1 Amounts indicated have been adjusted where necessary to provide comparability with 1946 estimates. The most important adjustment is the reduction of $799,385,346 in Signal Service of the Army, representing $1,249,385,346 of gross obligations and $450,000,000 of recoveries transferred to Air Corps, Army.

The decrease of 7.2 percent in quartermaster obligations is only slightly greater than the decrease in average strength of the Army and reflects the close relationship which fund requirements under this appropriation bear to the number of troops to be clothed and fed.

APPROPRIATIONS SHOWING INCREASES

The increase of 5.0 percent in medical obligations is accounted for by the increasing number of patients in general and convalescent hospitals in this country.

The increase of 10.4 percent in chemical obligations may be accounted for by the greatly increased incendiary bomb program. Procurement of the 4.2-inch chemical mortar shells will continue at a high level, since requirements for the war against Japan approximate total available productive capacity.

The increase of 20.7 percent in engineer obligations reflects a special project without which this appropriation would show a decrease of approximately 20 percent. Obligations for new construction under this appropriation will be decreased by more than 50 percent, and procurement obligations will be decreased approximately 40 percent. In addition to the funds required under ASF appropriations, an amount of $51,905,000 is being requested for allocation to the Army Service Forces under the appropriation "Expediting production.' This amount is 96.5 percent less than the estimated obligations of $1,500,163,809 for the current fiscal year. Retrenchment in the facilities program was begun as soon as the tide of battle indicated that it could be undertaken safely. Toward the end of March new facilities which would not come into production until later in the year were eliminated. This action was followed in April by elimination of all facilities not needed for the Pacific war.

MONTHLY EXPENDITURES

While it is estimated that net obligations will decrease approximately 15 percent, it is believed that expenditures for fiscal year 1946 will be only slightly less than those for fiscal year 1945. The expenditures have increased steadily over the past several months and will probably remain at current high levels for the remaining months of this year and the early months of fiscal year 1946 (see chart 2).

The lag between obligations and expenditures averages about 6 months. The high obligations incurred during the past winter will result in high expenditures for several months to come, despite the large volume of contract terminations. Reduction in expenditures as a result of termination will be offset in part by termination costs and by payment for items already delivered but not yet billed or vouchered. Transportation, travel, port operations, maintenance, repairs, and utilities and many other operating expenses will increase sharply during the period of redeployment. Even the reduction in the size of the Army will result in temporarily increased expenditure because of mustering-out pay.

PROCUREMENT

During calendar year 1944 total deliveries amounted to $22,098,000,000, which was 96.7 percent of the procurement goal for the year. For calendar year 1945, the current schedule of deliveries is $21,251,000,000, representing a decrease of 3.8 percent from 1944 deliveries. Total monthly deliveries for calendar years 1944 and 1945 to date, together with scheduled deliveries for the remaining months of 1945 and for 1946, are shown in chart 3.

You will notice how deliveries rose to a peak in March of this year, and then dropped back in April and May, and how they are scheduled for a sharp decline thereafter.

The dollar values of procurement include equipment and supplies for issue to the Navy and to our allies under lend-lease agreements. The distribution of issues during the first quarter of 1945 is indicated in chart 4.

You will notice from the chart that the Army takes approximately 85 percent of the total.

PRODUCTION ATTAINED A TRIBUTE TO INDUSTRY

Although 1944 deliveries were within 4 percent of the procurement goal for the year, they were far short of actual requirements. The procurement goal is established after full consideration of production feasibility, and serves as a standard of performance which is believed to be possible of achievement by American industry. Calendar year 1944 was a year of steadily increasing requirements. As requirements increased, delivery schedules were increased accordingly until late in the summer, by which time it became apparent that further increases could not be met during the few months remaining in 1944, but would have to be added to the 1945 schedule.

Increases in programed procurement for the calendar year 1945 that were made during the last months of 1944 are indicated by chart 5.

MONTHLY PROCUREMENT PROGRAM

This chart, you will note, shows the total programed procurement as it was made out in successive months.

For example, in September we had programed procurement of a little over $20,000,000,000, and that rose until February, when it reached about $28,000,000,000. Then in subsequent months we were able to reduce it as the tide of battle turned in our favor.

REASON FOR INCREASED REQUIREMENTS

One reason for the steadily increasing requirements during 1944 was the continued increase in strength of the Army. It had been. expected that the strength would level off at 7,700,000, but after that figure was reached in March 1944 the total continued to rise. On December 31 it was 8,053,000, and by the end of April 1945 it had reached 8,249,000. A much more important reason for the increase in requirements, however, was the increased demands of the theater commanders, especially for the items which were found to be most effective in actual battle.

The effect upon procurement of shifts in demand is illustrated by a comparison of computed procurement requirements and actual deliveries for selected items. (See table headed "Comparison of 1944 computed procurement requirements with 1944 actual deliveries.")

SHORTAGES DID NOT AFFECT SUPPLY TO TROOPS

The gross shortage in 1944 deliveries as compared with computed requirements was in excess of $3,000,000,000. For most items the shortage did not result in any failure of supply to troops, since the deficit in procurement could be met by depletion of depot and reserve stocks. The necessity for restoring depleted stocks, however, further increased the requirements for 1945. Except for the defeat of Germany, the current 1945 delivery schedule would have been about $27,533,000,000, which is 29.6 percent above the current schedule and 24.6 percent higher than 1944 deliveries.

CHART 3

ASF procurement comparisons, calendar years 1944, 1945, and 1946

1 Excludes Signal Corps items for which procurement responsibility was transferred to Army Air Forces

on Apr. 1, 1945.

Revised June 12, 1945.