know that I can. Maybe I can at least attempt to do it by your assistance.

So I thank you for being here. I appreciate the contributions that you all make to our society.

Mr. NICHOLS. Secretary Lehman, you have often spoken or published criticisms that tend to centralize defense management and functions. In your remarks you spoke about decentralizing buying, and I commend you on what you've done in your shop in that particular area.

I have a quote here where you said, for example, and I quote, "Is defense establishment overgrown?" Yes, no intelligent human would pay $700 for a toilet cover. It took a unified buying agency of 50,000 billets to do that.

We're going to be hearing from agencies a little later on, and I want to talk about DLA for just a little bit.

It is a big agency. Have you encountered any particular problems from centralization as you carried out your duties? I'd like for each of you to respond to that.

It just seems to me that a centralized buying agency makes a lot of sense. I mean, you don't have duplication in buying belt buckles, or buying items that are common to all three services. It just looks like it should make a lot of sense.

What are the problems that you've encountered with it?

Mr. LEHMAN. Mr. Chairman, the problem is one of scale. Centralization can bring savings and efficiency at a certain point, but when you carry it beyond that point it brings dysfunction and unwieldiness just by the vast size. You saturate markets with the vastness of your buy.

I don't often agree with everything that the Defense Inspector General says, but he coined a very good phrase in explaining the phenomenon of what has happened with the toilet seat, and the other spare parts scandals. It's what he called the clericalization of the process. That's what I meant in the remarks you quoted. It destroys the chain of common sense when you clericalize and bureaucratize a buying process. And that toilet seat cover was bought through that clericalized process. No one human being, no matter how far you try to track, was then, or is now, responsible for buying that item.

Six different subgroups of the Defense Logistics Agency and two in the Navy were involved in making that purchase. That was the same story on the hammers and on the diodes, and so forth.

Centralization has been carried to a grotesque extreme, and it is

not-

Mr. NICHOLS. If I might interrupt. Did DLA buy the diodes? I understood the Navy bought the diodes?

Mr. LEHMAN. No, that unfortunately is the common perception. It was DLA that bought the diodes and bought the toilet seat cover. They bought them for the Navy. Part of the problem is due to that, the original concept of a centralized buying agency that I provided, by the way, the exact chain of events to the committee last year. What happened in the diode case was the buying agency in Orlando, our Navy computer support group, requested that the diodes be bought for kits from Sperry, and that request was processed through the Defense Logistics Agency, DCAMA-B [defense contract

administration services management area-Baltimore] for the regional DECAS Division of DLA, and so forth.

The problem is that the end items that are service unique have been included often, I might say, at the initiative of the service, not DLA. DLA is simply responding to work that is given to it, and too many entities have taken the easy way out and said we won't do it. Let DLA buy it.

And, the Defense Logistics Agency is a very large bureaucratic entity. The regulations they have to work under are much more cumbersome than the streamlined line-accountable authority that we're trying to give to project managers who have only one command CEO to report to between the ultimate decisionmaker and his program.

So that's what I mean by decentralization. And even in the commodities I'm not convinced that today that oil, for instance, is more cheaply bought by one vast centralized buying authority. It could be possible, but I don't know for sure because I don't think it's universally applicable either way. But taking advantage of a much more complex market is very often done better by a decentralized buying authority.

So I think it's gone too far, and centralization on the scale of what we're talking about has gone well beyond where the optimum efficiencies lie.

Mr. NICHOLS. Well, I guess I'm just trying to equate it to the private sector. I would think Holiday Inns buying towels would buy them centrally out of Memphis, TN rather than-

Mr. LEHMAN. Sometimes, but if you read more recent accounts of, say, the last 10 years, of the more successful businesses like in the book "In Pursuit of Excellence," and others, the successful companies have decentralized and put authority back in the profit centers. They have given them budget goals, and profit targets, and not micromanaged them on how to do it.

It's very hard to generalize. Some things are more effectively bought in large quantities as when there's kind of a generic market, and the strength of a large buy gives you the best price. But, that is a much rarer situation than the more complex market situations where individual buying is better.

Mr. NICHOLS. Well, you've educated me. I'll get my Forbes magazine and do a little reading.

What about your experience?

Mr. ROURKE. Mr. Chairman, as I keep pleading, with my vast 2 months of experience, I'll have to be a little bit cautious in how I respond to some of your questions.

But I did happen to review this particular arena with Secretary Taft today following his testimony, and the question is the value of the utility function of the Defense Logistics Agency. The short answer, Mr. Chairman, is they do perform a very valuable function in that commonality area where they can purchase in economic quantities for servicewide functions, indeed, as Secretary Lehman points out, the single unique situations for the service.

The question is, as always with a bureaucracy, have they gotten too far out? Have they engrossed too much? Have they gotten past their charter? Those are the kinds of things I think with the unique responsibility Secretary Taft has, and, indeed, the respec

tive service secretaries, that we've got to take a look at as we're attempting to shore up our own little units of support, the budgetary considerations that Mr. Hopkins spoke of, and that all of us face. We're all going to be doing a lot of shoring up, and I think DLA is one of those areas that will be looked at for the reasons that have been cited.

Mr. MARSH. Mr. Chairman, if you look at DLA, and I think your observations are correct, the logic and the concept of central buying of common items is a sound one. The risks that you get into, and I think they have occurred, are two: either encroachment or lack of supervision. I believe there is a tendency on DLA's part to reach down and to want to get into things that we in the Army, believe are Army peculiar-that are essentially unique to the Army, and they want to pull those up to DLA. We think that is not helpful, and we don't think that's going to save. But there is, you might say, I guess it's sort of empire building, there's encroach

ment.

Second, they buy about three-fourths of all of our foodstuffs in the Army. Whenever they get involved in contracting around this country, the problems that DLA has in contacting around this country is no different than the problems that we have in contracting. That is, when you're having somebody manufacture something for you, or perform contracts for you, you have to supervise those contracts. You can get fraud, waste, and abuse from organizations that have been consolidated just as easy as you can get fraud, waste, and abuse from those that have not been consolidated.

To cite an example of that, there was a recent item of procurement that was defense-wide which involved the helmet. I think if you get into that situation it will confirm some of the observations that I've made about the administration of that contract.

Mr. NICHOLS. Mr. Hopkins.

Let me ask one other question. From my Senate staff report, I understand they recommend reorganization of the Office of Secretary of Defense, along mission lines generally. Would you give us your position on that proposal?

Second, do you favor an Undersecretary of Defense for readiness? Third, do you believe the several Office of Secretary of Defense positions mandated by statute are useful?

Who wants to be first?

Mr. ROURKE. Mr. Chairman, if I may, since I know the least about it, I'll speak first, and not be embarrassed by the substance. Mr. Chairman, on each of those, if I interpret the last item first, the Secretary of Defense has done very well-and I've only known this one well, but have been familiar with some other Secretaries of Defense in previous incarnations. I think it's such an extraordinarily difficult burden that he bears, as you yourself, sir, have correctly observed. I think he ought to be free from legislation to organize that place any darn way he wants within reason, within certain burdens.

It is an extremely difficult function, as I've indicated, and to saddle him with a wiring diagram with which he himself is not personally comfortable, I don't think makes a heck of a lot of sense. I've seen the practical result of that where people are cut off from information flows, from intelligence flows, and where you just

cannot force that mule to go into that corral. And my suggestion, sir, is that he be given all the flexibility that the burdens of the job will permit.

In terms of an Under Secretary for readiness, sir, I am not certain that that is a requirement that is not already being fulfilled in an ample manner by other people who have those responsibilities presently. The present policy and structure of the Under Secretaries and their substrata of Assistant Secretaries, for this Secretary of Defense from my observation of 5 years, works extraordinarily well.

And as my colleagues have pointed out, it isn't really a question in this instance of a wiring diagram. It's a question of the people. You can change those wires any way you want, and if you don't have good people you don't have a good wire.

And my suggestion, sir, is that we even get better people than we have today, not only in the Department of Defense, but in a lot of other agencies, and the wires will adjust accordingly.

Mr. MARSH. Mr. Chairman, I oppose the suggestion that we go to a mission-type organization at DOD. I have served as an Assistant Secretary of Defense, served there for a year, and I've been in this particular post for 5 years. Their suggestions about what is termed matrix management, and this approach, I agree with Mr. Rourke completely that you've got to give-you've got to trust somebody, and you've got to give the Secretary of Defense the necessary background, by statute and authority, for him to organize that building. There's no one that can tell you what reorganizing will do along mission lines. We can tell you pretty much what will happen in Defense because of our 40 years of experience as a department. But people can't tell you what's going to happen once you start reorganizing and placing significant responsibilities into a mission type of management.

I would not want to set out on that course now when we have the difficulties that we face, one, in budgeting, and second, and more importantly, is the threat. I think to move into such a new, broad, programmatic mission-type approach is the wrong thing at the wrong time and will probably yield the wrong results.

Mr. LEHMAN. Mr. Chairman, I agree with my two colleagues. I think that the system, as outlined, could work, but I think it's essential that the Secretary of Defense be given the flexibility to organize his staff the way he thinks best. Every staff has to really be adapted to the individuals involved, and the functions that they perform. And I couldn't agree more with Secretary Rourke that the real key, instead of continually making it less and less attractive through the revolving door legislation, and the constant real reduction in pay, is to make it more attractive to bring in very good people, and keep them for a long period of time instead of the average 2-year tenure that we have today. Otherwise, I agree with everything that my colleagues have said.

Mrs. BYRON. I might have a question.

I apologize for being late. I was in another hearing and I had another meeting.

Since we have all three Secretaries in front of us today, and the thrust of this hearing is reorganization of the Department of De

fense, what would happen if all three of the Secretaries' slots were eliminated?

Mr. MARSH. Mrs. Byron, the Congress can do whatever they want to do because under article 1, section 8, that's their responsibility. But I would tell you that what you would lose, in my view, is a constitutional element that you would not be able to replace. That element is civilian control and oversight of the Defense Establishment, which is an implied constitutional power.

As a result, you would lose some of your connecting links with the American people. Your civilian Secretaries perform a role as spokesman for the Defense programs and policies of this country by going out to the country.

Also, it's the service Secretaries, more than likely, that are up here on this Hill responding to Members of Congress, and responding to the press when things go wrong either in procurement or in the performance of our forces.

I don't quarrel with that because there is an accountability to the Congress that rests in the Secretaries of the various departments. This is their function. I think it is essential that we retain this.

Mrs. BYRON. What if they were transferred to an Under Secretary of Defense?

Mr. MARSH. I think once you-I think you have to make a determination that you're looking at a pyramid from the top down, and how far down that pyramid do you want to go with your civilian oversight. I think that the place that you want to put that oversight is at separate units of services-the Air Force, the Navy, and the Army. I think that pulling them up into the Office of the Secretary of Defense is going to estrange them from the services that you want them to surveil.

Mrs. BYRON. Would you be in favor of strengthening the jurisdiction of the service Secretaries as opposed to the service chiefs?

Mr. MARSH. I don't think it's necessary that you upgrade the service Secretaries, and that you have to downgrade the service chiefs in order to do that. I believe that the current statute that creates the Office of the Secretary of the Services, and they're each slightly different, is adequate as long as each Secretary exercises the authorities that are contained in the statute. I think the necessary ingredients are on the books now to implement the kind of oversight that the Congress wants.

Mrs. BYRON. You're comfortable with the way things are?

Mr. MARSH. I think that some changes can be made, as I suggested in my statement. There are certain issues that occur in which the service Secretaries do not become involved that I think need to be corrected. I think we've made progress in correcting them. However, you have in the Department of Defense a distinction that turns on the word "operations." Until you've been there, and worked under that you cannot really fully comprehend it, but it's a very significant thing.

As a result, you find service Secretaries sometimes not becoming involved at certain stages in programs where I think it would be helpful. They're bypassed, so to speak, because they're not involved. That is not intentional by the military departments, but it