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the OSD Task Force that these purported benefits are sufficient to offset the considerably higher cost of the USUHS physician.

Exhibit II-19 at the end of this issue compares the cost per participant under USUHS and HPSP for the fiscal years 1981, 1982, and 1983. The number of participants in HPSP is approximately eight times the number of students in USUHS. In FY 1983, the cost per year per participant under USUHS will be $77,200, while the comparable figure under HPSP will be $19,150.

The OSD Task Force can find no convincing justification for the continued operation of the University and recommends that it be closed. We recognize that there will be some direct costs associated with replacing USUHS physicians, but there will still be a substantial net savings to DOD from the closing of the University.

Conclusions

The USUHS is an extremely expensive source of obtaining physicians for the services. Other sources such as HP SP are less expensive (one-fourth the cost) and much more practical.

Recommendations

OSD 31-1: USUHS should be discontinued. Additional students should not be selected for the program and appropriate provisions should be made for current students so that their medical careers are not jeopardized. Under one approach, the University should be phased out gradually. Alternatively, USUHS students could be placed in medical schools under HPSP.

Savings and Impact Analysis

Exhibit II-19 provides the savings estimate for the OSD Task Force recommendations made above. We estimate annual savings of approximately $34.6 million if the University is closed. The total USUHS budget for FY 1983 ($47.8 million) included $1.8 million for Research, Development, Test, and Evaluation (RDT&E). We have assumed that this expenditure would be made even if the University were closed. Therefore, we estimate gross savings at $46.0 million. net savings estimate of $34.6 million takes into account an estimated annual $11.4 million cost to train HPSP physicians to replace those currently supplied by USUHS.

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We recognize that there are OSD and service personnel who provide guidance and assistance to USUHS but are not included in USUHS budget figures. Though their services would not be required if the University were closed, we have not attempted to quantify these additional savings. It is also recognized that there may be some costs associated with the transfer of current students.

Assuming an annual inflation factor of 10 percent, the savings in the first three years, after implementation costs, would be:

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The Secretary of Defense should direct that operation of the USUHS be discontinued as discussed above. To the extent that USUHS is authorized to have more than 300 civilian employees, DOD may not discontinue operation of the University until it has complied with the requirements of 10 U.S.C. Section 2687 (1980). Pursuant to this statute, DOD must publicly announce the proposed closure of the University, comply with the requirements of the National Environmental Policy Act of 1969, and submit a detailed written justification to the House and Senate Armed Services Committees. Congress then has 60 days in which to affirmatively reject the consolidation plan before the closure can be implemented by DOD.

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1/ FY 1983 budget of $47,880,000 less 1,800,000 for RDT&E.

II.

ISSUE AND RECOMMENDATION SUMMARIES (CONT'D)

E. PERSONNEL ISSUES

OVERVIEW

The Office of the Secretary of Defense (OSD) Task Force did not attempt a detailed review of the compensation system. The total compensation package is comprised of a base pay provision plus compensation for specialty skills, hazards, retention, and civilian comparability. The 1973 introduction of the all-volunteer force has led to many adjustments, and substantial steps have been taken in recent years to upgrade military pay.

The OSD Task Force did not attempt to identify anomalies within personnel programs in the individual services. Recommendations are made to address general personnel areas which do not appear to be cost-effective.

One of the anomalies identified was the commissary system. The commissary system was introduced in the military in 1825 to provide food to officers at isolated frontier Army posts. While some currently perceive commissary benefits as a portion of compensation, they were never so intended. Commissaries were established to overcome the lack of available private sector sources for food. The OSD Task Force notes that today few of the commissaries in the continental United States meet this criterion for existence.

It is also noteworthy that only 41 percent of the customers of these commissaries are active duty personnel. Retired military families comprise 59 percent of the customer base.

The commissary system today bears little relevance to the purposes for which it was established. The OSD Task Force recommends that most commissaries be closed, and that those few which are really warranted be run as part of the exchange system. In any event, there appears to be no logical justification for Federal subsidies of the existing commissary system.

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We have also made specific cost-efficiency proposals with respect to permanent change of station moves, Selective Reenlistment Bonus program, and Aviation Career Incentive Pay.

II.

ISSUE AND RECOMMENDATION SUMMARIES (CONT'D)

E. PERSONNEL ISSUES (CONT'D

OSD 32: COMMISSARIES

Summary Recommendation

The Department of Defense (DOD) should discontinue operation of commissaries in the continental United States and should permit exchanges to sell food and staple items in those areas where adequate commercial food stores are not available.

Financial Impact

$328.0 million annually

$113.0 million one-time

Potential Savings: DOD annual appropriations would be reduced by approximately $328.0 million, the amount of the subsidy for commissaries in the continental United States.

Implementation Cost: One-time cost
of termination for civilian employees
in U.S. commissaries.

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