DETERMINATION OF MILITARY STRENGTH

Senator O'MAHONEY. How was that decision reached to the effect that 31⁄2 million men would be the number?

Mr. LOVETT. The Joint Chiefs of Staff in their various joint staff studies arrived at the required strength in the light of the then world situation and our immediate need of approximately 1,416,000 men for the Army, approximately 810,000 for the Navy, 175,205 for the Marine Corps, and about 1,061,000 for the Air Force. The sum of these totaled about 3,462,000. Those troop strengths and supporting unit strengths were of course the derivative of the amount of units in a military sense which would be considered necessary or desirable for the type of total Military Establishment the country needed at that time. This was later increased to a total strength of 3,593,516the increase going to Army.

POLICY RELATED TO MATÉRIEL REQUIREMENTS AND PRODUCTION

CAPACITY

Senator O'MAHONEY. With respect to the matériel requirements. and the production capacity you made it very clear that the policy laid down by the Security Council was that we should have the facilities for the eventual production of the matériel desired and needed and that this would be built on an expanding basis, so that it would be possible in the event of an emergency to step up the rate of production; am I right?

Mr. LOVETT. That is correct.

OBLIGATIONAL AUTHORITY

Senator O'MAHONEY. That raises the question as to the fiscal arrangements you have made for maintaining the pipeline. You described that also in your statement. That in turn requires some discussion of the obligational authority and the percentages of demand, moneywise, for the various activities.

Can you amplify that, please?

Mr. LOVETT. Yes, Mr. Chairman. The adoption of the program of multiple production sources, I believe, is perhaps the fundamental of the whole process of supplying with initial equipment the troops provided for here, plus providing an expandable base which is most important in the event of mobilization as well as a combat reserve and a method of providing the troops with equipment for current usage.

The amount of obligation authority is determined in large part by the lead time of the most critical items. The lead time is about 18 months for our single-seater aircraft. Those aircraft, Mr. Chairman, are far more complicated than our World War II aircraft, as has been indicated in our previous session here.

The determining factor is the slowest item or component used in the aircraft assembly. At the moment I believe that it is aircraft jet engines and electronics. That lead time being 18 months, we then had to work back from that into obligational authority required in fiscal year 1952 so that we may enter into contracts for the aircraft and so that there won't be a break in production. Expenditures are not entirely satisfactory as a measure of the deliveries. Perhaps a review of the percentage changes between the fiscal years in the

procurement as compared with the pay and the military personnel costs will answer your question.

MILITARY PERSONNEL COSTS AND STRENGTH

In the fiscal year 1950 military personnel costs were 35 percent of the total and major procurement and production costs were 20 percent. In fiscal year 1951 those items had changed so that military personnel costs which had previously been 35 percent were only 17 percent and the proportion budgeted for major procurement and production had gone up from 20 to 47 percent.

In the budget before you for fiscal year 1952 it is interesting to note that military personnel costs remain the same at 17 percent and major procurement and production costs have gone up to 49 percent of the total.

Senator O'MAHONEY. The meaning of that from this table, a copy of which has been distributed to the members of the committee, seems to be that while the cost of military personnel has increased from 1950 to 1951 and then again in 1952, the increase of the cost of major procurement and production costs have increased much more rapidly, or is estimated to increase much more rapidly.

Mr. LOVETT. That is correct.

Senator O'MAHONEY. I think it is important that you make clear for the record the importance of obligational authority, because sometimes I have noticed that there is a tendency to regard contract authority as merely a method of hiding an appropriation; whereas, as I understand your opening statement and what you have said now, contract authority or obligational authority is rather the authority to commit the Government to the payment for the production of items which take years to produce in some cases.

Mr. LOVETT. That is quite correct.

Senator O'MAHONEY. You must have the obligational authority when you make the contract otherwise it would be impossible to obtain production.

Mr. LOVETT. That is correct, Mr. Chairman. It is a demonstrated fact that you do not get production until the manufacturers get the orders on their boards. They do not get the order on their boards until they have a firm contract which enables them to go out and procure their basic materials and line up their subcontractors. So without obligational authority we cannot get the long lead items within the time needed.

Senator O'MAHONEY. In order to make this table, which I think ought to go in the record, a little more clear, may I ask for the numbers of military personnel for each of these years 1950, 1951, and 1952? Mr. LOVETT. We have that in summary.

record covering that.

(The table referred to is as follows:)

I will put a table in the

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 rccapture 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. I am 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.