Beginning with the first communications satellite (Early Bird) in 1965, there has been controversy over the proper amounts and types of costs to be billed by the Air Force. Although there were no formal agreements between the Air Force and NASA, a series of letters and memos resulted in an informal agreement not to bill Comsat on a full-user-charges basis. Our review showed that the Air Force did not charge Comsat for over $6 million of launch service costs through fiscal year 1969.

Because the parties have agreed upon the method used to determine costs chargeable to Comsat for the Intelsat I, II, and III series of launches, we believe that no legal basis now exists for the Air Force to change the method unilaterally. Certain costs of the Intelsat III launches were chargeable to Comsat under the method agreed upon but were not charged. Such costs-GAO has identified $31,000-should charged to and recovered from Comsat.

be

For the Intelsat IV series of launches, a new agreement was executed. Although the agreement is essentially the same as before, it allows the method of charging costs to Comsat to be changed through negotiation. We recommended that the Air Force determine the charges to Comsat for the Intelsat IV series on a full-user-charges basis, including a provision for depreciation, and that NASA negotiate with Comsat to use such costs in its billings for all Intelsat IV launches.

The Air Force has directed that a revised method of accumulating costs for launch services to non-Government organizations be implemented so that full-usercharges could be determined on an actual cost basis. Subsequently, the Air Force advised us that it would hold meetings with NASA to agree on billing procedures for launch services to Comsat and that it would fully consider our views. (Report to the Congress, B-168707, Oct. 8, 1971)

230. Elimination of Unnecessary Telephone Equipment. The General Services Administration (GSA) establishes standards for telephone equipment used by civil agencies. The 16 civil agency installations which we reviewed did not comply with these standards.

Since each of the installations had installed excessive or sophisticated equipment, we proposed reducing the number of call directors, reducing or reallocating primary and extension lines, and removing or replacing other equipment. Such changes would not impair telephone service at these installations. Our proposals were

estimated to save 18 percent of the $409,700 in telephone equipment and services costs incurred annually at the 16 installations.

We suggested, and the Office of Management and Budget and GSA agreed, that surveys be conducted which would insure compliance with GSA standards. In January 1972 GSA amended the Federal Property Management Regulations to require civil agencies (1) to periodically survey installed telephone equipment and (2) to furnish GSA with certifications that the surveys have been conducted. The first survey was to be accomplished by June 30, 1972, and was to be followed by annual surveys. (Report to the Congress, B-146893, Sept. 9, 1971)

231. Benefits from Centralized Management of Leasing Communications Service.-DOD, which spends about $250 million annually for leased communication services in the United States, established the Defense Communications System-a worldwide, long-distance, Government owned and leased systemand the Defense Communications Agency to manage it. It has not established, however, a complete inventory of its communications resources. Also, usage information is not always available and the information which does exist is not always reliable. Further, use of communications systems does not always indicate the purpose for new requirements.

Because the offices responsible for reviewing new requirements do not have complete information on exist ing systems, they cannot evaluate new requirements or existing resources from a comprehensive systemwide viewpoint. Generally, these offices can recommend disapproval or alternative means to provide a service but have no directive authority. Reevaluations of the need for existing services, if made, are performed by the users of the service.

We proposed that the Secretary of Defense study:

The feasibility of a centralized DOD activity with authority and responsibility to select the means of providing new service after the appropriate levels have approved its need. The cost of a centralized validation office should be compared with the cost of the dispersed functions now performed.

Providing the centralized activity resources, including a complete inventory of communications facilities (or, as an alternative, access to such information) and data on their traffic volume and purposes.

Assigning the activity responsibility and authority for controlling the scheduling and for monitoring the qualitative aspects of the periodic reevaluations of existing services and for determining whether such services could be provided more economically, but with acceptable effectiveness, by other means, particularly where common-user facilities are available. DOD advised us that it examined its policies and procedures in consonance with its objectives and the studies referred to above and concluded that a centralized authority, per se, would not necessarily resolve all leased telecommunications management problems and in fact might create new problems. DOD considered it more appropriate to deal with general problems through present management arrangements together with more effective action by the military departments. The Joint Chiefs of Staff were directed to develop standard and timely review procedures to reevaluate leased communications and a standard data base to provide accurate inventory data and increased cost visibility. Also, certain terminals, circuits, and portions of networks were eliminated which resulted in saving about $120,000 annually. (Report to the Secretary of Defense, B-169857, Dec. 22, 1971)

Property Management

232. Buying Spare Parts for Initial Support of New Aircraft. The Air Force spends hundreds of millions of dollars annually to obtain spare parts needed to support new aircraft during initial operation. This support, known as initial provisioning, includes spares and repair parts ranging from bolts and resistors costing pennies to wing assemblies and electronic modules costing thousands of dollars. We selected the F-111 aircraft for evaluating the policies and procedures under which initial provisioning was carried out because the program was well under way at the time we began our review.

The Air Force spent too much too soon to buy many F-111 spare parts which were not needed during the initial support and which may never be needed and subsequently may be scrapped. This occurred because of a management system which assumed deliveries of the aircraft would be made on schedule and which was not sufficiently flexible to permit timely changes in the program for initial provisioning. The system committed the Air Force to buy large quantities of spare parts for aircraft which may not be delivered or which may be de

livered long after originally scheduled. Furthermore, because of numerous changes in design which invariably occur in developing and producing military aircraft, many of the spare parts rapidly become obsolete. The lack of flexibility in the initial provisioning program for the F-111 aircraft resulted in:

Buying about $116 million worth of spare parts before they were needed. Spare parts worth $9.6 million had already been declared excess.

Buying substantial quantities of spare parts several times even though data available to the Air Force showed that there was no current need for these parts.

These problems were compounded because the Air Force had committed itself early in the program to buy all the spares at a markup from the prime contractor rather than directly from the manufacturers. The Air Force had not evaluated the trade-off between the markup and the value of the service provided by the prime contractor. We estimated that the markup was about $56 million on $291 million worth of spare parts manufactured by subcontractors.

In response to our recommendations, in which it generally concurred, the Air Force said:

It would revise its policies and guidelines for determining materiel requirements to emphasize that initial provisioning applied to short-term deliveries. It would provide a schedule showing realistic projected aircraft deliveries to the user when slippages were forecast.

Air Force activities which computed requirements had been instructed to adjust estimated demand. rates as appropriate for new items and the Department of Defense had studied this matter.

Actions were currently being evaluated which should permit expanding competitive procurements from other than the prime contractor and a new system would be developed and tested.

Current weapons systems audits and those planned by the Air Force Audit Agency would evaluate basic provisioning concepts, policies, and practices.

(Report to the Congress, B-133396, Jan. 31, 1972)

233. Initial Support Stocks for Navy Ships.Much of the backup equipment and spare parts which cost the Navy millions of dollars annually as initial support for shipboard equipment is seldom, if ever, used. These quantities could be reduced significantly

without impairing fleet readiness and thus result in savings in inventory investment and maintenance costs. We proposed that the Secretary of the Navy:

Redefine the policies for acquiring insurance items-i.e., those for which a repetitive demand is not anticipated-so that only one such item is obtained.

Reevaluate the policy of obtaining both complete equipment and spare parts to support equipment installed on ships.

Eliminate the separate determination of requirements for depot and tender stocks to support ballistic missile submarines.

Direct the Naval Audit Service to broaden its audit coverage in the provisioning area.

The Navy agreed that it should attempt to solve problems concerning its investment in repair parts. Although it did not concur in certain of our proposals, it cited a number of actions that had been taken, or which were being taken on the problem areas noted. (Report to the Congress, B-133058, June 28, 1972)

234. Maintenance of Equipment. We reviewed certain repair programs in each of the military services to determine whether the most economical mix of buying and repairing equipment was used. In the Navy, the Air Force, and the Marine Corps, there were only a few insignificant instances when materiel was procured while similar items were not repaired. In the Army, there also were only a few instances but some involved substantial amounts.

In April 1971 there were about 980 armored personnel carriers (M113A1) to be repaired at Army depots in the United States. The Army Tank Automotive Command (TACOM) originally scheduled 454 vehicles for repair in 1971 but only 42 were actually approved because TACOM had not been provided enough operation and maintenance funds. During 1971, however, TACOM spent about $34 million to buy 1,125 armored personnel carriers.

It costs about $12,000 to overhaul an M113A1 and about $31,000 to buy a new vehicle. Thus, while the 412 vehicles not included in the fiscal year 1971 repair program could have been repaired for about $4.9 million, it cost about $12.8 million to buy new ones.

A similar condition existed in the Army Mobility Equipment Command for five items of equipment included in our review.

We recommended that the Army establish procedures to identify situations in which repair programs

are not sufficiently funded but procurements of new items are scheduled. In those cases, funds should be transferred from the procurement to the operations and maintenance appropriation to create balanced repair and procurement programs.

The Army generally agreed with our recommendations and published guidelines which restrict procurement of principal items when an unfunded repair requirement exists. The Army applied these guidelines while it prepared its fiscal year 1973 budget and reduced planned procurements by $159.9 million with a corresponding increase in overhaul programs of only $28.7 million. (Report to the Secretary of Defense, B-146888, Jan. 6, 1972)

235. Repair of Air-to-Air Missiles.-The Navy placed too little emphasis on repairing Sparrow and Sidewinder missiles in fiscal year 1971. New ones were ordered and funds were requested to procure additional missiles in fiscal year 1972 while the number needing repair increased. As a result, the Navy's readi ness goal was not met and the Navy's capability for air-to-air combat was impaired.

Since repair takes less time and costs less, we suggested that additional funds be provided to repair Sparrow and Sidewinder missiles in fiscal year 1972 by transferring funds from other repair programs or reprograming new missile procurement funds.

The Navy informed us that it would consider the potential for transferring funds from other repair programs in its midyear budget review but, because of contract commitments and other factors, it was undesirable to curtail production of new missiles programed for procurement in fiscal year 1972.

We accepted the Navy's position but recommended, if a similar situation occurs in fiscal year 1973, the Navy act earlier to transfer procurement funds to the operation and maintenance appropriation to fund a larger repair program. (Report to the Congress, B132995, Apr. 25, 1972)

236. Vehicle Use and Maintenance Practices.In managing motor vehicle fleets, the Department of Agriculture, like other Federal agencies, uses General Services Administration guidelines which state that reviews of time-of-use data-the number of days vehicles on hand have been used-are necessary for evaluating vehicle needs.

Although the Forest Service policy provided for its field offices to make analyses of time-of-use data, some of the Forest Service field offices had been lax in estab

lishing criteria and procedures and in implementing the analyses in evaluating vehicle needs. The Soil Conservation Service (SCS) had not provided for its field offices to use the analyses in evaluating vehicle needs. The positive benefit which can result from the use of periodic analyses was shown by comparing the small percentage of idle vehicles in a Forest Service region. which used the data with the large percentage of idle vehicles in Forest Service and SCS locations which did not use the data.

Also, in view of the wide variance in average vehicle maintenance costs among its regions, the Forest Service needed to review, compare, and evaluate the vehicie maintenance practices of its various regions. Our comparative analysis of annual maintenance costs in two regions showed that differences in the average number of maintenance labor hours per vehicle had been the major cause of the variance.

In response to our recommendations, the Forest Service stated that vehicle utilization study directives were being revised and that a detailed study of maintenance cost variances was being initiated. SCS, while agreeing to make time-of-use analyses at certain field locations, stated that it believed the recording and analysis of time-of-use data for all vehicles at all locations would cost more than any savings which might be realized. (Report to the Secretary of Agriculture, B114833, Aug. 13, 1971)

237. Leasing of Land Acquired for Federal Water Resources Projects.-Land acquired by the Corps of Engineers (civil functions), Department oi the Army, for reservoirs or projects with similar purposes may be leased to former owners for agricultural use. In accordance with the Corps policy, land acquired before 1956 had been leased for extended periods without any restrictions against the production of pricesupported crops. Land acquired after 1956 had been leased without any crop restrictions for 5 years. As of June 30, 1970, the Corps had 2,032 leases for about 272,000 acres of land without restrictions and 2,382 leases for about 260,000 acres with restrictions. The rentals were not providing a return to the Government consistent with its cost of the land.

Our review of 740 unrestricted leases showed that 365 leases for land acquired after 1956 had resulted in a loss of revenue in 1 fiscal year of about $254,000. Of 375 leases for land acquired prior to 1956, 284 leasees received payments of about $302,000 in 1 year from the Department of Agriculture for price-supported

crops. These payments exceeded the annual rentals paid for the lands by about $148,000.

Public Law 86-423, approved April 9, 1960, permitted farm owners who leased agriculture land acquired by the Government to continue to produce price-supported crops on the land and to be eligible for payments under the price-support and related programs. Contrary to this law, about 121 of the leased properties were being operated by individuals other than the former owners or tenants. Department of Agriculture payments on these leased properties of about $156,000 in 1 crop year exceeded the annual rentals by about $88,000.

In response to our recommendations, the Department of the Army advised us that the Corps of Engineers would analyze its current policies and practices for leasing project lands for agricultural purposes and would consider the impact of price-support payments and other factors on appraisals. (Report to the Congress, B-173324, Oct. 1, 1971)

238. Consolidation of Reserve Fleet Activities. The Maritime Commission, the Department of the Navy, and-to a lesser extent-the Department of the Army maintain inactive vessels or reserve fleet sites on the east, west, and gulf coasts. The agencies have a common mission of preserving the reserve fleets in the best condition possible with available funds in case they are needed for commercial or national defense purposes.

Because the reserve fleet activities are similar and because the fleet sites are close to each other, we reviewed the situation to see if it would be practicable to consolidate the management of Maritime, Navy, and Army fleet sites in the Beaumont, Tex., and San Francisco, Calif., areas.

We reported that, after the first year, annual savings of about $664.000 could be realized by having the Maritime Administration, Department of Commerce, assume the function of preserving certain Army and Navy inactive vessels in the areas we reviewed and by closing a Navy berthing site and an Army wet storage area. Savings during the first year would amount to about $392,000 because of certain nonrecurring impact costs, such as towing, corrective preservation steps, and site preparation, that would be incurred in effecting the consolidation.

We believed that Maritime would be able to assume the maintenance and preservation function more economically than the Navy in the Beaumont and San Francisco areas because Maritime used experienced

civilian employees, whereas the Navy used relatively inexperienced military personnel. Additionally, fewer administrative employees would be needed by Maritime because some of the Navy administrative tasks would be absorbed by the employees located at Maritime reserve fleet sites.

We recommended that the Secretary of Defense and the Secretary of Commerce study the feasibility, including the effect on costs, of consolidating functions. for other Army, Navy, and Maritime Administration inactive fleet sites.

Maritime and the Army agreed with our recommendations. The Navy concurred in the intent of our recommendations but was strongly opposed to having Maritime assume the maintenance, preservation, and related administrative functions at one of its San Francisco sites. The Navy was concerned about the ability of Maritime to preserve combat ships and the ability of the Navy site to carry out its military responsibilities should Maritime assume the maintenance and preservation responsibility for the inactive vessels.

The Deputy Assistant Secretary of Defense informed us that the Army and the Navy would study, with the Maritime Administration, the feasibility of consolidating the functions of other inactive fleet sites. (Report to the Congress, B-168700, Nov. 18, 1971)

239. Management of Motor Equipment Activities. Our review of the District of Columbia Government's management of its motor equipment activities revealed a number of areas in need of improvement. For example:

Responsibility and authority for surveillance of motor equipment activities throughout the District Government had not been assigned to a single individual or office.

The District Government's departmental systems for recording and reporting motor equipment cost and operational data did not provide accurate and meaningful information necessary for satisfactory management of the equipment.

A potential existed for rotating motor equipment between high- and low-use assignments and for pooling low-use equipment.

Neither the District Government nor any of its departments had established policies and procedures for determining when maintenance and repairs to motor vehicles would not be economically justified or when motor vehicles should be replaced.

The departmental maintenance facilities generally scheduled preventive maintenance of motor vehicles at more frequent intervals than recommended by the vehicle manufacturers.

The District Government had improperly aug mented its passenger vehicle fleet by acquiring excess Federal passenger vehicles without regard to the limitations set in annual appropriation acts.

The District Government agreed, in general, with the cited weaknessess in motor equipment management and accepted our recommendations (1) to assign the responsibility and authority for surveillance of motor equipment activities to a single office and (2) to es tablish District-wide control over passenger vehicle acquisitions and disposals. Action was taken in March 1972 to implement our recommendations. (Report to the Congress, B-118638, July 2, 1972)

240. Real Property. Our review showed that about 460 of the 2,600 properties listed in the real property inventory as owned by the District of Columbia should have been deleted because they were no longer available for use. The review also showed that, despite substantial changes in landholdings, the Dis trict's financial statements for fiscal years 1968, 1969, and 1970 consistently showed landholdings valued at $39,759,298.

The District's financial statements were inaccurate because procedures for adjusting the accounting records for the acquisition and sale of land had not been followed. Furthermore, financial records were not reconciled with inventory records.

The District's Director of General Services in response to our recommendations stated that the District was (1) developing a real property information system and (2) preparing a Commissioner's Order to fix responsibility for keeping the system accurate and up to date. (Report to the Director, Department of General Services, Sept. 15, 1971)

241. Transfer of Inventory Accounting From Stock Funds to Industrial Funds at Installation Level. A report to the Congress outlined the benefits to be derived by the transfer of Department of Defense (DOD) inventory accounting from stock funds to industrial funds at the installation level. We noted that the maintenance of separate accounting systems for the Aberdeen, Md., industrial fund and stock fund resulted in duplication of functions and records. Assumption of the stock fund accounting operations by