satisfactory except that we require a full year's extension in lieu of the 6 months extension provided in both H.R. 10777 and S. 3006.

Similarly, the House Armed Services Committee has substituted section 510, of H.R. 10777 for the language shown in section 510 of S. 3006. We do not believe that section 510 of H.R. 10777 is as desirable as the language contained in the original draft of an amendment proposed in the House Committee on Armed Services, a copy of which has been submitted for the record.

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.

Further details on this are contained in my prepared statement. The House committee also inserted a new general provision in this legislation, section 507 (b) which requires that section 810 housing must now be authorized as a line item project in our annual authorization bill. This requirement is of course consistent with our current practice on other types of family housing construction, and we therefore concur in this new language.

Mr. Chairman, it is as always a pleasure to meet with you here, and it is my wish, together with the departmental representatives who will also appear later before you, to provide this committee with any information it desires in connection with your consideration of this legislation.

Thank you.

Senator STENNIS. Mr. Secretary, thank you for your statement. Now we have certain questions here that have been prepared by Mr. Nease, our professional staff member, who happens to be away today, and without notice of this meeting.

I don't want to take all the time. I want to yield to the other members of the committee.

May we give these questions to you now for early return with the answers for the record?

Mr. BRYANT. I will be very happy to, sir.

(The questions and answers to each are as follows:)

Question 1. According to statements attributed to you in the public press, your testimony before the House committee indicated that each unit of Capehart housing costs the Government $160 per month, which is over and above rental allowances forfeited by the occupants. Would you comment on this, please?

Answer. As indicated in my testimony before the House Armed Services Committee, there are two elements of cost to the Government in connection with Capehart housing. First, the construction cost is paid off by monthly amortization payments over a 25-year term; payments on a unit costing $16,000 are about $90 per month, which is approximately the average quarters allowance of the occupants. Second, there is the cost of managing, maintaining, and operating the Capehart housing; this cost cannot be determined precisely, because it is difficult to segregate costs attributable to housing from those for other post facilities, but as indicated to the House Armed Services Committee, it is estimated at about $50 to $60 or $65 per month. However, I should like to point out that these are estimates from which actual costs in individual cases may vary considerably.

As Congressman Hardy pointed out during the House committee's hearing, the sum of the highest quarters allowance for enlisted men ($96.90) and the operating cost ($65) is about $162. However, the sum of the monthly mortgage payment plus the operating cost at about $155 more accurately reflects the cost of the housing. We agree that either figure is a reasonable order of magnitude for aggregate cost of Capehart housing, but it should be noted that this cost

includes acquisition of capital assets by ne Government. Over a 25-year mqrtgage term, the average monthly principal reduction on a $16,000 unit would be $53.33. Of course, this debt reduction is partially offset by depreciation, which on a straight line basis over 50 years amounts to $26.67 per month, so that the value of monthly capital acquisition is reduced to $26.66. Subtracting this amount from the monthly aggregate cost produces a net cost of about $125 to $135 per month.

We consider this a reasonable cost for providing acceptable quarters including all utilities, and compares rather favorably with the cost of comparable quarters on the private market. This fact was recognized by Congress in authorizing the program for leasing of private units at tactical sites, at a cost not to exceed $150 per unit per month.

Question 2. Do you not consider $50 to $60 per month to be excessive for the maintenance and operation of Capehart units?

Answer. The estimated cost of $50 to $60 per month for maintaining and operating a typical Capehart family housing unit is not considered excessive, since the costs include many services not normally associated with maintenance and operation of housing in civilian economy. Maintenance and operation costs of Capehart housing include all costs associated with the housing such as (1) maintenance and repair of the building structure, its equipment and its utilities, such as plumbing, electrical, heating and air-conditioning systems; (2) provision of utilities, including electricity, gas, oil, water and sewage service; (3) maintenance of exterior utility systems, roads, walks and grounds; (4) the provision of services such as fire protection, refuse collection, pest control, and administration and furniture repair; and (5) painting and redecoration. addition, military housing is subject to greater wear and tear than normally encountered in civilian economy because of the frequent change of occupancy; also, the military occupant is not expected or permitted to perform minor maintenance and repairs, adjustments to equipment and improvements which civilian occupants may normally be expected to perform.

Question 3. What are you doing to reduce these costs?

In

Answer. OASD (P. & I.) has taken the following actions to reduce maintenance and operation costs:

(a) A memorandum has been issued, dated March 7, 1960, containing the DOD policy, standards and criteria for maintenance and operation of family housing.

(b) In cooperation with the military departments, OASD (P. & I.) is conducting a comprehensive field study of military family housing which will encompass a survey and evaluation of management techniques and procedures for the operation and maintenance of family housing and the costs thereof. This study will provide the basis for further actions to obtain economies and effectiveness in the management and costs of maintenance and operation of military family housing.

Question 4. Why is Air Force building housing for upper-grade officers in some cases averaging 30 percent above MCA cost limitation?

Answer. Since the Capehart program contains no cost limitations for housing for specific ranks, the DOD considers the congressional area limitations as the governing criteria. All of the housing known to have been criticized by the GAO for excess cost conforms to the applicable area limitations, and this is considered desirable in order to provide living accommodations suitable to the rank of the occupant and comparable to housing which civilians of equal standing and responsibility command in the local economy.

The key to the problem lies in the conflict between the cost limitations and the size limitations, as the following table illustrates:

NOTE.-These costs are to the 5-foot line and do not include utilities or other improvements beyond this

line.

54781-60-5

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(b). 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 maximum 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 thousand 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.

i

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.

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 be 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