Dr. WADE. Yes, sir. I think when you go back to this 1961-62 time period, that the original approach was to focus on items primarily consumable and items that were common throughout the Department.

Mr. NICHOLS. Then how have we gotten into buying specific items for the Army, that are not common to the Navy, that are not common to the Air Force?

Dr. WADE. Well, one▬▬

Mr. NICHOLS. Has your mission changed?

Dr. WADE. No, sir. I think what has happened here is we have gotten smarter over time. And we have found, for example, that many of these items fall into what we call a family of items, and can be managed, I think, more efficiently and more coherently, even if they are, for example, service-unique. Looking from the 1962 to 1985 time period we: One, have tried to improve the overall productivity of the Agency, and in this regard I think it has to be agreed by the military departments, that by looking at a family of items, and having one Agency manage these items we have been able to be more efficient in the sense of cost economy, but also in the context of availability of product.

General Babers might want to add to that.

General BABERS. I think we have grown smarter over time. We stock a lot of different types of nuts, bolts, washers, diodes, you name it; we know the marketplace.

Mr. NICHOLS. Let's skip the diodes just for the moment, and the toilet seats. [Laughter.]

Dr. WADE. I wish we could get rid of that problem permanently. General BABERS. But again, this specialization by hardware family has enabled us to get to know the marketplace better, and I think, become better and more sophisticated buyers.

Mr. NICHOLS. And is it not true that the services, themselves, have come to you and asked you to buy certain items for their service?

Dr. WADE. Yes, sir. I think if you look at, for example, the past 12 months under the increasing interest of the Agency and Department, that we have on the order of about 30,000 more items (stocked items) being carried by DLA. This is just another indicator of the overall cost effectiveness of this operation.

Mr. NICHOLS. It appears to me that a good argument was made back in 1962 when you created DLA, that can be made now, for some sort of a centralized buying agency. It would appear that you ought to be able to buy common items in volume cheaper than the Navy could buy them, the Army could buy them, or the Air Force could buy them singly. Despite that, the Navy tells me that they can buy paint cheaper in Norfolk then they can buy it from DLA. There is another concern that has cropped up from time to time. You mentioned that you were there in Vietnam, and bought a lot of material that the military needed. Where would your civilians be in time of a real shooting war? If they were uniformed people when a tank breaks down, or something, in a war zone, we can order them to fix it. Would DLA civilians be there at all in wartime?

General BABERS. Sir, we are predominantly civilian. About 1,000 military.

Mr. NICHOLS. I hope you will break down that 53,000 people. What percent are civilian, and what percent are military? General BABERS. About 2 percent are military.

Mr. NICHOLS. Two percent; ninety-eight percent are civilian? General BABERS. Yes, sir. The overriding majority of work is done here in the continental limits of the United States, not overseas. We have some functions in oversea areas, but that is very limited.

Mr. NICHOLS. Are you telling me that in a wartime scenario your civilian people would not be in the combat area, would not be called into combat areas?

General BABERS. No, sir; that is not envisioned. It would be just like the work force at Anniston, AL. They would stay at that depot, overhaul those tanks in war just as they do today. We stay back and buy the parts and have them on the shelf so when Anniston wants them, or they are wanted in Grenada, or Germany, if they can place a requisition, we will fill it.

Dr. WADE. Mr. Chairman, let me add a comment to that, which I think is important. When you look at the makeup, or the functioning, or what I would call, the overall people force that make up our acquisition system, it is terribly important that we underline the fact that we want quality in the operation, we want the very best people to manage the acquisition of our weapons systems, the implementation of the logistics operation. One of the initiatives I have underway is to make some changes with the support of the Congress, that, as a general rule, these billets should not only be set aside for one person or the other, but the filling of that job should be based primarily on performance as a very major criterion. I think, in this context, General Babers has been doing a superb job in enhancing the overall efficiency of the work force, both military and civilian. I think we need to do more of that across the whole force.

Mr. NICHOLS. In hearing testimony from the various service secretaries, the Secretary of the Navy feels like he can do the job better. I believe he so stated that he would generally support the abolishment of DLA, as contrary to the other service secretaries, who feel like some changes might be in order but none of them had said abolish Defense Logistics Agency.

Why would the Secretary of the Navy, why would his position be that he felt like he could take on the buying responsibilities that you are now doing for the Navy, at no additional cost, in fact, perhaps, at a cost savings in the purchasing area?

Dr. WADE. Mr. Chairman, I believe the right person to ask that question of and I presume he has been in front of this committee, is my dear friend, John Lehman. My observation would be that, No. 1, the facts should speak for themselves; and here, as we presented both in my statement and the comments from General Babers, is that we are providing efficiency in our operations, the cost-effective analyses are all positive.

And we see, for example, that the operating arms of the Department of Defense are even asking for the DLA to pick up more of the national stock items. We can do better.

But I think, before we accept some of these theses on moving out the management of these items and breaking them up and, per

haps, going back to the redundancy of the early 1960's, that we actually ask for the cost-effective analysis to back up these statements.

We have provided these kinds of comments to you this morning, and I would ask for a similar input before we decide on that type of judgment.

Mr. NICHOLS. Mr. Lally.

Mr. LALLY. Thank you, Mr. Chairman.

Secretary Wade, you addressed one of our favorite issues here, as the chairman mentioned, with the diodes discussed in your statement. One other procurement issue cited as an example, were some leg restraints for an aircraft ejector seat. We have seen numbers that these restraints, while they are actually worth $12, have been procured for DLA at a price of $103 for the right strap, and $244 for the left strap. Could either of you inform the subcommittee on history of the procurement of these leg restraints?

General BABERS. Yes, sir, in 1982 that was transferred by the Navy into the Defense Logistics Agency. The procurements made by the Navy before transferring, were at a contract price of $214 for one, $163 for the other side. That item, when it was under the Navy's integrated management, was sole-source to a company in England that holds a patent. We still must buy it sole source from that particular organization. We have made two procurements since it came to the Defense Logistics Agency. We paid $154 on one of those occasions, and $190 on the other. We have contacted the Navy in the past to see if we couldn't break the proprietary nature of that leg restraint and the quick release mechanism; and they have declined.

Mr. LALLY. What you are saying then is that the DLA procurement has been at a lesser

General BABERS. That is correct, sir. I find no history of a $103 leg restraint.

Mr. NICHOLS. Would the gentleman yield for just a minute.
Why did they decline to do that, did they give you a reason?

General BABERS. The British firm holds a patent on the item. It was on that foundation they thought that they would not want to go through the process of qualifying another source, or coming up with another design, because there is safety-of-life consideration involved in like item.

Mr. LALLY. A bill pending before this subcommittee, H.R. 4068, would abolish Defense Logistics Agency and Defense Contracting Audit Agency, transfer their functions to the military departments. It would also prohibit any increase in the civilian personnel authorizations of the military departments in the assumption of the duties currently carried out by these agencies.

My question is do the military departments currently have among their civilian personnel experienced people who could assume the procurement and contract audit functions which they would be required to assume-sufficient experienced people?

Dr. WADE. The answer is no. We have been optimizing this operation since the 1961 time period, and we have succeeded with the kinds of figures we have demonstrated this morning as a result of this type of continued approach towards improving the productivity operations as a whole.

They don't have the people. I think you will go back to the redundancy as they build up that capability over time. And I think with the severe budget restraints that have been facing the department, as we look out to the future that this would be, one, unsound; and second, I think, would be doomed to failure.

Mr. LALLY. Thank you, sir.

Mr. NICHOLS. Mr. Kasich.

Mr. KASICH. My question is for either of you gentlemen. The chairman raised the issue, the issue of DLA buying common parts, and noted that there were a lot of service-unique items being purchased by DLA. The witness responded by saying that this is a kind of a spillover effect, and that since we have the bureaucracy there we might as well buy some service-unique items. That was a really lousy answer, in my view, to that question.

Your purpose is to buy common items for the services, which means that you can probably buy in more economic quantities. Should you be buying service-unique items; and if so, why are we moving in that direction?

General BABERS. The definition of what we buy has evolved over time from when it would be a common-use item, used by more than one service, to one where it is a member of a family of hardware. If we buy nuts, bolts, screws, plates, steel, oil, any of the thousand items-if we buy one category, we are busy working with a firm that sells many brands of the same item.

So we know our marketplace by dealing on a hardware family basis. And, I think, that was the foundation upon which the guidance was changed that directed certain items assigned to DLA for management.

Mr. KASICH. Do you think we should change that? Or just go back to buying common items and let the individual services buy the service-unique items?

General BABERS. I don't know what would be served by that, Mr. Kasich. On an individual basis, right now, if there is something that the service wants back that is causing a particular problem, or if there is a design instability or if we are having trouble supplying it, that action is available to them. We make those transfers on a continuing basis.

Mr. KASICH. In regard to Mr. Lally's question on the patent rights: do you think there should be dates or certain limits on proprietary rights? So that at some point, unless the item has commercial application, there ought to be a flatout limit on the ability of a company to maintain monopoly rights forever?

Dr. WADE. Mr. Kasich, the topic you raised here is very important and very difficult. We have this issue under review at the Department of Defense, and we hope to have at least a first output from this review in the next month.

Mr. KASICH. I had a bill a couple of years ago that established a limit on proprietary rights of 8 years unless the product itself had legitimate commercial application. If it didn't, if it was unique to the services and if it could not be found at a commercial marketplace, at some point in time, then you would have a limit on those rights. Would you be able to support that kind of legislation?

Dr. WADE. Well, let me first offer two criteria that I think you have to put in front of you as you solve this problem.

First, is that you do not want to denigrate the interest of our defense industry to provide the best high technology. If we do that and we note the importance of quality that is in our forces and equipment, and the importance that is to overall deterrence, we have to make sure that anything we do does not denigrate that in a signficant way.

Second, though, I think the point that you are interested in here is the ability to break out these piece parts for competition so that we can get a fair return on our money.

The issue in front of us is how we go about balancing those two criteria, because in part they run against each other. To set a general rule, I think, is rather difficult; and that is the problem that is facing us. I think in many areas we can't set a time scale.

At the same time, I would like to say that when we finally come down on our new policy, how well does it do in fitting these two criteria?

Mr. KASICH. Don't you think, however, that some objects are in fact, unique only to the military? You know, Admiral Platt who has been very successful in the Navy, advocates this and says that if you disappear from home for 7 years you are presumed dead and your wife can remarry. If you have a monopoly, or if you have a patent, then at some period of time that patent ends. These proprietary rights are the greatest rights in the world, because they last forever.

Shouldn't there be some period in time when, rather than having the services required to keep battling the $125-an-hour lawyers over these contracts, shouldn't there be some period in time when an item does not have any commercial value and those rights are transferred to the Government? Don't you think 8 years is long enough for a company to have a monopoly right?

Dr. WADE. Well, when you use the expression "some time," I would have to agree with you. But the question is, is it 5, or 10, or 20 years?

Certainly if the product was paid for by the Government as part of an R&D program, then we certainly own the fruits of that research.

Now, if you come forth and have a very, very powerful new technical invention, and we restrict you in the context of putting that into our system, by saying within 5 years it will be 100 percent owned by the Government, I think there has to be some way of relief in special cases. As a general rule, I think, a time period makes sense; but at the same time, there is always an exception to the case, and it is exception to the case that, I think, provides the real difficult issues here. Therefore, generally, yes; but at the same time that we have to have an approach toward handling that special case.

Mr. KASICH. Thank you, Mr. Chairman.

Mr. NICHOLS. Thank you, Mr. Kasich.

Mr. KASICH. Well, Mr. Chairman, if we have time I could ask a couple more questions if you want to wait.

Mr. NICHOLS. I yield to the gentleman.

Mr. KASICH. Thank you, Mr. Chairman.

The issue that has been raised, General, about the total explosion in numbers of civilian personnel, and bureaucracy, that has