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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.
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. 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 DLĂ 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
7 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?
Čertainly if the product was paid for by the Government as part of an R&D program, then we certainly own the fruits of that re search.
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.
The issue that has been raised, General, about the total explosion in numbers of civilian personnel, and bureaucracy, that has been raised by a number of people here, including Secretary Lehman. What are we going to do to control this?
We know we are going to be in for tough budget times. Personnel is a big issue. We have too many people working for the Pentagon right now, both within the services, in the civilian area and also within OSD. Can we make reforms that would cut down on the bureaucracy that we have down here?
Dr. WADE. Well, first of all, I think it is rather obvious this is not just an internal problem. We are facing an external threat. You can look at the peacetime capability of the Warsaw Pact, you know the numbers are very high indeed.
As far as improving upon the numbers involved with the DOD, both civilian and military, we can improve and, I think, improve in a very large way upon how we go about improving, particularly the acquisition process as a whole.
We have, and I would like to underline this, since 1981, and the formation of the 32 Carlucci initiatives, the various improvements that have followed therefrom, and have been very, very significant. It is a job that we can all be quite proud of, improving our overall acquisition programs.
You know the improvement of the DSARC process. The integration of acquisition with the planning and the budgeting process, multiyear procurement, the economic production rates, better cost estimations, I think these are all, have had a very sizable impact on how well we are managing ourselves overall.
But when you look to the future and ask yourself what types of funds will be available, and what types of problems face us, I think, we now have to take a look at some of the more difficult issues that we have stayed away from in the past. Some of these have to do with the overall makeup or work force, the organization that supports the work force, and perhaps, even the requirements process.
These have a bearing on acquisition. And I think that the makeup of this committee, the Packard Commission, and the Senate are all addressing these items. I think, having a thorough discussion on matters of this kind will give us the right answer over time.
Mr. KASICH. Do we have too many; or don't we, Dr. Wade?
Dr. WADE. I don't think we have too many. I think we can do a better job in the context of how we allocate our people to the task.
General BABERS. Sir, may I just respond that many of the things we have done to get our collective act together in the acquisition business have added to the work force. That is not going to go away soon unless there is some backoff in the things that drive us to pay special management attention.
Mr. KASICH. The final one, Mr. Chairman, is computer technology. Do you need more money from Congress to have better computer technology in DLA? I think you are doing a better job, General, a much better job than when this committee first started 3 years ago. Do you need additional money for upgrading?
General BABERS. Well, I am pleased that you recognize the prob lem. We have a major automated information system review council, a MAISRC in process. We will be going before them in about a
month to justify to the OSD staff a program that will upgrade and modernize our ADP equipment.
We are going to be in big, big trouble unless we get on with modernizing, not only our main frames and all of the ancillary items. This also includes the software systems that go with it.
Dr. WADE. I would like to add to that, if I may, Mr. Kasich, that as we go back to the 1983 time period when various horror stories came up on spare parts, that the Department, with the support of the Congress, has addressed the need for a more modern management system, which as a crucial part, entails the use of new computers.
People and computers have been provided to the Department of Defense. But I think, the most important point here is it takes time to get this into the Department and functioning well.
And we need to understand that we are underway, but we need several more years to complete the job. We feel as a corporate group that we really have this problem underhand.
Mr. NICHOLS. Let me ask this question of you gentlemen.
You should be generally familiar with the provisions in the Senate bill that address DLA and other agencies; have you generally supported those bills, those provisions in the Senate bill?
Dr. WADE. I am not so sure where they are as of this time, Mr. Chairman. If it has anything to do with breaking up DLA, reverting back sizable portions to the services, as I said before, my judgment and, I believe, the judgment of the Secretary of Defense is: One, that is unsound. Two, it will end up costing us more money. And three, I think, to be more pejorative, it is doomed to failure.
Mr. NICHOLS. Mrs. Byron.
As you mentioned, Secretary Lehman has led the criticism of the defense agencies, in particular the Defense Logistics Agency. Has the Navy voluntarily passed on to the DLA for procurement in the last few years national stock items unique to the Navy? Has it shifted items to your organization, or is it jealously guarding the items that it traditionally purchased?
General BABERS. Sir, items are being transferred, 23,000 to be exact, by the Navy, these past 2 years.
Mr. BARRETT. Is this done voluntarily on the part of Secretary Lehman? Is this something the Navy is asking you to do? Or OSD? Or the Secretary?
General BABERS. There is OSD guidance on transfer criteria: a standard against which reviews are to be made to determine whether or not items would be transferred. It is the service's initiative then, in compliance with that directive, that causes items to be moved.
As Dr. Wade said, somewhere around 38,000 for all the services this past year, and about the biggest percentages of those are coming from the Navy.
Mr. BARRETT. General Babers, could you tell us how many of these items have reverted to the Navy, if any?
General BABERS. You mean have gone back to the Navy?