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. În 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 keep

ing 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

control, and it is not. Also, work is being done with regard to auditing by the services themselves and, therefore, the work by the DCAA is duplicative.

Like the DLA, the DCAA has experienced high personnel growth levels for the past number of years, from 166 employees in 1965 to more than 4,600 employees in 1985. Also, like the DLA, there have been efficiency and proficiency problems at the DCAA. Forty-one percent of the DCAA audits have taken more than 60 days to complete, many more than 100 days to complete. Seventy-five percent of the personnel there that deal with audits are not CPA's.

Most recently, the Secretary of the Army complained to this subcommittee-and I'm well aware of it-about the increased burden that this type of legislation would impose upon the services. He said it would be virtually impossible for the Army to absorb its share of DLA's responsibilities without additional resources. That is in contrast to the Secretary of the Navy, who has indicated to me personally, and indicated to other people who have asked, that they would welcome the opportunity to do the work of the DLA and that they feel they could probably do so without any significant increase in personnel.

Basically, Mr. Chairman, what I am suggesting here is that modern corporations today, those that are large but that are also competitive, and those that are very large who have implemented new management techniques, are moving away from centralization. They are moving away from bureaucratization and they are moving toward accountability and decentralization and deregulation. I would hope that the subcommittee would look at my proposal to move in a direction of decentralization and accountability. Thank you very much.

Mr. NICHOLS. Thank you very much, Mr. Courter. Without objection, your statement will be made a part of the record.

PREPARED STATEMENT OF HON. JIM COURTER

Mr. Chairman:

I appreciate this opportunity to appear before your Subcommittee today to testify in support of my legislation to abolish the Defense Logistics Agency and the Defense Contract Audit Agency. However, before I proceed, let me commend you for conducting this important and long-overdue inquiry into our military organization; I hope that the result of this process will be a more efficient military establishment in peacetime and a more effective fighting force in wartime.

I want to begin by briefly reviewing my bill, H.R. 4068. Quite simply, this bill would abolish the Defense Logistics Agency and the Defense Contract Audit Agency and return their functions to the individual military Services. No increases of Service personnel would be permitted as a result of this legislation, nor would the reconstitution or reconfiguration of the abolished agencies be permitted.

I am well aware that my legislation is viewed by some potentially interested parties with sentiments ranging from concern to panic. It is not my purpose here to allay those concerns; rather, I am here to explain for the Subcommittee the logical foundation upon which my legislation is based.

It is apparent to me and to many other observers that former Secretary of Defense Robert McNamara was mistaken in his belief that the centralization of military functions would promote "effectiveness, economy, or efficiency" as mandated by the Defense Reorganization Act of 1958. By reviewing the history and operations of the DLA and DCAA, I will illustrate the logical bankruptcy of over-centralizing defense management, and, in the process, make the case for my legislation.

The DLA was created in 1961 to procure and manage items used by more than one military Service. These items, for the most part, were not weapons-related. In order to handle these burgeoning responsibilities, particularly during the Vietnam war era, the DLA grew in size by 360%, from 16,000 employees in 1962 to 59,000 employees in 1967. The DLA presently employs approximately 49,000 personnel at 300 locations.

It appears that DLA operations became unwieldy and inefficient when the military Services began to unload certain burdensome buying and management responsibilities, rather than streamlining their own management structures. As one DLA official said several 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 a $10 billion inventory, and executes $15 billion in procurement actions each year.

DLA's growing involvement in weapons systems management has been a large part of the Agency's overall increase in responsibilities. Since 1981, DLA has experienced a 198% increase in weapons systems items managed, and a 661% increase in the number of weapons systems affected. These developments produce concern in a number of areas.

First, because we have very little weapons commonality between the Services, the weapons systems items DLA manages are increasingly Service-specific. In fact, 70% of all DLA-managed items are Service-specific, thus violating the original Agency mandate to handle items common to more than one Service. In addition, because DLA must handle so many complex weapons systems items for the different Services, mistakes are invariably made, some of them even fatal.

In 1980, for instance, a F-101 fighter crashed, killing two crew members. Subsequent investigation revealed the cause of the crash to be a corroded fuel hose. The fuel hose, purchased by DLA, had an external resemblance to the properly specified hose, but, in fact, it did not meet the specified requirements for corrosion resistance. More generally, DLA-managed items for military aircraft have been responsible for an inordinate percentage of "not mission capable" ratings: 61% of ratings for C-130 transports, 55% of ratings for C-135 aircraft and 47% of ratings for F-111 fighters, among others. It was also recently reported that a DLA-managed helmet contract for the Army had produced 460,000 dangerously substandard helmets, requiring the Army to take corrective action.

Difficulties with the management of weapons systems items are only a subset of the overall management difficulties which have beset the Agency. Many of these problems are attributable to the sheer volume and complexity of the DLA inventory management task.

One important function of DLA is to manage accurately the item inventories for the Services. This task requires keeping a current accounting of relevant items, properly coded for priority, or "essentiality." However, GAO recently reported that 64% of the electronic weapons systems items handled by DLA were improperly coded for essentiality. In another case, GAO discovered that 50,000 Navy items managed by DLA had been improperly deleted from the inventory; 1615 Army items suffered the same fate. Another GAO study of two DLA supply centers revealed that 38% of the inventories were inaccurate.

Of particular management concern at DLA is the billing and collections function. Again, the sheer magnitude and complexity of the task conspires to create problems which sometimes result in improper disbursements of funds. In 1984, GAO reported that 75% of DLA's 77,000 invoices were paid without proper documentation. In the same year, DLA made improper payments totalling $8.5 million to private businesses and contractors; fortunately, the businesses were conscientious enough to return the undeserved payments to the government. 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 days overdue.

A final brief word about DLA personnel is in order here. Without casting unwarranted aspersions on groups or individuals, I should note that 75% of DLA's operating costs are personnelrelated, and that these costs rose 70% 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 actions, but that only causes me to question the functions of the remaining 31,500 personnel at DLA.