of technical services, or divisions had to contend with up until last year in the Navy, and up to 2 years ago in the Army and Air Force: Every single post, camp, and station received its funds from dozens of different sources. I recall the Army had an instance where money for one station came from 67 different parts of the budget. How can there be any financial control where you have that many absentee managers controlling the money? It is impossible, but that was the basis of the whole structure.

CHANGE IN FINANCING PROCEDURES

Over the last 2 years the Army, Navy, and Air Force are changing their financing procedures so that the funds to support an identifiable activity out in the field are in one place.

Senator SALTONSTALL. Give the gasoline example in the Air Force. That is the best one.

Mr. MCNEIL. That is another step, if I can come to that in a minute. I am speaking first of the administrative-type funds. The Army budget before you here is the first presentation of that kind. It is going to take a year or so before the operation of the new development, which you authorized in 1949, will pay dividends, but it is coming. I think you all should be encouraged.

BUSINESS-TYPE INVENTORY OPERATIONS

Another part of the legislation you gave us, I would like to tell you briefly what we are doing in this. Under that legislation we were authorized to take our commercial and industrial operations and our common-use standard stock inventories and put them into a truly business-type operation, and a number of things have happened: Under that authority the Department of Defense has taken the various elements of sea transportation and organized what is in effect a corporate enterprise, the Military Sea Transportation Service.

I would say any private operation in this field can come to us now and take lessons in operation. The schedule of materials for shipment is better than we have known in history.

The scheduling of a year and a half ago of shipments out-bound was done in the regular manner. There had been no machinery built up over a hundred years to really pinpoint responsibility, a point which you touched on a minute ago, Senator Ferguson, and as a result all through our history whenever we had an emergency there were always a number of ships idle, laying at anchor waiting for a cargo that had been scheduled or waiting to unload because people were not ready for it and all those things. What has happened as a result of installing this business operation? For 3 months last fall, no ship lay at anchor on the west coast, the first time in history, in a big operation, that has happened.

What does that mean to you and the rest of the taxpayers? That means $6,000 a day saved. Every day a ship lies idle, no matter who made the mistake, that is what it cost. That is a waste I do not think we can tolerate, but we tolerated it for years until recently.

Action based on the authority given us in 1949 has permitted changes so that at the present time if anybody schedules material out through the port of San Francisco or asks for a ship to be there to

pick up cargo and the cargo does not show up for a week, it costs them $6,000 a day, and it shows up. Therefore nobody is doing it. They are doing one of the most beautiful jobs of scheduling tonnage through West ports that has ever been done in history. I call that a step ahead.

SAVINGS ON PRINTING

If I could take just a minute more on this. Take the subject of printing. Senator Hayden is quite interested in that. Under the authority you gave us in 1949 and working with Senator Hayden's staff, we have now operated a print shop in the Department of Defense under strictly a business-type operation. What has happened? The output per person in the printing plant is three times what it was some months ago. That is on the credit side of the ledger. In spite of increased paper and labor costs, the actual cost of printing a thousand forms is less than half what it was. That principle, now that we have it running, is now being extended throughout the country.

ROCKY MOUNT ARSENAL, DENVER, COLO.

The Army has established the Rocky Mount Arsenal, at Denver, under the working capital or corporate principle. In the first 2 months of operation under the new system which is a corporate-type operation, getting a fixed knowledge of job costs, it showed up that under the old Government system of operation we were losing $180,000 a month. Nobody had to go out and tell the local management to fix it. They sat at their own table and took action to correct costly practices. I would say that the Rocky Mount Arsenal is running 30 percent more efficiently than ever before. It is action that the Army is taking because at last we have some machinery to point up what may be wrong.

CLOTHING AND MEDICAL SUPPLIES

The Air Force put its clothing under a revolving fund account. No clothing can now be taken off the shelf unless the current appropriation provides for the clothing of new recruits or the sale is made for cash. There is an aggressive step taken by the Air Force, again under this legislation which you provided, which is saving some very substantial sums just on that one point alone.

I might tell you that all medical supplies will be under the same kind of inventory and fiscal control beginning January 1, 1953.

HOSPITAL PROGRAM WASTE IN PANAMA

Senator FERGUSON. There is certainly a waste in this hospitalization, for instance, in Panama where your Navy was running for beds $35 a day.

Mr. MCNEIL. I remember that, sir.

But it is through a process like this, of getting these things on a business basis and using every person that we can find who is really competent to change the system, that we can eliminate waste. We hope ultimately to be more efficient than the average big business of today-this is the goal toward which we are pushing forward.

Senator FERGUSON. Why would you have a Navy hospital and an Army hospital? The Navy beds were costing $35 a day, the Army beds $14 a day. You did not have enough in either to fill it. You could have had both in one, but you had to keep them going.

Mr. MCNEIL. That perhaps is not perfect yet, but a great deal of work has been done on it. That was about 2 years ago?

Senator FERGUSON. About a year ago.

Mr. MCNEIL. I think a considerable amount of work has been done. I will not say it is perfect yet. All I want to say is that there are a considerable number of things of that type going on. Maybe we are not very good salesmen, because we are not telling the story as well as we should. I would like to say that does not excuse us for some of the things we are not yet doing.

Senator O'MAHONEY. Of course the real point, Mr. McNeil, is how can we best make it the responsible duty of officers in the field not to be extravagant.

Mr. MCNEIL. Some of these things I have just been discussing, such as the printing, the clothing operation, putting medical supplies under proper inventory and dollar controls so they are not utilized unless there is some money in that year's account, all that assists in providing the local person both with a cost consciousness and enables him fully to utilize

Senator O'MAHONEY. Are specific instructions given to these men? Mr. MCNEIL. Yes, sir.

Senator FERGUSON. Have you had discipline for extravagance? Mr. MCNEIL. Yes, but I doubt that it would satisfy fully the feelings of everyone.

COST-CONSCIOUS PROGRAM

Senator SALTONSTALL. Also for the first time this year cost consciousness has been put on an officer's rating; is that not correct?

Mr. MCNEIL. Yes, sir. One of the individuals who works with Mr. Garlock was out at the recent maneuvers in Texas and when he came back told me of the interest and the discussions around at lunch, breakfast, and so forth, of the officers in the field of this cost-conscious. program, which I think Secretary Pace discussed with you. I was surprised that it had gone as far and that down deep in their heart they were as enthusiastic about it as he told me they were.

Senator O'MAHONEY. I do not want to ask you these questions, sir, because you are wearing civilian clothes, so I am going to ask the budget officers: What is the best way to make the man in uniform, who carries a soldier strap, responsive to this demand that is raising from the public and from the Congress, and properly so, that money shall not be wasted in military operations.

I will ask you first, Admiral Solomons, Deputy Comptroller of the Navy.

STATEMENT OF REAR ADM. E. A. SOLOMONS, UNITED STATES NAVY, DEPUTY COMPTROLLER OF THE NAVY

MANAGEMENT OF EXPENDITURES

Admiral SOLOMONS. The only way that I know that you can gain the ends desired both by the Congress and by the military departments is education of the individual in the field that it is his money which

is being utilized to paint his ship, it is his money as well as the rest of the country's money which must be utilized to the very best advantage.

Senator O'MAHONEY. Does it not take more than education? Does it not take an order? Discipline?

Admiral SOLOMONS. There is throughout, and I speak of the Navy from personal knowledge of operations in the field, there is a determined effort on the part of everyone who has the authority to expend public funds, to expend it as wisely and as best they can to accomplish the end of maintaining the service in the highest and best state with the available funds. It may be something which you are not fully cognizant of that ships run on an allotment. The commanding officer of the ship is given an allotment for certain expendable and necessary materials and he must determine how much of that can be spent for the paint necessary to preserve his ship. He must reserve the necessary funds to reimburse the stock funds for the lubricating oil that goes into the ship. He must operate within that allotment and since it is a very limited fund, expend it carefully and wisely to the best advantage.

SHIP PAINTING

Senator FERGUSON. Who determines when a ship should be painted? Admiral SOLOMONS. The commanding officer.

Senator FERGUSON. Of course there is a way I think in which we are falling down. The commanding officer may be the best officer in the world as a commander, but what does he know about preservation of material? Here is the trouble. There is a feeling that West Point and Annapolis education qualifies you for everything. I just do not think it is a fact any more than the University of Michigan can do it, that some men know when you should paint a ship because it is essential to preserve it. Other men may be great generals and great admirals, an admiral on a ship, and not know how much paint is needed. He may be painting it all the time just to make it look good.

Admiral SOLOMONS. That was about what I was going to remark, sir, that it is not for appearance that a ship is painted, because a scrubbed paint is far better in appearance than a new coat of paint, but it is for basic preservation due to your operations and the amount of weather and when you see the rust breaking through your paint, you know you must then go down and scale it and put on your preservative in order that that ship be maintained and not fall apart. Senator FERGUSON. But has it ever been known that you did do painting to keep the deck hands busy?

Admiral SOLOMONS. No, sir; not that I know of.

Senator FERGUSON. The boys down below will not tell you that. Admiral SOLOMONS. And I have done my share of chipping and painting in my younger days.

Senator O'MAHONEY. Admiral, I suspect there are some young men around this table who served in the Navy.

Senator FERGUSON. Some who have gray hair.

Mr. MCNEIL. The skipper does not just decide to paint the ship from hull to the tip of the mast. He is following certain instructions as to preserving the metal.

Admiral SOLOMONS. Minimum standards of preservation.

Mr. MCNEIL. Those standards are set. The skipper does not go to the yard for overhaul whenever he feels like it.

Senator O'MAHONEY. I do want to get a statement from General Asensio and from General Honnen. I do want to have Mr. Lawton answer Senator Saltonstall's question about the choice between expenditure limitation and appropriation cuts before we break up. So may I ask you, Admiral Solomons, did you have anything else to add?

MANAGEMENT OF BUDGETED FUNDS

Admiral SOLOMONS. Only, sir, that in general the management of the moneys which the Congress appropriates to the services is under constant study in order to improve the utilization of that money as wisely and as carefully as we can, and from the Comptroller's standpoint, sir, we are rapidly developing allotment and accounting procedures which more closely develop the utilization of each dollar. Senator O'MAHONEY. Will you be good enough to file with the committee, not necessarily for inclusion in the record because it may be voluminous, the material showing the orders which go to various commanding officers requiring them to exercise a responsibility in the economical expenditure of funds at their command, and then also discuss it with the proper officials in the Department of the Navy, and you have any suggestions for inclusion in this bill as a matter of law, provisions which will provide for discipline to make economy essential in the mind of expenditure officers, I think the committee will be happy to have it.

if

And those questions are addressed to you, General Asensio and to you, General Honnen, also.

General Asensio and I take you in the order in which you sit around. the table.

(The material referred to was filed with the committee.)

STATEMENT OF MAJ. GEN. M. J. ASENSIO, DIRECTOR OF THE BUDGET, UNITED STATES AIR FORCE

MANAGEMENT OF EXPENDITURES

General ASENSIO. The very size of the Air Force, as is the case in the other services as well, demands that it operate on a decentralized basis. Obviously we must exercise management functions through command. Actually, management is an inherent part of command and cannot be divorced from it. It is so recognized and it has been the practice for some years in the Air Force to incorporate in the efficiency report which we call a report of effectiveness a specific statement as to the economy of the use of resources by all officers. There is a concerted effort to make all echelons exercise proper management. Where instances of improper management come to light, prompt action is taken to seek correction. All along the line there is a growing improvement.

Actually I subscribe to Admiral Solomons' statement to the effect that education is necessary by virtue of the fact that we have grown apace during the recent past. Under those circumstances we cannot be sure that in all instances we have managers where managers

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