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I am not familiar with exact numbers. There have been selected items that, because of a special interest, either through problems of design, or determined to be essentially critical to a weapons systems operation, have been shifted back. It would be a very small number, however, just a handful.

[The information follows:] You asked Admiral Eckelberger to provide data on transfers from DLA back to the Navy. I have attached figures covering all DLA returns to all Military Services for fiscal year 1983 and fiscal year 1984. The transfers to the Navy for fiscal year 1985 and fiscal year 1986 are as follows:

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Summary: DLA returned a total of 1,464 NSN's to the military services during fiscal year 1983–84. This figure represents all returns including CIT items

Prep. DLA-OPM (N. Manion, x46261) Oct. 29, 1984.

Mr. BARRETT. I see.

Previous reports have indicated that several agencies that have combat support missions may or may not be sufficiently responsive to the needs of their users, in particular the CINC's, but also the services. I am not trying to associate myself with those criticisms one way or another, but those criticisms have been accompanied by a series of proposals of things that might be done to ensure that the Defense Logistics Agency, and other agencies, such as the Defense Intelligence Agency, the Defense Communications Agency and the Defense Mapping Agency, are responsive to the operational needs of their users.

I would like to ask you what you think of certain proposals that the subcommittee is considering to take care of that criticism, should the subcommittee determine that it is necessary?

One proposal would have the Chairman of the Joint Chiefs of Staff periodically review the Agencies' charters to ensure that they emphasize the combat support mission. Would you have any objection, or any comments on that proposal?

Dr. WADE. Not having studied it in detail, I would prefer to do that first. But let me offer a general observation. In addition to the overall mission of the Agency, there are these specific high priority support functions that have application to specific weapons systems. I would note here that during the course of our summer review, as we go through the programs, and when we address the makeup and the funding requirements for an agency, we also will highlight some of the key high priority items that have to have the special focus interest.

I think this arena is the place to make that review rather than to try to provide additional legislation which, in many ways, can restrict the flexibility in solving these problems as we look to the future.

So, as a general observation, I believe the system can be made to work. But without being too specific, I would like to look at the bill itself.

Mr. BARRETT. All right. I had a number of other proposals. But I think it is probably a wiser course to have you look at those proposals and, perhaps, respond in writing.

Dr. WADE. Yes, sir; I would be delighted to.
Mr. BARRETT. All right.
Thank you very much, I have no further questions.
Mrs. BYRON (presiding]. Mr. Lally.
Mr. LALLY. I have no further questions.

Mrs. BYRON. I want to thank both of you for appearing today. I apologize for getting here late, but I was in a procurement subcommittee meeting.

The meeting is now adjourned. We will reconvene Wednesday the 26th, at 2 p.m., to hear testimony from Mr. Korb, Major General Antonelli, and General Vessey.

Thank you.

[Whereupon, at 11:30 a.m., the hearing adjourned.]

HOUSE OF REPRESENTATIVES,
COMMITTEE ON ARMED SERVICES,

INVESTIGATIONS SUBCOMMITTEE,

Washington, DC, Wednesday, February 26, 1986. The subcommittee met, pursuant to other business, at 2:23 p.m., in room 2216, Rayburn House Office Building, Hon. Bill Nichols (chairman of the subcommittee) presiding.

STATEMENT OF HON. BILL NICHOLS, A REPRESENTATIVE FROM

ALABAMA, CHAIRMAN, INVESTIGATIONS SUBCOMMITTEE Mr. NICHOLS. Our first witness this afternoon is the Honorable Jim Courter, a very valuable member of the full committee, and a gentleman who has introduced legislation before this committee.

Mr. Courter, we recognize you at this time for whatever statements you care to make on this issue.

STATEMENT OF HON. JIM COURTER, A REPRESENTATIVE FROM

NEW JERSEY
Mr. COURTER. Thank you very much, Mr. Chairman.

I want to thank the members for permitting me to testify, and I want to congratulate the subcommittee for the work they are doing in looking at the military organization. It is something that should have been done a long time ago and I'm very pleased that the committee is taking such a serious interest in the structure and organization of the Department of Defense.

I would like to spend a few minutes supporting legislation that I introduced. The legislation is really quite simple. It abolishes the Defense Logistics Agency and the Defense Contract Audit Agency. It also permits no increases in service personnel, nor would the reconstitution or reconfiguration of the abolished agencies be permitted under the legislation.

The proposed legislation has been greeted with less than unanimous enthusiasm, as I expected that it would be. There has been concern by people inside and outside the Pentagon bordering on panic. I would like to take a few minutes to explain the logical foundation of this move because I think it can be supported.

It is apparent to me that when Robert McNamara attempted to reform the Department of Defense, he relied a great deal on the concept of centralization, with the idea that that would bring efficiency and economy to the Department of Defense. I believe that time has shown that that attempt at centralization has moved us in the wrong direction and has created an overcentralized, bureaucratic, unresponsive Department.

The Defense Logistics Agency specifically was established in 1961. It was supposed to procure and manage items used by more than one military service and, therefore, one can understand the logic of having that type of centralized control, centralized buying, for efficiency and control, et cetera.

The DLA, as happens to all agencies and departments in the Federal Government, and probably State governments as well, has increased dramatically in size over a number of years. It increased by 360 percent, from 16,000 employees in 1962 to over 49,000 personnel in 300 locations today.

It appears that the Defense Logistics Agency operations became unwieldy and inefficient, when the military services saw an opportunity and began unloading certain, burdensome buying and management responsibilities on the DLA. As one DLA official said a couple of years ago, “Realistically, if the military services had not transferred missions and functions to DLA, it is probable that they would have achieved savings through management improvements. DLA, in its present form, now manages 2 million items, maintains an inventory of approximately $10 billion, and executes about $15 billion in procurement actions every single year.

Since 1981, DLA has experienced a 198-percent increase in weapons systems managed, and a 661-percent increase in the number of weapons systems affected by their management. We have very little weapons commonality between the services. That is something that our full committee has attempted to remedy and do something about. But, nevertheless, the reality is there. The weapons systems that DLA manages are increasingly service specific. In other words, they're moving in the opposite direction from their original charter. As a matter of fact, we checked recently with GAO, and with DLA, the agency under question, and, found that about 70 percent of all DLA-managed items are service specific, thus violating the original agency mission itself.

In 1980, for instance, an F-101 fighter crashed, killing two crewmembers. Subsequent investigation revealed that the cause of the crash was a corroded fuel hose. Upon further investigation, it was discovered that this part was ordered by the Defense Logistics Agency. It appeared to be the proper type of hose but, upon further examination, it did not have the proper specifications with regard to corrosion resistance.

More generally, DLA-managed items for military aircraft have been responsible for an inordinate percentage of what we call “not mission capable” ratings. Of the “not mission capable” ratings, 61 percent of the ratings for the C-130 were caused by the DLA-managed parts; 55 percent of the “not mission capable” ratings for the C-135 were due to DLA items; and 47 percent of the F-111 fighters, those that were “not mission capable,” were attributable to Defense Logistics Agency parts or management of parts.

It was also recently reported that the DLA-managed helmet contract for the U.S. Army had produced 460,000 dangerously substandard helmets, which was corrected by the Army.

Many of these problems are attributable to the sheer volume, the sheer complexity of the DLA, the size of their inventory, and the lack of accountability. None of it is caused by individuals who aren't sincere and who are not attempting to do their job. But the bureaucracy, in my mind, is simply getting in the way.

One important function of the DLA is to manage accurately the item inventories for the various services. This task requires keeping a current accounting of relevant items, properly coded for priority, or what they call “essentiality.” However, GAO recently reported that 64 percent of the electronic weapons systems items handled by DLA were improperly coded for essentiality. That is well over 50 percent. In another case, GAO discovered that 50,000 Navy items managed by DLA had been improperly deleted from the inventory. They didn't know they were there. That's tens of thousands of items. For the Army, 1,615 items suffered a similar fate. Another GAO study revealed that in two DLA supply centers 38 percent of the inventories that they examined lacked accuracy. They were simply inaccurate. Nothing would cause greater problems for our services if they reached to get supplies and spare parts and they were not there.

Of particular management concern at DLA is the billing and collections function. Again, the sheer magnitude, the sheer size, the sheer complexity of the task conspires to create problems which sometimes result in improper distribution of funds. In 1984, GAO reported that 75 percent of DLA's 77,000 invoices were paid without proper documentation. In the same year, DLA made improper payments totaling approximately $8.5 million to private business. Those businesses, seeing the problem, reimbursed the Treasury for the money. Finally, in its 1985 Government financial management review, GAO reported that DLA had paid $23 million for items never received from vendors and another $53 million for deliveries that were more than 90, and sometimes more than 100, days behind schedule.

I should note that 75 percent of DLA's operating costs are personnel related. These costs rose approximately 70 percent from 1979 to 1984. In addition, in 1984, GAO reported that DLA employee productivity was down, resulting in $23 million in increased labor costs. Dr. Wade, from OSD, informs me that DLA only requires 17,500 personnel to handle all of its procurement responsibilities and functions. That leaves me with a question: What are the other 31,500 people really doing?

Now, the personnel question has another broader dimension, that being the question of truly-accountable civilian control over the peacetime military establishment. With the creation of 11 central defense agencies, the Congress has, in my mind, been conceding and giving up more military decisions to the career civil servants and military officers. John Lehman said not long ago that "Ultimate authority over the Defense Department must be exercised by those responsible to the source of political power which, in a constitutional democracy, is the electorate," the constituents.

Defense agencies, including the DLA, and the Defense Contract Audit Agency, are, in a fundamental sense, beyond effective political control and accountability. The result is that we are wasting tremendous sums of money, we're not as ready as we should be, and there is a lack of confidence in our stockpiles. We should not be encouraging this centralization, the bureaucratization, this lack of accountability. In my mind, we should be moving in the opposite direction.

The other agency, affected by my legislation is the Defense Contract Audit Agency. My objection to this Agency is mostly philosophical. I feel that the Agency should be under effective political

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