Crowe in his former capacity, to be fighting like hell for the resources for their individual areas. When we had the great chemical weapons battle, which was not very popular here on Capitol Hill, wisdom prevailed with the help of some good people on this committee. General Rogers fought like a tiger to get that program through because he knew how critical the deterrent force was in Europe. For almost 4 full years, the complaints and the agonizing, the frustration, and the flights back and forth to Washington were enormous because he needed that capability to perform his function. Perhaps more so, given the relative understanding of how things stand in the Pacific. When we visited with Admiral Crowe when he was in his former capacity in Hawaii. we had the same registration of views, the same agonies, the same complaints. I didn't see anyone beggingand they're both brilliant flag officers-I didn't see anyone begging for that wiring diagram to include the entire budget process. They don't really want that. They don't really need it. They don't have that capability, and they don't want to pull a little beltway over their shoulders and get wrapped in this entire budget cycle we're into. But, believe me, Mr. Kasich, the views of the CINC's and the views of these other individuals discussed on the diagram are taken into consideration They are part of our budgeting process. They do appear at the DRB cycles, as we've discussed here earlier. It's an indication more of frustration, of their inability to provide 110 percent for the troops, the sailors, the airmen they represent. Mr. KASICH. But if I have in my own congressional office a group of people that I work with, for example, in Washington on a day-today basis, and four times a year I let my district office come in and testify before me as to what should be done out there-I'm working day-to-day with people in this office-where do you think the influence is? Mr. LEHMAN. Mr. Kasich, where do you think we build our budget from? What we have to do is resolve the competing demands of nine specified and unified commanders. Bill Crowe complained because he could never get the Air Force to give him the F-111's he wanted out there. But the Air Force knew it would have to take them out of Europe and Bernie Rogers would have been screaming. We have to do the training and optimize the resources for all of the CINC's in the services. But the CINC's are where we get our requirements from. We don't have some secret fleet somewhere that the CINC's don't own. Everything that comes under my jurisdiction is owned by a CINC, and every requirement we have is to meet a CINC-generated requirement. Bernie Rogers doesn't quite sympathize with what I'm giving and allocating to the training requirements of CINCPAC. ČINCPAC doesn't quite appreciate how much CINCCENT needs, and the requirements of ship-days out there. We have to decide, with the Joint Chiefs being the principal uniformed military input, how to allocate scarcities. And of course they're going to bitch. Of course they're crying because they don't get everything they want. Nobody is getting everything he wants. But to absolutize just one of the voices and say we've got to give him budget authority is just going to put interregional rivalry in the place of interservice. Mr. KASICH. I'm not suggesting for a second, Mr. Secretary, that we give them all of this authority. We're talking about very limited authority in things like command and control, training, the joint training, probably maintenance, and maybe some MilCon. I mean, narrow areas. But you've got to understand that this isn't John Kasich that's saying these things. This is a report from Harold Brown, Clark Clifford, Melvin Laird, Robert McNamara, Elliot Richardson, Jim Schlesinger. Also, Sam Nunn, Barry Goldwater. This isn't something I'm pulling out of the air. This is something that we have seen consistent concern about. But I appreciate what you're saying, all of you, because you're really showing that you want to take people into account, and you really want to be concerned about what they say. So I appreciate your response. I don't know whether that resolves it. Mr. Chairman, can I ask a question in one other area? I'd like one other comment from Secretary Lehman. Mr. NICHOLS. Not too long. Mr. KASICH. Mr. Secretary, I wonder if you would just comment on this. You talked about the Beirut bombing. It was pointed out in the Goldwater-Nunn report in the Senate, as they read through and reported things they thought needed to be corrected. They said the report on the Beirut bombing discussed the problems inherent in the layering of commands, including the Joint Chiefs. There were eight existing layers between the Marines on the ground and the Secretary of Defense. The fact that we have a proliferation of headquarters and bureaucracies is evident in a bunch of statistics that talk about all these growing numbers. Isn't that somewhat different than the argument you made up front about the problem that we had in Beirut? Maybe I got lost. Mr. LEHMAN. No; that's exactly what I was pointing to. As the results of the Long report, and the congressional report of the members here in this room indicated, what certainly helped to contribute to the disaster over there was the layering and the size of the bureaucratic side of the chain of command. There were too many layers. We moved to thin that out as far as the Navy side was concerned. We abolished one whole layer, CTF-60 [Commander Task Force 60] in Naples. We got rid of that. We tried to eliminate the split between the NAVEUR [Naval Forces Europe] Headquarters and the Deputy NAVEUR Headquarters, but General Rogers opposed that. We eliminated 200 people from the SACLANT [Supreme Allied Commander, Atlantic] staffs. So we took the appropriate action. We don't want to go backward now and grow those staffs and add new layers to them. Mr. KASICH. Did we have too much debate, too much friction, too much argument between all the services as to who, in fact, ought to be able to be in control? Mr. LEHMAN. No; that was not a factor at all. It was simply bureaucratic delays and staffing. Interservice rivalry was a contributor to that. Mr. KASICH. Thank you, Mr. Chairman. Mr. LALLY. Thank you, Mr. Chairman. Secretary Lehman, I understood you to say that the famous 4cent diode that was purchased for $110 was purchased by DLA. Mr. LEHMAN. That's right; yes. Mr. LALLY. Well, I'll read to you, Mr. Secretary, from the Inspector General Report of May 9, 1983. And on page 2 it says, "we found that NTEC" which I believe is Naval Training Equipment Command, failed to determine the most economical method for acquiring the spare parts listed in ISIL No. 5. "NTEC purchased all repair parts listed on ISIL No. 5 from Sperry, even though 348 of the 483 items on this ISIL were available through the Federal supply system at considerably lower cost." And he goes on then to give examples of six items including the famous 4-cent diode at $110, another item, which was available through DLA at 5 cents, for $100, and the second one at 5 cents for which $100 was paid. Another one at 24 cents through DLA for which $75 was paid. And then there were two items, one available through DLA at $11.10 for which $243 was paid. And the last one was $15.41 through DLA for which $241 was paid. So, according to the Defense Inspector General Report, Mr. Secretary, all of the items were purchased from Sperry by NTEC. Mr. LEHMAN. Yes; but what they left out was that they were purchased by DLA through DCASMA. Mr. LALLY. No; that is not correct, Mr. Secretary. Mr. LEHMAN. No; it is correct, Mr. Lally, and I'll be happy toyeah, I know you read it, and what they left out- Mr. LALLY. Let me read another paragraph of the report. Mr. LALLY. All right. "The modification established a 'not to exceed' "-NTEC's procurement activity issued a contract modification authorizing Sperry to procure all parts on the ISIL. The modification established a "not to exceed" cost for the parts, and provided that the parts would be negotiated by DCASMA-B. "Negotiations between Sperry and the DCASMA-B resulted in a definitized purchase order on January 18, 1983. As a result, all items were acquired through the prime contractor in lieu of the DOD supply system or source manufacturer." MEMORANDUM FOR DEPUTY UNDER SECRETARY OF THE NAVY (FM) SUBJECT: Quick-Reaction Report Audit of Alleged Overpayments for Selected Spare Parts for F/A-18 Flight Simulators (Project 31G-002) Introduction This report is in response to a congressional inquiry dated March 16, 1983, containing an allegation of overpayments for F/A-18 flight simulator spare parts procured from Sperry Systems Management, Sperry Corporation, Reston, Virginia, by the Navy Training Equipment Center (NTEC), Orlando, Florida. Our objective was to determine if the prices paid for the spare parts in question were excessive and if So, to evaluate related procurement policies and procedures that led to this situation. We reviewed contracts and other documentation supporting the spare parts procurements from Sperry during calendar years 1982 and 1983, as well as NTEC's overall system for procuring parts. We also reviewed the negotiation process between the Defense Contract Administration Services Management Area Baltimore (DCASMA-B) and Sperry, which led to the definitized fixed price delivery order. Our audit was made in accordance with generally accepted government audit standards and included such tests of NTEC and DCASMA-B records as were deemed necessary under the circumstances. The audit was conducted in April 1983. Background NTEC contracted with Sperry for the development of an Operational Flight Trainer (OFT) for the F/A-18 aircraft. As part of the contract, Sperry was required to furnish NTEC Interim Support Items Lists (ISILS) consisting of parts believed to be necessary to support the OFT. The ISIL provided recommended part numbers, manufacturer, National Stock Number (NSN) if one has been assigned and the contractor's estimated price to supply the item. Stated another way, the Navy pays the contractor to tell the Navy whether the item is available through the Government's supply system. As of April 29, 1983, 8 ISILS were submitted by the contractor. ISIL Number 5 was questioned in a congressional inquiry that alleged excessive pricing for the parts. Discussion We found that NTEC failed to determine the most economical method for acquiring the spare parts listed in ISIL Number 5. NTEC purchased all repair parts listed on ISIL Number 5 from Sperry, even though 348 of the 483 items on this ISIL were available through the Federal Supply System at considerably lower cost. The 348 items purchased from Sperry at a cost of $80,204 would have cost only $3,658 if requisitioned from the Federal Supply System. Most of the items were available from one Defense Logistics Agency supply activity. The following examples show the magnitude of the variances purchased from Sperry and System: their between the cost of items cost in the Federal Supply For those items not in the Federal Supply System, additional savings may have been achieved by procuring directly from the source manufacturer, whose prices are normally lower than those of the prime contractor. Sperry was the manufacturer on only 5 of the 483 items. NTEC stated that it did not have sufficient resources needed to determine if parts being purchased from the prime contractor were available from less costly sources. This process would have taken about 2 to 3 days for 1 to 2 individuals for ISIL Number 5 if done manually. We also reviewed the other 7 ISILS and noted that they also contained NSNs which were procured from Sperry. NTEC's procurement activity issued a contract modification to the basic OFT contract (Contract N61339-79-C-0144) in April 1982, authorizing Sperry to procure all parts on the ISIL. This modification established a "not-to-exceed" cost for the parts and provided that the price would be negotiated by the DCASMA-B. Negotiations between Sperry and the DCASMA-B resulted in a definitized purchase order on January 18, 1983. As a result, all items were acquired through the prime contractor in lieu of the DoD supply system or source manufacturer. We were advised by DCASMA-B that if the purchase order were amended or cancelled, additional costs would be incurred because Sperry had already acquired or delivered most of the parts on the ISILS. The Naval Audit Service (NAS) recently reported that NTEC was not adequately screening contractor ISILS (Report Number A41412L Naval Training Equipment Center, Orlando, Florida, February 8, 1983). The NAS report stated that unnecessary costs were being incurred in acquiring support items for training devices because NTEC routinely procured support items from the prime contractor at prices much greater than available through the Federal Supply System, General Services Administration schedules and item manufacturers. The NAS recommended that NTEC implement procedures to screen all procurements for availability in the DoD supply system, ensure that contractors correctly identify manufacturer's part numbers and FSCMS and utilize the most economical procurement methods available. NTEC concurred with these recommendations and stated that action would be completed by September 30, 1983, when implementing procedures were fully in place. During our audit we noted that NTEC had initiated efforts to screen certain support item lists furnished by contractors. Although this was a start, we found that most support item lists were still not being screened, or were only marginally screened, due to a stated lack of personnel. INTEC requested 12 manpower spaces and funds to develop an automated system. These requirements were furnished to the Chief, Naval Education and |