One reason given to GAO by persons involved was that they
were not aware of procedures
to follow.
Another was that,
since the discrimination
was subtle,
it would be difficult
to
prove,
The problem, therefore,
may not be as minor as the
few reported
cases seem to suggest,
DOD requires
landlords
to give written
assurances that
they will
rent to all military
personnel regardless
of race,
creed, color,
or national
origin.
Of 17 installations
checked, GAO found that only 6 had current
and adequate landlord assurances on file.
Some military
personnel have entered into rental
or sales agreements for units which are supposed to be officially
restricted
because of landlords’
failure
to furnish
assurances.
62
GAO suggested that
steps to insure that:
the Secretary
--Nondiscrimination
and landlords.
--Maximum coordination
is attained.
assurances
of Defense
are obtained
should
take
from owners
among HROs in metropolitan
areas
DOD agreed that HRO operations
could be improved and cited
action taken or planned to accomplish objectives
in GAO’s
GAO met with agency officials
and learned
recommendations.
such as revising
reporting-in
prothat subsequent actions,
cedures and giving more attention
to intensive
management,
should alleviate
the problem of personnel
failing
to process
for recording
and rethrough the HRO. DOD said procedures
porting
HRO operations
had been strengthened
since GAO’s reA directive
is being revised which addresses the recview.
ommendations.
DOD said its instruction
on equal opportunity
in housing
emphasized GAO’s suggestion
that HROs provide greater
assurance that alleged cases of discrimination
will
be promptly
GAO
believes
proper
implementaand thoroughly
investigated.
tion of the instruction
should correct
delays in investigating
However, GAO feels that some cases of apparent
complaints.
discrimination
may continue
to be unreported
for one reason
or another , and increased attention
should be given to interviewing minority
personnel
to identify
such problems.
DOD said military
departments
were notified
of deficiencies GAO found in DOD’s policy
requiring
signed nondiscrimiDOD plans to
nation assurances from owners and landlords.
review
revise
Instruction
4165 51 to provide for a periodic
of written
assurances toi” insure they are current
and correct.
(B-133102, June 12, 1973.)
63
CONSTRUCTIONOF LODGING FACILITIES
WITHOUT ADEQUATECONSIDERATION
OF AVAILABILITY OF COMMERCIALMOTELS
Denar tment of Defense
In 1970 and 1971 the Army, Navy, and Air Force began to
construct
temporary lodging facilities
(TLFs) to provide
temporary accommodations at modest prices for military
personnel and their
families
attempting
to find permanent quarters at .new duty stations,
The services
said TLFs were
needed because of a lack of adequate commercial motels at
reasonable
rates e Construction
was financed
from the services v welfare
funds, which are largely
profits
generated from
post exchange sales q
At the request of the Subcommittee on Small Business
Problems in Smaller Towns and Urban Areas, Select Committee
on Small Business, House of Representatives,
GAO examined
actions
taken by DOD and the military
services
in connection
with their
TLF program.
The review was based on the Subcommittee’s
concern that DOD’s promise to curtail
construction
of unneeded TLFs was not materializing.
The Subcommittee
had conducted several hearings wherein private
industry
had
voiced complaints
that local motels near many bases where
TLFs were planned could meet the need for such facilities.
Complainants
felt
that such projects,
if constructed,
would
constitute
unfair
competition
since their modest prices
(about $8 a night for a family
of five)
were possible
only
because of Government subsidy.
The Subcommittee requested
that GAO examine the validity
of justifications
for TLPs at
six specific
Air Force installations.
In a report
to the Subcommittee issued in September
1973, GAO concluded that surveys the Air Force used to support the requests
to build TLFs at six installations
did not
meaningfully
explore the capabilities
of nearby communities
to provide suitable
facilities
through leasing arrangements.
GAO informally
advised DOD and Air Force officials
of its
findings
on two projects,
still
to be built
at the time of
our review,
and requested
that they reconsider
plans to
build.
The officials
continued
to feel the projects
were
needed, and construction
was undertaken.
64
In December 1972 DOD issued a directive
on TLFs to
The directive
provided for informaguide military
services.
tion on the capabilities
of the local communities
to meet
TLF needs and for close liaison
on the subject with those
Although sufficient
time has not elapsed to
communities.
permit a valid evaluation
of the effectiveness
of the TLF
directive,
GAO believes
that it could be improved.
Because of the Subcommittees’
desire to obtain the results of the review as soon as possible,
GAO didn’t
follow
its customary practice
of obtaining
agency comments.
(B-169926, Sept. 27, 1973.)
65
DEFENSE INTERNATIONAL ACTIVITIES
NEED FOR TIGHTER CONTROLOVER
U,S, COMMITMENTSTO OTHER NATIONS
Department
of Defense
and Department
of State
In recent years the Congress has been concerned over the
number and scope of agreements by the executive
branch committing
the United States to provide substantial
assistance
to foreign
countries.
DOD reported
that,
as of September 30, 1972, approximately $12.6 billion
of defense funds had been used to support the military
forces of Vietnam, Korea, Thailand,
Laos,
and the Philippines
0
GAO found that the U.S. Government, through its military
and diplomatic
officials,
enters into numerous types of agreements and arrangements with foreign
governments,
not all of
which require
coordination
with or approval of the Department
of State.
The agreements committed the United States to substantial
cash payments directly
to the concerned governments
and to material
support of their military
forces--commitments
ultimately
resulting
in the expenditure
of many millions
of
dollars.
GAO found no evidence that the Congress, which is responsible
for establishing
levels of Federal spending, was
notified
or advised by the executive
branch before entering
into these agreements s
GAO believes
there is a need for the executive
branch
to exercise more coordinated
control
and management, especially
by the Departments of State and Defense, over our commitments
to foreign
governments B GAO recommended that the Secretary
of State:
(1) establish
procedures
to require
that all agreeincluding
those
subordinate
ments be subject
to his approval,
to or designed to implement basic government-to-government
agreements which commit the United States to specific
performance requiring
the expenditure
of substantial
amounts of
a central
repository
to be established
money, (21 require
within
the Department for all such international
agreements,
arrangements,
and commitments similar
to the one now existing
for treaties,
and (3) provide annually
to the appropriate
66
committees of the Congress a list
and description
together
with
estimates
of the future
agreements,
that each agreement involves.
of all
years’
such
costs
State said that GAO recommendations
concerning
a documentation procedure and a central
repository
for international
agreements warranted
careful
study and would be seriously
considered.
The Congress in late 1972 passed Public Law 92-403,
requiring
the Secretary
of State to transmit
to the Congress
the text of all international
agreements other than treaties.
The Secretary,
however, may not consider most of the subordinate
and implementing
agreements,
such as those covered
in the GAO review,
to be subject
to Public Law 92-403 because
GAO therereporting
of the parent agreement would suffice.
fore suggested that the Congress consider legislation
requiring the Secretary
to submit annually to the Congress a list
and description
of all such subordinate
and implementing
agreements involving
substantial
amounts of U.S. assistance.
(B-159451, Apr. 24, 1973,)
67
DESIRABILITY OF IMPROVED REPORTING
ON U.S. CONTRIBUTIONS TO NATO
Department
of Defense
and Department
of State
The cost to the United States for participating
in the
North Atlantic
Treaty Organization
(NATO) is not readily
determinable,
because funds come from several different
appropriations,
In 1972, the U,S. contribution
to the NATO
budgets was about $85 million.
GAO found however, that the
U,S. spent ,at least an additional
$40 million
as a result
of
its NATO membership, primarily
for personnel
assigned to
and other costs are paid from
NATOo U-S. contributions
several different
appropriations
and authorizations,
including DOD, the Department of State,
and the Foreign Assistance
Act.
Other costs were incurred
in paying for U.S. forces committed
to NATO, unrecovered
costs for prefinanced
construcThe total
tion in Europe, and the cost of moving from France.
U.S. cost for participating
in NATO amounts to as much as
GAO believed
that this diffused
fund$16 billion
annually.
ing of U.S. NATO activities
makes congressional
overview and
control
difficult.
In GAO’s view, the costs incurred
by the agencies involved are for international
security
assistance,
even though
Theresome of the costs may also be for national
programs.
fore,
GAO believes
that all of these costs should be taken
into consideration
along with the requests for direct
funding
of international
security
programs.
DOD stated that U.S. participation
in NATO represents
funding for the defense of the United States and did not
agree with GAO’s view that the cost of NATO to the United
States is international
security
assistance.
DOD felt,
however) that NATO support is but one of many DOD responsibilities
that are subject
to changing requirements.
Establishing
a separate appropriation
would eliminate
the flexibility
required
to s meet these changing needs,
/
GAO therefore
recommended to the Congress that it consider either
placing
all direct
costs of NATO financing
under
the Foreign Assistance
Act and requiring
the executive
branch
to report
on other costs incurred
or requiring
the executive
(B-156489, Feb. 23,
branch to report
all costs incurred.
1973,)
68
,
‘PAYMENTS FOR PHANTOMTROOPS IN THE
CAMBODIAN MILITARY FORCES
Department
of Defense and Department
of State
At the request of a member of the Congress, GAO investigated allegations
that Cambodian Army unit commanders inflate
their payrolls
and pocket the pay of phantom (nonexistent)
troops.
American officials
acknowledged that corrupt payroll
practices
have existed for some time and that, despite corrective
efforts,
the problem of phantom troops had not been
eliminated.
However, neither
the American officials
nor the
Cambodian Government knew the extent of the corrupt practices.
Using estimated percentages
of padded troop strengths
provided
by U.S. officials
in Cambodia, GAO estimated
that Cambodian
military
commanders may have drawn the local currency equivalent of $750,000 to $1.1 million
in January 1973 for phantomtroop pay.
In 1971 and 1972, the United States provided the local
currency equivalent
of about $56 million
to support military
pay and allowances.
These funds were commingled with Cambodian
Government resources
and could not be attributed
to payments
to specific
troops or units.
However, the availability
of
such large amounts undoubtedly
facilitated
corrupt pay practices.
(B-169832, July 3, 1973.)
I
69
OTHER AREAS OF OPERATION
POTENTIAL FOR REDUCTION OF COMMUNICATION COSTS
THROUGHCENTRALIZED MANAGEMENT
OF MULTIPLEX SYSTEMS
Department
of Defense
and civil
agencies
In 1960, the Defense Communications
System (DCS) was
established
and the Defense Communications Agency (DCA) was
organized to manage DOD’s single integrated
long-distance
communications
system.
The objective
was to obtain maximum
economy and efficiency
in allocating
and managing DOD communiIn 1961, the General Services Administration
(GSA)
cat ions.
was authorized
to establish
the Federal Telecommunications
Systems (FTS) to integrate,
with certain
exceptions,
all
In
1963,
the
National
Government civil
communications
systems.
Communications System (NCS) was established
to strengthen
the
communications
support of all major Government functions.
The
NCS includes the DCS and the FTS, as well as other telecommunication
networks.
GAO has previously
reported
problems
caused by the diffused
management of Government communications
and the unique relationships
between DCA and the military
departments
and between DOD and civil
agencies.
GAO made this review to demonstrate
possible
cost savings
through centralized
management in a specific
application-increased use of multiplex
systems for both military
and civil
Multiplexing
is a technique
Federal agency communications.
in which electronic
devices at each end of a single circuit
simultaneously
transmit
a number of messages, thereby eliminating the need for numerous individual
long-distance
circuits
between terminal
points.
l
Although multiplexing
has been available
since June 1968,
when the Federal Communications Commission removed restrictions on the use of inter-connecting
devices not furnished
Federal agencies have made little
use of
by common carrier,
the technique
in the continental
United States.
GAO’s study, which included 200 circuits,
showed that new
multiplex
systems could be established
and communications
For example,
costs could be reduced by about $400,000 a year.
by installing
multiplex
equipment at Homestead Air Force Base,
Florida;
Andrews Air Force Base, Maryland;
and Norfolk,
Virginia,
and connecting
them by a single multiplexed
circuit,
70
t
54 individual
circuits
leased for 8 agencies (including
2 civil
agencies)
could be eliminated.
The multiplex
system
costing about $72,000 would result
in savings of over
$50,000 a year compared with current
circuit
costs.
The savings
potential
is significant
because:
annually,
--DOD leases, at about $15 million
cuits of the type included in GAO’s review,
which appeared susceptible
to multiplexing.
--Only a token number of circuits
were included in GAO’s review.
--The lease
cantly.
costs
of circuits
civil
3,200 cirmany of
agencies
had increased
leased
signifi-
--Systems GAO proposed included only low-speed data and
teletype
circuits,
whereas multiplex
equipment capable
of handling higher speed DOD and civil
agency requirements is available.
GAO believes
that the benefits
of multiplexing
can best
be obtained by a single organization
with authority
and responsibility
to develop and manage systems meeting requirements of all Government users.
Without additional
policy
and procedural
guidance in the framework of the NCS, the
present fragmented
and parochial
arrangements
would continue
and would result
in unnecessary costs as well as in duplicate sys terns.
GAO recommended that:
--The Director,
Office
of Telecommunications
Policy
a Policy that departments
and agenWW 9 establish
cies identify
their
communications
requirements
which
are susceptible
to multiplexing
and that the requirements be satisfied
by multiplexed
facilities
when
economically
and operationally
feasible e In forming
such a policy,
he should consider
establishing
a
single entity
to be responsible
for developing
and
managing multiplex
systems for the entire
Government.
--The Secretary
of Defense, in accordance with his
sponsibilities
as Executive
Agent, NCS, develop
specific
procedures
for coordinating
civil
and
71
re-
’
nontactical
military
communications
ceptible
to multiplexing.
which are
sus-
DOD advised.GAO that it plans to make DCA the central
organization
in DOD with authority
and responsibility
for
OTP
and
DOD
questioned
all nontactical
multiplex
systems.
the desirability
or necessity
of centralized
management or
rather
than
suitable
and approhigh-level
policy direction,
priate
interagency
coordination,
although OTP agreed that
the Government should take advantage of the benefits
of
multiplexing
and is proceeding
with the establishment
of a
GSA said that it is responGovernment policy
in this area.
sible for telecommunications
for the civil
activities
of
On
the
basis
of
responses
executive
departments
and agencies.
to the matters discussed in this report
and on its experience
on communications
matters discussed in previous reports,
GAO
believes
that coordination
may only continue
separate multiplex systems within
and between military
and civil
agencies
and that therefore
more definitive
management arrangements
are needed.
(B-169857, Jan. 18, 1973.)
72
‘GOVERNMENTNOT EOUITABLY COMPENSATEDBY
TELEPHONECOMPANIES FOR USE OF ITS EQUIPMENT
TO SERVE PUBLIC PAY TELEPHONES
Department
of Defense
and civil
arrencies
DOD provides
telephone service by means of Governmentowned systems at about 160 military
installations.
Some
commercial telephone
companies use these system facilities
(cables)
in conjunction
with their public pay telephones
installed
on military
installations.
Revocable licenses
permitting
telephone
companies to
install
public pay telephones
on military
installations
provide that the telephone
companies may use those Governmentowned cables,
wires,
poles, etc. which are required
to
provide service.
The companies must pay the standard commissions that would apply to all other public pay telephones
Commissions range from 9 to
under similar
circumstances.
20 percent on revenues collected
from public pay telephones.
At six military
installations
reviewed,
GAO found that
the companies paid standard commissions although the installations
furnished
some of the cable facilities
used to psovide public pay telephone
service,
whereas commercial concerns
and other Government organizations
normally
do not furnish
such facilities.
GAO estimated
compensation due the Government to be about $52,000 annually
at the six locations
on
the basis of the prevailing
area rate for leasing such cables.
Other methods of computing the compensation for using facilities may also be equitable
and appropriate.
Even after
deducting the above compensation,
the average revenue per telephone still
exceeded that of public pay telephones
installed
in General Services Administration
buildings
in the San
Francisco,
California,
area.
I
GAO recommended that DOD establish,
as policy,
that
standard commissions are applicable
when no cable facilities
are furnished
but that adjustments
be made when circumstances
differ
from other public pay telephones.
/GAO also recommended
that DOD direct
the renegotiation
of existing
agreements or
licenses
which conflict
with this policy.
The Office
of Telecommunications
Policy stated
compensating
the Government for use of its facilities
reasonable
and that there appeared to be no obstacle
73
that
appears
to doing
Subsequently,
GAO
so. The DOD response was inconclusive..
was advised that the Army (the action agency) had attempted
to work out mutual agreements with the telephone companies
Results
and the companies had agreed to review this matter.
of those studies are expected in the spring of 1974.
(B-133201, Mar. 15, 1973.)
74
’
OPPORTUNITIES FOR REDUCING THE COST OF
CONSTRUCTINGAND OPERATING HEALTH FACILITIES
Department
of Defense
and civil
agencies
Pursuant to a law enacted by the Congress, GAO undertook a comprehensive
study of the costs of constructing
and
operating
health facilities
and reported
to the Congress on
ways to reduce these costs for facilities
built
with assistance provided
under the Public Health Service Act.
GAO
also examined into ways in which the demand for facilities
1
could be reduced or 1eliminated.
Constructing
and operating
health facilities
In a November 1972 report
to the Congress, GAO identified many opportunities
for improving the planning,
construction,
and operation
of health facilities,
including
advance
analysis
of specific
health care needs, identification
of
alternative
sources of funds, reuse of building
designs,
and different
construction
techniques.
Hospital
planners
generally
do not evaluate on a lifecycle basis alternative
construction
techniques,
material,
designs,
and operating
sys terns.
Many hospital
administrators and architects,
to curb the rising
cost of hospital
construction,
search for obvious savings in initial
construction.
These initial
savings often preclude
later
savings in
operations
and maintenance that exceed the initial
cost
savings.
To demonstrate
the impact that certain
alternatives
would have on initial
construction
and life-cycle
costs,
GAO selected
a recently
opened hospital
for detailed
study.
The demonstration
showed that
--initial
construction
costs of the redesigned
would have been as much as 8.6 percent lower
those of the facility
that was built
and
facility
than
--life-cycle
costs of as much as $10.4 million
could
have been saved by incorporating
the alternate
improvements
into the redesigned
hospital.
75
GAO recommended that the Department of Health,
Educaand Welfare (HEW) (I) compile and publish
information
tion,
on the essential
factors
to be considered
in project
planning, (2) explore the feasibility
of reusing hospital
designs,
(3) adopt a common set of construction
requirements
for HEW-administered
programs,
(4) develop and disseminate
a scientific
base of knowledge on construction
requirements,
and (5) require
that the fast-tract
and total-concept
approaches be considered
for health facility
projects
assisted
under the Public Health Service Act.
GAO also recommended that HEW establish
the capacity
to provide life-cycle
cost data to health facility
planners
and require
that applicants
for Federal funding justify
the
use of construction
techniques,
materials,
designs,
and
operating
systems which differ
from those HEW recommended.
GAO recommended further
that,
until
HEW establishes
the
capacity
to provide life-cycle
cost data to health facility
planners,
HEW should encourage planners
to consider
the information
presented
in this report,
along with local’operating conditions
and costs,
in identifying
the alternatives
for life-cycle
analyses that are likely
to be the most appropriate
for inclusion
in the facility.
Demand for health
facility
construction
GAO also identified
and studied ways in which health
facility
construction
could’be avoided by either
reducing
the demand for such facilities
or increasing
the productjvity
of existing
facilities.
The study showed that the demand
for hospitals
and, to a lesser extent,
other health care
facilities
could be reduced and that,
by more efficiently
using existing
facilities,
millions
of dollars
in construction costs would not need to be spent.
These results ,are
attainable
by (1) placing
greater
emphasis on preventive
medicine practices,
(2) making more appropriate
use of
various types of health care facilities,
(3) increasing
the
use of more efficient
and economical medical care delivery
systems,
(4) using more effective
utilization
review techniques,
(5) changing health insurance
incentives
that emphasize inpatient
care,
(6) sharing more hospital
services,
(7) organizing
more efficient
and. economical health care
systems, and (8) strengthening
the role and increasing
the
capabilities
of areawide health planning agencies.
’
GAO made a number of recommendations
to the Secretary
of HEW calling
for the changes cited above.
In implementing
the cooperathese changes, GAO recommended that HEW solicit
tion of other Government agencies, private
health organizations,
and medical professionals
and assume leadership
in
these areas,
Some health care providers
have changed traditional
health care demand and utilization
patterns,
decreasing
the
need to construct
acute care and other types of health facilities.
The economic benefits
emanating from these changes
and the means by which such changes have been effected,
as
discussed in GAO’s report,
should be of particular
interest
to the Congress.
Accordingly,
GAO recommended that the
Congress consider these matters in relation
to legislative
such as those providing
for the rehealth care proposals,
organization
of the existing
health care delivery
system
and for programs on national
health insurance.
HEW, 5 other Federal agencies,
and 17 private
organizations were requested to review and comment on all or parts
The agencies and organizations
agreed with
of the study,
the report.
(B-164031(3),
Nov. 20, 1972.)
77
NOT ALL COSTS OF PUBLIC AFFAIRS ACTIVITIES
ARE CONSIDERED IN APPLICATION OF THE LIMITATION
ON SUCH COSTS
Department
of Defense
GAO reviewed selected
activities
(aerial
teams, military ceremonial
bands, civilian
tours,
museum programs,
exhibit
groups9 and educational
activities)
which are, at least
in part,
promotional
in nature and found that costs amounting
to $24 million
for these activities
are not included in the
$28 million
limitation
on annual obligations
for public affairs
activities
imposed by the Senate Appropriations
Committee.
GAO has not concluded that all of these activities
public affairs
activities.
are, in fact,
Operating
costs for activities,
which fall
within
DOD’s
interpretation
of its definition
of public affairs,
and
salaries
of employees who spend more than 50 percent of their
time in these defined public affairs
activities
are included
in the public affairs
expenditures
reported
to the Congress,
For fiscal
year 1972 DOD estimated
that expenditures
for
public affairs
were approximately
$22 million.
GAO recommended that DOD reexamine its position
on what
it includes as public affairs
costs,
since many of the activities
mentioned in GAO’s report meet, at least in part,
DOD’s
definition
of public affairs
o The Office
of Management and
Budget considered
some of these promotional
activities
as
public relations
activities
in OMB Bulletin
70-10.
GAO also recommended that procedures
be established
to
account for and report
costs of all employees who work in
public affairs
activities
0 In addition,
GAO suggested that
the Senate Committee on Appropriations
may wish to clarify
what types of DOD activities
it expects to be reported
under
the $28 million
limitation,
In commenting on GAO’s conclusions
and recommendations,
DOD stated that it had reexamined its definition
of public
affairs
and found it valid and viable.
While DOD agreed that
the activities
selected
by GAO contributed,
in part,
to the
accomplishment
of the public affairs
mission,
DOD stated
that only civilian
tours have this as their primary mission.
DOD also stated that only the costs of activities
which have
78
’ public affairs
as their primary mission are included
in the
$28 million
limitation,
DOD has directed
the military
departments
to charge against
the limitation
any incremental
costs incurred
in operating
civilian
tours.
(B-161939,
July 20, 1973.)
79
NEED FOR FEDERAL AGENCIES TO IMPROVE
SOLID-WASTE MANAGEMENTPRACTICES
Department
of Defense
and civil
agencies
Federal legislation
and Executive orders have stressed
the importance of proper solid waste disposal,
resource reI covery, waste reduction,
and the Federal agencies’
responsibilities
for providing
leadership
in the nationwide
effort
to protect
and enhance the quality
of the environment.
To
determine how well Federal agencies were fulfilling
their
GAO reviewed disposal
policies
and pracresponsibilities,
tices of those agencies --Bureau of Land Mtinagement, Forest
Service,
National
Park Service,
and the Department of the
managed the bulk of the Federal land having disAmY --that
posal sites,
Federal regulations
generally
prohibit
Federal agencies
from burning wastes in open fires
and using open dumps.
GAO
reported
open burning and open dumping on Federal lands administered
by the Bureau of Land Management, the Forest Service, and the National
Park Service to be widespread.
The
Army generally
was disposing
of its unsalvageable
wastes in
a satisfactory
manner.
The agencies generally
lacked a systematic
approach to
identifying
and solving waste disposal
problems.
GAO recommended that the Secretaries
of Agriculture
and the Interior
direct
the Forest Service,
Bureau of Land Management, and
National
Park Service to:
--Establish,
sponsibility
at the various
centers
for
organizational
levels,
solid waste matters.
re-
--Establish
procedures
so that (1) solid-waste
management policies
are communicated effectively
to all officials,
(2) headquarters
provides
adequate policy
guidance to regional
personnel,
and (3) regional
officials carry out agency policies
effectively.
--Require
periodic
inspections
and reporting
of inspection results
of (1) agency-operated
and lessee- and
permittee-operated
disposal
sites on Federal land and
(2) disposal
sites used by the agencies on private
land.
80
.
.
GAO reviewed
also the procurement,
resource recovery,
and recycling
policies
and practices
of the General Services
Administration
(GSA) and the Department of the Army and reported that although both agencies had been recovering
some
wastes for reuse or recycling,
much more could be recovered.
Generally
the Army was recovering
wastes only when it was
economically
advantageous;
little
consideration
was given
to salvaging
and recycling
primarily
for environmental
benefits.
GAO recommended that GSA and the Army, in their
procurement activities,
should be aware of and should emphasize to
their
suppliers
the environmental
benefits
that could be obtained through using more reusable or recyclable
materials,
containers,
and packaging.
agencies generally
agreed with GAO’s findings
and
recommendations
and specified
steps they were taking to implement GAO’s recommendations.
(B-166506, Oct. 26, 1972.)
The
81
MILITARY READINESS
NEED FOR IMPROVEMENTIN READINESS
OF THE AIR FORCE IN EUROPE
Department
of the,Air
Force
Aircraft
squadrons of the United States Air Forces in
Europe (USAFE) were not fully
combat-ready
generally
because
such
as
funding
limitations,
of factors
beyond their
control,
Air Force-wide
combat crew shortages,
priorities
of the war
in Southeast Asia, and the forced relocation
of U.S. Forces
from France.
Also the readiness
status of USAFE’s aircraft
units was
lower than reported
because the criteria
used to measure
readiness
of the units did not consider
all pertinent
factors
and because some measurable areas, such as manpower and
equipment, were not always properly
reported.
Readiness reports
should fully
disclose
to higher commands all factors
which could limit
a combat unit’s
ability
Complete, accurate,
and uniform
to perform its missions.
readiness
reporting
would permit
the Air Force to more realistically
assess immediate needs and would provide a sound
basis for obtaining
additional
resources
or relocating
those
available.
GAO proposed that the Air Force revise its
Consequently,
instructions
for measuring readiness
to disclose
all significant factors.
GAO also proposed that action be taken to
provide uniform interpretation
of the criteria
and that the
Air Force Inspector
General emphasize the accuracy of reporting operational
readiness
in his instructions.
The Air Force has taken steps to improve criteria
has also developed a readiness measurement system that
corporates
many of the guidelines
we suggested.
and
in-
The Air Force agreed that many factors
limited
the
readiness
of forces assigned in Europe and stated that,
within
budgetary constraints,
every possibility
was being
explored to remedy the situation.
82
GAO also suggested that,
in view of the combat readiness
level of the USAFE squadrons,
the Secretary
of Defense consider the following
alternatives
:
--Increase
the funding support so that
tions and fuel can be prepositioned.
sufficient
muni-
--Reduce the number of squadrons maintained
in Europe
to a level that could be effectively
supported with
available
funds, personnel,
and materiel.
--Accept the risks associated
rons in Europe at a reduced
(B-146896,
Apr.
25, 1973.)
a3
with having combat squadreadiness
level.
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.