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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 MAÎS 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 Narra gansett 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

51,000 in 1954 to 41,300 in 1960. At the same time, the replacement value of our physical property plant increased from $15.1 billion to $20.07 billion.

Mr. Ford. Are these civilians, Captain?

Captain HUSBAND. Yes, sir. These are the civilian public works employees at these various activities. During the same period, the backlog of essential maintenance climbed from $160 million to $191 million but we invite your attention to the fact that adjusting for the 1955 dollar it has stayed essentially constant.

Mr. Flood. Wait a minute. What was that?
Admiral PELTIER. The dollar is not worth what is was in 1955.
Mr. Flood. I know that. How do you apply it to this thing?

Admiral PELTIER. This is the backlog of maintenance. We show $190 million worth of backlog. If you took that in the 1955 dollar that would only be $160 million.

Mr. Flood. I was thinking of the other term, "deferred maintenance."

Admiral PELTIER. This is deferred maintenance.

Captain HUSBAND. We have managed to reduce our transportation costs per mile. Today they are 95 percent for general purpose vehicles of what they were in 1954, in spite of the fact that during the same period the cost of labor and parts for these vehicles has increased 25 percent. Also, we are getting more miles per vehicle, shown in red, up from 6,500 to 9,543 miles per vehicle per year, while reducing our inventory, our fleet of vehicles from 40,852 to 34,233.

Mr. Flood. You are still within the jurisdiction of our national yardstick on use of Government vehicles, on mileage and age and everything, aren't you?

Captain HUSBAND. Yes, sir.
Mr. FLOOD. What is so wonderful about this?

Captain HUSBAND. We think we are doing a little better than most of the Government activities.

Admiral PELTIER. The increased usage, sir, is quite a significant factor.

Mr. Flood. How would that happen all of a sudden?

Admiral PELTIER. Better management, better dispatching, less down time, less waiting time.

Captain' HUSBAND. These management improvements require continuing attention and support from all echelons of command and supervision. In addition, the Secretary of the Navy has directed that particular attention be paid on all inspections and audits for the maintenance and repair of real property.

In conclusion, while we have been discussing budgeting, engineering, accounting, and management in relation to maintenance, on this chart, as shown in red, our goal is the efficient integration of all of the processes of facility management into a single management system.

VEHICLE UTILIZATION

Mr. Ford. Captain, may I ask you to revert to that transportation chart, please? Is there any significance to the fact that if you multiplied miles in 1954 by the number of vehicles and you did the same thing fiscal year 1960, I suspect you would come to more miles in 1960 than you would in 1954. What does that mean?

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