a man by the name of Johnson, who is Secretary of National Defense, approves your order, it will not be carried out?

Secretary MATTHEWS. My position in that matter, of course, is determined by law which has been enacted by Congress. I have full authority and full responsibility of the Secretary of the Navy, as provided by the laws of the country, and I administer that authority. In case it is in conflict with anyone superior to me in authority, the person with superior authority would have his orders prevail over mine.

Mr. PLUMLEY. You make no order that is not subject to cancellation by somebody' higher than you?

Secretary MATTHEWS. Well, I do not know what you mean by that. Mr. PLUMLEY. You know what I mean by it.

Secretary MATTHEWS. I make orders so far as they are final under the law, and they are my orders. So far as any orders are subject to superior authority, then, of course, they would be subject to that superior authority.

Mr. PLUMLEY. You had better read that answer back to him. He has not said what he means. What he tells me is, his order is final,

and he knows better than that.

(The answer was read by the reporter.)

Mr. PLUMLEY. I think that I am content to let that go,

which means

that you do not have any authority whatever. I do not believe that you want to leave it that way. You better have that read again. Secretary MATTHEWS. I am satisfied to leave the record as it is.

Mr. PLUMLEY. That you have no authority whatever?

Secretary MATTHEWS. No; I do not say that at all.

Mr. PLUMLEY. You did say that right here.

Mr. MAHON. The record speaks for itself.

Secretary MATTHEWS. We will let the record speak for itself.
Mr. PLUMLEY. That is enough for me.

Mr. MAHON. Are there any more questions for the record, Mr. Plumley?

Mr. PLUMLEY. I have no more. I have said too much already.
Now, what is your name, please?

Mr. KIMBALL. Dan Kimball.

Mr. PLUMLEY. Where did you come from?

Mr. KIMBALL. California.

Mr. PLUMLEY. How did you happen to come down here?

Mr. KIMBALL. I was asked to come down here by John Sullivan and the President; John Sullivan, the former Secretary of Navy.

Mr. PLUMLEY. What office did you occupy under John Sullivan?

Mr. KIMBALL. Assistant Secretary of Navy for Air.

Mr. PLUMLEY. John Sullivan was a pretty good fellow.

Mr. KIMBALL. Yes; he was a friend of mine.

Mr. PLUMLEY. How did you happen to be continued in the present

position which you occupy?

Mr. KIMBALL. I cannot tell you.

Mr. PLUMLEY. That is all that I want to know.

Mr. MAHON. Let me say that you have full freedom to amplify the record. What we want is a statement of the facts that will be helpful to us and the Congress.

Let me say, Mr. Secretary and Admiral Sherman, the committee is deeply appreciative of your appearance here. You have made excellent statements. They have been responsive to our interrogation. We are trying to do our job, and you are trying to do yours. We are somewhat confused as to what the right course is. I rather think that no man knows all the answers to the problems that are now confronting us. We are all on the same team and working as Americans in the interest of national defense, and we are going to count on the members of your staff and various officials of the Navy to help us as we proceed to the consideration of all these items in the appropriation bill.

We thank you very much.

TUESDAY, FEBRUARY 21, 1950.

SUMMARY OF 1951 BUDGET

WITNESSES

REAR ADM. HERBERT G. HOPWOOD, UNITED STATES NAVY, DIRECTOR OF BUDGET AND REPORTS

CAPT. EDWARD W. CLEXTON, UNITED STATES NAVY, DEPUTY
DIRECTOR OF BUDGET AND REPORTS

FRED V. DEMARET, ASSISTANT CHIEF BUDGET ANALYST
CAPT. JOHN W. AILES III, OFFICE OF BUDGET REPORTS

Mr. MAHON. The committee will come to order.

Admiral HorWOOD. Today, sir, I expect to give a summary of our budget. I will be followed by the Chief of Naval Matériel, Vice Admiral Foster, who will concern himself with policies in connection with inventories, cataloging, and items of that nature.

I understood it was the desire of the committee to go into that particular phase. That will take up the morning.

This afternoon we will have the Bureau of Naval Personnel.

Mr. MAHON. We will be pleased to hear you at this time, Admiral Hopwood.

I want to say that I note Secretary Matthews is again with us today. We welcome him here. We hope he will be able to be with us from

time to time.

GENERAL STATEMENT

Admiral HOPWOOD. Mr. Chairman and members of the committee, the budget estimate of the Department of the Navy for the fiscal year 1951 is the fourth annual estimate I have had the pleasure of summarizing in my capacity as Director of Budget and Reports. We have all learned to appreciate the thoroughness of your labors to insure that every dollar spent will buy the highest possible degree of readiness of our operating forces. Also, during these 4 years, I have learned to appreciate more and more the arduous task which confronts the com

mittee in its review of the volume of detail which makes up the Navy budget.

The budget for 1951, through a revised appropriation structure, has been designed to lighten the task of review, although the full effect may not become apparent for a year or so. Programs have been redefined; closely related costs are budgeted for within a single appropriation title. The Navy's 1951 estimates are assembled under 21 titles, descriptive of the function they support. Collectively, these improvements make the budget more comprehensive and should tend to lighten your review task.

PERFORMANCE BUDGET

The need for general overhauling of the appropriation structure has become increasingly evident within the Navy and has been recognized in the past by members of this committee and the former Comittee on Appropriations for the Department of the Navy. Our current concept of performance budgeting has grown directly from the seed first planted by the House Committee on Appropriations in its report on the 1947 naval appropriation bill. Since that time the Navy has continually had under study the development of the performance budget.

Again last year, this committee indicated its interest in having the 1951 budget presented on a performance basis and the Congress gave further recognition to this problem when, under title IV of the National Security Amendments Act of 1949, it provided that future budgets for the Department of Defense be based upon programs and activities.

Also, the task forces of the Hoover Commission in their survey of naval budgeting and accounting procedures confirmed the observations first made by this committee and the Congress.

In view of our long-standing and well-known desire to push forward with improvements in the budget structure, the Navy welcomed these events, particularly the opportunity to submit its 1951 budget on a performance basis. We believe that the budget before you is in line generally with the desired objectives. I would be less than sincere, however, if I left the impression that all concepts of performance budgeting have been realized; they have not. But this budget represents a major step forward. It will permit the establishment of accounting records which ultimately will reveal cost data essential to performance budgeting. It is like the lead time in procurementdelivery of the finished product sometimes lags the initial authorization from 1 to 3 years. So it is with the performance budget, following the initial authorization of a basic financing plan, the experience of at least one full year of accounting on a performance basis will be necessary before the real advantages will be evident.

Three principles have predominated in the development of the appropriation structure of the Navy budget for 1951:

1. Costs directly connected with a complete program have been grouped under a single appropriation, such as "Ships and facilities" and "Aircraft and facilities."

60777-50-pt. 4———4

2. Costs directly allocable to a well-defined area of primary interest also have been grouped under a single appropriation, such as "Military personnel, Navy" and Military personnel, Marine Corps." I might add, "Medical care."

3. Those costs which are not solely related to any particular program but which are service-wide in nature have been grouped to permit the most effective and economical administration. Examples are: Naval Observatory, Hydrographic Office, and the communications network. As the committee proceeds with its review of the estimates, some exceptions to these principles will be noted. When these exceptions arise, I will explain the reasons which led to the decisions. In all cases, our efforts have been directed toward improving the efficiency of the Navy as a whole through its budget structure.

I should like to emphasize that the management of the Navy will be strengthened by this appropriation structure; command relationships will not change; bureau functions and technical responsibilities will not change; and matériel cognizance and procurement responsibilities will remain as at present.

As an aid in tracing the appropriation language of the new bill from previous acts, I have given to the committee studies which indicate, in detail, what has happened to the old language; that is, whether it was omitted as surplusage or where it is contained in the new bill. In addition, I have furnished annotated copies of the new bill which show the legislative authority for each of its provisions. Careful examination of this material will indicate that the new Navy bill contains no substantive changes even though appropriation language has been simplified and clarified. At the time of my closing statement, I will discuss in detail with the committee the new language proposed in this bill. During my term as Director of Budget and Reports, I have made a concentrated effort to remove all point-oforder language from our appropriation act. I will explain this in detail during the analysis of the new language.

Also, to assist the committee to better understand the transition from our old appropriation structure to the new, I have furnished the committee with copies of a summary table showing the distribution of funds contained in this bill. This table shows the total amount under each new title and the amount transferred from each old title to make up that total.

The Secretary of the Navy and the Chief of Naval Operations have presented to you earlier the significant aspects of naval plans and policies which have governed the preparation of the estimates. I will summarize the estimates in support of these plans and policies. The Chief of Naval Material, who will follow me, will present overall policy on inventories, procurement, industrial mobilization, and cataloging. Representatives of the bureaus and offices who administer the various programs will follow to justify the estimates in detail.

I have previously submitted to the committee several sets of tables which summarize the estimates and show in tabular form some of the most significant items. At the close of the hearings, with the approval of the committee, I would like to summarize the high lights of the hearings and insert into the record certain of these tables.

CASH APPROPRIATED AND NEW OBLIGATION AUTHORITY 1949, 1950, AND 1951

I have here a series of charts which portray the high lights of the Navy's 1951 budget. Chart I-table A-shows a comparison of the 1951 estimate with 1949 and 1950.

Total cash appropriation and new obligating authority, 1949, 1950, 1951

Includes $124.8 of contract authority carry-over from 1950 for aircraft procurement.

In fiscal year 1949 new obligating authority totaled $4,920,000,000. This was composed of $3,899,000,000 in cash and $1,021,000,000 of contract authority. In addition, $234,000,000 was appropriated to liquidate contract authority granted in previous years. For the fiscal year 1950 there was appropriated $4,183,000,000 in new obligating authority composed of $3,524,000,000 in cash and $659,000,000 in new contract authority. In addition, there was appropriated $790,000,000 in cash to liquidate contract authority granted in previous years. For fiscal year 1951 there is requested $3,881,000,000 in obligating authority composed of $3,281,000,000 in cash, $475,000,000 in new contract authority, and $125,000,000 in unobligated contract authority brought forward from fiscal year 1950. In addition, there is requested $728,000,000 in cash to liquidate contract authority granted in previous

years.

I might indicate that the complete break-down of the contract authority and the purpose for which the appropriations were made are included in the table on the previous page, which has already been inserted in the record.

Mr. MAHON. The total Navy request, then, would be approximately $4,000,000,000?

Admiral HoPWOOD. In cash it would be the sum of these two [indicating] or $4,009,000,000, of which $728,000,000 is to liquidate contract authority granted in prior years-1949 and 1950.

Mr. MAHON. In order to get the over-all total, you would have to add the $125,000,000 and the $475,000,000.

Admiral HopwOOD. To get the total requested of the Congress, we add the $4,009,000,000, plus the $475,000,000 new contract authority plus the $125,000,000 old contract authority-1950-carried forward,