Mr. BATES. What is it with respect to the appropriation account? Mr. Moor. In terms of limitation.

Mr. BATES. Who will control that? The thing that I am trying to establish, previously, the individual services had so much money, both for their appropriation accounts and also for the stock accounts. DSA moves into the picture. It takes over a tremendous part of that in the wholesale level.

How much is left for the individual services, and who made that decision?

Mr. Moor. I think the best way to explain it is to say this: For each of the commodities that DSA is starting to manage at the wholesale level a capitalization action takes place. The individual services look at all of the stocks they own and they code the items to DSA, they retain for their use in position if they can the retail, and capitalize, which means transfer over without reimbursement to DSA. what are called wholesale stocks, which is basically the difference between the total and that retained for retail level.

DSA in turn takes these wholesale stocks and it is on this basis that DSA buys and sells stocks.

Mr. BATES. I understand that.

What I am trying to determine, who determines the size of the retail level?

Mr. Moor. The military services.

Mr. BATES. Anything that is left over they send to DSA?

Mr. Mooт. That is so, sir.

Mr. HARDY. Go ahead.

Mr. SHORT. To summarize, for the items it manages, DSA is the wholesale supplier to the military services. It manages that part of the pipeline that is closest to the producer. The military services operate that part of the supply line closest to the operating forces. The military services decide what and how many they want, where they want it, and when. DSA decides how much to buy, how much to stock, and how to distribute to meet the needs of the services.

Mr. BLANDFORD. To summarize that for the record: At some future date, some future incident, if a shortage of combat boots develops, if the service establishes that it submitted its requisition for 50,000 pairs and if in the decision of DSA it was unnecessary to actually purchase 50,000 pair, but instead that purchase could be stretched over a period of time, 3 or 4 years, rather than go out and purchase it then, then this is a responsibility of DSA?

In other words, to pinpoint responsibility here, assuming that the service itself establishes its requirement, it has fulfilled its responsibility by submitting to you what it considers it needs. Then your responsibility is to decide whether or not to fill that requirement. Mr. SHORT. Not to decide whether to fill it, Mr. Blandford, but how to fill it.

Mr. BLANDFORD. Well

Mr. SHORT. We have no choice as to filling it.

Mr. BLANDFORD. You have a choice in this respect:

If three services each submit a request for 50,000 pairs of boots and you decide it would be silly to buy 150,000 pairs of boots based on the submission of that amount by the services, you might even gamble as a broker that they are only going to need 75,000.

So you only buy 75,000, isn't that your decision?

Mr. SHORT. No, sir, if they send us a requisition and it totals 150,000 boots

Mr. BLANDFORD. What do you mean by "decided how much to buy"? Mr. SHORT. To buy ahead in order to meet the anticipated demands of the services.

Mr. BLANDFORD. Then it is not the responsibility of the services to submit a request for how many they want, it is the responsibility of DSA to fill what they ask for, but to anticipate what they may need in addition to what they may ask for?

Mr. SHORT. There we get into a joint responsibility.

Mr. BLANDFORD. That is what I want to pinpoint in the record. Mr. SHORT. You will recall the services, if I may go back, furnish DSA in number, by phases, their general mobilization materiel requirements, their requirements for in-place Reserves, and their special program requirements coming up; they set their stock levels in their retail stockage points; they decide all these things.

These first four, they give DSA in terms of quantities phased out into the future. For those items which we have been managing and issuing to the services, we have accumulated demand and issue data. For these items they give us program information such as their tables of organization and equipment, tables of allowance, what their troop strength is going to be, projected into the future, how it is going to be deployed, equipment density, et cetera; using these things for the normal replenishment requirements DSA puts all this together and computes how much they need to buy and when, and how much to keep in stock, in order to meet the demands of the services.

The real hard demand comes when they give us a requisition and this we must fill. The thing we have the responsibility for is being able to meet their anticipated demands.

Mr. BLANDFORD. Somebody along the line here has to be responsible for an estimate as to future needs. Somebody is going to have to make that decision. All I want is for the record to show who is responsible. Mr. SHORT. For general mobilization Reserves, in-place Reserves, special programs, et cetera, the services make the computation.

DSA makes it for the items we have in stock and for which we have accumulated experience data, based also on other information that the services give us. For example, if their strength is going to double, they must tell us that. Then for these kinds of items, stable, standard items that we have built up experience in, we can compute the requirements.

Mr. BLANDFORD. If the Army in its thinking feels that there may be unusual demand for combat boots in the next year, and submits a request to you for 100,000 pair of combat boots, you will fill that request without question?

Mr. SHORT. Yes sir.

Mr. BLANDFORD. Is that right, General?

General MCNAMARA. This is the priority breakout, there on our requisition form, that is established by the JCS. So this will come. in. But it is true that we would fill this requisition without question. Mr. BATES. Doesn't that put us, General, in the position which we have faced on many occasions in the past, where we had mistakes on

the typewriter, mistakes generally, and they will come to you and you wouldn't honor that

General MCNAMARA. That is right. Twenty-three percent of the requisitions that come in have errors on them and they bounce back just as fast as we get them. We call attention to that as soon as

we can.

Mr. BATES. How do you determine an error?

General MCNAMARA. So far it has been merely determined by visibility of numbers that are obviously erroneous.

Mr. BATES. Are your records good enough at this point to be able to make that determination?

General MCNAMARA. In the fields that we are managing-remember that we took over going concerns in the early assigned areas. We are better prepared in these fields than in the new ones that are coming in. Mr. BATES. When something looks like an error, you contact them and find out what it is all about?

General MCNAMARA. That is true. However, 23 percent have proven to be errors so far.

Mr. HARDY. If I could understand one other thing about this point Mr. Blandford has been making.

Do I understand that on the basis of this discussion a shortage in uniforms that Mr. Bates refers to a while ago because of a reduction in inventory was due to the fact that the services themselves reduced their requirements?

Mr. SHORT. I am not familiar with the case, sir, that Mr. Bates was talking about. Therefore, I cannot say what happened. I do know that, as a result of a study made a few years ago, the top military logistics chiefs agreed that the supply effectiveness of the single management agencies was at least equal to presingle management.

Mr. HARDY. I thought maybe that would be the answer to this— Mr. SHORT. It could be

Mr. HARDY. I didn't know whether it was due to a deliberate reduction in the inventory by the single manager or the DSA, whichever may have been responsible.

Mr. SHORT. To my knowledge, it wasn't due to that. As you said, Mr. Chairman, it could have been due to a low or depleted retailed stock, also.

Mr. HARDY. That is something I wish we did know, what really caused it. Because if it was a management proposition, then it might point out a need of some deficiency, a need for the correction of some deficiency in management.

Mr. BLANDFORD. One of your functions is to review and when authorized by the Secretary of the military department to compute special program mobilization materiel requirements. As I see this, unless you are requested to review this by the Secretary of the military department, no matter what that special requirement that comes in you must fill it. The only place you would be responsible or would assume the responsibility would be if you then decided not to fill it in the go back-you would make the decision as to the time factor in which that would be filled

Mr. SHORT. No, sir.

Mr. BLANDFORD. When to buy it.

Mr. SHORT. It is our responsibility to ship in accordance with the time that they

Mr. BLANDFORD. This is anticipating something in the future. There isn't any buying time requirement except that you are told that the Army feels there will be a special requirement for 100,000 pairs of combat boots in the next fiscal year. They don't know when. This is part of their crystal-ball gazing which is all we are all involved in here. Your crystal ball says, "Well, we can get a better price on these if we buy them in November than if we place them in September." So you wait until November to place the order which is the way you might operate, is this right, General?

General MCNAMARA. Let me make a point here. First of all, we don't make the buy because of the price. We make the buy on the level we are attempting to keep rather than on the price. We don't go out just because the price of leather is low. In addition to that, there would be another point, Mr. Blandford, on the 100,000 pairs of boots. We would be buying more than the 100,000 because we would be buying the tariff-size coverage to meet 100,000 since we don't know what the sizes of these particular individuals would be. We would be interested in that at wholesale level more than that one figure of 100,000. They couldn't predict in their requirement the actual sizes they would want.

Mr. BLANDFORD. I am trying to anticipate 2 or 3, I hope never, 2 or 3 years from now when there is some kind of shortage of something and somebody is going to have to bear the responsibility.

General MCNAMARA. I think for clarity's sake, on the wholesale level you must look to me as the individual responsible for that.

Mr. BLANDFORD. You can always turn around and say that the services didn't ask you. The services can turn around and say they didn't ask because you have the authority to review and they

General MCNAMARA. I am part of a team. I am not going to be turning around to these people and say "See here now." I am going to try to find out as much as I can from them to be an effective wholesaler of this team.

Mr. BLANDFORD. Mr. McNamara said yesterday that the thing that prompts him to act is when you have improved efficiency. One way of improving efficiency is to be able to pinpoint responsibility. And that is what I am trying to do here, to determine a failure in the supply system.

General MCNAMARA. I think when they, the services, hand to us a programed requirement then we become responsible.

Mr. BLANDFORD. Once the amount has been submitted to you, you then assume responsibility? Is that correct?

General MCNAMARA. That is what I think is the responsibility of a wholesaler

Mr. HARDY. You wouldn't undertake to assume responsibility for immediate delivery of the entire quantity that they have projected through a year?

General MCNAMARA. Our planners would be much closer than this, Mr. Hardy. We would be out ahead of the business. If an emergency would come up because of some reason we could have some problem.

Mr. BLANDFORD. I think we have that established. I wanted the record to be clear.

Admiral LYLE. Within the services in the past we have had these relationships and problems. There is nothing new and unique about them, about such problems between the requirer and the supply source. Mr. BLANDFORD. The same problem with the single management service.

Admiral LYLE. You have the same thing.

Mr. BLANDFORD. We want to establish it for the record here, and it could become a factor at some later date in determining how efficient the organization is.

Mr. SHORT. Part of the answer to your question is when they give us these requirements, these forecasted requirements, they give them to us by time phases, usually by quarters.

As for relationships, the general mentioned a little while ago the Defense Supply Council. This consists of the Deputy Secretary of Defense as Chairman, the Secretaries of the military departments, the Chairman of the Joint Chiefs of Staff and the Assistant Secretary of Defense for Installations and Logistics.

The primary job of the Defense Supply Council is to advise and assist the Secretary of Defense in matters pertaining to DSA, and the charter also says that the Council will be available to consult with the Director on any problems he wants to consult with them about. The relationships with the Office of the Secretary of Defense are the same as the relationships that the military departments have with the Office of the Secretary of Defense. We deal with the Assistant Secretary of Defense, I. & L., on logistic matters, as the principal civilian staff assistant of the Secretary of Defense for logistic matters. We deal with the Comptroller Assistant Secretary on financial matters. We deal with the Manpower Assistant Secretary on manpower and personnel matters, the Civil Defense Assistant Secretary on civil defense matters, et cetera. The headquarters staff and these officers are in touch, on a daily basis, just as they are in the military departments. With the Joint Chiefs of Staff we receive weekly briefings as to the logistic implications of national and military plans, tactical, contingency, emergency, and so forth. There is regular coordination and review with the J-4 of the Joint Staff. With the military departments we have free and direct access both at headquarters and field levels. There is no dealing at arm's length here. They-the staffsare in constant touch daily and at all levels.

Staffing: Military staffing is on a joint basis with military personnel drawn from all the military services.

Some progress: During the period October 1 to December 31, 1961, which we refer to as the planning phase, because during this time General McNamara had only assumed command of the supply center by direction of the Secretary of Defense, we developed an organizational and staffing plan for the headquarters, and

Selected the headquarters site.

Drafted engineering plans and cost estimates for conversion of warehouse space at Cameron Station to office space for headquarters. At the present time, the headquarters is split at four locations.

Determined personnel and financial requirements.

Concluded agreements with military departments for transfers of fiscal year 1962 resources.