SOURCE OF ORIGINAL ESTIMATE AND METHOD OF DETERMINING CUT

Senator O'MAHONEY. To go back to your opening statement, you spoke of the first rough estimates developed in the three military departments during January and early February and said that these estimates indicated that about $104 billion would be needed to finance the build-up in forces and material during the remainder of fiscal year 1951 and 1952. That, of course, was substantially higher than the figure with which you finally came to Congress.

Would you amplify that a bit, please, Mr. Secretary, and tell us first from what sources these first rough estimates came and how they were cut down?

Mr. LOVETT. Yes, Mr. Chairman. Those first estimates can hardly be dignified by that word.

Senator O'MAHONEY. That is why you call them rough.

Mr. LOVETT. Yes. They were extremely rough. They included, as indicated here, some of the funds which were subsequently covered in the fourth supplemental appropriation act. They included, furthermore, the funds which were designed to provide facilities at home and abroad for the expanded services. They grew out of an attempt on the part of the services to meet the July 1, 1952, figure with everything that the forces needed, even though the procurement of some of those items could be phased over a longer period of time.

There were also in there some items of doubtful value, as I have pointed out in my statement, but more particularly they included large quantities of the easy to get items which are common to civilian supply and in which the lead time is substantially less, being, we will say, in the order of 6 to 10 months as compared with the hard to get items which run 18 months in the case of single seater aircraft and two to three years in certain types of ships. What we tried to do was to apply a rule of reason under which we would eliminate at this stage the financing requests beyond the minimum lead time for reorder necessary to assure no gaps in our production. In the process of review by various boards of civilian experts and within the military establishments themselves the funds came down in a perfectly orderly fashion and by agreement within the Department itself.

Senator O'MAHONEY. It would appear from what has been said, particularly at the last hearing, that in the Department of Defense there are certain estimating agencies in which the base figures or the original figures are developed first. What are those estimating agencies?

Mr. LOVETT. Dealing with them in broad terms, Mr. Chairman, each of the services has a system of initial screening.

Senator O'MAHONEY. I want to get back behind the initial screening. I am not getting to the original figures. Who develops those? Mr. LOVETT. Let us take a particular service, the Air Force. The requirements for the number of groups now called wings sets a yardstick by which the procurement of aircraft itself is derived. As the aircraft come into the scheduling, then all of the elements that go into that are likewise scheduled-electronics, automatic pilots, navigational equipment, radio, and so forth. Those are then added together and in addition to them the facilities which are needed, either on a recapture basis, being facilities we already have, or new facilities for expansion are considered at the various levels of command. Those figures then go up through the Budget Section.

Senator O'MAHONEY. What are these first various levels of command?

Mr. LOVETT. To take a specific point, after the Air Staff-and Secretary McCone can give you this in great detail-have you that chart here that shows the series of boards?

Mr. MCCONE. No; I have not.

Mr. LOVETT. I mean the one that you had at the last session. Senator O'MAHONEY. I have that in mind, Mr. Secretary. thinking now of all of the services, not Air, but Navy and Army also.

ORIGINAL ESTIMATES DEVELOPED IN FIELD

Do these original figures develop in the field in any instance, or do they all develop here in Washington?

Mr. LOVETT. They develop in the field in certain instances.

Senator O'MAHONEY. The first step is obviously the determination of the number of personnel you are going to have and the equipment that is to be supplied to that personnel. That you have already described. You have told how the Joint Chiefs of Staff developed it and how it was transmitted through the Secretary of Defense to the President and by the President to the National Security Council and there reviewed, then returned and approved and the program launched.

I have pointed out to you, sir, that the first estimates that came in called for about $104 billion. You ended up with $60 billion plus. So, these estimates which produce $104 billion originated somewhere. I am trying to determine how they began and how they were cut down. Mr. LOVETT. Perhaps a simpler example would be the matter of a facility used for training. Once the troop strength is established and the initial equipment flows from that, the method of induction and the handling of the training would be checked by the staff of the service involved. They would look over their various facilities. They might find, for example, that at Camp X they would be expected to receive 15,000 additional personnel; whereas their facilities would enable them to receive only 3,000. That would then leave a shortage of 12,000. That shortage would be forwarded from the field to the accumulating agency in Washington. That would go down as the personnel housing requirement, which would include feeding, et cetera.

In the process of review we might find, for example, that there was a facility possessed by another service which did not need the facility in full at that particular time. By comparing the requirements of the services in the common form, we might find that the Air Force could borrow from the Navy a facility at Sampson Field, we will say, and thereby eliminate the construction of housing for the shortage of 12,000 men by using the housing of a sister service that did not have the requirement at the same time. That is where a very high proportion of the savings was found.

PROPORTION OF CUT TAKEN BY VARIOUS SERVICES

Senator O'MAHONEY. Can you divide that among the services? What was the proportion of cut taken by the Army, by the Navy, and by the Air Force in the reduction from $104 billion to $60 billion plus? Mr. LOVETT. I cannot do it in my head, Mr. Chairman.

Senator O'MAHONEY. These are very complex figures. You could scarcely be expected to do that.

Mr. LOVETT. As between totals and the public-works program, we can give you some order of magnitude of the initial as compared with the final agreed figures.

Senator O'MAHONEY. Many of us have a very definite feeling-I know I do that the Defense organization requires as large an Air Force as we can probably build and still maintain the economy. I ask you what the proportion of cut was that the Air Force had to take? Mr. LOVETT. I have not got it in mind, but I can,' I think, be more responsive by saying that the cuts were not applied on a percentage basis, Mr. Chairman. The review took place item by item, category by category, to see whether there was some facility available not now in use which could be used. We had directions to do that not only from your committee but from others.

Senator O'MAHONEY. I observed with interest on your original statement that you said that there was an intensive review in order to eliminate duplications in the first place, and then to eliminate items that had value which might be doubtful, and then to eliminate the items that were comparatively easy to get, so that the expenditures on the contracts would be concentrated upon those items which would be difficult to get and most needed for the support of the armed services.

Mr. LOVETT. That is correct.

RECRUITMENT OF EXPERT CIVILIAN GROUPS

Senator O'MAHONEY. In recruiting the groups of expert civilians who were called upon to help in doing that, how did you proceed?

Mr. LOVETT. The practice of the three services differed somewhat. In the case of the Army they retained a very well-known firm of engineers, Sanderson & Porter, to review the procurement process and the requirement process in certain areas.

Senator O'MAHONEY. Secretary Pace referred to that in his opening statement.

Mr. LOVETT. I believe he did. In the case of the Air Force, they brought in a group of experienced men from industry on a consultant basis. They examined the requirements of the Air Force, including those for facilities not only industrial but for training as well as operations. As a result of that screening, there were certain areas in which it appeared that facilities were in being which by some unusual expenditure of effort might be employed by the requiring service.

In the case of the Navy, this similar process took place, using the best advice they could get in the process of review of the initial estimates.

EFFECTIVENESS OF CIVILIAN EXPERTS

Senator O'MAHONEY. Did this review result in actual cuts?
Mr. LOVETT. Yes, sir.

Senator O'MAHONEY. Do you have those figures?

Mr. LOVETT. I believe, if you let me check here, we can give you samples.

Senator O'MAHONEY. What I am driving at is this: I think it would be well to have the general cost of the recruiting of these civilian

experts and then the amount that they saved, if they saved anything, so that we can balance the net gain to the defense effort from the employment of screening experts.

Mr. LOVETT. We borrowed a number of these men, Mr. Chairman. I think Mr. McCone can give it for the record if you wish.

Mr. McCONE. The civilian committee that Mr. Lovett referred to was brought in by the Air Force for the review of the public-works program. They did not review the Air Force program. There were six individuals involved on the committee. They were selected because of their experience in business and most particularly their experience in the field of construction.

Senator O'MAHONEY. Can you give their names?

Mr. MCCONE. Mr. Howard Bruce of Baltimore was the chairman. Mr. Felix Kahn of San Francisco, a construction engineer, was a member. Mr. Arthur Barrows, the former Under Secretary of the Air Force, was a member; Mr. Carl Dennett, of Boston; Mr. Arthur McCain, the vice president of the Chase National Bank, and Mr. Chenery, chairman of the board of the Southern Natural Gas Co., and a vice president of Standard Oil of Indiana, Mr. J. E. Rouse.

METHOD OF SELECTION OF EXPERT GROUPS

Senator O'MAHONEY. How were those selected?

Mr. MCCONE. They were selected by the Air Force and because of their experience in business and the fact that all of them in private life had either been in charge of or had to do with very substantial construction programs.

Senator FERGUSON. When you say "public works," you mean barracks and airfields?

Mr. MCCONE. Airfields and installations that are necessary for the operation of the Air Force.

Senator FERGUSON. Would that include foreign bases, both airfields and barracks?

Mr. MCCONE. That is correct.

Senator O'MAHONEY. Perhaps it might be appropriate to remark at this point, Mr. Secretary, since you have public works up, that the Appropriations Committee, in considering the independent offices bill, adopted an amendment which I helped to draft. The idea, I think, was suggested by the several other members of the committee, including Senator Ferguson, that the architects to whom contracts were to be given for the construction of buildings, facilities for the Atomic Energy Commission, should be instructed before any contract was made to design utilitarian buildings rather than beautiful and expensive structures which would be the last word.

I hope that will also be the policy of the Defense Establishment. A lot of money can be expended in dressing up these buildings.

Senator HAYDEN. But there is a question that goes to the primary construction, as to whether or not we assume, as we did during the Second World War, that they were to be used for maximum living of 5 years and then wrecked if we did not have another war, or is this a type of construction that would be of a more permenent value?

Senator O'MAHONEY. The Secretary in his opening statement made reference to that and said the plan was to build permanent and semi

permanent facilities rather than temporary structures which the Department of Defense decided might be wasteful. It is a matter which will be examined as we proceed.

Senator HAYDEN. There is a standard way of putting up warehouses and things of that kind. Private industry has certain standards. If those standards of private industry could be applied to military construction, it seems to be it would be highly desirable.

Mr. MCCONE. This committee examined the building criteria plan and made recommendations that resulted in some savings. Their procedure was very interesting. I think, if I may have a minute, I will explain it.

The requirements for facilities in the Air Force originate with the commands and other operating agencies of the Air Force and are then screened by the Installation Board, which is a staff agency under the Chief of Staff. We divided our civilian committee into panels and placed on the panel a civilian and also a major general who was not. of the command. Then that panel called in the command and carefully reviewed their program, screening it and analyzing it as to essentiality. Then the panel would be drawn together daily and would compare the requirements from the various commands. In that way they, over a period of weeks, reached some very interesting conclusions and recommendations. One of them had to do with this subject of criteria of which you speak.

DISCUSSION ON EXPENSIVE DETAIL IN BUILDING

Senator FERGUSON. Mr. Secretary, I think we had in mind more. the detailed specifications where, for instance, as a member of the former Truman committee, we discovered that many offices that were completed during the last war were paneled in mahogany with builtin fireplaces. I think one is in the Fisher Building in Detroit. It was a magnificent office fitted for a colonel, all paneled, with a fireplace. In fact, some businessmen occupied it later. I went into that office. The businessman immediately apologized, advising me the corporation did not do that work; that it was done by a colonel in the Army.

That is what the chairman and the Senator from Michigan has in mind. It is not only the fact you have to build these buildings; it is this detail where there is great expense. That is why we use the word "utilitarian"; that it could be used permanently, but they did not need the mahogany and the marble and the various things that went to make it elaborate.

Did this committee that you have go into the detailed specifications of these structures?

Mr. MCCONE. Yes. They went into the detailed specifications of the barracks and the major structures. Of course, obviously they could not go into the details of some office in some remote location, but they did go very carefully into the details of the construction of the barracks of the major structures. They made some recommendations concerning those.

Senator FERGUSON. We had the same thing in Boston. Detroit may be remote, but let us take Boston. They had the same thing there in the erection of buildings.