of money is the same. For every dollar we have an item on the program which, if delivered, we will have to pay for. Internally, you have overobligated for some items and you do not have money. Actually, if you could deliver the item you would not have money to pay for it until you got these overobligations straightened out. The figures that we have presented to you show those overobligations straightened out. We have it item by item and by quantity, with the amount of money beside it. You add them all up and it comes to $8,265.4. Chairman CHIPERFIELD. Mr. Fulton. Mr. FULTON. Could I ask you a question along that line? On calculating the program for the coming year and fiscal 1954, you have probably calculated either exactly on items to be purchased or you have had in the calculation some leeway or margin for variation. Is there any way that you can tell us what your leeway in this fiscal 1954 program is, for example, in the Department of Defense? Colonel CORBETT. For the Department of the Army, sir, the program that we have planned for the coming year, that we have now designated on the best information that is available to us, what items are coming from stock and what items are coming from procurement. We know the cost of the item that we are going to charge from stock. On the item that we are going to charge from procurement, we take the latest contract price, that is, the price as of the time the program was made up. We charge that price against it. When a contract is let next year that price will fluctuate either up or down. That is the way, actually, we get the savings this year as we told you in the price change. Mr. FULTON. How much margin then, would you say there was in the fiscal 1954 program? What would you leave for fluctuations and variations and things like that that you cannot calculate exactly now? Anything? Colonel CORBETT. No, sir; we leave nothing in the program for price escalation or engineering modifications in the Department of Army program, sir. We go by item, by cost, and by unit cost. Mr. FULTON. Then, why do you always end up with a surplus, with an unprogramed, unexpended, and unobligated balance at the end of each fiscal year when you come to ask for more? Secondly, you always seem to have room for your engineering modifications and development that you say you do not program for. Colonel CORBETT. Sir, there are two factors that enter into that. First of all is the program which is, shall we say, something else, but firm. During the year different requirements arise and the forces you are supporting change. So requirement comes to very high priority. Therefore, your program actually throughout the year changes. In fact, we have program changes almost every day. Consequently, you have a certain amount of funds generated every month that come out of these program savings. At the same time, you have a certain amount of items which the technical services state they do not have enough money to pay for. So each month we have this great voluminous report that comes in and we try to balance off at the end of every month. The savings that come up are immediately programed for high-priority requirements which we have not been able to program for before. Mr. FULTON. Then, when you have such a variable program, which you say varies from month to month, when there is talk of a cut in this particular program, there is no way, for example, the Department of the Army can come up and say, "That is going to cut off so many tanks, so many planes, so many end items of military use,” because you have such a changing program you cannot now say definitely enough what the end items will be for 1954. Colonel CORBETT. Yes, sir; we can say what the end items will be. We know now that we can say what each end item is for. We have it in sufficient detail that we can tell you actually what units it is going to in these foreign countries. Mr. FULTON. Then I do not understand your saying you have such a change in program month by month, if that is the case. You see, it is either a fluid program that you change as you go on one of your statements, or else it is a fairly exact, crystalized program as we see here. It cannot be both. Colonel CORBETT. The changes that I spoke of before are major changes, some of them. One good example of the major change that occurred in a program last year was when it was determined to furnish tanks that were procured offshore for the Netherlands and Denmark. We took off the M-47 tank and we put on Centurion tanks, which were of British manufacture. That was a major change in the program. There are changes of the same order. Certainly that is the largest change that we have, but there are changes of the same type, not of the same magnitude, that occur quite often. Mr. FULTON. My final question is this: If that is the case, you say that you have a firm program for the year and it is made on strategic urgencies. You would then be able to supply this committe with what would have to be cut in hardware and in the end items if the program were cut overall, let us say, a half billion dollars. Likewise, you would be able to supply the same information if the program were cut a billion dollars and what effect it would have for the program on your procurement in the fiscal year 1954. Chairman CHIPERFIELD. Will the gentleman yield? Along that same line, what is the figure, Mr. Wood, of the cut in the present program? That is the revised figure? Mr. WOOD. It is $354 million, with a possible further amount of $50 million, depending on whether certain possible drafts against those funds develop between now and the end of the fiscal year. Chairman CHIPERFIELD. Following up Mr. Fulton's question, what have you cut off in this new program that amounts to $354 million? Mr. FULTON. That is a good question, Mr. Chairman. Mr. HALABY. We attempted to answer that question a moment ago by service, by describing the savings. A large amount of those savings came out of overestimating the number of trainees that we would have. Chairman CHIPERFIELD. Mr. Halaby, if I have a horse that is worth $10 and I try to sell it to you for $15 and I finally come back to you with the real value of it and sell it to you for 10, you do not save $5; do you? Mr. FULTON. No; but here is the point I made earlier. You had a cushion in there that you were overestimating prices with, because if you were going to be safe on a program, you were not going to cut it to the exact time and price. Chairman CHIPERFIELD. It is not the savings, really. It is just an overestimated price on it. Mr. FULTON. So I have asked, What is the cushion in the program or the leeway for margin or error? Chairman CHIPERFIELD. If you are going to buy 2 guns and you only buy 1, you are saving. If you have the wrong price on it and then get down to the right price, I am not sure you do. Mr. FULTON. I know a certain Congressman who said his wife was always coming home and telling what she had saved in these bargain sales. He said, "If you do it next week, you are going to bankrupt me." Mr. VORYS. A Congressman out at Las Vegas said he won $25 because he did not bet and that is what he had set aside to gamble with. Mr. HALABY. Just as a general statement, I think General Ridgway and General Stewart and various others have explained to you how the overall military requirements are much higher than these building blocks will ever reach. There are deficiencies in every one of these countries that will never be met. We are going up to a certain level and meeting those deficiencies. No one, to my knowledge, has ever claimed, Mr. Fulton, that these programs we present here each year are static, fixed programs. Every year it has been made plain, I think, that they are illustrative and they are certainly dynamic. There is just no question about it. I would not want to pretend they are not flexible to meet changes in requirements. Mr. FULTON. I am glad to hear that. On the floor last year, or the year before, I was arguing that a program should not be cut and Mr. Roosevelt on this committee had been so sold that he said, "If you cut one dime out of this, you may ruin the country." Mr. HALABY. You will get a dime's worth less requirements. Mr. FULTON. The question is, When we approach this program, how are we selling it-as a fixed, static program or as a fluid program? It it is a fluid program and there is a cut, for example, $500 million proposed, then you people should be able to give those of us who will be sustaining the program in all probability, what that does to your program. Mr. HALABY. We can tell you, sir; we can give you a list of items that total up to $500 million. Mr. FULTON. On the order of strategic urgency which would you first dispense with? Mr. HALABY. That would take a considerable amount of work and, as I know you have found each year when you have asked that question, it is almost impossible to get the kind of answer that will satisfy you. When you take $500 million and just arbitrarily put it by a certain country here, a certain battalion there, and so on and so forth, you get nothing but what the current thinking of the individual who provides you with the statement may be. Chairman CHIPERFIELD. Off the record. (The then following remarks were not reported.) Mr. BENTLEY. This $210 million estimated savings from the military department is included in that $354 million that you mention! Mr. WOOD. It is. Mr. VORYS. What about the $968.9 million transferred to other agencies? Is that under the 10 percent? Mr. WOOD. $603 million of that is under the transfer authority. You may recall, Mr. Vorys, last year, the emergency transfer from military funds to the defense support for the United Kingdom when that crisis developed there. The balance has been allocated to other agencies for programs administered under the Mutual Defense Assist ance Act. It includes that sort of transfer. A more detailed analysis of this amount is included in the following table: |