The "National Guard personnel, Air Force," program is set at $47.1 million, to be financed with $47 million in new appropriations plus $0.1 million of reimbursements.

The budget contemplates continuation of the current year strength of 72,000 in paid status. Minimal air crew and technical training will be accommodated within these financial resources.

Fiscal year 1962 new obligational authority for "Operation and maintenance, Air Force," is $4, 340 million. This amount, plus $262 million reimbursements will provide financing for the fiscal year 1962 program of $4,602 million.

While recognizing that a relatively substantial decrease is occurring in our manned force structure, more than offsetting the related fund reductions are the very sizable increased requirements in fiscal year 1962. For example, additional ATLAS and TITAN squadrons, and two ballistic missile early warning sites will have become operational: further implementation of the SAGE program will occur; there will be a higher per capita operating cost of our manned combat fleet with their attendant increased capability; additional family housing units are coming into the Air Force inventory; and provisions have been made to increase the indoctrination training for a SAC airborne alert program.

OPERATION AND MAINTENANCE, AIR NATIONAL GUARD

For "Operation and maintenance, Air National Guard," new obligation authority for fiscal year 1962 is $193.4 million, an increase of

$3.9 million over the current year appropriation (including the supplemental request of $2.2 million). With the reimbursable obligations estimated at $1 million, this amount will finance a total program of $194.4 million.

The Air National Guard's 24 wings are programed to operate 1,973 aircraft from 93 flying installations in fiscal year 1962. There are slight decreases in both aircraft and aircraft flying hours programed, due to scheduled conversion of several units from jet fighter to C-97 aircraft at a lesser number of aircraft per unit. The budget provides a small increase in air technician strength to meet increased maintenance workload resulting from these and other aircraft conversions. In addition to the flying installations, the Air National Guard will incur operation and maintenance costs at 44 nonflying installations.

The fiscal year 1962 program for "Aircraft procurement" is $3,256.3 million which we propose to finance with $3,040 million in new appropriations plus $90 million in anticipated reimbursements and a carryover from fiscal year 1961 of $126.3 million of unprogramed funds. The increase in the fiscal year 1961 program to $4,296.6 million as compared to the $3,910 million presented in the fiscal year 1961 budget represents an increase of $386.6 million.

Last year, Congress added three specific program increases to this appropriation; $190 million for B-70 (the fiscal year 1961 budget provided $75 million); $100 million to be used for fighter interceptor or for the B-70, and $70 million for airborne alert. These add-ons (totaling $360 million) were reduced to $349.2 million by the overall 3-perrent cut applied to all procurement appropriations; $245 million of the total funds provided for the B-70 ($257 million) has been applied to the fiscal year 1961 B-70 program; the remainder-$12 millionis being applied to the fiscal year 1962 program. The $97 million ($100 million less 3 percent) add-on for the fighter interceptor was not programed in fiscal year 1961 and is being applied likewise to reduce the tew obligational authority requirements for fiscal year 1962. The $7.9 million add-on for airborne alert ($70 million less 3 percent) has been programed for that purpose in fiscal year 1961.

Mr. MAHON. Was there much controversy in the Air Force over the fact that the $97 million available in 1961 was not utilized but was applied to the 1962 budget?

General FRIEDMAN. Insofar as the application of the funds was coned for the procurement of current fighter-type aircraft, I think ere is complete unanimity in the Air Staff that that is not the best

to go.

Mr. FORD. That was for what aircraft?

General FRIEDMAN. The F-106 was mentioned in the reports, I beEve, Mr. Ford.

Mr. MAHON. The Congress did not recommend this be done. It just made this possible.

General FRIEDMAN. That is correct, sir. As I recall the language it said that there was $100 million appropriated for the procurement of fighter aircraft and if not required, the determination to be made by the Department of Defense for procurement of fighters, it was available for application to the B-70 program.

Mr. MAHON. I am sure you are about to answer the next part of the question. Was there much pulling and hauling to get this money applied in fiscal year 1961 to the B-70 program?

General FRIEDMAN. First, I will say that we got very good reaction to release of the add-on amounts made by the Congress last year. The only item being up in the air was this $97 million to which you refer. In our A, B, C, and D submissions, I think in the B or C budget, as I recall, the Air Force did request a higher program for the B-70 than that now included in the budget, and that did contemplate the use of the congressional add-on.

Mr. MAHON. In other words, if for fiscal year 1962 you had been given a higher level of funds for procurement and for the Air Force generally, you would have wanted to use this $97 million probably during fiscal year 1961?

General FRIEDMAN. Yes, sir.

Mr. MAHON. But failing to get a higher level program for the B-70 in your 1962 budget then it is not essential that the $97 million be applied in fiscal year 1961?

RECOUPMENTS

General FRIEDMAN. That is correct, sir.

For a number of years we have been able to recoup unprogramec funds in prior years' appropriations, and to apply these recoupment to finance programs in the current and budget year. Through this technique we have been able to reduce the amount of new appropria tions required. In recent years the bulk of these recoupments hav come from the "Aircraft, missiles, and related procurement" account History now proves that we were conservative in anticipation of re coupment of funds in the fiscal year 1961 budget. One of the prim reasons for this conservatism was our inability to pinpoint the effect of expenditure controls on the "fall-out" from prior programs. I is now obvious that this process of tightening up caused funds to b freed much sooner than we had forecast. For example, during la year's hearings, we reported to this committee that we estimated r coupments from the "Aircraft, missiles, and related procurement appropriation to be approximately $290.3 million during fiscal ye 1960, whereas our actual net recoupments in fiscal year 1960 totale $421 million in this account. We also estimated, during last year hearings, that recoupments during fiscal year 1961 could approac $100 million; again we underestimated.

Currently, we are anticipating approximately $422 million in r coupments during fiscal year 1961; we have recouped approximate $300 million as of December 31, 1960. These recoupments resu mainly from price adjustments, contract terminations and progra revisions. As actions of this nature occur, and funds become ava able, they are reprogramed with concurrent reporting to this con mittee, or carried forward to reduce NOA in the budget year at

reflected in appropriate detail in the budget. For example, in the fiscal year 1961 budget, we anticipated transfers of $476 million from the "Aircraft, missiles, and related procurement" appropriation to other appropriations. However, late in fiscal year 1960, it was determined that this entire transfer of $476 million would not be necessary and only $172 million was actually transferred. The difference of $304 million, therefore, was not required in fiscal year 1960 and has become a part of the total estimated transfers to be accomplished during fiscal year 1961 of $1,204 million, which is reflected in the fiscal year 1962 budget as a source of financing the following fiscal year 1961 programs: "Aircraft procurement", $484 million; "Missile procurement", $535 million; and for "Research, development, test and evaluation", $185 million.

Mr. MAHON. General, it would appear that this might be a fertile field for reductions in the 1962 budget.

General FRIEDMAN. Sir, we have, as you know, on previous occasions indicated that we thought the well was about dry. I have changed my mind in this respect. I do not think that the well will ever be dry. I think that our experience-Mr. Pritchett indicated to me, 1954 through 1961 we had estimated some $7 billion in recoupments and our actual against the $7 billion has been close to about 912 billion-but I would like to point out one thing as regards using this as a basis of reduction in new obligating authority, and as I point out in my talk here a little later on, if I knew exactly where this was going to occur and in what program year it was going to occur then I would be likely to agree with the Congress. However, inasmuch as we don't know specifically where these funds will appear and so long as we report it to the Congress as a deduct against new obligating authority, I feel as though you are obtaining the same result as making an arbitrary reduction beforehand.

It is the same kind of proposition-and I will speak very freely as I have in the past with this committee-in the O. & M. appropriation. I know that mistakes are going to be made, and I have many people who point out to me on Sunday morning where the mistakes were made on Saturday. If I knew where the mistakes were going to cur in the year before, I could do without that money, but in essence I am trying to finance the program with the minimum amount of funds that I feel are necessary. I just do not have the power or the crystal ball that I would like to have to do this job perfectly, and I do not think anyone has. You are dealing with too big an operation to be that good.

In the fiscal year 1962 proposed appropriation bill it is provided, by letion of existing language, that after June 30, 1961, no further transfers can be made from the "Aircraft, missiles, and related prourement" and "Procurement other than aircraft and missiles"" appropriations and, under new language, that after June 30, 1962, no further obligations can be incurred in these accounts.

Those are the old 1959 appropriations that were replaced with the three procurement accounts starting in fiscal year 1960.

After the latter date only balances of unliquidated obligations will be carried forward into fiscal year 1963 in our accounting records. It s obvious that there will be recoupments after June 30, 1962, when Consideration is given to the size and complexity of these two procurement appropriations, the many thousands of contracts involved,

and the innumerable program adjustments which occur. Under the proposed language such amounts will revert to the Treasury beginning in fiscal year 1963.

Mr. FORD. Could I ask a question there, Mr. Chairman?

Mr. MAHON. Mr. Ford.

Mr. FORD. When you say "such amounts," do you mean unobligated obligation authority will revert?

General FRIEDMAN. Anything that is unobligated-yes, not obligated prior to June 30, 1962-will revert to the Treasury. In other words, that will clean out those two old accounts.

The matter of more accurate recoupment forecasting should be eased in the current procurement appropriations since we have instituted control and reporting systems by weapon system, which should allow us to obtain better forecasts of the effects of program changes and more accurate reporting of obligation and expenditure data on a weapon system basis.

In my earlier discussion yesterday, Mr. Chairman, I described what those changes were.

Mr. SIKES. General, before you leave this subject, and in one syllable words so that I can understand it, how did we have such large amounts of money available in the recoupment program? Is it altogether from reprograming or, if so, why has there been such a change in the Air Force programs?

General FRIEDMAN. Sir, it is not altogether from reprograming. There are price redeterminations going back into programs as long ago as 1956, 1957, 1958 contracts.

Mr. SIKES. Does that mean people charged us too much and you went back and collected the overcharge?

General FRIEDMAN. No, sir; it is just the opposite. For instance, let's take an item such as spares. Going back to a 1956 program and taking a look at the spares that we had on contract then, taking a look at the current trend of our program, it becomes obvious to us that it would be wasteful, even though the funds were appropriated and apportioned, to continue that procurement; so we cut the procurement on spares in that fiscal year's program back to the requirements today.

Mr. SIKES. Then does this come under the heading of "second guessing"?

General FRIEDMAN. I do not know that I would call it second guessing. I think it is good management.

Mr. SIKES. The Air Force and this committee in my opinion could be accused of poor planning. I would like a better explanation to show how this money becomes available and whether it does result from poor planning.

General FRIEDMAN. I will state emphatically that it is not poor planning on the part of this committee or an oversight on the part of this committee.

You have seen a rather detailed briefing over here, prior to the beginning of the regular sessions, on how we go about our contracting and determination of contract costs with the contractors. We are being just as thorough as we know how, and we are dealing with a procurement which extends in some instances over a 24-month period.