ROTATION OF MEDICAL STOCKPILE From our review of selected items in the civil defense medical stockpile, managed by the Public Health Service, it appears that deterioration losses might be reduced by transferring limited-life items to the Department of Defense and Veterans' Administration for current use. For example, the Public Health Service estimates that during the next 3 years about $8.2 million worth of potency-dated antibiotics will need replacement. We observed that the Veterans' Administration purchased $600,000 worth of these antibiotics, while the Department of Defense purchased about $3.1 million. Large quantities of these items were in the civil defense stockpile, and their issuance for current use by these agencies would enable replacement of the stockpile with fresh stock, thereby reducing deterioration losses which undoubtedly will otherwise occur. Efforts of the Public Health Service to arrange such transfers to other agencies have been impeded, we believe, by the divided agency responsibilities and the reluctance to accept items that have been in storage for some time. We have brought this matter to the attention of the Secretary of Health, Education, and Welfare, the Secretary of Defense, and the Administrator of Veterans' Affairs, suggesting that they review the feasibility of using limited-life items in the civil defense medical stockpile for current Government requirements and establishing programs for the systematic rotation of items that can be used in the current activities of other agencies. At the present time, we have not received the comments of the agencies. (See pp. 120-124.) In a report to the Congress in March 1964 covering a review at several Air Force depots we disclosed that $4 million worth of spare parts had been condemned and committed to disposal without any examination to determine their serviceability. AIR FORCE POLICY QUESTIONED This happened mainly because of an unrealistic and inflexible policy of the Air Force Logistics Command that required that age-controlled items whose prescribed shelf lives had expired be automatically condemned without regard to their possible remaining usefulness. At one location, for example, we found that they had condemned 990 valves valued at $6.75 each or a total of $6,682. Later the valves were processed for sale as scrap although, at that time, a requirement existed for 380 valves of this type. The scrap value of the condemned valves was estimated to be $26. The component of the valve on which the shelf life was based was a rubber washer, priced in Air Force records at 24 cents. Our test showed that the washer could be replaced in a minimum of time at a fraction of the cost of a valve. After we brought this matter to the attention of the Air Force, corrective action was taken in the form of revisions to existing regulations and directives. The Air Force estimates that the savings resulting from the retention in active inventories of age-controlled items which were previously subject to automatic condemnation and disposal may reach $15 million by June 1965. This concludes our statement, sir. We will be pleased to answer any questions. Senator DOUGLAS. Thank you very much, Mr. Campbell. This is a characteristically admirable, concise, and specific statement of the concrete ways in which waste has existed and in which it could be corrected. I will ask Senator Jordan if he has any questions. Senator JORDAN. Thank you, Mr. Chairman. I want to commend Mr. Campbell for a very forthright statement. SCOPE OF GAO REVIEW The first question that comes to my mind is this: What percent of the items in Government stockpiles do you cover in your review? I know you are limited to a number of items that you can inspect, but what percentage would you say you cover? Mr. CAMPBELL. It would be probably as little as 1 percent. Senator JORDAN. Then we might expect that the difficulty that you find and the waste and extravagance you find could be multiplied at least by a hundred if you had the time and the manpower to go over the whole inventories of stock items. Mr. CAMPBELL. That would be possible. We mention these items, Senator, some of which may seem very small in amount because, as you say, when multiplied by thousands, in the aggregate they come to a very, very substantial sum. PROCUREMENT AND MANAGEMENT OF ADPE Senator JORDAN. You mention the recommendation you made for the establishment of a central management office with authority and responsibility to make decisions on the procurement and utilization of ADP equipment. The administration is not apparently willing to follow your recommendation. I think you made a good sound case for that kind of central management office. I do hope that the administration will reconsider its attitude. You point out very aptly that substantial waste has taken place in this area. I was interested in your comment on car leasing as against car buying. I know from experience that the rates that people in the business charge for leasing automobiles has to be substantial. They intend to write them off in the first 18 months or so, the total purchase price. If used beyond that period rather than a very short time, it certainly would seem that the recommendation to buy this transportation is very much in order. Now yesterday we talked some about these short-shelf-life items. with the witnesses from the Department of Defense. INVENTORYING OF ITEMS I can understand the deterioration that takes place in this type of merchandise when it is stored, but I can't understand the disappearance of these items. You mentioned in your report here today that some items can't be accounted for. Would you suspect that there is theft or pilfering going on or would you be more inclined to think there is a foulup in the recordkeeping? Mr. CAMPBELL. Our impression is that the pilferage is not too serious-undoubtedly there is some; I think it is more a matter of careless or poor recording. Mr. NEWMAN. In this area I believe there are certain practices that we normally find in a business concern, that of taking inventories periodically. In many cases when the warehouses in the different services have to keep under their personnel ceilings, it seems the last thing they do is to take an inventory. INADEQUATE RECORDS Basically in business today, that is large and small companies, in order to issue a financial statement to its stockholders, public accountants come in, inventories are taken under their observation. This does not exist in the services and in many cases in order to get the daily job done they have sacrificed the taking of cycle or annual inventories. As a result, there are many item transactions that don't get on the warehouse records so they are lost. Also, the inventories deteriorate, no one makes mandatory periodic inspections to see that the items are up to par for issuance. It is in this area that we have to put some emphasis, on the type of short-shelf items we are talking about. Senator JORDAN. You mentioned, too, Mr. Campbell, that in one instance a lapse of some 4 years occurred between your recommendation and the implementation of your recommendation. This, it seems to me, could result in disasters if we can't get faster action. Mr. CAMPBELL. Senator Jordan, our followup, now is somewhat more prompt than has been possible for us in the past. I think that we are going to press on a more current basis for the Department to make these corrections. ADPE SERIOUS PROBLEM I would like to go back for a moment to the matter in which Chairman Douglas has been very much interested. That is ADP. I don't want you to feel that because I have spent so little time in my statement on this problem that we don't feel very strongly about it. Senator JORDAN. That is one where the big dollars are. Mr. CAMPBELL. It is a very serious problem. (See p. 207.) DISAGREEMENT WITH BOB AND OTHER AGENCIES Mr. CAMPBELL, We are in complete disagreement with the Bureau of the Budget and with other agencies in this matter of control of the ADP situation. Senator JORDAN. I hope you continue to press your point. I agree with you. Mr. CAMPBELL. I think it is coming regardless, but I would like to see it come sooner. But they will come to it because this is such an enormous development that there is no way to estimate what it will cost the Government in the next 4 or 5 years. STOCKPILING OF MEDICAL ITEMS Senator JORDAN. Now there is a smaller item, but one of concern to me, that is the stockpiling of medical supplies for Civil Defense. We all know that those stockpile items will deteriorate on the shelves if we can't get some kind of rotation system where in 6 months or a reasonable time some items are removed from Civil Defense and put in use in veterans hospitals or where they are buying similar items currently. 47-662-65 Obviously there will be a waste when the useful life of these items has expired and the quality is questionable, then they will go into the garbage can. I hope you can work that out. You have made an important suggestion in your system of rotation so that we can keep fresh supplies at all points of use. Mr. CAMPBELL. You will find in the matter of handling food, for example, if you visit some of these sites where large quantities of food have to be available, that the rotation system seems to be moving smoothly. The average man on the job is more aware of the possibility of food going bad. But this matter of drugs is something else; they require a more technical understanding. From what I've seen of the food program I think the rotation is really remarkable. Senator JORDAN. You keep harping on the medical supply, the drug end of it. We need the same kind of attention paid to that as has apparently taken place with respect to foodstores. Mr. CAMPBELL. Yes, sir. Senator JORDAN. Thank you. Thank you, Mr. Chairman. Senator DOUGLAS. I want to thank the Senator from Idaho for his characteristically constructive questions which go right to the point. I would like to start at the back part of your statement, Mr. Campbell and work forward, if I may. Do I understand that you have samples of these valves which were condemned as being unfit? Mr. RUBIN. Yes, sir. Senator DOUGLAS. I wonder if they could be produced? Mr. RUBIN. Yes, sir. Senator DOUGLAS. The only trouble with them is this rubber washer? Mr. RUBIN. That is right. Senator DOUGLAS. And the valve cost $6.75? Mr. RUBIN. Yes, sir. Senator DOUGLAS. The rubber washer cost Mr. RUBIN. 24 cents. You can lift the washer. The washer comes right off. Senator DOUGLAS. So they threw 990 away because a 24-cent item was overage? Mr. RUBIN. Yes, sir. Senator DOUGLAS. Are the representatives of the Department of Defense here? Commander DURKIN. Yes, sir. Senator DOUGLAS. Your name, please? Commander DURKIN. Commander Michael F. Durkin, Office of the Secretary of Defense, Legislative Affairs. Senator DOUGLAS. Do you know of this? Commander DURKIN. Not that specific one, Mr. Chairman. Senator DOUGLAS. I would like to ask the representative of the Department of Defense if he would go into this matter and make a report to the committee with a copy to the Comptroller. Commander DURKIN. Yes, sir. (The following was subsequently supplied :) DOD STATEMENT ON GAO REPORT 1. Title: "Wasteful Practices in the Management of Age-Controlled Aeronautical Spare Parts," B-146865, March 10, 1964 (OSD Case No. 1795). 2. GAO finding: The Air Force had condemned and committed to disposal age-controlled spare parts without any examination to determine their suit ability. After the GAO's findings were brought to the attention of Air Force, corrective action was begun. The Navy, based on information furnished by the Department of Defense, also follows the practice of committing to disposal, upon expiration of shelf life, those parts categorized as "consumable" items. 3. GAO estimate of unnecessary costs: $4.8 million. 4. Time period of GAO report: July 1961 to June 1963. 5. DOD comments on GAO finding: None. 6. DOD comments on costs: No exceptions were taken to the GAO alleged unnecessary costs incurred. 7. DOD corrective action: Actions taken by Headquarters, AFLC, prior to and subsequent to the GAO review should result in rapid correction of the deficiencies cited by GAO. Significant Air Force actions taken include (1) a symposium attended by personnel of all air materiel areas, (2) regulations were revised providing new policy and guidance, (3) technical orders were changed, (4) each air materiel area has established monitors to maintain a review of the age-controlled program and (5) AFLC plans to make regular visits to air materiel areas to review progress. Since the GAO draft report, the Navy has made a review of its age-controlled aeronautical items. Of the 7,600 categorized as consumable, 800 have been singled out as assemblies and will be subject to repair. The remaining 6,800 items are low-cost items, such as individual parts, which are not considered economically repairable.1 Senator DOUGLAS. As the Senator from Idaho suggested, this is only one sample. This may have been occurring elsewhere. Mr. RUBIN. We have another sample. Senator DOUGLAS. You have another sample from another place? Senator DOUGLAS. Is this in the 990? Mr. RUBIN. No, sir; this is another item. Senator DOUGLAS. What was thrown away here? The whole item was thrown away? What part was defective? Mr. RUBIN. There is a little rubber ring. Senator DOUGLAS. Could you tell me what the part as a whole cost? Senator DOUGLAS. And this rubber ring would cost how much? Senator DOUGLAS. Do you know how many of these were discarded? Mr. RUBIN. I believe in this case they were not thrown away. They were condemned and restocked for practice in this particular case. Mr. NEWMAN. 630 were condemned. Senator DOUGLAS. Had they been scrapped or did you stop them? Mr. RUBIN. As I recall this case, they were stopped before they were scrapped. Senator DOUGLAS. I will say in my judgment the top brass in the Department of Defense is doing everything they can in these matters. I don't know whether Mr. Campbell will agree with me, but in general he agrees. But it is a huge organization, and it is very hard to correct every instance, and these individual illustrations are very good and they should cure some of the cockiness which the lower echelons in the Department of Defense at times display, a feeling that they are infallible and they should not be criticized. Certainly not by civilian authority. What you are saying is very valuable. Mr. CAMPBELL. As I have said, we are receiving the greatest of consideration from the top authorities in the Defense Department. As you say, this is an enormous organization and it takes a long time for even those at relatively high levels to become aware of the problems. 1 See staff report, 1965, p. 122, for synopsis of GAO Report B-146856, Mar. 10, 1964. |