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In a large housing project such as a typical Capehart, savings are achieved through volume construction, and these savings also accrue to the construction of the relatively few houses for senior officers in a project. As a result, the cost of a larger house built as part of a big project cannot be compared to the cost of a comparable custom-built house in the civilian market.

Question 4(a). Are there no DOD regulations to regulate the cost of Capehart units for such officers under the $16,500 unit average?

Answer. DOD regulations require conformance to the size limitations as established by the Congress and to the overall unit cost limitation for Capehart housing.

Question 4(6). Is there any good reason why a provision should not be included in this bill specifying that the cost of appropriated fund housing, as prescribed in Public Law 85-852, and Capehart units be comparable?

Answer. It has been reported that one of the GAO's criticisms of this situation is that the Air Force is obtaining larger housing resulting in inequities between the services which could have an effect on morale. We believe the contrary may be more correct. The Army and the Navy are much older services with most bases having very large prewar quarters for the senior and flag officers. As can be seen from the above table, the cost limitation restricts senior and flag officer quarters to areas considerably smaller in size than that allowed by the Congress. Hence, the inequity will be in Air Force housing when compared to existing Army and Navy senior and flag officer quarters, and the inequity will be even greater if the services are not allowed to build to the maxi. mum size limitation. When consideration is given to the steadily increasing cost of construction, it is quite apparent that a limitation by maxmum cost will result in increasingly smaller quarters. It should be noted that the trend in the civilian market, in spite of increasing unit costs, is to larger housing. Only by using the size limitations can we approach comparability.

An analysis of the GAO report listing these “excess cost” houses by base and by rank reveals that only one house was involved in 9 of the 14 cases listed, and only 3 of the 14 cases involved more than two houses. The total number of houses involved is reported to be 68, which is less than 0.1 of 1 percent of the Capehart program to date. So few quarters of this category are involved in a given project that these can be built without sacrificing size or livability in housing in the remainder of the project.

We do not recommend the imposition of cost limitations to Capehart family housing units of the various grades, since it is not practicable to take bids on this basis. The present system wherein a maximum cost average is used has served the purpose quite adequately.

Question 5. Last year, this committee placed a 20,000-unit limitation on the number of Capehart units that could be constructed between June 30, 1959, and September 30, 1960. In section 507 of this bill, you ask that this limit be increased to 30,000 units. Why is this necessary?

Answer. The limitation referred to in the question is contained in section 414 (b) of Public Law 86–149 and applies to authorizations contained in subsections 104 (b), 204 (b) and 304 (b) of the act. The Department of Defense does not seek amendment to this limitation.

Section 507 of S. 3006 would amend section 803(a) of the National Housing Act, as amended by section 414(a) of Public Law 86-149, which inserted in lieu of the last proviso of said section 803 (a): “And provided further, That no mortgages shall be insured under this title after September 30, 1960, except pursuant to a commitment to insure before such date, and not more than twenty thousands? family housing units shall be contracted for after June 30, 1959, pursuant to any mortgage insured under section 803 of this title after such date.”

Subsequently, the date of September 30, 1960, was changed to October 1, 1961, by section 701 (a) of Public Law 86–372, the Housing Act of 1959.

Thus, it will be noted that not more than 20,000 units of Capehart housing can be contracted for after June 30, 1959, pursuant to commitments to insure prior to October 1, 1961. The Department of Defense plans to contract for 20,000 Capehart units authorized by Public Law 86–149 and Public Law 85-685 and is seeking authorization of 8,718 additional Capehart units in S. 3006. If the 20,000-unit limitation now contained in section 803 (a) of the National Housing Act is not increased, no additional units which may be authorized for the fiscal year 1961 program can be built. The Department of Defense is asking that this limitation be increased from 20,000 to 30,000 so that newly authorized units can be built.

Question 6. How many of the 20,000 units approved last year have been placed under contract as of this time?

Answer. As of April 9, 1960, the Department of Defense has placed 2,364 units in six Capehart projects under contract, as shown by the following list. It will be noted that only two projects are actually under construction while letters of acceptability have been issued on the remaining four projects. A letter of acceptability is considered as a contract because it obligates the contractor to take certain actions preliminary to the award of the definitive housing contract and obligates the Department to make the award when these conditions have been complied with.

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At this time about half of the fiscal year 1960 program is under advertising. The military departments have not advertised a greater proportion of the program because, at the suggestion of the Bureau of the Budget, the Assistant Secretary of Defense (Properties and Installations) on November 23, 1959, placed a limitation on the number of Capehart units which could be under advertising but not closed at any one time in order to avoid creating undue pressure on the mortgage market. This limit was set at 10,000 units—3,400 for Army, 2,200 for Navy, and 4,400 for Air Force.

7. In your statement you briefly covered the status of your survey of inadequate public quarters. In section 508 of the bill you request an extension from July 1, 1961, to January 1, 1962, as the date when substandard quarters must be brought up to standard or disposed of. The House-passed bill sets this date as December 31, 1961. Will the date set by the House allow adequate time to accomplish your purpose ?

Answer. We feel that we need a full year's extension to July 1, 1962, in lieu of the 6 month's extension provided in both H.R. 10777 and S. 3006. At several locations, for example, a Capehart project has been authorized and approved for developmenht but will not be completed by January 1, 1962. At other locations, Capehart projects are included in the fiscal year 1961 military construction authorization program; these most certainly will not be completed by January 1, 1962. The inadequate public quarters which are occupied by military personnel who will be ordered into the new housing, will be needed until the new housing is complete. There are approximately 2,700 units in this category.

At other locations, where it is not possible to program replacement housing due to the nonpermanent nature of the activity, or uncertainty as to future manning levels, it would not be in the best interests of the United States to dispose of the inadequate public quarters or expend funds to bring these quarters up to acceptable standards. There are approximately 600 units in this group.

In addition to the above categories, there are special problems in oversea areas which make it infeasible to dispose of inadequate public quarters by December 31, 1961.

Question 8. Will not some of this housing scheduled for disposal, even though inadequate by your standards, continue to have a period of usefulness?

Answer. It is true that use could be made of certain units of the housing now scheduled for disposal. As was indicated above, there are specific plans

for use of approximately 3,300 units of the 10,000 now planned for disposal. It is likely that as a result of further evaluation of the balance of 6,700 units, a determination would be made that there is a use for an additional number of such units.

Question 9. Would it not be better to set no date at all, but leave the destruction of these quarters to the judgment of the Secretary of Defense?

Answer. Rather than eliminating the terminal date for disposition of inadequate public quarters, it would appear sufficient to authorize an extension of this date to July 1, 1962, in order to provide adequate time for a study of this subject and permit the Department of Defense to make recommendations leading towards a permanent solution to this problem by means of new legislation in connection with the fiscal year 1962 military construction authorization bill.

Question 10. Could some such housing be used to house families of lower grade enlisted personnel who now must live on the economy in inferior quarters?

Answer. It is my opinion that some of the public quarters which have been designated inadequate can be used to house families of lower grade enlisted personnel. It has come to my attention that at some locations, because of the lack of community support at reasonable prices, some lower grade enlisted personnel have been required to live in quarters which are inferior to those Government facilities to be disposed of.

Question 11. I understand that the provision does not apply to Lanham Act housing that are now rental quarters. What governs whether these units are torn down or continued in use?

Answer. The provisions of section 407 of Public Law 85-241, as amended, do not apply to Lanham Act housing. Under Public Law 79–120, there is permanent authority for the rental of housing other than public quarters, such as Lanham Act housing. Under this latter authority, certain housing which was specifically constructed as rental housing continues to be rented. In short, section 407 applies to public quarters and Public Law 120 is applicable to all other housing. If housing has been constructed with funds specifically appropriated for rental housing, or if no funds appropriated for public quarters have been expended for its acquisition or conversion, Public Law 120 is applicable; otherwise, the housing is subject to the provisions of section 407, if a determination of inadequacy is made under that section.

With respect to the disposition of rental housing, the determinations required pursuant to Federal Property and Administrative Services Act relating to excess property apply. These units may be declared excess if they are determined to be beyond economical repair. In such cases, GSA procedures governing the disposition of such property would be used. The Department of Defense and the military department, through a delegation from GSA, are authorized to sell such structures intact for off-site removal or for salvage,

Question 12. The General Accounting Office has pointed out that some of the Lanham Act housing scheduled for disposal is superior to housing being rented by enlisted personnel on the economy. Fort Ord, Calif., is said to be an example. Is this not contrary to your argument for extending the date in section 508 ?

Answer. No; section 508 applies only to public quarters which have been declared inadequate and not, as pointed out above, to Lanham Act housing.

The Army's Lanham Act project at Fort Ord, constructed in 1940 and consisting of. 550 units, has been administered as rental quarters since July 1, 1957, for enlisted personnel authorized Government quarters. The Army commenced phasing out the tenants from this project in September 1959. There are no tenants occupying these units at the present and they will be demolished in the near future. The Department of the Army has advised that it would cost approximately $900,000 to make minimum repairs and yet these units would still he inadequate. It is understood that the project is in very poor condition although perhaps better than some substandard private housing in the nearby community.

Question 13. One reason advanced as to why some Lanham Act housing is scheduled for destruction is because considerable maintenance and operation funds are required to maintain it. On the other hand, it is understood rental revenues exceed the maintenance costs in some instances. It would therefore seem economical to retain some of the better of these units, would it not?

Answer. Under present legislation, rental housing revenue is deposited to miscellaneous receipts of the Treasury. Maintenance and operation costs are currently paid from the Defense “Operations and maintenance” appropriation. Furthermore, I would doubt that rental revenues from Lanham Act housing

would be adequate in most instances to cover the costs of maintenance and operation. It should be realized that some Lanham Act housing is almost 20 years old ; in most instances this housing was built for temporary use and is at least 14 years old. Units of this age and type require substantial upkeep and the rentals which are low to start with would be insufficient to cover these costs.

Question 14. If the military departments were permitted to use this rental revenue for the purpose of maintaining these units, would they be retained ?

Answer. If legislation were enacted which would permit the military departments to use this rental revenue for the purpose of maintaining Lanham Act units, I believe that some of the better units might be retained. However, such units would be kept only when a requirement exists for their use. Needless to say, a revolving fund arrangement whereby the income could be used to at least help defray the costs of maintenance and operation would be of assistance to military commanders in programing repairs to these units and would relieve the competition for maintenance and operation dollar which every base commander faces. Basically, a determination of economic feasibility together with requirement would be paramount in deciding what Lanham Act units would be retained.

Question 15. The House has inserted new and rather extensive language in sections 510 and 511 of the bill with reference to the clearance of real estate acquisition and disposal actions. What is your reaction to this language?

Question 16. In lieu of the House language, do you have a proposal to make?

Answer. Section 510 of S. 3006 would repeal section 2662, title 10, United States Code and section 43 of the act of August 10, 1956 (70 Stat. 636). These provisions, formerly contained in title VI of Public Law 155, 82d Congress, provided that the secretaries of the military departments and the Administrator of the Federal Civil Defense Administration shall come into agreement with the Armed Services Committees with respect to certain real estate actions involving $25,000 or more. The Attorney General has advised the President that these sections violate fundamental constitutional principles and, in view thereof, the President recommended to the Congress in his budget message earlier this year that these sections be repealed. However, during their examination of this section, the House Armed Services Committee revised and expanded this language to that now shown in section 510 of H.R. 10777. The language contained in H.R. 10777 appears to raise constitutional problems similar to those discussed in the Attorney General's opinion.

We do not believe that section 510, in its present form, is as desirable as the language contained in the original draft of amendment proposed in the House Committee on Armed Services, copy of which is hereto attached for the record, and which we both endorse and offer as a practical and workable substitute. Our principal objection to the wording as now contained in H.R. 10777 is that real estate transactions over $50,000 come to a complete halt during adjournment sine die in those categories where it cannot be certified that the national defense would be imperiled. Obviously there will be any number of occasions in the ordinary course of proper business management of real property when it would be difficult if not impossible to make such a certification. Yet a substantial delay in management action might well be critical, both financially and otherwise. In essence we believe that the provision as now incorporated in H.R. 10777 will create serious administrative problems with possible serious financial impact.

SUBSTITUTE LANGUAGE FOR SECTION 510 [Excerpt from p. 2754, Report No. 42, hearings before the Committee on Armed Services,

House of Representatives, on #.R. 10220 and H.R. 10777] On page 49, strike all of section 510 and insert in lieu thereof the following: "Title 10, United States Code, is amended as follows: “Section 2662 is amended to read :

“ 'Section 2662. Real property transactions : Reports to the Armed Services Committees.

"'(a) The Secretary of a military department, or his designee, may not enter into any of the following listed transactions by or for the use of that department until after the expiration of thirty days from the date upon which a report of the facts concerning the proposed transaction is submitted to the Committees on Armed Services of the Senate and House of Representatives :

“*(1) An acquisition of fee title to any real property, if the estimated price is more than $100,000.

"°(2) A lease of any real property to the United States, if the estimated annual rental is more than $100,000.

“*(3) A lease of real property owned by the United States, if the estimated annual rental is more than $100,000.

“(4) A transfer of real property owned by the United States to another Federal agency or another military department or to a State, if the estimated value is more than $100,000.

“‘(5) A report of excess real property owned by the United States to a

disposal agency, if the estimated value is more than $100,000. " 'If a transaction covered by clause (1) or (2) is part of a project, the report must include a summarization of the general plan for that project, including an estimate of the total cost of the lands to be acquired or leases to be made.

"*(b) The Secretary of each military department shall report quarterly to the Committees on Armed Services of the Senate and the House of Representatives on transactions described in subsection (a) that involve an estimated value of more than $5,000 but not more than $100,000.

"'(c) This section applies only to real property in the United States and Puerto Rico. It does not apply to real property for river and harbor projects or flood control projects, or to leases of Government-owned real property for agricultural or grazing purposes.

"'(d) A statement in an instrument of conveyance, including a lease, that the requirements of this section have been met, or that the conveyance is not subject to this section, is conclusive.'

“(2) Chapter 159 is amended by deleting the following item in the analysis :

" "2662. Real property transactions: Agreement with Armed Services Committees; reports.' "and inserting the following item in lieu thereof:

" "2662. Real property transactions : Reports to the Armed Services Committees.'"

Question 17. Contained in the Navy portion of the bill was an item for the Naval Station, Washington, D.C., in the amount of $13,320,000. The House deleted this item, but I understand that the Navy desires restoration. Will you give us your views on the merits of this item? I had hoped that when flying activities were finally removed from the Bolling-Anacostia fields, this valuable property could be put back on the tax rolls.

Response : After removal of the flying activities from the Bolling-Anacostia airfields more than one-half of the total area of 910 acres now used by the Navy and Air Force will be released by the Defense Department.

The Yary will retain about 130 acres, 35 of which contain all of the permanent buildings that the Navy considers worthy of retention for minimum or long range use including the Photographic Center and buildings which can be used for the heliport. The remaining 95 acres will be used as the site for buildings to house naval station activities that must be relocated from deteriorated wood frame structures which are on land owned by the Interior Department.

The purpose of the item for construction at the Naval Station, Washington, D.C., in the amount of $13.320,000 is to provide administrative facilities, housing and a mess hall for 150 bachelor officers and 1.500 bachelor enlisted men assigned to specific duties in the Washington, D.C., area, a brig and minor modification to existing facilities for the heliport. The buildings now used for bachelor housing at the Naval Station, Anacostia, are located on land which is owned by the Department of Interior and scheduled for use in the expansion of the highway and park systems. This circumstance plus the deteriorated condition of the buidings makes relocation of these activities an urgent necessity.

The siting of the Vary facilities on the 95 acres at the north end of the present Anacostia airfield has been approved by the National Capital Planning Commission except for possible adjustment of the boundaries which may become necessary as the result of further engineering studies which are to be made, and clearance has been given by the Director, Bureau of Budget, to announce this approval.

The Navy has considered a number of other sites in the Washington area and the National Capital Planning Commission has considered two additional sites, including the area to the south end of Bolling Air Force Base and a site on the General Services Administration Reservation at Suitland, Md. Howerer, the 130-acre site at the north end of Anacostia Air Station was found to be mutually acceptable to NCPC and the Department of Defense

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