Mr. SHANEFELTER. No, sir, what we do have are those elements which they considered essential. I think they are the same ones you talked about previously. Essentially, Mr. Chairman, the reason why the Gates Commission estimate was under estimated is they estimated accession requirements of roughly 280,000 versus the 400,000 or so we are having now. They estimated that the quality of the force would remain essentially the same as it was then, whereas we have changed those forces. Essentially, those are the two key factors. Senator NUNN. On page 55, you state the Gates Commission budg etary study frequently referred to as the AVF study, even though made before the AVF experiment, its projections are still considered relevant today but somehow suggests that an increase of $2.1 billion in the defense budget as required is to maintain a fully Volunteer Force of 2.5 million on a stable continuing basis. Now, what I am trying to say, is I know in your report you say you can't precisely compare your findings with this Gates Commission report because the assumptions were different. But can you give us your best estimate of a comparison between what the Gates Commission recommended or projected and what you state has happened? You are saying $3.6 billion is the annual cost now, approximately. and that is to maintain a force of about 2 million men or one-half million men less than the Gates Commission projected would cost, $2.1 billion. So, is it inaccurate, you correct me on this, to conclude that the Gates Commission was off about $1.5 billion? It costs $1.5 billion more to maintain one-half million less men than Gates anticipated. Mr. SHANEFELTER. Mr. Calderone. Senator NUNN. I am not talking about societal costs. Mr. SHANEFELTER. Yes, sir, that is where it gets fuzzy. Senator NUNN. Let's leave that out. You can state whatever you want about that. Mr. CALDERONE. Sir, the Commission's estimates include increased pay to first term enlisted men and officers, however, the pay increase approved by the Congress was 8.6 percent higher than the Commission anticipated. The Commission assumed savings would result from reduced turnover under an All-Volunteer Force. However, in actuality turnover rates increased under the AVF due to changes in administrative policies. They also assumed higher reenlistment rates under the AVF, which, because of administrative policies, have not been realized. The Commission expected lower turnover and higher reenlistment rates to reduce the number of required accessions, therefore, the Commission's estimates of accessions were greatly understated. The Commission also assumed the services would be willing to accept the maximum percentage-20 percent of mental category IV enlistees, however, as we know, the services are recruiting a significantly lower percentage of category IV. The Gates Commission also failed to consider some of the additional benefits which have accrued to enlistees since the time of their study, such as better housing, and other soldier oriented programs. This was the reason why their cost estimate is much lower than our estimate. Mr. SHANEFELTER. The bottom line, as you stated, it is about $0.4 billion, $1.5 billion. Senator NUNN. About $1.5 billion? Mr. SHANEFELTER. What the Gates Commission assumed, that is correct. Senator NUNN. That is to sustain about one-half million less men? Mr. SHANEFELTER. No, sir, that is adjusting for about the same size force. Senator NUNN. Are you adjusting that figure? Mr. SHANEFELTER. Yes, sir. Senator NUNN. The $1.4 billion would represent in terms of percentage. How far would that mean the Gates Commission was underestimated? Mr. SHANEFELTER. Eighty to one hundred, wouldn't you say? Mr. SHANEFELTER. Without having the data right in front of me. Senator NUNN. It costs 80 to 100 percent more than the Gates Commission anticipated? Mr. SHANEFELTER. Yes, sir. Senator NUNN. That is your best comparison? Mr. SHANEFELTER. Yes, sir, although we think that it is difficult to make a comparison. Senator NUNN. I agree, they had a lot of different assumptions. Senator NUNN. Last year, Secretary of the Army Clifford L. Alexander was quoted as saying The Volunteer Army is cheaper than a draft Army because we can avoid the internal turmoil that could be created if there were a draft. According to the newspaper accounts, he added the All-Volunteer Army was virtually a bargain for the taxpayers and the Volunteer Army costs $40 million less than the draft Army because of the reduced turnover costs as well as less spending on training, equipping and transporting of recruits. Mr. Staats, based on your study, do you agree with that assessment? Mr. STAATS. No, sir, we think the report itself speaks to our conclusion, that we do not agree. Senator NUNN. In fact, is it just the opposite on every one of these points? Mr. STAATS. It seems to be. Senator NUNN. How could anybody come to that conclusion in the position of being Secretary? Secretary Alexander is a very honorable, honest man. I have great admiration for him. It leads me to really wonder who over there is giving out figures? How could anybody come to that conclusion? Is it explainable in terms of analysis or errors, or bookkeeping methods? How can you possibly have the Secretary of the Army Mr. STAATS. I don't know. Senator NUNN [continuing]. With a total opposite conclusion to what all the facts indicate? Mr. STAATS. I don't believe we can really shed much light on your question. Senator NUNN. You can't explain that? Mr. STAATS. I don't believe we can. Senator NUNN. Mr. Shanefelter. Mr. SHANEFELTER. No, sir. Senator NUNN. Can anybody offer an explanation about how the conclusions can be so fundamentally different on something so important? Mr. Shanefelter, you have been into it for Mr. SHANEFELTER. Mr. Chairman, the only thing I could speculate on without looking at the study is a different definition of what constitutes a cost and a different criteria for assigning it to the AllVolunteer Force or the draft, and those two things would fundamentally alter the figures that we are talking about. Senator NUNN. In the future, when people are giving outside figures they should, in fairness, not be trying to assess this. They should talk about a few of the assumptions. Mr. SHANEFELTER. Yes, sir. Senator NUNN. They should talk about the fact we aren't comparing governmental costs or taxpayers costs. We are talking about societal costs. Mr. SHANEFELTER. Yes, sir. Senator NUNN. Costs to the people who would receive less if there was a draft. Mr. SHANEFELTER. Yes, sir. Senator NUNN. It think it is very importnat if we are to have any meaningful analyses as we continue in this dialog over the next few years. In my opinion, the Volunteer Force probably is going to become much worse in the eighties, but that is something we will talk about to Mr. White. I think it is awfully important that people discuss not only their conclusions, but also some of their fundamental assumptions, otherwise the public and Congress, for that matter, is in the helpless position of not having any kind of reasonable estimate, comparing apples to oranges. Mr. SHANEFELTER. Yes, sir. Senator NUNN. Would you agree with that? Mr. SHANEFELTER. Yes, sir. Senator NUNN. Mr. Staats, I want to thank you and all of your people for something I think will help us a lot in the future. I hope everyone here understands the limitations of this study. We are simply asking you for a budgetary analysis, in no way can you cast your judgment on the Volunteer Force and its effectiveness. We may want to take more studies from you. I hope everyone understands that is what you were asked to do and I think you have done a very thorough job. Mr. STAATS. We appreciate very much your statement, Mr. Chairman. We are planning to continue our interest in this subject and our plans are to undertake a study, perhaps next month, where we will try to make some judgment on the effectiveness of All-Volunteer Force. That is our main ambition in undertaking that but that is part of our job and our basic charter is to try to assess the effectiveness of the program and the costs and benefits of the program and we are going to undertake an effort along those lines. Senator NUNN. I think that would be extremely helpful. I am glad you are going to do that. How long do you anticipate that will take? Mr. STAATS. It is very difficult to give you a very definite estimate at this point until we are along in our planning. We will be glad to keep you advised as we proceed with it. In fact, if you would be willing, we would like to sit down with you as we plan that study, to be sure that we are getting at the issue. Senator NUNN. I think there are two elements of that. One is, how do you measure success? What is the measurement of success, which I have asked DOD to come up with for some time. In other words, what do we measure against? What are the goals of the Volunteer Force and what do we measure against? I have never gotten that definition. You have to have a definition of what the goals are in order to be able to measure against that. I would like very much to discuss that with you, and I would hope the Department of Defense, and Mr. White, can begin to address these issues. How do we in the eighties define the Volunteer Force with success or nonsuccess? If every time there is a problem, we have to increase pay, then you don't really have a constant measure. So there are two dimensions. One is what is success and the other thing that I think is so important is to anticipate and look down the road, 5 years, 10 years, 15 years, and determine what those problems are likely to be down the road so they don't surprise any of us. Mr. STAATS. And you point with respect to goals I think is the obverse side of that coin, define goals in relationship to identified problems or possible problems that will emerge in any program. The turnover is an obvious one, but there are many other elements that will go into the judgment of the effectiveness of All-Volunteer Force. But you are quite correct in saying that the Department of Defense fundamentally has to define those objectives against which you and we and others who tried to assess the effectiveness have something to relate to. Senator NUNN. The other thing that the Department of Defense really needs to address-Mr. White you can rebut all of this when you get up here-but I think it is extremely important, if you don't agree with this $18.4 billion, to come up with your own estimate and tell us how you reach it. That will be fine. But the point is there simply hasn't been any estimate by the Department of Defense, except recruiting and advertising costs and what it would cost if you went back to the draft versus what it is costing now-there never has been a fundamental statement made by DOD as to what it really is costing. At least it hasn't been presented to this subcommittee. What has happened, and this affects the national security, is that since there is no reasonable estimate, and since there is no reasonable projection of future costs by the Department of Defense, Congress limits the defense budget. And in limiting the defense budget, as Secretary Brown has pointed out now, we are seeing personnel costs and these other costs impact on procurement, research and development, readiness, O. & M. funds, and we are seeing these additional costs impacting very greatly on the other parts of the defense budget. It is one thing to say that the volunteer force is going to be sustained by Congress, whatever it costs. If the Congress is willing and the American people are willing, so be it. But it is another thing to keep this defense budget constant and have the Volunteer Force costs going up, and take it out of the crucial military inventory that we need for the future. 23-962-78-5 What we are seeing is a steady-I am giving my judgment here, I won't ask you to comment on this-we are seeing a steady erosion of our defense capability because we have never had a frank analysis of what we are going to have to pay if we are willing to pay for the volunteer force. That is intolerable in the next 10 or 15 years. If the last 5 years' pattern is repeated for the next 10 or 15 years, we are going to see our defense capability erode to the point I think national security will not be what we would like for it to be. So that is my own prejudice and bias and I think we have to face these costs. If the taxpayer of this country wants to continue to pay for it, then that is fine. But we can't continue to take it out of the military inventory of research and development, and overall, O. & M. funds. That is what happened in the last 4 or 5 years, Mr. Staats. You can comment on that if you would like to. That is my strong feeling. I am not looking at this independent of the overall defense budget but as a part of it. Mr. STAATS. Thank you very much, Mr. Chairman. QUESTIONS SUBMITTED FOR THE HEARING RECORD; ANSWERS SUPPLIED BY ELMER B. STAATS, COMPTROLLER OF THE U.S. Senator NUNN. Last year the Defense Department justified part of the military construction request for hospitals by this statement: "For Military Health Care facilities modernization-a major incentive for this program was the elimination of the physician draft which made it imperative to maximize the productivity of our existing medical staff. Over the first three years, a good beginning was made as an average of $242 million per year of projects were approved." (statement by Mr. Perry Fliakas, Deputy Assistant Secretary for Installations and Housing). Are these kinds of construction costs attributed to the AVF? Mr. STAATS. We did not attribute these construction costs to the AVF because we could not determine what percentage of the increase was related to ending the doctor draft versus upgrading existing facilities. Also, in a prior report to the Congress dated August 30, 1976, entitled "Recruiting And Retaining Federal Physicians And Dentists" improvements in health care facilities was not noted on an overriding factor influencing physicians to leave the military. We reported this in more detail to the Secretary of Defense on November 8, 1976. We noted from questionnaire responses received from physicians and dentists who remained in the military that they were generally satisfied with the phys ical facilities and support. Furthermore, responses from physicians and dentists who had left the military did not indicate inadequate physical facilities and support as a major factor causing them to leave the military. In view of the contradictory evidence between our reports and the testimony of Mr. Fliakas we did not attribute these costs to the AVF. Senator NUNN. There are some areas that have been cited as savings from the All Volunteer Force but are not included in the GAO report. In your statement you referred to the GAO rationale on offsetting pay costs by additional taxes. Other savings that are sometimes cited include increasing the length of enlistments, changes in reenlistment bonuses. assignment policy changes and additional substitution of equipment for people. Did you examine these areas for possible savings? What did you conclude? ENLISTMENT TERMS Mr. STAATS. Changes in enlistment terms which are attributable to the AVF should have resulted in cost savings to the Active Forces and did result in additional costs to the Guard and Reserve Forces. However, we were unable to adequately determine the net change in costs. Before July 1975, all the services except the Air Force offered enlistment options for 2- or 3-years terms. On July 1, 1975, DOD suspended several of these options which meant that all active duty (regular) enlistments would be at least 3 years for the Army, Navy, and Marines and 4 years for the Air Force. In testi |