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Prepared the fiscal year 1963 budget.

Drafted interservice support agreements with military departments.

Participated in the preparation of a charter.

Issued interim operating guidance and delegations of authority to field activities.

Prepared a plan for establishment and activation of the electronic supply agency.

Prepared a plan for assumption and control of surplus property disposal activities. On January 1, 1962, the Director

Assumed command of all field activities except the industrial and automotive agencies.

Assumed command of the Philadelphia Quartermaster Center and the Richmond Quartermaster Depot. In February 1962, DSA assumed responsibility for management of civil defense stockpiles (except medical) and procurement of supplies for the fallout Shelter program.

On April 1, 1962, the Director assumed command of the Industrial Supply Agency.

On April 20, 1962, the Electronics Production Resources Agency was disestablished, and DSA assumed its responsibilities.

On May 1, 1962, DSA began the merger of the Army and Marine Corps clothing etories.

On July 1, 1962, the Automotive Supply Agency will be transferred to DSA and the Electronic Supply Ageney will become operational.

When currently assigned activities become fully operational, DSA will

Manage 1.2 million items.
"Own" an inventory of approximately $2.6 billion.
Procure approximately $2.9 billion annually.

Distribute approximately $3.2 billion annually. It will manage the defensewide surplus property disposal program. It will administer the traffic management program under which the various DOD agencies have been expending roughly six or seven hundred million dollars a year. It will employ approximately 25,000 civilian and military personnel in field activities

The headquarters staff of DSA

Mr. BLANDFORD. Mr. Short, just one question. The personnel figure you gave us is based upon currently assigned activities involving 1.2 million items and an inventory of 2.6 billion.

Mr. SHORT. Yes, sir. The headquarters staff is being built up on a phased basis as DSA assumes its responsibilities, that is, as they are phased in.

Mr. Bates. Have you evaluated all of these items, the 1.2 million, already?

Mr. SHORT. No, sir.
Mr. BATEs. How do you know it is the figure?

Mr. SHORT. It, the total, is an estimate. Some, of course, have been and are under DSA and were under single managers.

Mr. BATES. You have 150,000 now?
Mr. SHORT. It is 175—200,000 items we have now.

Mr. Bates. How do you know the rest of these items are going to be susceptible to the criteria and to that which comes under the law.

Mr. Moot. The answer is this, Mr. Bates: All items and all commodities that have been assigned to General McNamara have been coded in contrast to being transferred except for electronics which currently is being coded. So the count, except for electronics, is an accurate count, an aggregation of all the coded items that the services have said can be transferred to DSA for integrated management either through DSA or through decontrolling them.

Mr. BATES. We haven't gone into that coding very deeply, except you indicated—General McNamara indicated the services do code these things. I think we ought to take a little look at that and find out how they are coded and what they mean and whether they are common items.

Mr. Suort. This gets us back to criteria.

Mr. HARDY. Some time or other we are going to have to get into a detailed discussion of the criteria. It may be that we will have to have Mr. Short later on, perhaps General MeNamara, also, return for these detailed discussions. I have a good many questions that have occurred to me as we have gone along here. I think we are going to have to develop this business of all these traffic managers and that sort of thing. I want to explore the manner in which the efficiency is going to be accomplished in some of the matters. I think we will have to come back.

Mr. BLANDFORD. Let me make a statement, Mr. Chairman, if I may, so that when Mr. Short reads the record he will be able to comment on this at a later date. I will read a statement to you:

When this agency is fully operational by the end of 1963 it will have some 25,000 employees. It will be running an inventory of about $20 billion

General MCNAMARA. I didn't hear that. Mr. BLANDFORD (reading): It will be running an inventory of about $20 billion, half of our total inventory, which has come down from $52 billion, down to $41 billion, where I think it will

That is not all accurate. Part of that is excess, $12 or $13 billion. Here you are talking about an organization that is going to be running at a $20 billion inventory with procurement under it of something in the nature of some $4 to $5 billion a year. That does not include some three-quarters of a billion dollars of common use items that we will be contracting through GSA.

Whose figures are right?
Mr. SHORT. I don't remember the statement.
Mr. BLANDFORD. That is your No. 2 boss, Mr. Gilpatric.
Mr. SHORT. May I ask when this was made?

Mr. BLANDFORD. May 1, 1962, in a speech at Monterey, Calif. If we are going to have 25,000 employees under your inventory figure of $2.6 billion, with $2.9 billion procurement, then with a procurement of $1 billion, we can assume that you are going to need 50,000 employees if you are going to the figure that Mr. Gilpatric mentioned.

General MCNAMARA. I think there is a misquote on the total dollar sign on the figures.

Mr. BLANDFORD. This is put out by the Department of Defense. I can't vouch for it. I wasn't in Monterey when it was given. It is

level out.

the Office of Public Affairs, Washington 25, D.C., May 2, 1962. Call: Oxford 5--3201.

Mr. Hardy. Either Mr. Gilpatric has information that he hasn't given you or

General McNAMARA. I am sure I am going to consult him soon, Mr. Hardy.

(The following information was provided :)

SECRETARY GILPATRIC'S CALIFORNIA SPEECH

Secretary Gilpatric made brief reference to the Defense Supply Agency in off-the-cuff remarks at an Air Force Command Conference in Monterey, Calif. We have been advised that his remarks included the following statement concerning the Defense Supply Agency:

"When this Agency is fully operational by the end of 1953, it will have some 25,000 employees; it will be running an inventory of about $20 billion, half of our total inventory * * * with procurement under its cognizance of some $4 to $5 billion a year.”

There has been no opportunity to discuss this matter with Secretary Gilpatric. We note, however, that the figure he used was approximately the figure developed by the Project 100 committee as an estimated aggregate inventory of the then existing single managers, plus the inventories in commodity classes which were scheduled to come under integrated management, plus the estimated total inventories in those classes (aeronautical spares, chemical, and industrial production equipment) which were designated for study to determine susceptibility of integrated management. This figure includes substantial inventories which would remain under departmental management even if all the commodity classes involved were determined to be susceptible to integrated management.

The same is true of the procurment figure used by Secretary Gilpatric.

The figures we furnished the committee in our presentation represent our best estimate of what the values of DSA's inventory and annual procurement will be when it is fully operational with respect to the commodities which have been assigned to DSA. They do not include any estimates concerning commodities which are under study (aeronautical spares, chemical, and industrial production equipment) as to susceptibility of integrated management.

Mr. SHORT. I was down to headquarters stafling. Starting with six officers and three civilians on loan on the 1st of October and the analysis staff of the old Armed Forces Supply Support Center, which consisted of 14 or 15 people, we have a buildup to the 31st of December, 1961, to 200 people. We expect to reach 548 by the end of 1962, and by the end of June, 1963, for headquarters a total military and civilian strength has been approved by the Secretary of Defense, based on our assigned missions, of 746 people.

Dollar reduction: DSA's fiscal year 1963 budget reflects a reduction of $27 million in O. & M. costs below the combined statements submitted to OSD by the military departments for fiscal year 1963 for the same function. The inventory drawdown in fiscal year 1963 of over $200 million is also reflected in the President's budget.

Personnelwise, DSA will use 3,000 less through fiscal year 1963 than were called for by the staffing plans of the military departments for the same functions had they remained under them. Of course this 3,000 reduction in personnes is also reflected in the dollar figure of $27 million reduction in O. & M. costs.

Studies: During the Project 100 study which was the project which resulted in the establishment of DSA, the military departments, these teams that assisted the committee, agreed that there were three

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additional commodity areas which were worthy of study for possible integrated management. DSA was directed, by the Secretary of Defense, to complete studies of these areas.

First was industrial production equipment. The study team has completed its work. The results and recommendations of this study were forwarded to the Secretary of Defense yesterday.

Chemical supplies: This study was started in March of 1962. We expect to complete it by the end of September and forward recommendations to the Secretary of Defense.

Aeronautical parts and supplies: The initial pilot study has been started. When this study is completed, a plan for a full scale or a selective study will be prepared by the end of September.

A distribution study has also been made. The basis of this was the statement in the charter that DSA is responsible for a wholesale distribution system for assigned supplies.

Mr. BLANDFORD. If you have a copy of the rest of this statement that you could give to the reporter, he could copy it in the hearings at this time, since we are ahead of you at this point in the record.

Mr. Hardy. We have a lot of questions we are going to need to explore in this document, the subject matter that we have discussed. I think we should try to arrange to have you come back one day next week and go into that in some detail.

If we could go ahead and put the rest of the statement in the record here now. We have kept the Defense Communications folks here all morning.

I thought we might try to dispose of their presentation before we went to lunch ourselves, if we could.

Mr. BATEs. I also have an appointment.

Mr. HLARDY. If we could do that, I believe the committee would appreciate doing that now. If you could come back one day next Week

General McNAMARA. We will talk to Mr. Blandford.

Mr. HARDY (continuing). For a detailed study of some of these points. We certainly thank you. (The balance of the statement is as follows:)

THE FUTURE

DSA will not solve immediately complex problems inherited from single managers, nor the complex problems competent people have struggled with for years in standardization, utilization, and disposal.

Nor will it solve by itself the problems inherent in military supply, stemming from

Need for mobilization reserve stocks.
Rapid pace of technological developments.

Sudden changes in world situation.
But there are many benefits that can be expected :

Greater efficiency through uniform direction and control.
Uniform implementation of Secretary of Defense's policies.

Reduction of workload and increased supply effectiveness through standardized procedures, systems, and organization.

Reduced warehousing and transportation costs through streamlined distribution.

Increased rate of standardization.
Faster adjustments through reduced decisionmaking time.

Greater flexibility in programing, budgeting, and funding.

Reduced overlapping and duplication through consolidation of common facilities and functions—thereby reducing overhead costs.

Improved utilization of total system assets thereby reducing inventory investment. Better merchandising of surplus property. In conclusion, two quotations : "The President gave me two instructions: One was to develop the optimum force requirements, optimum in relation to the political objectives of our Nation, without any regard to arbitrary budget ceilings; but secondly, having developed those optimum force requirements to obtain them, procure them, operate them at the lowest possible cost. That we are seeking to do.”—Secretary McNamara when he announced the creation of DSA to the press, August 31, 1961.

"I am completely confident that we will achieve our objectives:

"First, and foremost, to provide effective logistic support to the operating forces of all the military services, in war and peace.

"Second, to provide that support at the lowest possible cost to the taxpayer."General McNamara, December 12, 1961.

General McNAMARA. This has been a very interesting period of my official career.

Jr. HARDY. We will try to make the sequel just as interesting.

Admiral, the committee is very pleased to have you here. Again, I apologize for running so long and being so late in getting started with you. I think you understand what we got involved in.

You can proceed now as you like best.

STATEMENT OF REAR ADM. WILLIAM D. IRVIN, DIRECTOR, DE

FENSE COMMUNICATIONS AGENCY, ACCOMPANIED BY COL. JOHN E. MORRISON, USAF, DIRECTOR OF PLANS AND PROGRAMS, AND CAPT. LOUIS M. DETWEILER, SUPPLY CORPS, USN, BUDGET AND PROGRAM REVIEW OFFICER

Admiral Irvix. Mr. Chairman and Mr. Bates, I am Rear Adm. William D. Irvin of the Defense Communications Agency, Director of the Agency, and I have with me Col. John E. Morrison, U.S. Air Force, our Director of Plans and Programs, and Capt. L. M. Detweiler, Supply Corps, U.S. Navy, our budget and program review officer.

With your permission, I would like to depart from the procedure of reading my prepared statement and present to the committee a recently produced motion picture on the Defense Communications Agency. The film explains why the DCA and the DCS were established, covers our organization and functions, and defines our management role in Department of Defense long-haul, point-to-point communications.

If this meets with your approval, Mr. Chairman, I will submit my prepared statement for the record.

Mr. HARDY. Thank you very much, Admiral. Your prepared statement will be included in the record.

( The statement referred to is as follows:) Mr. Chairman, the Defense Communications Agency was brought into being on May 12, 1960, at the direction of the Secretary of Defense. On that same date the Secretary directed establishment of the Defense Communications System.

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