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content and amount normally change from one project to the next or from a past time to the present. Second, the cost-accounting systems between industry and Government are sufficiently different to present problems. Third, there is a lack of comparability in the treatment of depreciation of facilities which industry accounts for and the Government normally does not, and in determining what overhead to attribute to a particular job. Finally, it is often not possible to segregate such costs as those associated with the support furnished a contractor by the Government.

This is not to say that costs are not important, but only that exact comparisons between contract and inservice costs are often not possible. In those areas where primarily labor is involved such as food service, cost comparisons are feasible and are, in fact, used.

Mr. Chairman, this concludes my prepared statement to the committee. I believe that we are making a concerted effort to manage the use of contract services effectively.

With your permission, I would like to further demonstrate this view and provide the more detailed information of interest to the committee by proceeding with a presentation by Col. James E. Hill from the Air Staff on the general use of contract services. And as we previously noted, Colonel Riemondy presented the detail yesterday on depot level maintenance contracting.

Having done this, sir, and at your pleasure, we will try to answer the questions you gentlemen of the committee may have.

Mr. HÉBERT. Colonel Hill you say is present?
Colonel Hill. Yes, sir.
Secretary IMIRIE. Colonel Hill, to my far left.
Colonel Hill. Mr. Chairman and members of the committee:

CONTRACT SERVICES

In this presentation I shall state the contents of our policy on the use of contract services, how successful we have been in applying that policy, and the specific uses of contract services from fiscal year 1959 through fiscal year 1961 in the functional areas of interest to the committee. With the exception of one overall trend chart on the use of military, civilian, and contract services manpower, this presentation will be confined to contract services used by the active Air Force for work in areas other than research and development, real property maintenance and repair, and depot maintenance which was covered by Colonel Riemondy yesterday.

DEFINITIONS

CONTRACT SERVICES-INSERVICE PERSONNEL Since I will be using two terms frequently during the course of this presentation, let me commence by defining them. Contract services are those services obtained from non-Air Force sources to perform Air Force work. Contract services provide a work force supplementary to our military and civilian manpower resources. Contract services include contracts in such areas as maintenance, overhaul and modification of equipment and facilities, operation of facilities such as the distant early warning line, training, and housekeeping services. In contrast, contracts for the manufacture of "hardware," construction of facilities, the purchase of supplies and utilities, rentals, lease of communication circuits, and the like, are excluded from contract services.

Inservice personnel is defined as military personnel, U.S. citizen and foreign national direct hire personnel, and foreign nationals utilized by the Air Force under arrangements with the host governments.

BASIC POLICY

INSERVICE CAPABILITY TO PERFORM COMBAT AND DIRECT COMBAT SUPPORT

FUNCTIONS-EXCEPTION: SKILL DEFICIENCY

Our basic policy and objective for the use of contract services, and conversely, for the use of our inservice manpower resource are contained in Air Force Regulation 25–6. That policy is to maintain an inservice capability to perform combat and direct combat support functions. Our objective is to provide an appropriate balance and relationship in the use of military, civilian, and contract service manpower so as to achieve maximum effectiveness and economy in accomplishing our workloads and missions.

Combat and direct combat support functions comprise not only cockpit positions but all work which, if not accomplished, would result in an immediate impairment of combat capability. Specific examples of these functions are base level maintenance of combat and support equipment, operation and maintenance of the ballistic missile early warning system, and other radar stations, the operation and maintenance of SAGE computers, and even the operation and maintenance of the powerplants in support of those computers. The only exception recognized to this policy is the lack of inservice skills to perform the function and then only for the time required to develop an inservice capability.

CONTRACT SERVICES IN INDIRECT COMBAT SUPPORT

EFFECTIVENESS-ECONOMY-LACK OF SKILLS

Contract services may be used in the indirect combat support functional areas when improved effectiveness or greater economy are achieved or, again, when we lack sufficient or adequate skills inservice to accomplish the work. Effectiveness is determined in terms of more work produced, better quality work resulting, or completion of work in less time than would be required by the use of inservice personnel. Contract services can often be employed effectively to perform one-time, peak, or seasonal workloads, or to perform work requiring special tools and equipment or a small quantity of special skills for which we do not have or cannot forsee a sizable continuing requirement. Economy considerations encompass both immediate and long-range costs and are determined on an individual basis where appplicable. The lack of skills criteria may be satisfied by the demonstrated absence of technical know-how, such as in the maintenance of new, complex equipment, or an absence of scientific knowledge in a research effort.

LIMITATIONS

MOBILITY AND OPERATIONAL READINGS, PERFORMANCE IN EMERGENCY, OVERSEA

PERSONNEL BASE, SECURITY, MANAGEMENT RESPONSIBILITY, FINAL REQUIREMENTS DETERMINATIONS, SUPERVISION OF AIR FORCE PERSONNEL, POLICE AND SECURITY POWERS

There are additional limitations placed upon the use of contract services in areas where we consider the use of in-service personnel mandatory. Contract services will not be used when their use will impair mobility or operational readiness, or diminish our capability to perform essential activities under emergency conditions.

The use of contract services must not be allowed to grow so large that an inadequate base of in-service personnel exists to support combat or oversea rotational personnel requirements. Nor will they be used in areas where security would be compromised. In-service personnel will be used to carry out the day-to-day management responsibilities of the Air Force, although contractual advice and assist ance in special studies is allowed. Similarly, the responsibilities for the final determination of Air Force policies and requirements must remain with the Air Force. Contractors will not be used to supervise Air Force personnel, except that supervision incidental to training, and will not exercise police and security powers for the Air Force, except facility protection services.

APPLICATION OF POLICY

COMBAT AND DIRECT COMBAT SUPPORT-INDIRECT COMBAT SUPPORT

The application of this basic policy through more specific functional regulations and day-to-day practice has occurred in recent years in an environment of rapid change. Time compression in technological advances has generated tremendous pressure on the capacity of the manpower resources to adjust. Increasing amounts of facilities associated with missiles, communications, and radars has brought new and different manpower requirements. The necessity and difficulty associated with meeting this change have been coupled with the requirement to obtain increasingly better use from those dollar and manpower resources made available to the Air Force.

Within this environment, the Air Force policy is considered a sound basis of action. To the extent that we maintain an in-service capability in the combat and direct combat support functions, readiness and combat capability can be assured.

The Air Force has done a reasonably good job of maintaining inservice capability in such functions. We have, however, granted more exceptions due to skills problems than we would have preferred, particularly in the electronics area. We have converted, or are in the process of converting, several areas from contractor to military manning, such as the operation and maintenance of SAGE powerplants, SAGE computers, and the Aleutian segment of the DEW line, but skills shortages in some fields still necessitate more than desirable levels of contracting.

Air Force requirements for personnel possessing highly technical skills have grown rapidly with the exploding technology. Training

leadtimes for such skills are long. In some of these skills, oversea requirements exceed those in the United States with the resultant heavy incidence of oversea duty for the personnel involved. The Air Force is continuing to experience difficulties in retaining airmen trained in highly technical skills. For example, we currently have only 66 percent of the total authorized senior aircraft control and warning radar maintenance airmen, and a reenlistment rate for A.C. & W. radar maintenance personnel of about 17 percent. The interrelationship of expanding requirements, long training times, some adverse balances between oversea and U.S. requirements, and an unsatisfactory retention rate prevents the Air Force from meeting all highly technical requirements in-service, and necessitates contractual assistance.

In the indirect combat support function, the Air Force has developed a number of well-controlled and highly successful contracting programs such as contractual feeding. We are periodically reviewing activities in the indirect combat support area to find improved uses of in-service and contract service resources, and, thereby completely realize our policy objective of effectiveness and economy.

With this framework of general policy and its application, I would now like to turn to specific data on Air Force practices, starting with the relationship between military, civilian, and contract services resources. As Mr. Imirie indicated in his statement, this relationship must be considered in terms of the total Air Force.

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The general trend in our total manpower resource from fiscal year 1957 through fiscal year 1962 is portrayed here. Man-year data was selected as being the most meaningful. All functional areas of in-service and contract services use have been included. Since contractors are not normally required to provide us with an actual count of personnel, we have developed contract services manyears based on a conversion formula which we have used for several years and have found reasonably reliable. Over the period shown, military man-years have declined 9 percent. The dip in fiscal year 1961 was due to uanticipated losses of officers and airmen which caused strength to fall below authorized levels. Civilian man-years, which includes all foreign nationals, have declined 18 percent, though the decline is less sharp in the more recent years. Most of the decline is in foreign nationals with U.S. civilians declining only 9 percent. Contract services man-years have increased 7 percent, al

. though total man-years available to the Air Force have declined 10 percent.

74109 0-61--16

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The change in the distribution of the work force brought about by the plusses and minuses in each category is portrayed on this chart. As you can see, the adjustment has been a matter of a few percentage points.

With these overall trends in mind, I would now like to turn to the Air Force use of contract services from fiscal year 1959 through fiscal year 1961, in those areas of interest to the committee.

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We have divided the contract service dollars into categories by the type of activity involved and shown the total dollars for each category. Several of these categories will be portrayed in more detail in a moment.

The first category “Contract operated facilities,” involves all installations or systems where virtually all functions are performed by the contractor. The purposes of these installations are many and varied, and because of the large size of this category, a more detailed breakdown will be provided on the next chart.

Since there is variety of purpose involved in this category, our management procedures must be flexible. All of the significant contracts in this category, however, were initially approved and are continuously reviewed at Headquarters USAF level. We have available to leave with the committee, a complete list of individual contracts in this category.

The second category “Field and organizational maintenance” includes the maintenance of all types of equipment done by personnel at base level. It does not include depot level maintenance, which was corered yesterday. As might be expected from our basic policy, this category is relatively limited and stable. Most of the dollars involved in this category are concentrated on such support equipment as vehicles, ground power equipment, office machines, and other indirect support equipment.

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