Colonel LESLIE. Sir, in fact, recently we defaulted a carrier who lost his air carrier certificate from FAA for certain violations of the Federal Aviation Act. So they have to have a current certificate of some sort with FAA to participate in our business.

Mr. RIVERS. Because I had introduced a bill last year I don't know whether you saw it or not-that MATS would be precluded from awarding any contracts to anyone that wasn't carried upon the proper situation, under the terms of the Federal Aviation Act. The reason I did it: Somebody brought me this tale that I am telling you.

General TUNNER. I believe this is included in the President's recommendations, that a certain type of certificate must be in the possession of the carrier.

Mr. RIVERS. Nobody can influence the FAA on the awarding of a certificate to operate an airplane.

Colonel LESLIE. Right, sir.

Mr. RIVERS. That is based on cold, calculated qualifications, as a condition precedent to his flying the airplane.

Colonel LESLIE. Yes, sir; they are very strict.

Mr. RIVERS. All right.

Mr. SMART. That is right.

Mr. RIVERS. I have no reason to question the FAA. I have no reason to question them.

Go ahead, Mr. Smart.

Colonel WILD. The next policy. MATS makes the maximum use of 1-year competitive fixed-price contracts. These contracts tend to attract the most capable carriers, and to provide stability in airlift programs. The use of these 1-year, fixed-price contracts provides advantages to both the Government and the airlines. Generally, the Government receives lower prices and is able to schedule and provide better services to the customer. It allows the commercial operator to plan ahead and better utilize his current equipment and resources. We believe that even longer term contracts would be more beneficial and would encourage carriers to modernize their fleets.

(Chart 4-9)

MATS often has a need for buying commercial airlift because of unanticipated airlift requirements. Call contracts, which are standby agreements with carriers, are used to satisfy this demand.

Mr. RIVERS. Let me interject right there. How long do you think they ought to have a contract? For 3 years or 4 years?

Colonel WILD. Yes, sir; we are talking about 3 years in this.

will come to that in a little while.

General TUNNER. Should I answer it?

Mr. RIVERS. Yes.

General TUNNER. One year with our option, provided there is a superior performance for 2 more years.

Mr. RIVERS. Give you the discretionary power, based on satisfactory performance?

General TUNNER. That is right.

Mr. RIVERS. Well, would you say possibly 4 years?
General TUNNER. Well, we would say 3.

Mr. RIVERS. Say I had a contract with you. I say "General Tunner, I want to do a good job. I want to get myself about six or seven new planes."

It will take me 4 years to liquidate my obligation.

General TUNNER. I wouldn't object to having the option for 3 additional years, no, sir.

Mr. RIVERS. I don't see how it could hurt. Because it would give you the incentive to weed out the least possible desirable people to do business with.

(General Tunner nods.)

Mr. RIVERS. Because what we want-that is, what I want, I want the best. If I can't get the best, I don't want to fool with them, myself. But they are taxpayers and some are good operators and they develop a fine relationship with the military and do a splendid job at the minimum cost over the years, possibly. That is not beyond the realm of possibility.

General TUNNER. Not at all.

Mr. RIVERS. So you wouldn't object to a 3-year addition?

General TUNNER. I would not.

Mr. RIVERS. What would that require? A change in the procurement law, Mr. Smart?

Mr. SMART. No, sir.

Mr. RIVERS. Go ahead, Colonel.

Colonel WILD. Talking about the standby contracts. We currently have such agreements with 24 carriers. While this type of procurement is more costly, it is a valuable management tool, which is used to satisfy operational requirements.

(Chart 4-10)

As I have previously stated, MATS is instructed by the Department of Defense to efficiently, and economically, utilize the military aircraft of the Military Air Transport Service prior to the employment of commercial air transportation. On the other hand, the congressional appropriation acts for the last 2 years have set aside appropriated funds, with the stipulation that they be used for no other purpose than the procurement of commercial airlift.

In 1959, when this set-aside was $80 million, MATS spent $70.4 million, so over $9 million were returned to the Treasury, thus denying DOD the use of these essential funds. Had we been directed to buy more civil airlift than MATS required, it would be impossible for us to economically utilize military aircraft as instructed by DOD.

In view of the DOD airlift policy recently approved by the President, we believe the need for a set-aside of a specific dollar amount for commercial airlift to be unnecessary.

(Chart 4-11)

Now I would like to give you additional details on how civilian airline revenue from MATS has grown in recent years. In 1955, the first peacetime year after Korea, the Air Force procured $5.6 million worth of overseas commercial airlift to satisfy DOD requirements. Since MATS flies no more than necessary for war readiness training, the increasing demands for airlift by DOD agencies has resulted in

increasing the dollar amounts of our contracts with the airlines. In 1959, MATS spent over $70 million for overseas commercial augmentation to the MATS military force. It is interesting to note that while the dollar figures have been climbing at a rapid rate, the cost per tonmile has decreased substantially. This is one of the tangible advantages of open competitive bidding.

(Chart 4-12)

We also buy special airlift in accordance with Department of Defense directives. The dollars spent on these programs cannot be applied against the $85 million reserved by Congress. At the present tune, MATS has five different special airlift programs under contract for a total of $28.1 million.

The Logair and Quicktrans programs are designed to provide rapid delivery of critical high priority, high value supplies and equipment to Navy and Air Force bases and aerial ports in the United States. You will note that we have not made a special logistic airlift procurement for the Army. While they do have a similar logistic system, they do it by short-term airlift procurement through the Military Traffic Management Agency.

The Rocket Run supports the Air Force missile effort; the Alaskan POL contractor delivers petroleum products to remote radar sites in Alaska; and the Alaskan passenger contractor carries passengers within Alaska.

We have recently received a requirement for aircraft with tail or nose loading capability to handle outsize cargo in the Logair system. This requirement cannot be carried in present commercial aircraft. We feel this will have an influence on the modernization of the Logair fleet by the airline industry.

(Chart 4-13)

For the year ending June 30, 1959, including the airlift procured by MATS, the Defense Department paid civil air carriers for air transportation $231.6 million.

Mr. PRICE. What is that figure made up of? You say you have spent up to $80 million-no, $70.4 million for the procurement available there for MATS. Now, what is the rest of that figure made ip of?

General TUNNER. Mostly transportation requests here in the Zone of the Interior.

And of course, a number of people, such as people in South American Countries and Central American countries, where there is no MATS run, move themselves and their families to and from their stations by commercial air.

Mr. PRICE. That is overall Department of Defense?

General TUNNER. That is an overall Department of Defense figure. Mr. PRICE. For the air transportation of all military personnel or civilian personnel of the Department of Defense for 1 year?

General TUNNER. Yes, sir.

Mr. BECKER. $231 million.
General TUNNER. And cargo.
Mr. BECKER. And cargo.

(Mr. Smart aside.)

Mr. BECKER. It includes the $70.4.

Mr. RIVERS. Doesn't this figure here mean-excuse me, Mr. Price Mr. PRICE. Well, we understand now that that includes that $70 million, out of that $80 million.

General TUNNER. That includes the-

Mr. PRICE. The rest of it is the overall air transportation cost for al personnel in the Department of Defense within fiscal year 1959. General TUNNER. Personnel and cargo.

Mr. PRICE. For personnel and every other transportation cost by air.

(General Tunner nods.)

Mr. SMART. About $160 million above the MATS $70.4 million.
Mr. PRICE. About $160 million.

Mr. RIVERS. Did you-excuse me.

Mr. PRICE. That shows that the Department of Defense makes more than ample use of commercial air transportation. I am not being critical. I mean

General TUNNER. Well, sir

Mr. PRICE. I mean the commercial air transportation has by no means been shut out because of MATS.

General TUNNER. I think the Department of Defense is much more effective using this much airlift. I think this is very commendable, that they use airlift instead of surface, to carry on their business more expeditiously.

Mr. PRICE. The general impression publicly is that MATS does all the air hauling for the Military Establishment in competition with private business. I don't know how general it is, but that is an argument that is used frequently.

General TUNNER. Yes, sir, I appreciate that.

Mr. PRICE. Which could by no means be substantiated.

General TUNNER. That is exactly why we wanted to bring this to your attention.

Mr. PRICE. Yes.

General TUNNER. That the Department of Defense does spend a tremendous amount of money with the commercial airlines.

Mr. PRICE. Yes. Far beyond anything that the people think we are doing.

(General Tunner nods.)

Colonel WILD. I would now like to briefly mention some of the more important

Mr. RIVERS. I would like to ask, though, before we leave that $231 million: If I were an Assistant Secretary of Defense in charge of procuring tents or blankets, and I wanted to get on a plane and fly to Montana to buy some blankets, or wherever they are made, would that come under that figure?

General TUNNER. Yes, sir.

Mr. RIVERS. So that $231 million is the Department of Defense's contribution to the industry in every transaction it has with the industry?

General TUNNER. Yes, sir, every transaction the Department of Defense has with the airline industry for the use of airlift.

Mr. RIVERS. I meant the Department of Defense has.
General TUNNER. Yes, sir.

Mr. RIVERS. Every time a voucher is used, that is added up. (General Tunner nods.)

Mr. RIVERS. And out of that $231 million, you have in your business assigned or spent, or it has gone through your bookkeeping, $70-odd million.

General TUNNER. $70.4 million, plus that $28 million of those small airlifts which we showed you.

Mr. Rivers. And that is what MATS has spent out of it?
General TUNNER. That is right.

Mr. RIVERS. The rest was spent out of something else.
General TUNNER. That is right.

Mr. RIVERS. I see.

Mr. BECKER. All in the Department of Defense?

General TUNNER. All in the Department of Defense.

Mr. RIVERS. All in the Department of Defense.

Go ahead now.

Colonel WILD. I would like to mention briefly some of the more important problem areas that we are faced with in procuring airlift

services.

(Chart 4-15)

One of our most serious problems is the performance and schedule reliability of our civil air carriers. During fiscal year 1959, the standards in our contracts were too low, and some of the carriers took advantage of this and gave us very poor service. Our fiscal year 1960 contracts have been strengthened considerably, and, as a result, the performance of the majority of the contract carriers has improved. However, we currently have some carriers who are considered marginal. In fact, we have defaulted two carriers who have not complied with the terms of their contracts. We are also occasionally faced with nonperformance on the part of airlines when their employees are on strike. This type of work stoppage concerns us as we depend more and more on commercial airlines.

(Chart 4-16)

You have previously heard of MATS problems with regard to obsolescence of military transports. This problem is also facing us with commercial carriers in that they utilize obsolescent aircraft in fulfilling MATS contracts. The minimum requirements that have been established in the past procurements, particularly in the cargo field, have not encouraged fulfilling requirements with modern turbine-powered aircraft.

Also, the users of airlift services are requesting improvements in the comfort and safety standards in passenger aircraft, so that the safety services, and seating arrangement on our oversea flights would be comparable to those used by the average American when he travels overseas on the commercial airlines. Further, as was previously explained, the vulnerability of the island bases on which both the military and commercial aircraft depend makes imperative the modernization of the commercial fleet as well as the military. The use of long-range turbine-powered aircraft will greatly shorten pipeline times and increase the responsiveness of air transportation to our oversea forces. We believe that changes in procurement poli