Page images
PDF
EPUB

tions did not seem to lend themselves to inclusion in a prepared statement.

If it would please the committee we would propose to present our statement, which will take about a half hour, and then we will attempt to answer any questions that were in the original list which you may think we did not cover adequately, as well as as try to answer any other questions which may come to mind.

Mr. MAHON. Proceed, Mr. Secretary.

GENERAL STATEMENT OF ASSISTANT SECRETARY OF DEFENSE

(COMPTROLLER)

Mr. MCNEIL. Mr. Chairman and members of the committee, I am pleased to appear here again, and to discuss with you title II: "Operation and Maintenance" appropriations. This title, while retaining separate appropriations for organizational components of the Department of Defense, clearly identifies the functional aspect of this group of accounts.

In my last appearance before this committee a question was askedWhat is the effect of the changes in the budget format on the authority of the Secretary of Defense over the appropriations for the military departments? Our answer was that "these changes do not give the Secretary of Defense any greater or lesser authority over the utilization of appropriations for military functions administered by the Department of Defense than he now has." That answer is correct.

However, the rearrangement of appropriations by functional groupings and the decision of your committee to hold a series of hearings on each title is having the effect of focusing attention on common problems of the services in each functional area. This will be particularly true in the operation and maintenance area, where, for the first time your committee has requested an opening statement from the Office of the Secretary of Defense as a prelude to the detailed examination of each of the appropriations with the military departments. This practice will intensify the consideration, and could facilitate resolution, of common problems in this area-which takes about 25 percent of the defense budget.

May I briefly review the several recommended changes, previously discussed with you, as they apply to title II.

First, the 10 "Navy operation and maintenance" appropriations would be consolidated into a single new appropriation. This change would place the Navy on the same basis-and give the Navy the same flexibility that the Army and Air Force have had for the past several years.

Second, estimates of the operation and maintenance costs in support of test and evaluation have been identified and transferred to the more comprehensive appropriations for research, development, test, and evaluation-similar to the transactions involving procurement

accounts.

Third, as a logical result of the functional approach, separate requests for "Operation and maintenance" appropriations for the Army and Air National Guard are presented.

Fourth, inasmuch as the Office of Public Affairs is an integral part of the Office of the Secretary of Defense, the separate account for this

Office is merged with the estimate for "Salaries and expenses, Secretary of Defense."

With these changes, title II represents, I believe, a more concise functional grouping of these estimates, more clearly defined and easier to compare than in prior years.

DEVELOPMENT OF THE $10.5 BILLION REQUEST

The development of the operation and maintenance requests followed the same pattern-basic and "add on" programs-that I discussed with you in respect to the total budget. The services and components of the Office of the Secretary of Defense submitted a basic request which in aggregate amounted to $10.8 billion in new obligational authority. In addition, the Army and Navy submissions included $238 million as part of an "add on" or augmentation package. Thus, the initial request, both basic and "add on" programs, totaled approximately $11 billion in new obligational authority. Expenditure estimates related to both the basic and "add on" programs amounted to $10.9 billion. As was the case in other types of appropriations, the basic budgets included some programs of lower priority than those included in the "add on" or augmentation requests. Accordingly, it became a practical matter, as we discussed with respect to the total budget, to consider the $11 billion request as a whole instead of dealing with the basic $10.8 billion and the "add on" $238 million separately.

Again following the pattern of the overall budget, the operation and maintenance requests were the subject of detailed presentations and line item reviews. Efforts were made to balance and relate various elements of the operation and maintenance requests to approved force and readiness levels. These efforts resulted in an estimate of $10,580 million which, after adjustment for $68 million transferred to the more comprehensive "Research, development, test, and evaluation" appropriation, represents the $10,511 million request now before you.

At this point may I say that there was, this year, a noticeable improvement in the quality of the justification material submitted in support of the services' requests. I feel quite sure that you will note this improvement during the course of your hearings. The difficult and time-consuming work necessary to balance this request with the overall plans and objectives was carried out with a spirit of cooperation worthy of special mention.

The foregoing process resulted in a net adjustment to the original NOA requests-basic and "add on" programs of $440 million or 4 percent. However, the $10.5 billion is an increase of $206 million over the enacted and pending supplemental request for new obligational authority for fiscal year 1959, and almost $300 million more than was available during fiscal year 1958.

Attachment A to this statement is a table showing, for the operation and maintenance area, obligations and expenditures, by service and by appropriation, for fiscal year 1958, fiscal year 1959 estimated, actual obligations and expenditures for fiscal year 1959 through the month of January and the fiscal year 1960 estimates.

OPERATION AND MAINTENANCE APPROPRIATIONS' COVERAGE

The $10.5 billion requested for operation and maintenance divides very broadly into about $4.4 billion for civilian personnel pay, including those employed in overhaul and repair operations; and about $6.1 billion for all other purposes. Of the $6.1 billion, $2.6 billion is to pay for services under contract, including utilities, and about $700 million is for the transportation of things and for temporary duty travel; and the remaining $2.8 billion is for the procurement of consumption-type supplies and materiel, including over $900 million for petroleum products.

Attachment B to this statement is a tabulation, by service, by appropriation, of the civilian employment from 1958 to 1960. Attachment C to this statement is a tabulation of operation and maintenance obligations by Service, by appropriation, 1958-60, indicating the amounts for personal services and the balance available for all other purposes.

The numbers of military personnel their planned utilization and deployment; the numbers and types of units to be maintained; the levels of operation; the kinds of equipment; and the requirement for supporting posts, camps, stations, and logistic facilities are key elements in determining operation and maintenance costs. While the Department of Defense fiscal year 1960 budget highlights contain detailed data reflecting these force and readiness elements, attachment D provides an unclassified summary.

Witnesses who follow will discuss in some detail the many key factors which result in operation and maintenance costs. However, I should like to review with you some of the particularly significant

areas.

Five appropriation within title II: "Operation and Maintenance, Army, Navy, Air Force, Army National Guard, and Air Force National Guard"-account for $10.4 billion, or approximately 99.2 percent of the total NOA request for fiscal year 1960. Although some of the key indicators related to those appropriations-military manyears, numbers of active aircraft and flying hours; numbers of active ships and steaming hours, and numbers of troop and logistical facilities decline from 1958 through 1960, higher fuel consumption rates in the case of aircraft and ships, and generally higher unit costs tend to keep the total cost high. At the same time, many other programs continue to expand and increase in cost.

FLYING HOUR PROGRAMS

The flying hour programs of both the Air Force and Navy are decreasing, as do their respective aircraft inventories. The Air Force active inventory of 22,578 in 1958 will decline to 19,982 (operating aircraft, 18,500) by end 1960. The Air Force flying hour program during the same period declines about 840,000 hours from 7,732,000 to 6,894,000. Similarly, the Navy active aircraft inventory of 10,533 in 1958 declines to 9,117 (operating aircraft, 7,200). The decline in Navy flying hours during the same period amounts to about 700,000 hours from 3,970,000 to 3,259,000.

The "mix" of aircraft-jet and conventional-continues to shift more heavily in favor of the jets. Air Force jets increase from 62

percent of the inventory in 1958 to 65 percent in 1960. Navy nets increase percentagewise from 42 to 47 percent.

Army aircraft inventory is increasing from 5,027 in 1958 to 5,363 in 1960 with a higher concentration of helicopters. The Army flying hour program increased during the period 543,000 hours-from 1,383,000 to a planned figure of 1,926,000, the bulk of course being low-cost hours. Fuel for the flying hour program is carefully priced out on the basis of the latest fuel costs, utilization rates of aircraft, and fuel consumption rates. The total fuel costs are estimated at $537.2 million for Air Force, $219 million for Navy and $14.2 million for Army-a total of about $770 million for 1960.

COST OF FUEL FOR AIRCRAFT AND SHIPS, 1956-60

Mr. MAHON. In respect to the statement you have made with respect to the cost of fuel, will you insert in the record the total cost for each year over the latest 5-year period.

Mr. MCNEIL. Yes, sir.

(The information follows:)

Costs of fuel for aircraft and ships funded in title II, operation and maintenance

[blocks in formation]

1 Excludes industrially funded MATS operations. Includes aircraft service test fuels. Excludes industrially funded MATS operations.

AIRCRAFT AND RELATED EQUIPMENT OVERHAUL

Mr. MCNEIL. In 1960, the Air Force estimates a combined total"in house" and contract aircraft and related equipment overhaul program-of about $725 million, $27 million less than the 1959 program The Navy plan for 1960 amounts to a total of approximately $235 million, or about the same level as planned for 1959. The 1960 plans of both services exceed the 1958 levels-Air Force by approximately $64 million and Navy by about $17 million.

As in the flying-hour program, recognition should be given to the differences in unit costs that account for some of the dollar increases in the face of declines in other program indicators. For example, to overhaul the J-79 engine for the B-58 is estimated at a unit cost of $28,726 as compared to the J-47 engine in use on B-47 aircraft, which now costs about $4,421 to overhaul.

We are submitting, in response to a request from this committee, a detailed statement on the division of this work between contract and "in house" facilities for overhaul and maintenance of aircraft and related equipment. For 1960 this report will show about 46 percent or $318 million of the Air Force, and about 15 percent or $35 million of the Navy's depot level work-funded in the "Operation and maintenance" accounts to be performed by outside contract. There is some unutilized "in house" overhaul capacity. One major Navy fa

cility is being closed as a result. There is also plenty of capacity in and competition from commercial sources. While it is difficult precisely to evaluate costs of "in house" versus contract work, the "in house" work involves lesser out-of-pocket costs-particularly if the Government facility is operated at an efficient level. I believe “in house" facilities of this type should be operated with reasonable workloads or be closed.

STEAMING-HOUR PROGRAM

The Navy planned force level for fiscal year 1960 is 864 active ships the same as at end fiscal year 1959 and a decrease from the 890 during fiscal year 1958. The steaming-hour program, which is closely related to active ship strength, similarly indicates a decline 2.3 million hours in 1958, 2.268 million hours in 1959, and 2.177 hours for 1960.

The costs of fuel, water, and utility services associated with ship strength and steaming-hour programs for 1960 are estimated at approximately $120 million. This is a reduction of $14 million over the actual experience of 1958, but an increase of $6.6 million over current estimates for 1959.

While included in total fuel costs, it now is necessary to recognize the costs of nuclear propulsion in the steaming-hour programs. In 1958 the costs for reprocessing reactor fuel elements amounted to $5.7 million or 4.3 percent of the total fuel costs. For 1960 these costs are estimated at $19.2 million or 16 percent of total fuel costs and an increase of $13 million over the fiscal year 1959 estimate.

SHIP OVERHAUL

The scheduled numbers of ship overhauls in 1960 will total 372. The scheduled repair element of the ship-overhaul program is estimated at $215.4 million for the year-approximately $40 million more than the estimate for fiscal year 1959. However, nonscheduled repairs in 1960 are estimated to require approximately $9 million less than planned for 1959.

The increase in the average age of combatant ships of the Navy, and a generally higher level of operations required of the fleet in recent years has resulted in greatly increased wear and tear on ships and their equipment.

In recognition of this situation, the 1960 budget contains the first increment of a special maintenance program involving substantial modernization of a selected group of combatant ships. For this particular purpose in 1960 the "Operation and maintenance" appropriation contains $63.2 million for 26 ships.

This is separate from the major and more complete rehabilitation and modernization of eight ships in 1960 at a cost of $45.8 million and $46.5 million for procurement of equipment toward the 1961 increment of this program in the "shipbuilding and conversion" appropriation. The result of both these programs will be to extend the life of these combatant ships considerably, as well as to increase the readiness of the fleet.

Unit costs of ship overhaul has increased substantially due to the complexity of the gear, as well as to labor rates. For example, new

« PreviousContinue »