a higher level than the rest of the Department. We do not have weapons and equipment like that. Senator JORDON. This for the Department would include weapons, of course. Admiral LYLE. Yes. Senator JORDAN. Well, that is a reasonable explanation. Your participation would be a very small, minute part of that. Senator PROXMIRE. Admiral, I want to thank you very, very much. This has been most enlightening and helpful. I did not mean in my questioning to imply that I was particularly critical of your agency. I think this is a model for the Federal Government; I think you have done a magnificent job in the last few years especially. I think that you can give us a great deal more advice and assistance than we can possibly give you. The subcommittee will stand in recess until tomorrow morning at 10 o'clock, when the witness will be Joseph Campbell, the Comptroller General of the United States. We will meet in room 318, Old Senate Office Building. (Whereupon, at 3:35 o'clock p.m., the subcommittee stood in recess until 10 o'clock a.m., Wednesday, April 28, 1965.) ECONOMIC IMPACT OF FEDERAL PROCUREMENT WEDNESDAY, APRIL 28, 1965 CONGRESS OF THE UNITED STATES, SUBCOMMITTEE ON FEDERAL PROCUREMENT AND REGULATION OF THE JOINT ECONOMIC COMMITTEE, Washington, D.C. The subcommittee met at 10:05 a.m., pursuant to recess, in room 318, Old Senate Office Building, Senator Paul H. Douglas, chairman of the subcommittee, presiding. Present: Senators Douglas and Jordan; Representative Griffiths. Also present: Ray Ward, economic consultant; James K. Knowles, executive director; and Hamilton D. Gewehr, administrative clerk. Senator DOUGLAS. The committee will come to order. I want to apologize for being 5 minutes late. I never have known the pressures to be as great on the Hill as they have been this week. We have with us this morning the Honorable Joseph Campbell, Comptroller General of the United States, and members of his staff whom he may introduce if he wishes when he begins his statement. For the record I want again to state that Mr. Campbell is one of the outstanding public servants of our time. His work in behalf of the taxpayers cannot be measured in terms of dollars or other benefits, though I think he has saved the taxpayers many hundreds of millions of dollars. I want to say that the country has been very fortunate to have Mr. Campbell for Comptroller General, as it was for 14 years before to have Lindsay Warren, who was a Member of the House of Representatives and then Comptroller General and who was a man of equal integrity and competence. Before beginning your statement, Mr. Campbell, I have two short statements to make. First, I am aware that one of your assistants, Mr. Stanley Warren, who rendered valuable assistance to this subcommittee on reports on the stock funds was untimely killed in line of duty overseas during the past year. Will you please furnish his family a copy of this record wherein public recognition is given to his valuable contribution to public service? Secondly, through a misunderstanding of one of our suppliers, the improper impression was given yesterday that all the short-shelf items that we had on display were actually outdated and useless. Some were outdated and have been declared surplus. Others had not. All were short-lived items, however. Mr. Campbell, your statement is quite short. You may read it in its entirety and then we will ask you a few questions. I will include my letter of April 7, 1965, to you at this point. Hon. JOSEPH CAMPBELL, Comptroller General of the United States, APRIL 7, 1965. DEAR MR. CAMPBELL: The Subcommittee on Federal Procurement and Regulation will held hearings on April 27, 28, and 29, 1965, as a continuation of the program of the former Subcommittee on Defense Procurement. You are scheduled to testify, accompanied by such staff as you desire, on April 28, 1965, at 10 a.m., in room 318, Senate Office Building. It will be helpful to the subcommittee if your testimony covers progress made in procurement and management of ADP equipment, standardization of military supply items, utilization of existing supply inventories, and the management of short-shelf-life items in the Federal establishment. In addition to the above, your opinion will be valued as to any other prime areas requiring improvement. It is noted that you have issued 201 reports during the past year which relate to subjects of interest to the subcommittee. The digests of these reports and the index thereto which you have furnished will be printed in the staff report we plan to issue before the hearings. Faithfully yours, PAUL H. DOUGLAS. STATEMENT OF HON. JOSEPH CAMPBELL, COMPTROLLER GENERAL OF THE UNITED STATES; ACCOMPANIED BY ROBERT KELLER, GENERAL COUNSEL; WILLIAM NEWMAN, DIRECTOR OF DEFENSE ACCOUNTING AND AUDITING DIVISION; HAROLD RUBIN, ASSOCIATE DIRECTOR OF DEFENSE ACCOUNTING AND AUDITING DIVISION; AND EDWARD J. MAHONEY, ASSOCIATE DIRECTOR OF THE ACCOUNTING AND AUDITING POLICY STAFF, GENERAL ACCOUNTING OFFICE Mr. CAMPBELL. Thank you very much, Mr. Chairman. This morning I have with me our General Counsel, Mr. Robert F. Keller; Mr. William Newman, Director of our Defense Accounting and Auditing Division; Mr. Harold Rubin, Associate Director of that Division. All of these men have been involved in the preparation of my statement and in various other reports which have come to your committee. We appear before you today at your request to discuss some of the more significant matters presented in our reports issued since last year's hearings. Since last appearing before this subcommittee, we have issued over 200 reports to the Congress relating to Department of Defense activities. Brief digests of most of these reports are contained in the background material prepared for your use by your staff. Also, your staff has been furnished copies of these reports. Our reports this year again point out examples of the need for improved management in logistics operations in order to achieve significant cost savings. This is not to say that the military departments are not making progress toward the correction of many of the problems. We are of the opinion that Department of Defense officials give careful consideration to the matters we bring to their attention. This is demonstrated by the fact that collections and other measurable realized or potential savings in defense operations attributable to action taken or planned on findings developed by the General Accounting Office totaled an estimated $255 million during fiscal year 1964. We are reasonably certain that the potential savings in fiscal year 1965 will be substantially greater. Yet, many of our reports still pointup weaknesses in the administration of activities similar to those discussed previously with this subcommittee. In our opinion, this can be attributed in large part to an apparent lack of sufficient awareness of individual responsibility for appropriate actions and indicates that constant attention must be given to emphasizing this underlying and basic concept of efficient management. In this statement we will discuss our findings with respect to (1) standardization, (2) failure to use available material, equipment, and facilities, (3) lease versus purchase of equipment, and (4) short-shelflife items. These are areas of defense activities warranting immediate attention. STANDARDIZATION Defense officials estimate that the standardization program has cost approximately $310 million since the enactment of the Defense Cataloging and Standardization Act of 1952, through fiscal year 1964. Almost $35 million is being spent annually on the program. These amounts do not include the salaries and expenses of military personnel working in the standardization area. Approximately 4 million active items are now in the military supply system, and it has been estimated that for each item eliminated from the supply system, a savings of about $1,000 a year in supply management costs will be realized. Last year when we discussed our initial report on lack of satisfactory progress under the defense standardization program, we stated that this program had not received the emphasis and central direction it required to achieve its objectives. During the past year, the Secretary of Defense established the Office of Technical Data and Standardization Policy under the Assistant Secretary of Defense (Installations and Logistics) to administer defensewide standardization efforts. While this office will likely strengthen the administration of the standardization program through more centralized management, we believe that continued surveillance by the Secretary of Defense is necessary to assure that appropriate action is taken to preclude the recurrence of deficiencies such as we have identified in our reports. We recently issued a second report to the Congress resulting from our continuing review of the standardization program. This report discloses that potential savings of over $30 million in supply management costs were lost because of delays in processing the necessary paperwork to record completed standardization decisions so that future procurements of unneeded items could be avoided. As an example, we found that 12 item-reduction projects for motion picture cameras had been completed; however, in some cases, almost 4 years expired before the resulting decisions to eliminate the unneeded items were recorded and made known to inventory managers. In commenting on our findings, the Assistant Secretary of Defense (Installations and Logistics) advised us that procedures have been revised to insure the timely recording of standardization decisions. In another recent report to the Congress, we have identified an additional phase of the standardization program that warrants the attention of management officials. We have a limited review of new items that had entered the supply system after completion of item reduction studies. We examined 722 items and found that 350 were identical to or essentially the same as those that had been previously eliminated or those that had been retained as standard items. The failure to prevent reentry of items previously eliminated or the entry of duplicate standard items has resulted in the loss of potential annual |