(The information referred to follows:)

The following excerpt from the President's budget, fiscal year 1962, page 511, is inserted at this point:

"For 1962, funds have been included in the amount of $2.8 million to initiate payment of the employer's contribution to States which authorize civilian employees paid from this appropriation to participate in their retirement systems. Since the pay rates of such employees are equated to those of comparable Federal employees, the total employer's contribution to be paid from Federal funds is limited to the rate authorized for Federal employees participating in the civil service retirement system."

Based on a Comptroller General decision (No. B-138072, Mar. 2, 1959), it was held that it is permissible for the Defense Department to pay the employer's share of social security contribution as authorized under 32 United States Code 709. On April 6, 1960, the then Assistant Secretary of Defense (M.P. & R.) directed the Army to put this in its 1962 budget ($2.8 million) on the basis that $2.8 million is adequate to cover those States which have approved legislation authorizing that this be done. The fiscal year 1963 budget will include a full year's contribution for these States and funds for additional States which authorize legislation prior to submission of the fiscal year 1963 budget.

TREND OF UNEXPENDED BALANCES

Mr. FORD. Your last chart, General Duff, shows that your obligated but unliquidated amounts for fiscal year 1960, $4.3, then it went up in fiscal year 1961 to $5, estimated fiscal year 1962, $5.1. That is about an $800 million increase.

General DUFF. Between fiscal year 1960 and 1962, sir?

Mr. FORD. Yes.

General DUFF. Yes, sir.

Mr. FORD. I thought we were trying to reduce those figures and the trend seems to be going the other way.

General DUFF. We are trying to reduce the amount that is unobligated at the end of the fiscal year, sir. This is the unexpended balance that was available at the end of each one of these years and as far as the actual for 1960 and the estimated for 1961 and 1962, this, of course, sir, depends on a number of circumstances, which would be the speed with which these items can be delivered. I think as far as fiscal year 1960 is concerned, this would probably be attributable to the fact that it was late in the fiscal year before we actually obligated the funds in the procurement accounts. For example, sir, the funds were made available much later to the Army for obligation and then as far as the actual obligation of the funds after being made available was concerned, it proceeded somewhat more slowly that year than it has in fiscal year 1961, the current year, and as we anticipate it will proceed for the budget year, 1962.

ARMY MODERNIZATION IMPLEMENTATION

Mr. MAHON. I would like to say this: Your testimony would indicate, General Duff, that the Army has not been alert and efficient in trying to secure modernization at the earliest possible moment.

Your testimony does not indicate that to me, but to people unfamiliar with Army procedure and Government procedure it would so indicate because you have admitted that a relatively very small portion of the procurement funds were obligated during the first 6 months of the year. We know that budgets are prepared long in advance. The Army has been knowing for months, even years, that it needed certain equipment. The Army went to the Secretary of

Defense and secured approval for certain funds. The Budget Bureau and the President gave their approval. Funds were provided by the Congress. Long before they were provided, the Army knew that, generally speaking, they would be provided and the average American who was interested in defense and impatient with the archaic equipment of the Army-that is, archaic in some respects-would be astounded or astonished that while the Army spoke for months and years of its desperate need for the funds, when it got the funds it did not use them quickly.

(Discussion off the record.)

Mr. MAHON. I want you to submit an extensive answer for the record to the question and I will give you a couple of minutes to give a quick answer as to why you only obligated about 28 percent of this money in the first half of the year.

General DUFF. Mr. Chairman, as you know, the Army is extremely anxious to get the new equipment in the hands of troops

Mr. MAHON. But the testimony and the record would not so indicate insofar as today's hearings are concerned. That was my point.

General DUFF. Yes, sir. We will provide a more lengthy explanation of this, sir, but the delays we encounter as far as the obligation of the funds are concerned are delays to assure that we are getting the best contract for the best equipment.

Mr. MAHON. That is all well and good, but I do not think that is a very good answer to the request.

Mr. WHITTEN. Would the gentleman yield?

Mr. MAHON. Yes.

Mr. WHITTEN. From the answer that the general gave, I gather you are trying to get your money's worth and you would not want to be in a hurry to the point of getting defective weapons, would you,

General?

General DUFF. This is very true and many of the weapons that have been in our procurement program have been weapons which we anticipated would be immediately available for procurement at the beginning of the fiscal year, but which we found were not available at that time, and, therefore, we had to make sure that the weapon was completely operational.

Mr. WHITTEN. In your preparations of the budget request to the President and to the Congress, your descriptive material as to how you planned to use the funds was based on the best potential weapons in sight.

If, after you got those funds, you saw there were still further improvements and weapons of an even better type that would be in sight in a short period of time, under those conditions would you delay to get the very best, all things considered?

General DUFF. If something that was a material improvement over the item that we had proposed to procure did become available, Mr. Whitten, with the permission of the committee, we would attempt to get the improved item.

Mr. WHITTEN. I do not mean to say that every man cannot speak for himself, but I think we have wasted billions of dollars by insisting that when Congress appropriates money that you run out and obligate it. I do not think the Army has had much money with which to do that.

I want to register for the record that I personally feel that the services are to be commended when they take this matter of expenditure slowly, both from the standpoint of protecting the Treasury, the dollar, and the end purchase, which is the equipment. I want the record to be quite clear that I commend you for it and that I differ with those who might feel that the military is a pump-priming, getrid-of-the-money-in-a-hurry sort of operation. I disagree with that method. I think we have had too much of it with regard to the other services.

Mr. MAHON. General, nobody on this committee wants you to throw away money. Everybody wants you to act in a prudent way and the implication of Mr. Whitten's statement that some might want you to throw it away I am certain is not meant to apply to anybody on this committee.

The general public thinks that before you ask Congress for the money, you ought to know what you are going to do with it. If you do not know what you want to do with it, Congress ought not to give it to you and if you know what you want to do with it and you come in and say you desperately need it, then it would appear think to the general public that you would get these things and make our defenses stronger as soon as you could.

That is the point I was trying to make. If you have selected the rifle you need to make the Army modern, if you have been buying some of them, what is the use of dawdling 6 months to buy more if you have got the money to buy more and if you need more?

Mr. LAIRD. They are even having trouble spending the money now appropriated and filling orders for 1961 rifles.

Mr. MAHON. I am using this as my example. We won't say rifles. We will say a weapon. My point is that I would like for the record to show more clearly why it has been necessary to move so slowly. You pointed out that you moved faster than you have in recent years. I am not saying you are moving too slowly. Maybe you should not have obligated but 10 percent. I would have no quarrel with that. What I want you to do is to get the best answer you can from the Army. I do not care whether you supply it or John Doe supplies it but get the best answer you can with respect to the question raised by Mr. Ford.

(The following statement was submitted:)

The Department of the Army has made a concerted effort to accelerate procurement under the PEMA program during fiscal year 1961. The accomplishment toward this objective during the first 6 months indicates significant progress over the same period for fiscal year 1960.

Procurement of equipment and missiles, Army

The high level of commitments indicates that a large dollar volume of procurement actions are well advanced toward obligation. The increase of $504 million in obligations plus commitments shows that procurement actions are significantly ahead of last fiscal year.

Although progress has been made in effecting early obligation of procurement funds, several factors have not permitted finalization of contracts in the first half of the fiscal year. In the modernization program the Army is attempting to purchase items of the very latest design. In some cases it has been necessary to await the completion of engineering and user tests to insure that the most modern and satisfactory equipment is purchased. In addition, to effect competitive procurements and obtain the maximum value for the funds available a number of negotiations have been conducted over a much longer period than normal in order to obtain more favorable prices.

Customer programs are normally released rather late in the fiscal year. Of the $701 million for this category only about one-third had been released for procurement action as of December 31, 1960. The major portion of the procurements still to be released are for the military assistance program. It is not anticipated that the balance of the customer programs will be made available for procurement action until March 1961. This has also delayed obligations as a percentage of the total program.

Mr. MAHON. Mr. Laird?

ADD-ON BUDGET

Mr. LAIRD. Mr. Chairman, I think in this overall presentation in might be well for us to have inserted at this point in the record the add-on budget that was submitted by the Army this fall, if that would be in order, Mr. Chairman.

General DUFF. I do not quite understand your question, sir. Do you mean the amount requested by the Army over the amount that was contained in the President's budget for fiscal year 1962?

Mr. LAIRD. That is correct.

General DUFF. Yes, sir.

(The information requested follows:)

Tabulation of differences between Army "D" budget submission to OSD and the President's budget, fiscal year 1962

Mr. LAIRD. Then I would also like inserted the add-on budget, comparable figures, which were submitted about 10 days ago to the Department of Defense. Could we have that at this point in the record?

General DUFF. Mr. Laird, I do not believe that there is an action that can be identified specifically as an action by the Army. The

current reexamination of the fiscal years 1961 and 1962 accounts is not an action in which each service is making such an examination and then making a recommendation to the Secretary of Defense. Rather, sir, it is a combination of the work of certain task forces which have been set up by the Secretary of Defense.

Mr. LAIRD. I understand you have an approved list which you recommended from your shop that would be comparable with the listing on this chart. I understand it is labeled "E budget."

General DUFF. May I say with regard to this, sir, that there was an action, a preliminary action, which preceded the action that is currently taking place in which the task forces are making this examination and these task forces are all chaired in the Office of the Secretary of Defense.

Mr. LAIRD. That is all I wanted inserted here. I understand each service has prepared an A, B, C, D, and E budget. Evidently you have a budget to fit anyone's desire.

(The information requested will be furnished at a later date.)

General DUFF. This was an action, sir, that actually preceded the current administration's consideration of this overall problem and it did not have the same stamp of official approval. It was not an actual Army transmission by the Secretary of the Army to the Secretary of Defense, sir, and for that reason, I do not believe that it has official validity. I would ask, sir, that this question be presented as an overall question to the Department of Defense.

Mr. LAIRD. My point is I have information that these lists are different. That is why I wanted to get this information, to show the difference between your add-on list of last fall and your add-on list that you presently have. I was going to lead up to some further questions at a later date to show the differences within your service from month to month.

General DUFF. Yes, sir. In general the procurement add-on list, which was a part of the "D" budget submission, and which was referred to in Mr. Lincoln's statement that was filed with the committee, as far as the total dollar amount of this list is concerned, it is in the same order of magnitude as the dollar amount of the exercise to which you refer, sir.

Mr. MAHON. Off the record. (Discussion off the record.)

Mr. LAIRD. On the record.

The general, I am sure, understands the figures that I am requesting here. I do not think that there is any misunderstanding about what I am asking for.

General MOORE. Let me go off the record and I think we will get this thing straightened out.

(Discussion off the record.)

Mr. MAHON. On the record. Proceed in any way you like.

Mr. LAIRD. General, would you explain about these different lists? General DUFF. Sir, as covered in Mr. Lincoln's statement, which has been filed with the committee for the record, the budget submissions presented for fiscal year 1962 were divided into four separate submissions: The A budget, B budget, C budget, and a D budget. As far as the D budget is concerned the order of magnitude in the "Procurement of equipment and missiles" category was about $21⁄2 billion. In the list of items which is associated with the D budget and