greatly increased our disposal program. In real property holdings, $390 million in land and structures alone were disposed of last year, and throughout the Navy we continue to press for smaller inventories and for the use of better business methods. It can be truthfully said that good business management has received more attention within the Navy during the past year than any other administrative task. The maximum results from this program can be obtained only if we pursue an orderly course toward its complete fruition, and apply these savings to reduce our deficiencies.

Supporting witnesses for each of the major activities of "Operation and maintenance, Navy," are present and also have prepared statements for either oral presentation or submission for the record, as you may desire. These gentlemen and I now await your questions. Mr. ŠIKES. Now we will proceed with the statement from Admiral Peltier.

You have it to present in this way, do you not, before we begin questions?

Admiral PELTIER. Yes, sir.

MAINTENANCE MANAGEMENT PROGRAMS

The Bureau of Yards and Docks has technical responsibility for development and installation of improved maintenance management programs for the entire Navy. It would, therefore, appear appropriate to apprise you of the efforts and progress being made relative to improving the management and accounting for maintenance. At the request of the Navy Comptroller, a short presentation has been prepared. Capt. A. C. Husband, Assistant Chief for Administration and Comptroller of the Bureau of Yards and Docks, is here with me today to give the presentation at this time.

IMPROVED MAINTENANCE ACCOUNTING AND MANAGEMENT

Captain HUSBAND. Mr. Chairman, members of the committee, I appreciate this opportunity to present to you the actions which the Navy Department has taken to comply with the congressional desire for improved maintenance accounting and management.

Last year this committee commented in connection with housing maintenance:

One of the most disturbing features of this growing program has been the complete lack of data on true maintenance costs.

Since last year's hearings on this appropriation, a number of important steps have been taken by the Secretary of the Navy, the Navy Comptroller, the Chief of the Bureau of Yards and Docks, and the various management bureaus and offices which I will summarize briefly.

The Navy program for improved maintenance management is called Project BEAM, or the first letters of the key elements, budgeting, engineering, accounting, and management.

Project BEAM is designed to integrate these elements into a single management system.

BEAM bridges the gap between financial management on the one hand and the day-to-day problems of operating management on the

other. In order to deal with these four topics I would like to first take up accounting.

Our real property inventory is based on Department of Defense category codes and it is the foundation for our maintenance accounting system.

The basic document is the plant account card. This tells us 41 things about any one piece of real property. For instance, it tells its location, its age, its acquisition cost, the type of construction, whether permanent or temporary, the materials of construction, the physical condition, the size, or the number of units, and the use to which it is being put.

Provision has been made to summarize all of this information by electronic data processing methods.

One place where this plant account information is used is the justification of military construction items; the facilities requirements minus the usable plant assets equals the shore station development program.

For example, in the justification of new barracks construction at Charleston, S.C., the chart shows a deficiency of 1,118 personnel spaces at this particular location.

Last March the Navy Comptroller completely revised the Navy accounting system for public works functions so that it would provide more detailed costs, especially for areas like family housing, and be compatible with plant inventory and construction.

Since our plant accounts and cost accounts are now expressed in the same terms, we can produce unit costs for maintenance of real property.

The new accounting system has been in operation for two fiscal quarters.

The returns are coming in from each activity, through our regional accounts offices to our computer at Port Hueneme, Calif., where they are combined with the corresponding units of real property inventory.

An engineering analysis is made and the information returned to the activity through the Bureau of Yards and Docks. This brings us to our next topic, "Engineering."

It is not enough that we collect costs. We must have reliable yardsticks of value which relate our expenditures for any function to the proper standard of maintenance. Costs must be related to the unit of plant or the operation.

For example, vehicle costs per mile, barracks costs per square foot, steam cost per thousand pounds, electricity cost per kilowatt-hour. Cost trends are also important to the operating manager.

These unit costs, or "functional norms," are affected by many variable factors, including such things as wage rates or prices in the locality.

Mr. FLOOD. When you make steam analysis costs do you base the cost per pound upon different types of fuel?

Captain HUSBAND. Yes, sir. For whatever type of fuel is used. at that installation, sir.

As well as for the type of construction, the condition of the facility at the beginning of the accounting period, the size or the number of units of that kind at that activity and finally, environmental

factors such as the climate, or the degree of use to which the facility is being put.

Another important factor is the maintenance cycle. For instance, after we have resurfaced and resealed an airfield runway, our expenses for maintaining that runway should be minimum for the next several years.

Finally, the lifetime cost of a facility is often determined by what the designers put into the original blueprints and specifications. We make every effort to design our facilities for minimum lifetime costs rather than lowest first cost.

The function of engineering, then, in Project Beam is to provide the operating manager with an engineered analysis of maintenance costs on which to base corrective action.

INDUSTRIAL FUNDING AT AIRBASES

Mr. FLOOD. In your industrial funding on the item you just left do you figure in for any one of your airbases the cost of construction, maintenance, and operation of your runways and hangars and the whole field? Do you figure in those components?

The reason I ask you that is the MATS people tell me that it cannot be done and refuse to do it, or they say they cannot do it. I think you do it and have been doing it for years.

Admiral PELTIER. We do not depreciate the original cost.

Mr. FLOOD. You have been doing industrial management funding for some time.

Admiral PELTIER. We have it in our public works centers, stateside. Mr. FLOOD. We are still fighting to get these flyboys to do it. As I understand it, you are a classic example of how industrial funding at an air operation should be done. They say they cannot do it or won't do it, is better. You know the problem I mean. Do you know the problem we have had with MATS on industrial funding? Admiral PELTIER. No. I am not familiar with that.

Mr. SIKES. Do you have the answer to Mr. Flood's question? Mr. FLOOD. Do you know the quarrel we have had with MATS for the last hundred years?

Mr. COCHRANE. I am aware of it, yes.

I want to explain the Bureau of Yards and Docks

Mr. FLOOD. I have been holding you up for the last 5 or 6 years as exhibit A, as to how the industrial funding jobs at an airbase should be done.

Mr. COCHRANE. We do not fund an airbase under this appropriation. We do maintain air stations at our public works centers, for instance, Norfolk. At our center there we do maintain the air station on a reimbursable full cost basis, for all costs of maintenance including overhead. We price in the military effort but of course it is appropriated in a different appropriation.

Mr. FLOOD. That is it. I want to remember that.

TECHNIQUE OF BUDGETING

Captain HUSBAND. Turning to budgeting, for the first time in the fiscal year 1962 budget each management bureau provides a separate budget project for the "maintenance and repair of real property."

This separates operations from maintenance. As shown on this chart, there is first shown the operating expense in this example for the public works centers and the construction battalion centers, miscellaneous facilities, and after it, in red, the maintenance and repair item for the operations listed above.

Similarly, under the maintenance and operation of naval housing the types, rental housing, public quarters, Capehart and Wherry, and then, in red, the item for the maintenance and repair of that family housing.

Our ultimate objective is to have a direct relationship between our maintenance cost expenditure history and the maintenance and repair portion of the operation and maintenance budget. However, as noted earlier, we need additional experience with the new accounting system and the development of standards before this direct relationship can be established.

STEPS TO IMPROVE MANAGEMENT OF REAL PROPERTY

Finally, under "M" for management, the Navy has taken a number of important steps to improve our management of real property. First, management of all family housing, except the Marine Corps, has been centralized under the Bureau of Yards and Docks, while retaining command responsibility in the field. This consolidation provides for uniform application of maintenance standards; for coordinated guidance and control; and most important, for a review and monitoring program to insure compliance with directives.

The Navy's housing program is based on hardheaded business management. A streamlined maintenance program has been designed around the unique requirement of housing to provide "get-in-andget-out" maintenance at a net reduction of some 50 percent in rehabilitation time. Our furniture requirements have been reduced by requiring usage of all privately owned furniture that has been shipped at Government expense, and by redistribution of furniture between stations. Utilities usage targets are being provided to each activity in a program to reduce utilities consumption by at least 10 percent. Performance of normal housekeeping tasks performed by a prudent homeowner is now required of all occupants of family housing.

For the first time, all costs directly related to family housing have been segregated and identified in this budget.

In addition, and in compliance with the desire of the Senate, the Navy has established special cost collection systems for housing at four activities to isolate overhead as well as direct costs. Our cost analysis program includes side by side comparisons of station force versus private contractor maintenance of our housing.

Pilot contracts have been awarded in San Diego, Calif., and Beaufort, S.C.

CONSOLIDATION OF COMMON SUPPORT SERVICES

In another management area, the Secretary of the Navy has directed that wherever two or more naval shore activities are in close proximity, common support services shall be consolidated to the maximum practicable degree. Important savings already have been realized from the consolidation of public works functions (maintenance,

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utilities, and transportation) at six major bases in public works centers at Norfolk, Newport, Guantanamo, Pearl Harbor, Guam, and Subic.

Mr. SIKES. Why don't you take the time to tell us what is new about this and if it is saving money, why is this just being thought of?

Captain HUSBAND. We have had the public works centers for some time but this year for the first time they are providing all of the public works services for the activities in that naval base complex. There are no public works departments in the customer commands and that consolidation of public works functions is what is reducing our costs. For example, we have had at Newport a reduction of some 11 percent in public works personnel.

We have reduced the number of shop spaces by 69,000 square feet and we reduced the number of automotive units by 53 at this one location on Narragansett Bay.

Mr. FLOOD. Where were you adjacent any place in the world to an Air Force or Army installation as we have at Anacostia-Bolling? Is there any other such place that you can think of offhand?

Captain HUSBAND. I can think of only one. That would be at Boston, where we are contiguous to the Army base.

Admiral PELTIER. And at Hickam Field, Hawaii.

Mr. FLOOD. What do you do in a case like that? Does this program function or can it function, or should it function in such a situation with another branch of the service where you are adjacent and contiguous as you are with two naval setups?

Captain HUSBAND. We are providing utilities service to Hickam. I do not believe it extends beyond that.

Mr. FLOOD. You say you are making this idea work. If that is so, since you are all in the Department of Defense, why shouldn't the other work-or don't you talk to each other?

Admiral PELTIER. That should be the next step. We are trying to get it within the Navy first.

Mr. SIKES. Proceed, Captain.

Mr. FLOOD. I would like a memorandum for the record as to the extent in which this is on the threshold of the next step.

(The memorandum follows:)

The policy of the Navy Department is to take maximum advantage of economies that can be effected by cross servicing between contiguous activities. Examples of such cross servicing are:

(a) The Navy Public Works Transportation Center, San Francisco, maintains vehicles for the Air Force, the Army, the Coast Guard, and the General Services Administration.

(b) The Navy Public Works Center, Guam, provides virtually all public works services for the 20th Air Force, Guam.

In addition, there are many locations throughout the world where one service is a tenant on the property of another service and receives its logistic support from the host service.

Mr. SIKES. You may proceed, please.

PERFORMANCE OF NECESSARY MAINTENANCE JOBS

Captain HUSBAND. In all of our public works departments, continuous scrutiny is given to the performance of necessary maintenance jobs. This has permitted, us, navywide, to reduce the number of individuals engaged in maintenance and utilities functions from