I believe in a pragmatic, evolutionary approach to Defense organization in response to concrete problems which we face. Such an evolution will contribute more to a strengthened national defense capability and to efficiency and economy than any major organizational upheaval based on abstract assumptions.

If I do not have any preconceived organizational goals in mind, however, I do have three basic objectives which I use as criteria in determining whether to make any organizational change.

They are these:

1. To better the support provided to our combatant forces, thus to increase their combat effectiveness;

2. To improve the decisionmaking process, particularly reducing time lag where possible; and

3. To reduce undesirable duplication and to promote efficiency and economy.

Mr. Chairman, I know that you intend to hear the heads of the five Defense agencies during your hearings. I am sure they will supply you with a detailed statement of their responsibilities, their functions, and methods of operation. I therefore have intentionally limited my opening statement to provide maximum time for any questions that you may wish to address to me either publicly or as it relates to certain of the agencies, in executive session.

Thank you, Mr. Chairman.

Mr. HARDY. Thank you, Mr. Secretary.

I would like to just make this quick comment. When we get right down to page 15 of your statement, you outline the basic objectives that you use as criteria with respect to making determinations of organizational changes. I think all of us would immediately subscribe to those basic objectives. I certainly would.

However, when we get into the implementation of objectives of that kind we frequently run into horses of different colors and the manner in which the determination with respect to these three objectives and the manner in which they are carried out sometimes are the subject of rather wide disagreement, I expect.

The problems that will develop in that regard before we get through these hearings, I am sure, will be brought out.

Mr. Blandford, did you have any questions here in connection with the Secretary's statement that you would like to develop before Mr. Bates and I get into specifics?

Mr. BLANDFORD. I would like to ask Mr. McNamara and Mr. Vance, your able counsel, to define, if you will, what you consider to be a service activity as contained in the law?

Secretary MCNAMARA. In particular the committee report of the House Armed Services Committee associated with the change of the Defense Reorganization Act of 1958 made it quite clear that it was the intent of the committee that the Secretary of Defense would be responsible for the formulation of policy and the Secretaries of the military departments for the conduct of operations insofar as those operations fell within their departments. And that perhaps is the best definition I can give you of a Service activity.

It is not a very specific definition because nowhere did I find in the committee report or the law a definition of either Service activity, or of policy, or of operations. My own philosophy is one that is

directed toward pushing down into an organization to the maximum extent possible the responsibility for decisions so that you have a true pyramid in the decisionmaking process with only a small number of decisions and small percentage of decisions coming to the top, and with the great bulk of the decisions pushed, as I say, as far down in the organization as the individual has experience and understanding sufficient to make that decision.

So when I think of service activities I think of all activities that the services can properly handle.

Mr. BLANDFORD. The reason I asked the question is that in reply to the statutory basis for each Defense agency which you submitted, you quoted a statement Mr. McCormack made in connection with 202 (c) (6) which was a floor amendment, and therefore not contained in the House report, since it was not a part of the House committee action. And the words "service activity" are contained in the law, but you have used Mr. McCormack's explanation as the justification for the agencies or partly as justification for the agencies that you have established.

Now let me read what Mr. McCormack's printed explanation stated in that connection, and ask whether you intend to implement the entire statement that Mr. McCormack made:

Procurement, warehousing, distribution, cataloging, and other supply activities; surplus disposal, financial management, budgeting, dispersing, accounting, and so forth; medical and hospital services, transportation, land, sea, and air; intelligence, legal, public relations, recruiting, military policies, training, liaison activities, and so forth.

Would there be anything left for the military departments if this were implemented?

Secretary MCNAMARA. It wasn't my interpretation of Mr. McCormack's statement that he indicated those activities that you have enumerated were not service activities, but rather than to the extent that functions included among that list of functions could be more efficiently handled were they to be removed from the departments, the law gave the authority to the Secretary to carry out such transfer. It seems inconceivable to me that all or even a majority of those functions could be more efficiently managed outside of the services or the military departments than within the military departments. Mr. HARDY. Would you, though, Mr. Secretary, looking back at that statement, and using it as the basis for a good many of the changes which have been made, would you construe that that provides a legislative history which makes possible the inclusion of all of these things into DOD operations?

Secretary MCNAMARA. Oh, no, certainly not, Mr. Chairman.

Mr. HARDY. Understand, I think this is a point we agreed to make clear. I don't understand how we distinguish between those which you have already undertaken and the other things Mr. McCormack has enumerated. I might make this observation along with this development of this particular matter. I don't recall, frankly, hearing all those remarks on the floor. I read them in the Record. And I certainly think that the context of the rest of the debate indicated that the scope of the amendment was considerably less than the language, which was quoted here from Mr. McCormack's statement, indicated.

Now the thing that I would like to clear up, if I can, is how far, under this amendment, how far can you go in absorbing this type of activity, detail, into the Department of Defense, the kind of detail which has so long been considered to be an operational matter within the scope only of the military services?

Secretary MCNAMARA. Mr. Chairman, I think that the law is quite clear in the qualification or limitation that it imposes upon the transfer of functions from the military department to an agency outside the military department.

If specifically states that this shall be done for the purpose of achieving more effective, efficient, and economical administration and operation and to eliminate duplication.

Mr. HARDY. That can cover most anything in somebody's opinion, can't it, Mr. Secretary?

Secretary MCNAMARA. I think that the facts bearing upon the transfer would determine whether the transfer met that standard, and the law is very specific on this particular point.

Mr. HARDY. But the only person who would judge that standard would be the Secretary of Defense; is that correct?

Secretary MCNAMARA. I am certain the Congress would wish to judge the transfer.

Mr. HARDY. How would it do it if it has given that authority by law to the Secretary of Defense? That is the point.

Frankly, I don't believe we did. If we did, I don't think we

meant to.

Now just put it right down on the line like that. I don't think we did. I am sure we didn't mean to, at least the Congress as a whole, but if that is the interpretation that is now placed on it, how far can the Secretary of Defense go in exercising his discretion, his sole judgment, and what can the Congress do about it?

Secretary MCNAMARA. He can't go any further than the facts will support a change that leads to more efficient and more economical administration and operations, and these matters are susceptible to proof, the change either did or did not lead to more efficiency.

Mr. HARDY. But you don't do it afterward, you put it into effect

now.

Secretary MCNAMARA. Exactly.

Mr. HARDY. Then you come back and we say, "Mr. Secretary, what a fool you were, you did all this stuff and it didn't work."

Secretary MCNAMARA. I would ask my counsel for his opinion on this now, but first let me say that it seems to me quite clear if a Secretary transferred a function under the authority granted by this section, which is section 202 (c) (6) of the law, and it did not lead to more efficient, economic, and effective administration and operation, it would have been an illegal act. And this, as I say, is a judgment that is susceptible to proof.

Mr. BATES. Yes, but that is after the horse is out of the barn. Now when you talk about these items here, these are tremendously important, they are vital for the security of the country and if someone makes a mistake and it is too late to change it, just where are we? It doesn't do any good to condemn somebody after the fact.

The problem here is a question of judging it ahead of time and I don't think the Congress is in a position to make that judgment.

These are very complicated estimates and nobody really knows the answer to it until the long run is through.

Secretary MCNAMARA. Mr. Bates

Mr. BATES. I have seen many of these agencies which they change for efficiency purposes; I only wish we had the money we saved on so many things. Somehow at the end of the fiscal year the money is all gone. But my question is this, Mr. Secretary, and my interpretation of the amendment is exactly the same as Mr. Hardy's. And if it is wrong then, how do you reconcile that with the very specific, wellconsidered-ahead-of-time comment in the report which said it was never intended and is not now intended that the Office of the Secretary of Defense would become a fourth Department of Defense delving into operational details on the daily basis? How do you reconcile that with the judgment exercised in respect to these five matters before us, particularly, we will say, the last one, the Defense Supply Agency. Secretary MCNAMARA. I think it is quite clear that these agencies are not part of the Office of the Secretary of Defense any more than the military departments are part of the Office of the Secretary of Defense.

Mr. BATES. Which particular Service would operate, we will say, DSA?

Secretary MCNAMARA. There are other units of organization within the Department of Defense than Services. As a matter of fact, as I understand the term, the word "Service" applies to the Army, the Air Force, the Navy, and Marine Corps. The term "military department" as I have used it, at least, applies to the three military departments, the Army, the Air Force, and the Navy-Marine Corps. In any event, using that for the minute as the definition, I would say that the Department of Defense is composed of more than three military departments plus the Office of the Secretary.

Mr. HARDY. You've got a National Security Council; you have a few other things of that kind-Central Intelligence Agency.

Secretary MCNAMARA. Yes, those are not part of the Defense Department.

Mr. HARDY. I understand, but they are certainly not going to operate the Defense Supply Agency.

Secretary MCNAMARA. No. I am trying to distinguish between the Office of the Secretary and the organizational units reporting to the Secretary of Defense.

Mr. HARDY. Then what you are saying is that under this procedure you have established new agencies within the Department of Defense that are not statutory, they are just some new agencies that are set in there to operate by themselves?

Secretary MCNAMARA. Yes. They have a statutory basis, of course. Mr. HARDY. Mr. Secretary, you must not mean that those agencies which are created by directive are of a nature similar to the services insofar as having some autonomy for operations? They would come directly under the operational control, detailed operational control of the Secretary of Defense, wouldn't they?

Secretary MCNAMARA. They report to the Secretary, but clearly I am not operating them on a day-to-day basis any more than I am. operating the military departments on a day-to-day basis.

Mr. HARDY. Well, there isn't anything in any of your law or procedures or anything else which would prevent a detailed operation of these agencies by the Secretary of Defense himself, if he saw fit to do it, is there?

Secretary MCNAMARA. I think it is quite clear, as I say, in the House Report associated with the 1958 legislation; it was intended that the Secretary of Defense would not engage in detailed operating functions. Mr. HARDY. I think that is right.

Secretary MCNAMARA. Therefore in answer to your question I think there is law that would say that he should not operate on a day-to-day basis an organizational entity such as the Defense Supply Agency.

Mr. BATES. Who is operating it if DOD is not operating it? Secretary MCNAMARA. Lieutenant General McNamara is the operating head of the Defense Supply Agency.

Mr. BATES. But he is not a member of an individual service.

Secretary MCNAMARA. Well, he is a member of the Service, he is a member of the Army, but he is not a member of the military depart

ment.

Mr. BATES. Wearing the hat that he is wearing he is not a member of the Army or the Air Force or the Navy.

Secretary MCNAMARA. Not of the military department.

Mr. BATES. With that hat. That is the distinction that we are drawing here, that the responsibility, the authority of the individual services are obviously weakened when they are moved upstairs to whatever you want to call it, but it is still DOD.

Now it seems to me that is quite in contrast as they operate at that level to the intent of the act we had in 1958. I am not commenting upon the wisdom of doing it at the moment, but I am upon the authority and that is what I would like to have counsel develop if you would.

Secretary MCNAMARA. I would like to ask my counsel to comment on this. I think it is quite within the act, and as a matter of fact directed by the act.

Mr. VANCE. Yes, Mr. Bates. The act provides that the Secretary of Defense is charged with the responsibility of bringing about a more effective, efficient, and economical administration and operation and eliminate duplication; that is in section 202 (c) (1). 202(c) (6) provides that whenever the Secretary of Defense determines it will be advantageous in terms of effectiveness, economy, and efficiency, he shall provide for the carrying out of any supply or service activity, common to more than one military department, by a single agency or such other organizational entities as he deems appropriate.

Mr. BATES. But I think most of us believed that was along the single-management concept and not a new organization separate and distinct from the individual services or something new like DSA. But in any event, let me ask you how you reconcile that with the very specific statement that is made in the report?

Mr. VANCE. It is my belief, Mr. Bates, that as the Secretary has already stated, this does not put him in operations. He has a Defense Supply Agency headed by General McNamara who is running the day-to-day operations of that agency. It is true that he reports to Secretary McNamara, but that does not place Secretary McNamara in day-to-day operations.