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FY 1977 - 11/21/75 - Defense, Intelligence (4)
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The original documents are located in Box 9, folder "FY 1977 - 11/21/75, Defense,
Intelligence (4)" of the White House Special Files Unit Files at the Gerald R. Ford
Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 9 of the White House Special Files Unit Files at the Gerald R. Ford Presidential Library
NATIONAL ARCHIVES AND RECORDS SERVICE
WITHDRAWAL SHEET (PRESIDENTIAL LIBRARIES)
FORM OF
CORRESPONDENTS OR TITLE
DATE
RESTRICTION
DOCUMENT
1. papers
background papers for meeting on the FY 1977
11/21/75
A
Budget
11 pages
2. papers
background papersf or meeting on the FY 1977
11/21/75
A
Budget
24 pages
SpecialFiles,
Issue Decision Papers for the President
Fy 1977, 11/21/75, Defense Intelligence (4)(box 9)
plc 4/17/84
RESTRICTION CODES
(A) Closed by Executive Order 12065 governing access to national security information.
(B) Closed by statute or by the agency which originated the document.
(C) Closed in accordance with restrictions contained in the donor's deed of gift.
GENERAL SERVICES ADMINISTRATION
GSA FORM 7122 (REV. 1-81)
Operations &
Maintenance
54
Department of Defense
1977 Budget
Operations and Maintenance
Background
The O&M appropriations finance the basic housekeeping services for the Defense establishment.
Included are pay for most DOD civilians, fuel, supplies, and contract services for all operating
units, and maintenance costs for equipment and facilities.
Alternative Levels
O&M is showing very large growth from 1975 to 1977, despite the relatively stable nature of the
force structure it supports. The "non-pay" area, where the major increases are occurring, is the
only significant portion of Defense purchases which has not been granted an exception to A-11 policy
on inflation. A-11 states that the budget year must be priced according to the prices prevailing at
the time the submission is made (Fall, 1975). Interpretation of this policy by BRD would permit
Defense to recognize the inflation that has occurred from the Fall of 1974 to the Fall of 1975 (7%)
and project that much increase into 1977. In addition, the Presidential decision of last year
providing for 1% per quarter real program growth applies to O&M, as well as to procurement accounts.
The following table illustrates the impact of these allowances and shows the extent of the growth
beyond these levels.
TOA ($ Billions)
1975
1977
% Change
Total O&M
26.2
33.7
+29%
Less Pay-Related
8.6
9.5
+10%
Non-Pay O&M
17.6
24.2
+38%
GERALD
Fall-to-Fall Inflation
R.
+1.2
+ 7%
1% per Quarter Growth
FORD
+1.76
+10%
Other Growth
LIGRAEY
+3.64
+21%
55
Summary of Issues
There are a number of program issues and "budget scrub" adjustments which can be made in the
O&M area. The following table summarizes these issues and indicates the extent to which reductions
are anticipated in the framework of the joint review. Issue papers are attached on each item.
($ Billions)
Total
Adjustments
Service Request
Budget Scrub (OSD adjustments in
the joint review)
-.8 -
PCS moves
-.3 -
Real Property maintenance
-.2
MAC Airlift charter
*
Inventory levels
- -.6
Travel
-.1 -
Energy Consumption
-.3
Civil Defense
-.1
Subtotal adjustments
-2.4
Other Issues (civilian personnel,
commissaries, rate stabilization)
-1.1
Total adjustments
-3.5
* Under .05
Thus, another way of perceiving our issues is that, in a rough way, they account for most of
the real growth in the Operations and Maintenance request.
GERALD
R.
FORD
LISEARY
56
Issue Paper
Department of cefense
1977 Budget
Permanent Change of Station Moves (PCS)
Statement of Issue
Can a series of revised policies be implemented to reduce personnel turbulence and PCS moves?
Background
Defense has requested almost $1.8 B for transportation and per diem travel costs associated with
1,700,000 PCS moves in 1977. This amounts to 0.8 moves for each active military person. In addition,
the services have requested an allowance of 97,300 in transient personnel ($1.1 B) to offset military
unit strength shortfalls due to PCS.
PCS moves are driven by force deployments, personnel turnover and military travel policies.
Changing three current travel policies could significantly reduce the number of PCS moves required
in 1977 and the outyears. These three policies are:
1.
Plan to meet prescribed average overseas tour lengths.
2. Remove Hawaii and Alaska from consideration as overseas tours.
3.
Implement a limited homebasing policy for personnel assigned to hardship overseas tours.
Alternatives
#1. Maintain existing PCS policies. (Agency request)
#2. Implement these policy changes gradually in 1977. (OMB recommendation)
#3. Accelerate implementation of these revised policies in 1977. (Fiscal constraint level)
GERALD
R.
FORD
LIBRARY
57
TOA ($ Millions)
1975
1976
1977
1978
Alternative #1
1,440
1,650
1,760
1,870
Alternative #2
1,440
1,616
1,518
1,606
Alternative #3
1,440
1,593
1,415
1,525
Analysis
1. Prescribed Overseas Tour Lengths
DOD currently prescribes tour lengths in all overseas areas. The Navy and Marine Corps plan to
meet or exceed their prescribed average overseas tour lengths in 1977, while the Army and Air Force
plan to meet only 77 percent and 86 percent of their respective prescribed average overseas tour
lengths. These planned average overseas tour lengths for 1977 are also less than the actual tour
lengths achieved during 1975. This is inconsistent with past trends indicating an increase in average
overseas tour lengths for the Army. Moreover, a Defense audit study on overseas tour lengths in 1975
indicates that the actual Air Force overseas tour lengths tend to meet or exceed prescribed tour lengths.
2. Designate Hawaii and Alaska Nonhardship Tours as Domestic Assignments
Currently all the military services consider tours in Hawaii and Alaska as overseas tours and
therefore treat them differently from tours in the other 48 States (the CONUS). This generates
additional moves because personnel completing tours in Hawaii/Alaska must be returned to the CONUS
rather than being redeployed to a foreign overseas area. Likewise arrivals to Hawaii/Alaska must come
from the CONUS, since personnel departing non-U.S. overseas areas cannot be directly assigned to
Hawaii/Alaska tours. The Marine Corps has the only exception to this general policy, since they do
send some Hawaii personnel directly to Okinawa and return some Okinawa personnel to Hawaii.
GERALD
R.
3. Implement a Limited Homebasing Policy
FORD
Public law permits officers and entitled enlisted personnel serving an unaccompanied overseas tour to
LIBRARY
move their dependents to any place within CONUS at their selection. These moves are called designated
point moves. Two Defense policies appear to cause the number of these moves to be greater than
necessary:
(1) Dependents occupying Government quarters must move when the sponsor is reassigned.
(2) Advance notification of the assignment following a short (12-13 months) overseas hardship
tour is not provided prior to departure for overseas.
58
Eliminating these two policies would save PCS resources by reducing the number of designated
point moves and would improve morale by reducing the disruption in family life created by frequent
movement. Additional savings would accrue, if the advanced assignment provided for a return to the
military members' current location, his current "homebase."
The Navy currently permits dependents whose sponsors serve hardship overseas tours to remain in
quarters and also attempts to return the sponsor to his "homebase." Prior notification, however, is
not provided. The Marine Corps is exploring the possibility of "homebasing" and concurs with the
housing policy change. The Army is also testing the feasibility of providing advanced notification
and "homebasing," but contends that the housing policy change will significantly increase waiting
time for CONUS housing and thereby create morale problems.
Table 1 shows the impact of implementing those policy changes under two alternatives.
Alternative 2 provides a gradual implementation of these changes and Alternative 3 accelerates
the implementation of these policies.
Under the accelerated alternative (Alternative 3) :
a. The Army would be required to meet its prescribed overseas tour lengths rather than only
90 percent in 1977.
b. Alaska/Hawaii would be the same as CONUS tours for all personnel after January 1, 1976,
rather than only for those assigned to Hawaii/Alaska after that date.
C. The homebasing policy would continue to apply to one-third of the personnel assigned
to overseas hardship tours.
GERAL
Table 1
($ in Millions)
FY 1977
FY 1978
Alternative 2
Alternative 3
Alternative 2
Alternative 3
1. Overseas Tours
-150
-206
-150
-206
2. Hawaii/Alaska
-46
-93
-68
-93
3. Homebasing
-46
-46
-46
-46
Total
-242
-345
-264
-345
59
Finally, reducing the number of PCS moves would permit a reduction in the number of transient
military personnel without in any way affecting unit strength or capabilities.
Agency Request: Alternative #1. The department believes existing policies should be maintained
pending their detailed review of the feasibility of implementing a "homebasing" policy and the morale
implications from changing the overseas status of Hawaii/Alaska tours.
OMB Recommendation: Alternative #2. Implementing these changes moderately in 1977 should be
feasible; the morale impact from a change in Hawaii/Alaska tour status depends upon the attractiveness
of those tours relative to other U.S. tours as perceived by military personnel.
GERALD
A.
FORD
Issue Paper
60
Department of Defense
1977 Budget
Real Property Maintenance Activities
Statement of Issue
Can funding for Operation and Maintenance of DOD real property be reduced while still providing
facilities adequate to accomplish the military missions?
Background
Funding for operation and maintenance of real property in DOD, exclusive of family housing, is
exceeding a $4 billion annual level. The Services, however, maintain that these funds are inadequate
to do the essential maintenance and repair, and that the resulting unfunded requirement, referred to
as the Backlog of Maintenance and Repair (BMAR), has grown to the point where mission capability is
affected. OSD initiated an audit to determine the validity of the backlog while allowing the Services
to begin funding to reduce it. The 1977 funding request represents initiation of the effort to bring
the backlog of maintenance and repair work to what the Services feel is a manageable level.
Alternatives
#1. Approve the Defense request ($4,289 million), which provides for decreasing the backlog of
GERALD
maintenance significantly and assumes a $100 million reduction below the service requests.
(Agency request)
FORD
#2. Reduce the Agency request by $222 million in 1977 through application of cost saving
techniques and allowing the BMAR to remain constant. (OMB recommendation)
TOA ($ Millions)
1975
1976
1977
1978
Alternative #1
3,624
4,002
4,289
|
Alternative #2
3,624
4,002
4,067
-252
Analysis
The following items have been analyzed and identified as reductions with the extent to which
Defense can be expected to concur indicated.
61
a. Use of military construction units - The 59 military construction units in all four services
can be used to accomplish at least $70 million in real property maintenance and repair annually. There
is no law which precludes their use for such type work and it can be advantageously substituted for
certain aspects of the construction unit's training. Accomplishing $70 million of RPM work with these
units would require only about 20% of their time, leaving the balance available for training activities.
Union opposition can be expected in some parts of the country. Defense staff reaction will be mixed
to favorable.
b. Reduction of Air Force military personnel - The Air Force utilizes military personnel to perform
RPM functions to a far greater extent than the other services, as the following table indicates:
1977 Military End Strength
Army
1,570
Navy
3,472
Marine Corps
613
Air Force
27,002
Total
32,657
Use of military personnel is much more expensive than either government civilian or contractor
personnel. The Air Force justification for the use of military personnel has been analyzed, and we
estimate that a conversion of 11,786 military workyears to contract is feasible. Military end strength
reductions related to this issue total approximately 14,000 due to the addition of supporting "tail"
positions which always accompany a reduction in military personnel. Savings would be $30 million in
1977 and $60 million in 1978. This is a net savings after the cost of adding contract labor is computed.
Defense reaction to this item will probably be favorable.
C. Backlog of Maintenance and Repair - The proposed funding of $222 million to work down the back-
log of maintenance and repair projects can be deferred. Adequate funding is being provided on an annual
basis to provide facilities to accomplish the military missions. In addition, results of the Defense
directed audits of the Navy and Army have cast doubt as to the validity of over 80% of the backlog.
Defense staff reaction will vary from mild support to strong opposition. It is anticipated that OSD will
reduce this request by $100 million in the budget scrub. Further reductions of $122 million are feasible.
GERALD
0803
1998817
62
Agency Request: Alternative #1. Last year the Secretary requested special information on the subject
and indicated skepticism. However, we anticipate strong opposition from certain staff elements. The
Services will oppose all alternatives to their request to varying degrees on the basis that any reduced
funding will reduce their readiness.
OMB Recommendation: Alternative #2. This provides adequate funding for operation and maintenance of
DOD real property in 1977. There is no evidence to support assertions that readiness will be degraded
as a result of this adjustment.
CERALD
is
FORD
Issue Paper
Department of Defense
1977 Budget
63
Defense Energy Consumption
Statement of Issue
Can Defense consumption of petroleum products for operating forces be reduced without degradation
of readiness?
Background
Defense consumes over $3 billion annually in fuel oil to operate its forces. Fuel costs for air,
sea and ground operations for the Department of Defense continue to spiral upward. Some efforts have
been undertaken to reduce consumption of petroleum and thereby absorb a portion of the huge price
increase which has occurred since 1974. For example, a large investment program for aircraft
simulators has been undertaken to permit lower flying hours without hurting readiness. Notwithstanding
these efforts, petrcleum costs to the Department will increase 27% for the period of 1975 through 1977.
During this two-year period, flying hours decrease 2%, ships' steaming hours increase 3.6% and ground
operations increase by 2.3%.
A summary of annual operating rates and fuel consumption is shown below:
Total
Total
Total BBL's
Flying Hours
Steaming Hours
Consumed
1975
8,500,000
849,000
182,000,000
1976
8,200,000
864,000
180,000,000
1977
8,300,000
880,000
182,000,000
Alternatives
#1. Reflects planned military air, sea, and ground operations of the military services. (Agency
request)
#2. Reduces flying hours through increased use of smaller aircraft and flight simulators. (OMB
recommendation)
GERALD
64
#3. All of the reductions in Alternative #2 plus a further reduction of 2.5% in the tempo
of operations. (Fiscal constraint level)
TOA ($ Millions)
1975
1976
1977
1978
Alternative #1
2,770
3,123
3,354
3,520
Alternative #2
2,770
3,123
3,207
3,362
Alternative #3
2,770
3,123
3,127
3,282
Analysis
Air, sea and ground operations within the Department will decrease less than 1 percent from 1975
through 1977, while overall petroleum costs will rise more than 27 percent. Several opportunities to
reduce fuel consumption are possible:
Navy and Air Force are presently utilizing large cargo aircraft to provide experience to new pilots.
In lieu of the C-130 and C-141 aircraft presently used for this purpose, smaller aircraft (T-37 and
T-38) can provide a large portion of the pilot training curricula. There would be no reduction in
flying hours, but petroleum consumption would be reduced by 2.2 million barrels which would save
$50 million.
The Air Force is testing a reduced flying hour program for the B-52 strategic bomber which is the
largest consumer of fuel per flying hour in the inventory. The new program stresses greater use of
ground based training aids and fewer flying hours. No problems have been identified to date. Appli-
cation of this new program to the entire B-52 fleet would reduce 2.2 million barrels of petroleum
consumption and save $50 million. Similar reliance by the Navy on training aids could reduce petro-
leum consumption by 1.0 million barrels and $24 million.
Reserve force flying hours are projected to rise from 344,000 in 1975 to 391,000 in 1977. If
the flying hour program were held to the 1975 level, a decrease of 1.2 million barrels of petroleum
and $23 million would result.
GERALD
65
Significant savings can occur by minor reductions in tempo of operations which we believe will not
effect military readiness. A 2.5% reduction in flying and steaming hours would result in additional
savings of 4.5 million barrels and $30 million.
Agency Request: Alternative #1. Defense would oppose any reduction in operations tempo. Their
objection would be based on an assumption that the reduction would decrease military readiness to an
unacceptable condition. They would have less objection to increasing use of training aids.
OMB Recommendation: Alternative #2. Offset a greater portion of the fuel price increase through
smaller aircraft and substitution of flight simulators.
66
Issue Paper
Department of Defense
1977 Budget
Inventory Levels
Statement of Issue
Can inventories of items procured through stock funds be reduced from planned levels?
Background
Inventories of supplies are maintained for issue to military customers on demand and to provide
stocks to cover time lapsing between ordering and receipt from production, for protection against
fluctuation in demands and receipts, and for mobilization purposes. As demands grow, the absolute
size of backup stocks also grows. The converse should be true when customer demands decrease.
Inventories of these items are projected to increase by $500 M from 1976 to 1977.
Alternatives
#1. Provide for restoration of fuel stocks drawn down in 1975 and other increases for greater
protection against stock-outs (Agency request).
#2. Maintain current stock levels. Do not increase fuel above the 1975 level. Allow increases for
new items entering the supply system and for cost increases experienced (OMB recommendation).
1/
Outlays ($ millions)
1975
1976
1977
1978
Alternative #1
--
240
500
500
1
Alternative #2
--
140
150
150
1/ Appropriations are generally not required in the revolving funds; however, excesses generated through
sale of inventory without replacement may provide funds for transfer to offset appropriation requests
elsewhere.
GERALD
agai
67
Analysis
A portion of the inventory increase relates to fuel drawn down in 1975 for economy measures. If
the decision were prudent then, it is prudent today ($150 M). (Defense consumes under peacetime
operations less than 2% of the U. S. fuel consumption.)
Many of the items stocked are commercial type and although considered critical to Defense require-
ments, they can, in emergencies, be obtained from the civilian sector (e.g., dress shoes, aspirin, radio
tubes and transistors). Again Defense consumption of these items is only a small portion of the total
production. Even for military technical repair parts, increasing stock levels across-the-board insures
only that long supply stocks will increase since many items have adequate stocks. (More than two-thirds
of all the orders are filled immediately by the supply depots.) In many instances, the reason for
stock-outs is contractor backlog, strikes, etc., and no matter how large the order, delivery is limited
by production capacity (e.g., forgings, castings). Two basic questions are: How long a pipeline should
be funded and how much mobilization reserve stocks should we buy.
Agency Request: Alternative #1. Defense would oppose further reductions, particularly of fuel stocks
as possibly impairing readiness levels.
OMB Recommendation: Alternative #2. We believe that inventory levels are generally adequate and
across-the-board increases are not required.
GERALD
?
FORD
LIBRARY
68
Issue Paper
Department of Defense
1977 Budget
Civil Defense
Statement of Issue
Should the scope of the Civil Defense program be redefined?
Background
The Defense Civil Preparedness Agency (DCPA) within the Department of Defense has responsibility
for the federal civil defense program whose mission is to prepare for the protection of the civilian
population in the event of a nuclear attack. Activities of the agency include developing and operating
a nationwide warning and detection system, identifying radioactive fallout shelters, providing for
civil defense training and education, and assisting state and local governments in strengthening emer-
gency operating capabilities.
About 65% of the DCPA program is provided in the form of grants and contracts to State and local
governments. While all use of DCPA funds must be related to preparing for a nuclear disaster, State and
local governments encourage secondary use of preparedness funds for natural disaster contingencies. They
look upon the DCPA as the major federal source of funding for such purposes, and for supporting their own
staff and institutional base.
Funding for DCPA activities has been about level over the past several years in the $80-85 million
range. The DCPA request for 1977 is $123 million, reflecting increases for communication and warning
systems support, and planning for a city evacuation program.
Alternatives
#1. Continue DCPA role of broad support of activities relating to both natural and nuclear
preparedness. (Agency request)
2. Redefine scope of DCPA program to limit support to functions narrowly related to nuclear
disaster preparedness. (OMB recommendation)
GERALD
FORD
69
TOA ($ Millions)
1975
1976
1977
1978
Alternative #1
82
87
123
130
Personnel end strength
653
653
653
653
GERAL
?
Alternative #2
82
87
40
42
Personnel end strength
653
653
300
300
FORD
Analysis
The alternative proposes that DCPA should limit its role to Defense peculiar nuclear disaster require-
ments, shifting more responsibility for the funding of disaster preparedness to the States and to agencies
responsible for natural disaster preparedness, such as the Federal Disaster Assistance Agency and the
Federal Preparedness Agency. DCPA would reduce and/or eliminate such activities as: salary support of
personnel in State and local offices who are being utilized primarily for natural disaster preparedness;
procurement of emergency vehicles and equipment which are used mainly for normal community rescue oper-
ations; and construction funds for disaster emergency centers in areas which have a low probability of
being affected by a nuclear strike. DCPA would continue to support functions which relate primarily to
nuclear preparedness. These would include the national communication and warning systems, preparation
and publication of material relating to nuclear disaster preparedness, procurement and maintenance of
radiological monitors to measure the effects of radioactive contamination, and planning related to the
city evacuation program.
Unless accompanied by compensating increases in other Federal preparedness agencies, a significant
reduction in DCPA funding would raise strong political opposition since virtually every State participates
in the program.
Agency Request: Alternative #1. Defense believes that neither the States nor other Federal agencies can
be depended upon to provide a common base upon which DCPA can build a nuclear preparedness program. Defense
would also point out that the 1972 NSDM #184 established a floor on the level of DCPA funding and recognized
the dual use of DCPA resources for both natural and nuclear preparedness.
OMB Recommendation: Alternative #2. Defense should fund only those functions closely related to nuclear
preparedness. States and other agencies should have primary responsibility for providing funds for natural
disaster preparedness. Consideration should be given to providing increased funding for appropriate
Federal agencies, including FDAA and FPA.
Issue Paper
70
Department of Defense
1977 Budget
Travel
Statement of Issue
Should Defense travel funding be reduced?
Background
Current estimates for travel funding show an increase of $12 million from 1976 to 1977, and
$128 million from 1975 to 1977. This covers travel for administration, operations, training and
civilian permanent change of station (PCS) moves. It does not include active military PCS, training
or unit moves. Since 1977 estimates do not contemplate an increase in per diem or mileage rates, all
growth can be attributed to expanded travel plans.
Alternatives
#1. Provide sizable increases in 1976 and 1977 over 1975 actual use (Agency request)
#2.
Reduce 1977 Defense travel to a level 5% below the actual 1975 travel level, adjusted for
per diem increases. (OMB recommendation)
GERALD
R.
TOA ($ Millions)
CUDS
1975
1976
1977
1978
1398911
Alternative #1
502
618
630
630
Alternative #2
502
536
536
536
Analysis
Program increases since 1975 are generally related to administrative type travel. Since reduc-
tions in civilian personnel are contemplated, it is unrealistic to assume that administrative travel
should be increased a decrease in requirements should be expected. Some travel could be
deferred or shortened and that deferral would not affect readiness. For example, travel for meetings
and conferences could be reduced. A 5% reduction in travel below actual 1975 experience would save
$94 million in 1977.
71
In the past, Congress has suggested and, in fact, legislated curtailment of travel. They would
undoubtedly support reductions in this area. The Defense Department would oppose reductions, claiming
1975 was an austere year for travel, and would attempt to reverse such a decision.
Agency Request: Alternative #1. Defense claims the travel level is needed to accomplish its mission.
OMB Recommendation: Alternative #2. This would reduce travel by 5% below the 1975 level adjusted for
legislated increases in per diem costs.
GERALD
P.
FORD
LIBRARY
72
Issue Paper
Department of Defense
1977 Budget
MAC Charter Concept
Statement of Issue
Should the Military Airlift Command (MAC) reduce commercial aircraft charter flights and utilize
unused commercial capacity at reduced rates on scheduled airlines?
Background
Annually, Defense airlifts over 1.1 million passengers to overseas locations from military airfields.
Almost all fly on commercially chartered aircraft to overseas areas serviced by U. S. flag scheduled
airlines. Scheduled flag carriers are willing to use their unsubscribed seating at less than charter
seat cost for military passengers since the incremental cost of adding a few extra passengers is
insignificant.
Alternatives
#1. Continue to provide commercial charter service from military airfields for military passengers,
retirees and their dependents. (Agency request)
2. Use block seat purchases on commercial scheduled airlines to move passengers to and from
overseas locations. (OMB recommendation)
TOA ($ Millions)
1975
1976
1977
1978
Alternative #1
21
23
26
24
Alternative 2
21
23
13
13
FUND
GERALD
R.
FORD
73
Analysis
LIBRARY
In recent years, U. S. flag carriers have experienced decreasing load factors on their overseas
flights. Commercial flights are currently flying half empty to the same locations for which Defense
is chartering dedicated flights for military personnel and their dependents. This results in an
unnecessary expense and waste of fuel. Four engine jets consume 40,000 gallons of fuel on round trip
from New York to Europe.
Recognizing this situation the CAB granted a limited "Fuel Crisis" waiver thru June 1976 to permit
two scheduled airlines to offer less than charter rates to the military for block seat purchases. During
this waiver period, there has been no problem with passenger movement. Defense would like to continue
use of block seat procurement but cannot without a waiver or change in policy by the CAB. They also
cannot pursue the waiver for fear of being cited for favoritism to scheduled airlines.
The Interagency Steering Committee which is reviewing the 1970 United States International aviation
policy has endorsed the part charter concept as a means to achieve fuller utilization of aircraft.
Extension of the waiver, however, is not now contemplated. The major concern of the CAB appears to
be allocation of business to all scheduled and non-scheduled airlines. One possible resolution of the
problem would be to allow scheduled airlines to carry recurring passenger loads and to contract with the
non-scheduled airlines for special charter flights.
In addition to the fuel savings, cost reductions are possible by:
- eliminating military terminal personnel and facilities, including possible termination of MAC
operations at McGuire AFB, New Jersey.
- eliminating travel costs between commercial airports and the military airport which often require
overnight stays at $35 per day.
- savings of 10% per passenger ticket thru block seat procurement.
Strong opposition to this proposal can be expected from service personnel (both active and retired) since
this would virtually eliminate the free transoceanic space available travel that they now enjoy. Unless
an equitable distribution of work is assured, opposition can also be expected from the non-scheduled carriers
participating in the CRAF.
A decision by the CAB follows consideration of all parties' views and opposition by the non-scheduled
airlines could result in disapproval.
74
Agency Request: Alternative #1. The budget request assumes there will be no block seat purchases
in 1977.
OMB Recommendation: Alternative #2. Assume CAB approval to extend the block purchase plan into 1977
and expand its coverage to all MAC routes. Strong Presidential support will probably be required.
This cannot be unilaterally implemented by Defense.
GERALD
&
FORD
LIBRARY
75
Issue Paper
Department of Defense
1977 Budget
Rate Stabilization
Statement of Issue
Should rates charged DOD customers for supplies and services furnished by revolving fund activities
be fixed in advance each year to include an allowance for inflation?
Background
Most consumable supplies for defense users are purchased centrally through revolving funds--called
stock funds--and paid for by the customer, when issued, out of annual operation and maintenance appropri-
ations. Similarly, major overhaul of ships, aircraft and certain other services are provided by industrial
type activities financed through revolving funds--called industrial funds--and paid for by the various
customers out of annual operation and maintenance appropriations. These revolving funds have, in the past,
operated as a business under a "break-even" procedure, adjusting their prices, as experienced, to recover
allowable costs.
Alternatives
#1. Adjust prices to include an allowance for future inflation. This would permit the customer
Operation and Maintenance appropriations to plan and budget for higher costs based upon anticipated
inflation in the coming year. (Agency request)
#2. Do not permit customer accounts to anticipate any inflation in the coming year in establishing
their budget levels (OMB recommendation)
TOA ($ millions)
1975
1976
1977
1978
Alternative #1
-
+350
+500
+500
Alternative #2
-
-0-
-0-
-0-
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Analysis
The intent behind the revolving fund system was to create an environment similar to that of private
industry--the cost of operations to be recouped when goods and services were sold to customers. The
Defense Department now proposes to fix prices and rates at an inflated level with no changes until the
following fiscal year. At that time a new rate would be established to recover any past losses which
might have occurred and to anticipate future inflation increases. Private industry cannot operate this
way because of the presence of competition. Despite the fact that the Defense revolving funds are
monopolistic, the principle of current pricing has been the expressed will of Congress. Another argument
against rate stabilization is that, to the extent that it incorporates anticipated inflation in its
prices, it is in violation of the A-11 prohibition against budgeting for anticipated inflation in annual
operating appropriations.
In favor of the proposal, two points can be made. First, planning in the industrial activities is
made extremely difficult with significant resultant inefficiencies. This is due to extreme changes in
workload generated by price changes which have to be absorbed by customers with a fixed amount to spend.
Thus, for example, a naval shipyard may plan to employ enough labor to accomplish 20 ship overhauls, but
when ensuing inflation occurs, perhaps only 15 overhauls can be funded. Because of the rigidity of
Civil Service regulations, it is not possible to bring about rapid drops in employment levels and
inefficiencies result.
The second point in favor of the proposal is that there are instances where the A-11 prohibition
against budgeting for anticipated inflation has been broken under very similar conditions. The Standard
Level User Charges (SLUC) applied by GSA, the GSA General Supply Fund, and Medicare all include in their
rates some anticipation of inflation.
Agency Request: Alternative #1. Defense argues that given existing exceptions and the resulting
inefficiencies, rate stabilization, including anticipated inflation, should be approved.
OMB Recommendation: Alternative #2. We do not object to rate stabilization per se. However, inclusion
of anticipated inflation in the budget for an operating appropriation violates the rules of A-11.
GERALD
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Construction &
Family Housing
DEPARTMENT DEFENSE
1977 Budget
77
Construction and Family Housing
Background
The construction/family housing area shows a substantial growth pattern in recent years as the
following table indicates.
TOA ($ millions)
1977
1970
1975
Request
OMB Recommendation
Military Construction (less ASTF)
1015
1858
2512
1708
ASTF (Aeropropulsion Systems Test Facility)
--
--
--
437
Family Housing
581
1164
1449
1129
With the exception of ASTF, which is a single 1977 construction project, some background
is in order concerning the forces which have been operating on both the military construction
and family housing programs in recent years.
A number of significant program initiatives have impacted on the military construction program since
1970. These initiatives have originated in part outside DOD. Three programs, in particular, water
pollution, air pollution and energy conservation have become significant elements of the Military
Construction Program in recent years. In addition to these federally driven programs, Defense initiatives
for the achievement of an all-volunteer Army, the improvement of nuclear weapons storage facilities,
a program to provide shelter protection for all tactical aircraft in Europe and the new facility
program in support of the TRIDENT project have all generated significant requirements for construction
projects.
In family housing there have been, since 1970, significant changes in the criteria applied by DOD
in assessing the eligibility for family housing and in determining qualitative standards for military
family quarters. In 1970, it was Government policy to provide family housing quarters only to married
officers and non-commissioned officers. In 1973, that criteria was reevaluated and changed to include
all married military personnel. This generated a significant deficit of family housing units, despite
the fact that military manpower levels have been declining in recent years. Construction of units to
meet these deficits has now been virtually completed but significant cost increases are now showing up
in the O&M area where these new units must be operated and maintained. Several years ago, DOD also
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revised the criteria by which family housing units were judged to be adequate or inadequate. The
measure used was comparison with the type and size house being constructed by builders on the open
market. This has resulted in a significant program of improvements to existing family housing units.
This program is addressed specifically in the family housing issue.
Alternative Level
The OMB recommendation recognizes and continues the initiatives and programs described above, with
the exception of the family housing improvement program, which we consider unwarranted, to the extent
requested.
Summary of Issues
The following table shows the adjustments made in the OMB recommendation by category of facility.
Impacts on 1978 are shown, but it is assumed that an offsetting amount of 1978 construction can be
deferred to future years.
TOA ($ millions)
1977
Agency
OMB
1978
Request
Adjustment
Impact
Military Construction
2512
-804
(+499)
Program/Force Related
330
- 65
(+120)
Operating Facilities
762
-249
(+196)
Pollution and Energy
424
- 74
(+ 11)
Medical Facilities
313
-210
(+ 60)
Guard & Reserve
208
- 60
( --)
Other
475
-146
(+112)
ASTF
Agency Request
--
--
(+437)
OMB Recommendation
--
+437
( --)
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Agency
OMB
1978
Request
Adjustment
Impact
79
Family Housing
1449
-320
(--)
Operations & Maintenance
1116
-130
( --)
Leases
116
- 18
( --) )
New Construction
126
- 91
( --) )
Improvements
91
- 81
( --)
TOTAL, Construction/Family Housing
3961
-742
(+499)
GERALD FORD
Issue Paper
Department of Defense
1977 Budget
80
Military Construction
Statement of Issue
To what extent can the Military Construction budget be reduced without adverse impact on military
capabilities?
Background
The budget submission for Military Construction contains about 2,000 individual projects. While
the program itself shows a year-to-year trend consistent with the other elements of the Defense budget,
it should be recognized that, with certain minor exceptions, the projects which make up any single
year's construction program are fully funded single items which bear no direct relation to either prior
year or future year funding.
Alternatives
#1. The services initially requested $2,831 million in 1977 and $3,071 million in 1978. OSD
will probably recommend adjustments of $-319 million in 1977 and $-200 million in 1978 for a revised
estimate of $2512 million in 1977 and $2871 in 1978. (Agency request)
#2. In addition to the amounts adjusted by OSD, further adjustments of $-859 million in 1977
are feasible on the basis that certain projects, while desirable, are either not essential or have not
demonstrated a satisfactory economic justification. Approximately $500 million of this adjustment
would probably have to be deferred to 1978. Although we have not examined 1978 in the same detail as
1977, it can be assumed that the $500 million can be offset by further deferrals from 1978 to subsequent
years. (OMB recommendation)
TOA ($ Millions)
1975
1976
1977
1978
Alternative #1
1858
2300
2512
2871
Alternative #2
1858
2300
1708
2671
78 Impact
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Analysis
The construction program has been analyzed by using the following definitions:
Deletable - Projects deleted under this definition are considered desirable, but not essential to
basic Defense mission requirements.
Deferrable - Projects adjusted under this definition are considered deferrable from 1977, but will
probably have to accomplished in the future.
The following table illustrates our analysis of the 1977 construction program. While attempts have
been made to be as objective as possible, there are no firm criteria for this type of analysis and the
results must be regarded as subjective, to a large extent.
1977
Adjustments
Request
Deletable
Deferrable
1. Operating Facilities
762
- 53
-196
Normal Military Housekeeping
and Operational Construction
2. Pollution and Energy
424
- 63
- 11
Projects governed by special
Federal policies and direct-
ives originating outside DOD
(i.e., OMB Cir. A-106)
3. Medical Facilities
313
-150
- 60
Related to all Defense
Medical Programs
4. Guard and Reserve
208
- 60
--
Facilities for all Reserve
components (Politically
sensitive)
GERALD LIBRARY R: FORD
1977
Adjustments
82
Request
Deletable
Deferrable
5. Program/Force Related
330
--
-65
Facilities tied to major
procurement programs or
force initiatives
6. Other
475
- 34
-112
Miscellaneous utility
construction, land acquisition,
planning funds, etc.
Agency Request: Alternative #1. The services will defend the construction program requested on the
basis that it is necessary to provide facilities for mission accomplishment and to upgrade a small
portion of the deteriorating facilities at military installations around the world.
OMB Recommendation: Alternative #2. We believe the 1977 program can be reduced by about $859 million,
without impact on major Defense programs.
GENALD R. TORO
Issue
er
Department of Defense
1977 Budget
83
Aeropropulsion Systems Test Facility
Statement of Issue
Should funding be provided in 1977 to construct an Aeropropulsion Systems Test Facility (ASTF) ?
Background
The proposed ASTF at Arnold Engineering Research and Development Center in Tennessee would provide
by 1983 a capability for testing new generations of high-performance turbine engines in environments
similar to those experienced in actual flight. This includes testing of engines, with intake and
adjacent structures at various angles in relation to air flow. Current facilities permit engine testing
only in isolation from surrounding aircraft structure and, hence, do not provide direct information on
possible interface and integration problems. Defense claims that the new facility would avoid costly
flight testing and the need for post-flight engine and structural modifications. The new test facility
would be used for both military and commercial engine development. Total costs for construction of an
entirely new facility are estimated to be $437 million.
Alternatives
#1. The services initially requested funding for this project in 1977. OMB agrees that ASTF
should be funded, if possible, in 1977. (OMB recommendation)
#2. Defer for reconsideration in the FY 1978 budget. The Deputy Secretary has already approved
this course of action. (Agency request and fiscal constraint level)
TOA ($Millions)
1977
1978
1979
1980
1981
GERALD
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BA
O
BA
C
BA
0
BA
0
?
Alternative #1
437
60
--
105
--
104
--
110
--
58
FORD
Alternative #2
--
--
437
60
--
105
--
104
--
110
Analysis
The requirement for this facility is based on the need for full-sized wind tunnels as a basic tool
in the development of turbine engines. While research on engine technology is NASA's responsibility,
δ
the actual development of high performance engines is an Air Force responsibility, since it is
historically the military (fighter aircraft) requirement that pushes the existing state-of-the-art.
The only way to develop a new turbine engine is to build it full-size, test it in a wind tunnel, correct
the performance discrepancies found, test it again and repeat the process until the engine will perform
to specifications.
Existing wind tunnels in NASA and DOD were originally constructed in the immediate post World War II
period. At that time, it was felt that all that was necessary for an effective test was to direct the
flow of air into the front end of the engine at the appropriate speed. We have since learned that the
interaction of the engine, the engine inlet (as large or larger than the engine itself), and even the
surrounding portions of the aircraft are all critical to an accurate prediction of engine performance.
Existing facilities simply cannot handle such simulations.
As a result, engines now being developed can only be tested in small segments of their potential
flight regimes. This results in overly-conservative designs and in the possibility of engine defects
being discovered during the flight test phase of the program. The ASTF would permit full coverage of
all potential engine flight regimes up to the limits of turbine engine technology and would permit
ground testing in areas which can now only be tested in flight.
Engine problems in an aircraft development program are extremely costly in terms of schedule
slippage and cost overruns. DOD contends that the avoidance of one major engine-related problem in
a large aircraft development program would probably amortize the cost of this facility. NSD staff agree
with this assessment.
OMB Recommendation: Alternative #1. OSD (DDR&E) is the major proponent for this facility, primarily
on the basis of permitting bolder design of engines in the future. We support inclusion of ASTF
primarily on the basis of its potential for reducing cost overruns in future development programs.
Agency Request: Alternative #2. This is a new initiative which cannot be justified in support of any
current mission requirement or approved program. Therefore, despite its desirability, it must be con-
sidered deferrable under stringent economic conditions. The Deputy Secretary has made this decision,
at present, although it will be appealed by DDR&E.
GERALD
LEVESIT
Issue
er
Department of Defense
1977 Budget
85
Family Housing
Statement of Issue
Should the Defense Family Housing program be reduced?
Background
The Defense Family Housing program provides funds for operation and maintenance of nearly 400,000
houses, for leasing nearly 25,000 units, and for the construction of new housing.
Alternatives
#1. Provide a family housing program of $1449 million in 1977. This would include 24,753 leases
and construction of 2667 new units. (Agency request)
#2. Provide $1129 million for family housing in 1977. This would include 22,418 leases and
construction of 894 new units. (OMB recommendation)
TOA ($ Millions)
GERALD
1975
1976
1977
1978
R.
Alternative #1
1164
1279
1449
1516
FORD
Alternative #2
1164
1279
1129
1187
LiBRARY
Analysis
Operations and Maintenance: (Request $1116 million in FY 1977) This program has been analyzed
by: (1) recognizing the inflation that has occurred from the Fall of 1974 to the Fall of 1975 (7%) and
providing for that much increase in 1977 and 1978 over the 1975 base and, (2) providing for 1% per
quarter program growth through the end of 1978. The Defense request is substantially above the
resulting level and can be reduced by $130 million in 1977. The services argue these increases are
needed because of rising utility rates, to reduce maintenance backlogs, and to provide financing
flexibility.
Leasing: (Request $116 million in 1977) Historically, the Army has had about a 5,000 lease short-
fall in Germany because of resistance of the Germans to lease. Rephasing the German lease program to
8t
recognize this reluctance and recognizing that the public sector can provide adequate housing in many
domestic areas, the request can be reduced by $18 million in 1977.
New Construction: (Request $126 million in 1977) The services are requesting construction of
2,667 new houses in FY 1977 and 3,961 units in FY 1978. The services assert these houses are required
because of installation mission changes; because local communities cannot provide adequate, sufficient,
or economical housing, and because of remoteness of foreign installations. Review of the requested
construction projects indicate that local communities can provide support. For example, New Orleans
with over 1.5 million people has sufficient housing to negate a 200-unit project. Mission changes at
Fort Polk, Louisiana and at Bangor, Washington (TRIDENT) would require funding for 894 units in FY 1977
and 1058 units in FY 1978. Allowing for these projects, the service request can be reduced by 1773
units in 1977 and 2903 units in 1978. Savings would be $91 million in 1977 and $128 million in 1978.
Improvements: (Request $91 million in FY 1977) The types of projects include: modernizing
kitchens with dishwashers, disposals and cabinet space; modernizing bathrooms; adding bathrooms,
bedrooms, family rooms, porches, carports, lanais, patios; enlarging patios, closets; increasing storage
space; providing privacy screening; improving playgrounds; adding skylights; soundproofing; adding entry
canopies; central air conditioning; painting; adding utility space; adding fire protection; adding
sunshades; and rearranging bedrooms. On some units total improvements exceed $20,000. The services
justify these programs to increase unit life, to improve morale, and to bring housing up to comparable
industry construction standards.
The OMB alternative would limit improvements to: increasing unit life, repair of major faults,
improving safety, and replacement of non-functional features. The alternative challenges the assertion
that these improvements are necessary because: (1) the existence of family housing waiting lists at
most installations implies that military personnel desire to live in the presently configured
quarters without these added improvements; (2) as presently constructed, the average difference between
DOD estimated housing fair market rental and forfeited BAQ exceeds $1,300. To the extent these improve-
ments are made, the difference would increase, thus, providing a further subsidy for married military
personnel occupying family housing. OMB recommendation would delete $81 million.
Congress has been sympathetic to the housing program and has often provided funds above the amount
requested.
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Agency Request: Alternative #1. Provide a family housing program as follows:
1977
1978
Units
TOA
Units
TOA
O&M (existing units)
n/a
$1116
n/a
$1139
Leases
24,753
116
20,624
82
New Construction
2,667
126
3,961
178
Improvements
n/a
91
n/a
117
OMB Recommendation: Alternative #2. Provide a family housing program as follows:
Units
TOA
Units
TOA
GERALD
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O&M
n/a
$ 986
n/a
$1037
Leases
FORD
22,418
98
22,024
90
New Construction
894
35
1,058
50
Improvements
n/a
10
n/a
10
Investment
DEPARTMENT OF DEFENSE
88
1977 Budget
Investment Overview
Defense request and alternative levels
The 1977 Defense request for research, development and procurement of new systems and equipment
totals $41.4 B, an increase of $11 B or 35% above the estimated 1976 level and 60% above the 1975
level. This increase provides for large growth in all categories of defense modernization. The
recommended alternative provides an overall increase of more than 20%, continuing to allow real growth
in all areas. The alternative makes no adjustments in the Defense request for strategic forces
modernization and recommends more moderate but still significant increases for tactical systems and
non-major systems procurement.
Research and Development. Except for the Navy F-18 aircraft development program, the recommended
alternative accepts the Defense proposed R&D level. The 1977 R&D program reflects level spending
for strategic R&D. Significant increases are planned for tactical systems development and for the
research and technology base.
Procurement. Strategic systems procurement is planned to increase sharply in 1977 as both the
B-1 bomber and Trident missile enter full-scale production. The recommended alternative provides
the full requests for these systems. The Minuteman III missile program will be an issue if Defense
amends its request and proposes to continue production.
In the tactical systems category, large increases are proposed for new ship construction, including
expanded procurement of nuclear-powered attack submarines and guided missile frigates, initial procure-
ment of a conventionally powered destroyer, and long-lead procurement of the new CVNX carrier and the
new CSGN nuclear powered strike cruiser. There are also significant increases in the procurement of
tactical aircraft and land forces equipment, including tanks. The recommended alternative provides
increases in these tactical areas but at a more moderate pace by adjusting production rate schedules,
by deferring initial production where procurement appears premature, and by terminating several low
priority aircraft and missile programs. The fiscal constraint alternative includes further deferrals
of tactical systems procurement. Both alternatives add $.8 B to the agency request to cover full
funding of ship construction.
The intelligence program reduction shown in the Defense modernization summary is not included as
a separate issue in this review, but will be addressed in the intelligence program review.
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Defense Modernization Summary
(TOA in $ billions)
1977
1978
1976
Agency
OMB
Agency
OMB
1975
Est.
request
Recommendation
request
Recommendation
R&D
Ștrategic
2.1
2.4
2.5
2.5
Major Tactical Systems Development
2.9
3.3
4.2
4.0
Other
3.6
3.7
4.1
4.1
8.6
9.4
10.8
10.6
12.0
11.8
Procurement
Strategic
2.1
1.6
3.6
3.6
Major Tactical Systems Procurement
6.8
9.9
14.5
12.7*
Intelligence
1.8
2.0
2.4
2.2
Other
6.7
7.8
10.1
9.1
17.4
21.3
30.6
27.6
34.0
30.6
Total R&D and Procurement
26.0
30.7
41.4
38.2
46.0
42.4
*
Includes $.8B not included in Agency request for full funding of ship construction.
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A large increase is also requested for non-major systems procurement including ammunition, communi-
cations equipment, aircraft modifications, spares and repair parts, and general support equipment. The
recommended alternative assumes that this procurement category can be considered on a level of effort
basis and still provides an increase which allows significant real growth.
Impact of recommended level
The recommended alternative achieves the following objectives:
maintains our commitment to continuation of major strategic programs and moves ahead with
a range of new strategic options.
signals real growth in principal areas of tactical systems development and procurement, reaffirming
the President's commitment to general purpose force modernization.
includes real growth in the Defense research and technology base.
demonstrates a commitment to efficiency by terminating or deferring low priority systems.
Summary of Issue
The following table lists the specific program issues:
Adjustments to 1977 Agency Request
(TOA in $M)
Issues
OMB Recommendation
Fiscal Constraint Level
Non-major systems procurement
-1,000 -
-1,000
Ground forces procurement
-238
-359
Major warships: Cruisers/Destroyers
---
-1,029 -
Aircraft carrier funding
-200
-200
Attack submarines and patrol frigates
-249
-660
Support ships
-363
-363
Full funding of shipbuilding
GFRALD
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+846
+846
Condor missile
FORD
-49
-49
F-18 development
-233
-233
Tactical aircraft procurement
-1,102
I
LIBRARY
-1,270
Aerospace overcapacity
-402
-513
Advanced tanker/cargo aircraft
---
---
Minuteman 111 missile procurement
(-322)
(-322)
-2,990
-4,830
91
Issue Paper
Department of Defense
1977 Budget
Non-major Systems Procurement
Statement of Issue
Should the level of non-major systems procurement be reduced below the current Defense estimate?
Background
About 35% of Defense procurement is comprised of non-major systems such as communications and
electronics equipment, ammunition, aircraft spares, repair parts, and support equipment. These are
the items which directly impact the capability and readiness of the current operating forces as
opposed to the major procurements of new ships, tanks and aircraft which will impact future force levels.
Alternatives
#1. Allow a 30% increase in non-major systems procurement in 1977. (Agency request)
2. Allow a 17% increase in non-major systems procurement in 1977. (OMB recommendation)
TOA ($ millions)
1975
1976
1977
1978
Alternative #1
6,700
7,800
10,100
11,300
Alternative #2
6,700
7,800
9,100
10,200
Analysis
The table shows funding of non-major systems procurement by principal category. The Defense request
will provide an overall increase of about 30%. The OMB alternative assumes that, in the aggregate, non-
major systems procurement can be treated on a level of effort basis. It assumes that a 17% overall increase
will cover inflation, provide real growth of 5%, and cover possible congressional action.
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Non-major Systems Procurement
(TOA $B)
1977
1976
Agency
OMB
1975
Est.
Request
Recom.
Munitions
1.2
1.3
1.6
Modifications and spares
2.2
2.3
3.1
Support equipment and facilities
2.0
2.4
3.1
Support vehicles
.2
.4
.5
Communications and electronics
1.1
1.4
1.8
6.7
7.8
10.1
9.1
Agency Request: Alternative #1. Additional reductions, however, are likely to be achieved during the
internal Defense budget review.
OMB Recommendation: Alternative #2. An overall non-major systems procurement increase of 17% can be
allocated to avoid any adverse programmatic effect.
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Ground Forces Modernization - Objectives and Programs
The major objectives of the ground forces modernization programs are to:
- Provide new technology equipment for the anti-tank and air defense missions.
- Counter the tank-rich Warsaw Pact forces by a combination of helicopters, tanks, and
anti-tank weapons.
- Continue to modernize the reserve forces.
- Rebuild war reserve stocks.
The major 1977 programs proposed by DOD to accomplish this are:
- Upgrading of helicopter gunships to provide improved anti-tank capabilities and development
of a new attack helicopter.
- Initial procurement of a new troop-carrying helicopter (UTTAS).
GERALD 1842017 ? FORD
- Procurement of new missiles for air defense and anti-tank purposes (TOW, Dragon, Stinger). .
- Upgrading of existing M-48 tanks.
- Increased production of new M-60 tanks.
- Development of a next generation tank (the XM-1).
- Procurement of a long range non-nuclear Lance missile to augment artillery capabilities.
The recommended alternative adjusts tank development and production schedules to (a) recognize
a fact-of-life slip in the build-up of M-60 tank production rate, (b) insure competition between U.S.
and German prototypes of the new tank. The alternative also proposes cancelling the non-nuclear
Lance program because of its marginal effectiveness. Other major initiatives are fully supported.
Issue Paper
94
Department of Defense
1977 Budget
Ground Forces Procurement
Statement of Issue
Should procurement of the non-nuclear Lance missile, and the XM-1 tank, be initiated in 1977?
What should be the production rate of the M-60 tank?
Background
The Army's force modernization Program includes initial procurement in 1977 of the Lance non-nuclear
surface-to-surface missile, initial long-lead procurement for the new XM-1 tank, and acceleration of
on-going production of the M-60 tank.
Alternatives
#1. Accept Army plans for 1977 procurement of the systems mentioned above. (Agency request)
#2. Cancel procurement of non-nuclear Lance and defer long-lead funding of the XM-1 tank. Recognize
a fact-of-life slip in the M-60 tank production build-up. (OMB recommendation)
#3. Maintain a constant M-60 tank production rate in the 1976-80 period and defer funding for
ancillary equipment. (Fiscal constraint level)
TOA ($Millions)
1975
1976
1977
1978
Alternative #1
186
379
656
564
Alternative #2
186
379
418
488
Alternative #3
186
379
297
470
GERALD
95
Analysis
Non-nuclear Lance - The Army has completed procurement of the nuclear Lance missile and now proposes
to procure a non-nuclear version to augment conventional artillery capability. The requirement for a
Lance armed with conventional warheads has been controversial both in Congress and within Defense
because this system overlaps existing Air Force capability. Both OMB and Defense staff have concluded
that Lance is not cost-effective. The Israelis have procured 104 non-nuclear Lance missiles and
carriers. This equipment will be completely delivered by December of 1975, and is not a factor in
the 1977 budget request. In the absence of additional foreign procurement, a decision to cancel
non-nuclear Lance in 1977 would terminate the production line.
XM-1 tank - The Army program for 1977 includes initial production funds for the new XM-1 tank
leading to initial production in 1979 with full-scale production commencing in FY 1980. The Army
has been directed to test a Leopard II German developmental tank in competition with U.S. developed
prototypes. Because of delays in testing the modified Leopard II, the Army plans to select a winner
of the U.S. competition and to enter full-scale development prior to completion of tests with the
Leopard II. This puts the German tank under a heavy competitive disadvantage since the Leopard
must not only outperform its U.S. competition, but must provide cost savings at least equal to the
termination costs for the ongoing domestic contractor.
The alternative would rephase the program to permit evaluation of the modified Leopard II tank, con-
sistent with the Defense commitment to the Germans to provide a competitive opportunity for the Leopard II
as part of the NATO Standardization program. Rephasing the XM-1 program to permit competition with the
Leopard II was raised by the 1976 House Appropriations Committee report. If the HAC proposed reductions
are sustained, the program will probably be forced to slip one year.
M-60 tank production - The Army has undertaken to increase its tank inventory and has significantly
expanded its M-60 tank production capability by opening a second source for hull and turret castings.
Production of tanks is planned to rise from 662 in 1976 to 886 in 1977. This is motivated by inventory
drawdowns experienced as a result of the 1973 Middle East War, by higher reestimates of requirements
to meet attrition losses, and by a decision to convert two combat divisions from infantry to armor.
GERALD
96
The recommended alternative supports the Army's decision to increase tank production but
recognizes a fact-of-life slip in the production of tanks procured with 1976 and prior year funds.
The Army program is based on achieving a tank production rate of 104 per month by March 1977. Delays
in selecting a second source for hull and turret castings have caused a seven-month slip in achieving
this production rate. This allows the funding of about 170 tanks to be deferred from 1977.
The fiscal constraint alternative further reduces the 1977 tank program by smoothing production
rates over the 1977 to 1980 time period. This would shift funding from earlier to later years with
inventory objectives still being achieved by 1980. A disadvantage of this alternative is that tank
production capability, which has just been expanded, will not be fully utilized. In addition to the
production rate adjustment, the fiscal constraint alternative defers funding of some ancillary
tank equipment (a laser range-finder and solid state computer) to permit more complete operational field
testing of these systems before commitment to production. The following table compares M-60 production
rates under all three alternatives.
Alternative 1
Alternative 2
Alternative 3
1976
662
662
662
1977
886
716
623
1978
649
649
623
GERALD
1979
786
786
623
.8
1980
171
341
623
FORD
LIBRARY
Total
3,154
3,154
3,154
Agency Request: Alternative #1. The Army considers these items of high priority.
OMB Recommendation: Alternative #2. Continue to support Army modernization efforts but recognize fact-of-
life changes in the M-60 tank and phase the XM-1 tank program to allow competition with the German
Leopard II tank. Cancel non-nuclear Lance.
97
Naval Forces Modernization - Objectives and Programs
The major objectives of the naval forces modernization programs are to:
- Increase the overall size of the combat fleet from 496 ships at the end of 1975 to 541 by
the end of 1984.
- Improve the capability against enemy cruise missiles by introducing an improved air defense
missile system into the fleet.
- Maintain a carrier force control of the seas and to project power ashore.
- Improve anti-submarine capability to protect sea lanes.
- Replace aging support ships to supply and maintain the operating forces.
The major 1977 programs proposed by DOD to accomplish this are:
- Maximum procurement of the Patrol Frigate combat ship to serve as convoy escorts.
- Initial funding for a new class of smaller carriers.
GERALD
- Purchase the first destroyer equipped with the new air defense missile system and provide
FORD
initial funding for a missile equipped nuclear strike cruiser.
LISARAY
- Continued procurement of nuclear attack submarines.
- Acquisition of fleet oilers and destroyer tenders.
The recommended alternative fully supports planned procurement of Patrol Frigates and new
destroyer/cruisers. The alternative modifies the proposed program by (1) adjusting attack
submarine funding to recognize shipyard capacity constraints, (2) deferring lead funding for
the new carrier to permit better program definition, and (3) slowing down support ship replace-
ment to allow for a Navy reassessment of support requirements.
98
Issue Paper
Department of Defense
1977 Budget
Major Warships: Cruisers/Destroyers
Statement of Issue
How should procurement of nuclear and conventionally powered cruiser/destroyers be phased?
Background
The Navy has identified as a high priority requirement an improved air defense capability against
Soviet cruise missiles.
Defense plans to initiate procurement of a mix of nuclear and conventionally powered destroyers
and cruisers equipped with the Aegis air defense missile system to meet this need. The first ship,
a modified DD 963 destroyer, (DDG) is planned for 1977 and would be conventionally powered. The
second ship, a strike cruiser, with some offensive as well as defensive capability, is planned for
1978 and would be nuclear powered. Last summer, the President amended the 1976 budget to provide
advanced funding for the ship but Congress deleted the funds requested. Title VIII of the 1975
Authorization Bill requires all major warships to be nuclear powered unless the President determines,
and informs the Congress that it is not in the national interest.
The current production plan is as follows:
1977
1978
1979
1980
1981
Conventionally powered destroyers
1
2
2
2
832910 P. FORD
Nuclear powered cruisers
1
1
1
Alternatives
#1. Fund a conventionally powered destroyer in 1977 and plan for a nuclear powered cruiser in
1978; the President must make a Title VIII determination in conjunction with the 1977 budget. (Agency
request and OMB recommendation)
95
#2. Fund a nuclear powered ship in 1977 and a conventional powered ship in 1978; a Title VIII
determination is not required in 1977.
#3. Slip the planned Navy program for one year; no Title VIII determination is required in
1977. (Fiscal constraint level)
TOA ($ Millions)
1975
1976
1977
1978
Alternative #1
1,029
1,073
Alternative #2
1,173
1,120
Alternative #3
1,029
Analysis
Defense plans to procure a mix of nuclear and conventionally powered destroyer/cruisers
as a feasible compromise between a more cost-effective but politically unacceptable all conventional
force and a very costly all nuclear fleet. The Navy desires to introduce the Aegis air defense
system into the fleet as early as possible in order to counter the Soviet cruise missile threat.
The Navy now appears to have overcome Aegis development problems and this complicated but highly
capable system appears ready for deployment.
Alternative #1 provides for the most rapid introduction of the Aegis into the fleet since the
lead ship, a derivative of the DD 963, would be relatively simple to design and build. The ship
could be available by 1982. The design of the nuclear strike cruiser, on the other hand, is as
yet not well defined. Even if the ship were fully-funded in 1977 as provided by alternative 2,
its delivery date could probably not be earlier than December 1983, the currently planned date.
While alternative #1 will require a Title VIII determination by the President, such a determination
can argue that (a) early deployment of a new air defense capability is essential and this can only
be provided by funding a conventionally powered ship; (b) we are still committed to the construction
of a nuclear powered cruiser but full-funding of this ship in 1977 would be premature.
GERALD
Alternative #3 allows large 1977 savings with penalty of at least a year's delay introducing
the Aegis missile system into the fleet.
FORD
Agency Request/OMB Recommendation: Alternative #1. This will require a Title VIII determination
LIBRARY
by the President in 1977 and will provide for the earliest possible introduction of the Aegis air
defense system into the fleet.
100
Issue Paper
Department of Defense
1977 Budget
Aircraft Carrier Funding
Statement of Issue
Should advance funding be provided in 1977 for a nuclear aircraft carrier?
Background
The Navy plans to retain a force of 13 aircraft carriers. In September, during the 1977 Defense
program review, the Secretary of Defense directed the Navy to develop a new carrier type instead of
continuing to build large follow-on carriers of the Nimitz class (90,000 tons). The intent of the
smaller carrier is to reduce investment and operating costs but the specifics remain undefined.
The new carrier will require extensive design work and the development of a new nuclear propulsion
plant. The cost of the first ship is budgeted at $1,900 million, of which $200 million in advance
funding is included in the 1977 request (about the same as a follow-on Nimitz class) In addition,
about $250 million will be required in R&D funds, mostly for development of a nuclear plant.
The funding profile for the first of a new size nuclear carrier (CVNX) is as follows:
($ Millions)
1977
1978
1979
CVNX
200
300
1,400
Alternatives
#1. Fund $200 million in advance procurement for the CVNX in 1977. (Agency request)
#2. Provide no funding for the CVNX in 1977. Defer procurement one year to permit better
definition of ship characteristics. (OMB recommendation)
FORD if LIBRARY 078438
101
TOA ($ Millions)
1975
1976
1977
1978
Alternative #1
-
-
200
300
Alternative #2
-
-
I
200
Analysis
There are three considerations that argue against funding advance procurement for the carrier
in 1977.
- The design characteristics are not defined. So little is known at this point about what
the ship will be like and the specifics of its power plant that the 1977 funding is no more
than a convenient number.
- Many in the Navy are skeptical about the cost-effectiveness of the new type carrier. The
cost of the first 50,000 ton carrier will be at least as great as a Nimitz class carrier
and it is likely to be less capable. The departure of Secretary Schlesinger removes the
prime catalyst for this program.
- The CVNX procurement in 1977 assumes both a 13 carrier force and replacement of Forrestal class
carriers after 30 years of service. However, the size of the force in the mid-80s is still
under discussion and a carrier force of 12 ships is a strong possibility. Also, service life
of the older Forrestal class carrier may be extended from 30 to 35 years.
Agency Request: Alternative #1. The CVNX represents a major new initiative by Defense aimed ultimately
at reducing procurement and operating costs by scaling down carrier ship sizes. Defense believes the
1977 funding would demonstrate its commitment to the new ship.
OMB Recommendation: Alternative #2. Continue to provide R&D funding only as evidence of Defense
commitment to the new concept. Deferment of production funding for a year will encourage a better
thought-out and planned program.
GENALD
102
Issue Paper
Department of Defense
1977 Budget
Support Ships
Statement of Issue
Should the Navy buy fewer oiler and destroyer tender support ships in 1977?
Background
Defense plans to modernize and expand its fleet of oilers from 16 to 19 by 1984. They plan to
procure nine new oilers for this program. The destroyer tender force will be maintained at 9. However,
7 new tenders are required to replace the aging fleet.
The procurement plan is as follows:
1975
1976
1977
1978
1979
1980
1981
Oilers
2
2
2
2
3
2
Destroyer Tenders
1
1
1
1
1
1
Alternatives
#1.
Fund two oilers and one destroyer tender in 1977 and in 1978. (Agency request)
#2.
Defer funding one oiler and one destroyer tender in 1977 and defer one oiler in 1978.
(OMB recommendation)
TOA ($ Millions)
1975
1976
1977
1978
Alternative #1
128
441
465
573
Alternative #2
128
441
102
431
GERALD
FORD
ANVUSIT
103
Analysis
Deferral of these ships would have minimal effect on the combat capability of the fleet
and would allow the Navy more time to reassess alternatives to satisfying support requirements.
Oilers - The Navy plans to increase its force of 16 oilers by 3 additional ships. At present,
half of the oilers are manned by Navy personnel and half by Military Sealift Command (MSC) personnel.
The new ships are to be Navy manned and built to Navy specifications. The Navy has not adequately
assessed options to man a greater portion of its oilers with MSC or union crews in order to increase
ship utilization and decrease ship requirements. A shift to more civilian manning would require
extensive retrofit of the new ships to meet commercial specifications. A delay in oiler construction
would permit the Navy time to reevaluate manning plans before commiting to a specific ship design.
Destroyer tenders - The Navy plans to replace existing destroyer tenders because of their
age (26 year average) and because of requirements generated by the new destroyers now being delivered.
At the same time, however, the Navy is embarking on an ambitious program to upgrade existing shore-
based repair facilities which perform the functions of destroyer tenders. The shore facilities are
in fact more efficient and capable than the tenders. It is not clear that the Navy continues to need
as many tenders as are now in the fleet to satisfy mobility requirements. Delay of the 1977 procurement
would allow time to consider placing greater reliance on fixed shore facilities than now exists.
Agency Request: Alternative #1. The Navy believes that deferral of support ship modernization is
not prudent.
OMB Recommendation: Alternative #2. Slowdown of support ship procurements will permit the orderly
consideration of lower cost methods of meeting requirements and not impact on force capability.
GERALD ANNURY ? FORD
104
Issue Paper
Department of Defense
1977 Budget
Attack Submarines and Patrol Frigates
Statement of Issue
Should patrol frigate and nuclear attack submarines procurement funding be rephased to reflect
industry capacity?
Background
Navy patrol frigates (FFG) are small ships with a guided missile capability. They are a relatively
inexpensive ship and can be constructed in one to two years faster than the 963 class destroyer. The
Navy plans to procure 60 of these ships through 1981 as a major step toward expanding the size of the
combat fleet. Nuclear attack submarines are tactical submarines used to search out and destroy enemy
submarines. Defense procurement plans are as follows:
1976
1977
1978
1979
1980
1981
Attack submarines
2
3
2
3
2
3
Patrol frigates
6
11
12
11
13
13
Alternatives
#1.
Accept Defense procurement plans for 1977 and 1978. (Agency request)
2. Shift funding of one attack submarine from 1977 to 1978. (OMB recommendation)
#3. In addition, reduce patrol frigate procurement by three ships in 1977. (Fiscal constraint level)
TOA ($ Millions)
1975
1976
1977
1978
Alternative #1
688
1,343
2,475
2,476
Alternative #2
688
1,343
2,226
2,707
Alternative #3
688
1,343
1,815
2,718
178817 GERALD
105
Analysis
Because of current shipyard backlogs, funding profiles can be adjusted for procurement of both
patrol frigates and nuclear submarines without any impact on production delivery dates.
Attack Submarines - Newport News and Electric Boat are the only shipyards currently capable of
producing nuclear attack submarines. The Navy estimates 60 months as the minimum required time
between ship award and delivery for this class of submarine. Consequently, the last of the 1977
ships can be awarded in January 1978 and still meet a January 1983 delivery date, as planned. By
1978, capacity problems are expected to ease sufficiently to permit procurement of three of these
submarines.
Patrol Frigates - The Navy has already reduced its planned buy from thirteen to eleven ships in 1977
and has indicated that even this number may be excessive given the capacity of the three yards that
are building these ships. Current estimates project that the time elapsing from contract award to
start of construction for the 1977 ships is nearly two years. Funding for three ships can be slipped
in both 1977 and 1978 without affecting delivery.
While the 1977 funding for both ships can be adjusted with no impact on ship delivery dates,
the recommended alternative provides requested procurement funding for patrol frigates. This reaffirms
the Administration's commitment to the program that most visibly increases combat fleet size. The
fiscal constraint alternative reduces funding for both ships in 1977.
Agency Request: Alternative #1. The Navy would oppose any reduction to its planned schedule as a
lack of commitment to the programs in question. Efforts to reduce 1976 funding for attack submarines
because of capacity problems were successfully opposed by Defense.
OMB Recommendation: Alternative 2. Defer funding of one nuclear attack submarine to 1978 because
of capacity constraints. Signal the Administration's approval of plans for significant increases in
combat fleet size by accepting the full Defense patrol frigate request.
GERALD
A.
FORD
LIBRABY
106
Issue Paper
Department of Defense
1977 Budget
Full Funding of Shipbuilding
Statement of Issue
Should shipbuilding be fully funded in 1977 for 1975 and prior year programs?
Background
The 1976 budget as presented to Congress requested 1976 funds to cover cost growth and escalation
experienced in prior year programs. However, Congress made some reductions in these funds and authorized
only the portion required for obligation in 1976, 197T, and part of 1977. The 1977 budget request fully
funds cost growth for all program years and escalation for 1976 and 1977. Escalation for 1975 and prior
year programs, however, is funded only for obligations required in 1977, with remaining funds of $846 M
deferred to 1978-80. The funding profile is as follows:
1976
1977
1978
1979
1980
1975 and Prior:
Cost Growth
932
532
Escalation
420
244
366
377
103
Alternatives
#1.
Incrementally fund escalation for 1975 and prior year programs as directed by the Authorizing
Committees, deferring $846 M of funding to 1978-80. (Agency request)
2.
Reestablish a full funding policy for all program years, adding $846 M to the shipbuilding
program total in 1977. (OMB recommendation)
TOA ($ millions)
1975
1976
1977
1978
Alternative #1
-
-
-
+366
Alternative #2
+846
-366
107
Analysis
From the early fifties through 1974, the Department of Defense adhered to a full funding policy for
shipbuilding and other procurement. "Full funding" means that before a contract is awarded, all the funds
necessary to complete that contract should be in hand. In the event that additional funding is required
before award but after authorization, necessary funds are provided by cancelling program. Additional
funding required after awards are requested in the next budget.
In the 1976 budget, when rising inflation rates increased the unfunded cost of 1975 and prior year
programs by over $1 billion, the President, in response to a request from the Secretary of Defense,
permitted a one-time exception to not fully fund the 1975 program. This avoided reductions in the planned
1975 program and presented Congress with a "fait accompli" since the $.9 B for escalation and cost growth
was committed before Congress provides the funding.
Congress, in the 1977 authorization, has taken a further step away from full funding and stated their
intent "to authorize only such funds for escalation in shipbuilding programs as are estimated to be
obligated in the current fiscal year and the next following fiscal year."
In the 1977 budget, Defense is proposing to return to full funding for the 1976 and 1977 programs
but to continue to incrementally fund 1975 and prior year escalation.
The merits of full funding rest on the proposition that the estimated end cost of a procurement,
particularly of a major weapons system, should always be clearly visible and completely covered, both
at the time of authorization and throughout construction. In this way, programs are not bought into on
the basis of artificially low cost; cost increases are seen in their entirety when they occur and provide
an opportunity to realistically reassess program. Future year program funding is not committed in advance
to past year program completion.
Agency Request: Alternative #1. Defense believes incremental funding of 1975 prior year escalation is
a marginal deviation from the full funding concept and in line with congressional action on the 1976 budget.
Defense would point out that full funding of prior year program escalation is a certain target for con-
gressional reductions.
OMB Recommendation: Alternative #2. We should avoid any further compromise of the full funding principal.
GERALD
&
FORD
LISAARY
108
Tactical Air Forces Modernization - Objectives and Programs
The objective of the Air Force 1977 tactical air modernization programs is to increase our ability
to defeat a major air/armored attack by the Warsaw Pact against NATO in Central Europe. Specific
objectives are:
- Improve the air-to-air combat capability, both quality and quantity, to maintain air
superiority.
- Provide increased support to the ground forces with particular emphasis on destroying tanks.
- Provide the capability to detect and intercept low flying aircraft.
The objectives of the Navy tactical air modernization program are to:
- Improve its defense capability against anti-ship missiles.
- Provide an air combat fighter to replace the F-4.
The major 1977 programs proposed by DOD to accomplish this are:
Air Force
- Continued procurement of the F-15 fighter and initial procurement of the F-16 fighter as
replacements for the F-4 aircraft.
- Continued procurement of the A-10 aircraft for close air support of ground forces.
- Continued procurement of the AWACS (airborne warning and control) aircraft for aircraft
detection and battle management.
FORD & LIBRARY GERVLD
109
Navy
- Continued procurement of the F-14 fighter and A-7 attack aircraft.
- Development of the F-18 aircraft to supplement the F-14 and A-7 aircraft.
- Continued development and procurement of several tactical air-delivered missiles.
The recommended alternative provides for continuation of all major Air Force procurement
programs but, except for the F-16 program, at slower rates than planned.
With respect to the Navy, the alternative provides for planned F-14 procurement but delays
development of a new air combat fighter pending a thorough design competition. In addition, the
alternative proposes termination of several uneconomic naval aircraft production lines and the
cancellation of a marginal missile development program.
CERALD 1888017 FORD
110
Issue Paper
Department of Defense
1977 Budget
CONDOR Missile
Statement of Issue
Should the CONDOR missile be cancelled?
Background
Since 1968 the Navy has proposed the initial production of this long-range air-to-ground missile.
However, because of reliability problems, high cost and questionable utility, production has been denied
by either the Secretary of Defense or Congress. Last year, despite wide opposition from Defense staff,
CONDOR procurement was at the last moment included in the 1976 budget.
Alternatives
#1. Fund the Service request for procurement of the CONDOR missile starting in 1976. (Agency request)
#2. Cancel the CONDOR procurement program in 1976. (OMB recommendation)
TOA ($ millions)
1975
1976
197T
1977
1978
Alternative #1
--
86
10
49
65
Alternative #2
--
--
:
--
Analysis
Aimed at designing a missile capable of long-range (60 mile) air delivery against heavily protected,
high value targets, the development of CONDOR began in the mid-1960's and has not yet been successfully
completed.
GERALD
?
0803
111
The following considerations argue against procuring the CONDOR and for cancelling the program:
Procurement is premature in view of the continued lack of missile reliability. Recent Navy tests
found the missile unsuitable for service use because of reliability problems.
Even if technical deficiencies are corrected, the missile has significant operational limitations.
It can be used only under clear weather conditions; its large size and low speed make it vulnerable to
anti-air defenses.
CONDOR is very costly and will be procured only in small numbers. The Navy now plans to procure
800 missiles at a procurement cost estimated by Defense of about $600 M, including costs of ancillary
delivery equipment.
There are attractive competitors to CONDOR both in the inventory and under development. The Walleye
guided bomb (5,000 is the current inventory) and the Harpoon missile are examples.
The alternative assumes that the CONDOR missile is not worth its costs and should be cancelled.
Agency Request: Alternative #1. The Navy wishes to procure a limited number of CONDOR missiles to provide
a specialized capability to attack at stand-off ranges, heavily defended high-value land-based targets.
OMB Recommendation: Alternative 2. Terminate the CONDOR program in 1976. There is considerable Defense
staff support for the view that CONDOR is not worth the cost.
GERALD
R.
FORD
1898817
112
Issue Paper
Department of Defense
1977 Budget
F-18 Development
Statement of Issue
Should the Navy reopen comeptition for a new air combat fighter?
Background
The Navy Air Combat Fighter (NACF) will replace F-4 fighter and A-7 attack aircraft. The F-18
design was chosen by the Navy in May 1975, on the basis of a congressionally-directed competition
between the F-16 and F-17 air combat fighter prototypes. While the F-16 was selected by the Air
Force, the Navy chose the F-18, a derivative of the competing F-17 prototype.
Alternatives
#1. Initiate full-scale development of the F-18 at a pace which will allow replacement of F-4s
to start in 1982. (Agency request)
2.
Recompete industry designs for a new NACF. (OMB recommendation)
TOA ($ Millions)
1975
1976
19TQ
1977
1978
Alternative #1
20
110
23
346
638
Alternative #2
30
5
113
396
Analysis
The F-18 design evolved as a compromise between performance requirements desired by the Navy
and the restriction imposed by Congress to select an aircraft from the F-16/F-17 competition. The
F-18 design that was chosen, however, has several deficiencies:
GERALD
113
Since the Air Force and Navy chose different aircraft designs, cost advantages of a common
system cannot be realized.
The F-18 only barely satisfies minimum Navy requirements especially with respect to range
and payload. It falls far short of goals that the Navy desires.
Although conceived as a low cost aircraft, F-18 program costs are already estimated to be
comparable to those of procuring additional F-14s and A-7s. F-18 costs are likely to rise
as the Navy attempts to upgrade F-18 performance characteristics. Since important elements
of the Navy are known to prefer the F-14 to the F-18, there is little motivation for the
Navy to restrain F-18 costs.
The OMB recommendation assumes that recompeting the aircraft without the constraint of choosing
an F-16 or an F-17 derivative may yield alternative designs that would approach Navy performance
goals at acceptable costs. Several contractors appear confident that better solutions than the F-18
can be found. If such an alternative were found, the Navy would then be strongly motivated to keep
costs below the threshold imposed by the F-14 options. The OMB recommendation differs from the
views of congressional critics, who wish the Navy to delay the F-18 and more thoroughly consider F-16
derivatives in the interest of greater commonality.
Agency Request: Alternative #1. DOD believes that the requested development program is essential
in order to prevent a gap in Navy fighter availability during the early 1980s and attack aircraft
in the mid-1980s, and that recompetition is not likely to produce more cost-effective alternatives
than the F-18. Also, a delay in the F-18 program would raise total systems costs.
OMB Recommendation: Alternative #2. Reopen design competition for a new Navy Air Combat Fighter.
This will delay introduction of a new combat fighter by about one year, but may produce more acceptable
alternatives than the F-18.
BLEALD
114
Issue Paper
Department of Defense
1977 Budget
Tactical Aircraft Procurement
Statement of Issue
Should the procurement rate of new Air Force aircraft be reduced?
Background
The Air Force tactical air forces are being modernized through procurement of three aircraft: the
F-15 air superiority fighter, the A-10 for close air support of land forces, and the Airborne Warning
and Control System (AWACS) for command and control of the air battle. The Air Force plans to spend
$2.7 billion in 1977 on these aircraft. In light of structural problems with the A-10 and foreign sales
potential in the F-15 and AWACS, it may be prudent to stretch out procurement of these aircraft.
Alternatives
#1. Build up the monthly procurement of A-10s from a rate of 5 per month in 1976 to 13 per month
in 1977; procure 6 AWACS aircraft and 108 F-15s in 1977 and 1978 (Agency request)
#2. Hold production of the A-10 to 5/month through 1977; procure 3 AWACS per year in 1977 and 1978;
procure 72 F-15 aircraft in 1977 and 108 in 1978. (OMB recommendation)
#3. Hold production of the A-10 to 2/month--the minimum sustaining rate--through 1977, keeping the
AWACS and F-15 rates the same as Alternative 2. (Fiscal constraint level)
TOA ($ millions)
1975
1976
1977
1978
Alternative #1
1,501
2,101
2,794
2,677
Alternative #2
1,501
2,101
1,692
2,278
Alternative #3
1,501
1,975
1,524
2,278
GERALD
LICENSE
115
TMP
Analysis
A-10. The A-10 is an aircraft designed around a large gun which can destroy tanks and other ground
targets. During recent fatigue testing of the A-10 airframe, a major unanticipated structural failure
in the fuselage developed after the gun was fired. This is a serious problem which must be thoroughly
understood and corrective action taken. Alternatives 2 and 3 delay increasing the planned procurement
rate of A-10s until the aircraft fix has been completed and demonstrated. Alternative 2 reduces 1977
TOA by $393 million; alternative 3 by $561 million.
AWACS. DOD plans to procure a total of 34 AWACS aircraft for worldwide contingencies with the NATO
theater driving the force size. Efforts are underway to encourage European countries to purchase some
of the 34 aircraft, but the outcome of these efforts is uncertain. The buy of 6 aircraft in both 1977
and 1978 will give the U.S. 27 aircraft and will reduce the incentive for European countries to partici-
pate in the procurement. If the 1977 procurement level were reduced to 3, it would give the European
countries more time and incentive to make a positive decision regarding procurement. The risk of such
a cutback would be higher unit procurement costs for those procured in 1977. Alternative 2 reduces 1977
TOA by $188 million.
F-15. Defense plans to purchase 108 aircraft in 1976 and in 1977. The OMB alternative of 72 aircraft
in 1977 assumes that at least 36 F-15 aircraft can be sold to foreign buyers in 1977, allowing the F-15
production line to be maintained at an efficient rate of 9 per month. Israel has already expressed
72
strong interest in the F-15. While the rate of F-15 introduction into the Air Force would be slowed,
F-4 aircraft could be retained in active inventory for an additional year without force or readiness
degradation. Alternative 2 reduces 1977 TOA by $521 million.
Agency Request: Alternative #1. Defense will resist any slowdown in the rate of tactical aircraft
modernization. F-15 and AWACS are the top priority Air Force modernization programs.
OMB Recommendation: Alternative #2. Continue tactical aircraft modernization but at a slower rate
than proposed.
116
Issue Paper
Department of Defense
1977 Budget
Aerospace Overcapacity
Statement of Issue
Should industry overcapacity be reduced by discontinuing several inefficient Navy aircraft
production lines?
Background
Defense currently supports 11 major aircraft prime contractors. However, the annual requirement
for new production military aircraft is not sufficient to maintain most of these contractors at
economical production levels. In many cases, aircraft lines are producing well below economic rates.
This issue examines the Navy's aircraft procurement program with a view to terminating those production
efforts whose principal justification is the maintenance of a "warm base" rather than procurement
aimed at filling major voids in the inventory at economical rates of production.
Alternatives
#1. Fund the Navy's request for procurement. (Agency request)
#2. Fund a Navy procurement program which cancels continued production of the A-4M, A-6E,
E-2C, and C-130 type aircraft. (OMB recommendation)
#3. In addition to Alternative 2, cancel continued production of the EA-6. (Fiscal constraint level)
TOA ($ Millions)
1975
1976
1977
1978
Alternative #1
1,926
1,994
2,122
2,129
Alternative #2
1,926
1,994
1,720
1,712
Alternative #3
1,926
1,994
1,609
1,596
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117
Analysis
The following table compares stated Defense requirements and inventory levels for several Navy
aircraft that are being maintained in production at low, uneconomical rates. The table shows that
with the exception of the EA-6, inventories either meet or show a surplus above required levels.
Defense
End 197T
Surplus (+)
Requirement
Inventory
Deficit (-)
A-4 (light attack)
198
238
+40
C-130 (tanker, electronic surveillance
and drone control)
68
68
A-6 (long-range attack)
219
310
+91
E-2C (early warning)
63
72
+9
OK
EA-6 (long-range attack and
jamming)
85
67
-18
A-4
DOD plans to reopen production lines for the procurement of only 36 A-4M aircraft during the
transition quarter through 1978 period. A planned transfer of all remaining Navy A-4's to the Marines
will satisfy the total requirement for these aircraft. No additional A-4 aircraft need to be purchased.
C-130
The C-130 family turbo-prop cargo aircraft has been in production at Lockheed's Georgia plant
for almost 20 years. The contractor's C-130 production line has been supported principally by foreign
sales at a level of only three aircraft per month. Hence, the very expensive airframe cost of $9
million each. In 1978 the Navy proposes to procure three of these aircraft to launch drone targets
and for a special communications mission.
FORD
ADDRESS
118
The need to enhance the target launching capability with this aircraft is not compelling. To
the extent that any of these special communications missions for C-130 aircraft are valid, existing
inventory aircraft should be modified for the purpose. Should foreign support of this line diminish,
there would be no way to justify the cost of these procurements.
A-6
This is the Navy's all-weather medium attack aircraft produced at a 12 per year rate. The
Secretary directed the Marines to transfer all Marine A-6's to the Navy and, hence, the requirement
for this aircraft has recently been reduced from 17 to 12 squadrons leaving the Navy with excess
quantities of A-6 on hand. There is no justification for continuing to procure this aircraft. The
quantities on hand are sufficient to maintain the total force until the next generation medium all-
weather attack aircraft is ready for procurement in the late 1980's.
E-2C
The E-2C is the Navy's early warning aircraft. Production is planned at a 6 per year rate. The
current approved requirement is for 63 such aircraft through 1982. Our present inventory includes
65 aircraft, and planned procurements of the E-2 through FY 1976 build this inventory in excess of
the requirement until normal operating attrition reduces the inventory to 64 aircraft in 1982. Continuing
to produce this aircraft at one every-other-month can no longer be justified. More selective application
of the E-2 assets to those carriers deploying to high threat environments will preclude major loss
of readiness in the fleet.
EA-6B
The EA-6B is the Navy's electronic warfare aircraft and is produced at the rate of 6 per year.
The basic purpose of this aircraft is deep interdiction missions against enemy logistics bases where
penetration must be made through a heavy electronic countermeasures environment. About 40% of the
total requirement for the EA-6 is for Marine Corps, to satisfy an interdiction mission which may be
inappropriate as a Marine Corps function. The Marines normally limit air support to the immediate
land battle. If the Marines transferred assets for interdiction to the Navy, existing assets would
be more than sufficient to meet requirements.
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119
Three of these aircraft (the A-6E, EA-6B, and E-2C) are all currently in production at the
Grumman Aerospace Corporation. Curtailing all 3, or even 2 of the 3 programs will have a significant
impact at Grumman. As nearly all of Grumman's business base is absorbed by the Navy aircraft programs,
the dollar values shown for Alternatives 2 and 3 have been adjusted to reflect the cost increases
which affect other Navy aircraft programs at Grumman.
Agency Request: Alternative #1. The Navy believes that continued low-rate production of these
aircraft is justified in order to maintain a "warm base" for aircraft systems not needed in significant
numbers in the inventory to provide for replacement and modernization of existing inventories. There
is however, some Defense staff support for terminating these lines with the possible exception of
the EA-6.
OMB Recommendation: Alternative #2. Cancel aircraft procurement programs where requirements have
been met. The Navy should aim at modernizing with suitable modifications of aircraft produced in
economic quantities.
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Issue Pa,
Department of Defense
1977 Budget
Advanced Tanker/Cargo Aircraft
Statement of Issue
Should the Air Force seek authorization to commence buying this type of aircraft in 1978?
Background
The Advanced Tanker/Cargo Aircraft (ATCA) will be a militarized version of a commercial wide-body
jet aircraft, such as the Boeing 747 or McDonnel1-Douglas DC-10. It will be used as both a tanker and
a cargo aircraft. The service request includes funds to demonstrate the feasibility of the approach
but does not provide for procurement.
Alternatives
#1. Conduct a feasibility demonstration only. (Agency request)
2. Initiate procurement of an Advanced Tanker/Cargo Aircraft in 1978. Limit purchases to a
maximum of 60 aircraft with the balance of the needed lift capability provided by modifying commercial
aircraft. (OMB recommendation)
TOA. ($Millions)
1975
1976
1977
1978
Alternative #1
62
0
Alternative #2
62
300
Analysis
DOD has identified a large unsatisfied requirement for additional airlift capability to meet its
NATO requirements on a timely basis. A low-cost plan to obtain this additional capability by modifying
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121
110 wide-body aircraft owned by commercial air carriers has twice been rejected by Congress. That
proposal had an estimated cost of $.8 billion over 15 years.
DOD also can start to consider a replacement aircraft for its fleet of 600 KC-135 tanker aircraft
which were acquired in the 1950's and have become expensive to operate and maintain.
The DC-10, 747, and L-1011 wide-body jets currently in production could be adapted without major
modifications to meet the Defense cargo and tanker aircraft needs. One wide-body jet tanker, for
example, has the capacity of 3-5 KC-135 tankers. Thus, replacing some numbers of KC-135 with a
smaller number of wide-body tanker/cargo aircraft would offer large operating economies.
The wide-body jet manufacturers are currently experiencing severe financial problems with at least
two of the manufacturers each facing losses of up to $1 billion on their program. Future business
prospects are low with the distress conditions existing in air transportation. Thus, the manufacturers
are eager for new business, and highly-competitive bidding could be expected for a new military tanker/
cargo program.
DOD has proposed only a prototype demonstration in 1977 with no follow-on plans for procurement.
The acquisition cost would average $30-50 million per aircraft when procured.
An alternate plan, which would help meet the airlift and tanker needs, take advantage of the favorable
competitive situation and would be more salable for Congress, involves:
GERALD
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- Buying 60 tanker/cargo aircraft at a cost of about $2.5 billion.
FORD
- Modifying 50 commercial aircraft at a cost of $.46 billion.
Procurement could be initiated in 1978. Defense would present a plan involving purchase of new aircraft
and modifications to the Congress. Approval to proceed would also be contingent upon Air Force agreement
to reduce the KC-135 tankers on an agreed ratio of no less than two for each advanced tanker/cargo air-
craft delivered, thus reducing future operating costs.
Informal discussions indicate the Air Force will support the above plan. OSD staff, however, prefers
the commercial aircraft modification plan only despite slim chances of Congressional approval.
122
Agency Request: Alternative #1. Limit funding to a prototype demonstration only. Continue to press
on an advanced tanker/cargo aircraft and Congressional approval to modify existing commercial aircraft.
OMB Recommendation: Alternative #2. Present a plan to Congress to purchase 60 tanker/cargo aircraft
and modify 50 commercial aircraft with initial procurement funding in 1978.
GERALD ABPROIT f. FORD
123
Strategic Forces - Objectives and Programs
The objectives of the 1977 strategic forces modernization program is to maintain a credible
deterrent by:
- Preserving the capacity to absorb a first strike and effectively respond against any
aggressor.
- Being prepared to launch a range of appropriate attacks, including attacks limited in
terms of targets and numbers of weapons.
- Being perceived as equal in overall capability to the forces of any opponent or combination
of opponents.
The major 1977 programs proposed by DOD to accomplish this are:
- Continued engineering development and initial full-scale procurement of the B-1 strategic
bomber.
- Continued development and procurement of the Trident submarine and missile system.
- Development of options for future deployment of improved intercontinental ballistic
missiles that could be launched from fixed silos or mobile launchers.
- Continued development of ballistic missile warhead accuracy improvement and long range
cruise missiles.
- Maintenance of a technology base for ballistic missile defense systems.
- Improvements in strategic force command, control and communications.
The recommended alternative makes no adjustments in the proposed strategic modernization program.
The alternative assumes, however, that any expansion or acceleration of this program that may be
necessary in the light of SALT developments should require specific Presidential guidance and approval.
GERALD LIBRARY FURD
124
Issue Paper
Department of Defense
1977 Budget
Minuteman III Missile Procurement
Statement of Issue
Should Minuteman III Intercontinental Ballistic Missile (ICBM) procurement be discontinued after
1976?
Background
The Minuteman III ICBM carries up to 3 Multiple Independently Targetable Re-Entry Vehicles (MIRV's),
is deployed in fixed, hardened silos in the North-Central U.S., and is the only U.S. ICBM currently
in production. The last scheduled procurement of 50 missiles in 1976 meets all remaining requirements
associated with the current deployment of 550 missiles, a number consistent with the Vladivostok SALT
framework. The Air Force has not requested funding for continuing procurement in 1977, but the Defense
Secretary may add funds for this purpose to the Defense request.
Alternatives
#1. Discontinue procurement of Minuteman III after 1976 (Agency request and OMB recommendation)
#2. Keep the production line open by procuring 60 Minuteman III missiles per year in 1977 and 1978.
(Possible revised Agency request)
TOA ($ Millions)
1975
1976
1977
1978
Alternative #1
298
289
Alternative #2
298
289
322
340
GERALD
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Analysis
125
Continuing Minuteman III production beyond 1976 was a principal item in the SALT-contingency budget
amendment submitted by Defense but not yet approved by the President. If funds for continued production
of the missile are included in the 1977 budget, this would preclude a visible Presidential decision
later in possible response to SALT developments. Defense staff estimates that this decision can be delayed
until February with no substantial cost penalty. A delay beyond June might incur sizable cost penalties.
If a SALT agreement is achieved with MIRV limitations as proposed in the Vladivostok accord, then
continued deployment of Minuteman III is not necessary and would be at the expense of less vulnerable
missiles currently planned for undersea deployment.
Agency Request: Alternative #1 but may be changed to Alternative #2. Defense may assert that continued
Minuteman III production is a necessary hedge against SALT developments.
OMB Recommendation: Alternative #1. If it is necessary to continue production in view of SALT develop-
ments, this can be done later through visible Presidential action.
GERALD
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1858817
Small
Agencies
GERALD R. FORD LIBRARY
This form marks the file location of item number
1-2
as listed on the pink form (GSA Form 7122, Withdrawal Sheet)
at the front of the folder.
1977 Presidential Review
Small Agencies
Table of Contents
*United States Information Agency
*Board for International Broadcasting
*Overseas Private Investment Corporation
Arms Control and Disarmament Agency
Office of the Special Representative for
Trade Negotiations
Council on International Economic Policy
Inter-American Foundation
Foreign Claims Settlement Commission
*Selective Service System
American Battle Monuments Commission
U.S. Soldiers' I and Airmen's Home
National Security Council
LIBRARY :
*Issue paper, agency appeal letter, or
background paper follows summary.
United States
Information
Agency
UNITED STATES INFORMATION AGENCY
Comments
Agency requested modest program increases and several
large Voice of America radio construction projects.
OMB recommends (1) deferral of 1976 VOA construction
project in the Philippines, already appropriated, (2)
denial of all 1977 program increases, including VOA
construction, and (3) cessation of low priority VOA
language broadcasts (Baltic languages, Greek, etc.)
and activities in countries of minor foreign policy
importance (mostly African and Latin American). Agency
appeals the Philippine project and restoration of
program to level only slightly below that of 1976.
See attached paper and appeal letter.
Budget
Full-time
Authority
Outlays
permanent
(In thousands of dollars)
employment
1975 actual
243,358
240,193
8,662
1976 current estimate
273,230
268,787
8,650
1976 OMB employment ceiling
XXX
XXX
9,046
Transition quarter current estimate
72,989
69,217
XXX
1977 agency request
274,600
275,100
8,945
1977 OMB recommendation
246,057
252,933
8,452
Effect of OMB recommendation
on agency request
-28,543
-22,167
-493
1978 estimate
281,519
273,194
8,452
FORD
if
GERALD
UNITED STATES INFORMATION AGENCY
The initial agency request of $309M BA included only minimal programmatic
increases but contained a number of large Voice of America radio construc-
tion projects. Given current budget policy, OMB recommends disallowing
all increases and the radio construction projects (deferring the Philippine
radio construction project already appropriated in 1976.)
Further, OMB recommends reducing current low priority agency operations
as follows:
$ M
Close lower priority country programs (approximately 20)
6.5
Close individual lower priority information centers
1.5
Discontinue VOA languages (approximately 10)
5.7
Reduce media output
4.2
Cut India book program, etc.
1.6
Reduce other support operations
1.9
While these have been identified by USIA as their lowest priority
operations, the agency argues that most of these cuts should not be
made. The agency believes a policy of detente makes USIA activities
all the more important to our foreign policy. Further, the agency
points out that some of these cuts would be unpopular with vocal
minority groups in this country.
The country programs to be closed are largely in sub-Sahara Africa and
Latin America. The list of potential languages to be cut includes
Estonian, Latvian, and Lithuanian, and Greek. In both instances, the
agency argues opposition in this country to these cuts would be damaging
to the administration even though those country programs and those
languages are of little importance to the attainment of our foreign
policy objectives.
UNITED STATES INFORMATION AGENCY
WASHINGTON
D RECTOR
November 17, 1975
Dear Mr. President:
In the past eight years USIA has made a substantial
contribution to reducing the growth of Federal spending. The
Agency's real resources (constant dollars) as of Fiscal Year
1976 are 20% less than they were in 1967. In the same period
the USIA staff has been cut by more than 20% -- a reduction of
2, 774 positions.
While USIA has already been thus reduced, we recognize
fully the need to hold down the growth of Federal spending at this
time. Accordingly, we are now significantly lowering our orig-
inal budget proposals for Fiscal Year 1977.
I am concerned, however, that the cut in the 1977 budget
allowance for USIA set by OMB would greatly weaken the Agency
when it is challenged to pursue around the world the ideological
struggle that is inherent in the policy of detente. Detente seeks
to replace a confrontation of arms with a competition of ideas.
USIA is a principal instrument in this competition. If its capa-
bilities to wage this vital struggle are damaged, critics would
charge that the Administration was giving away an advantage to
the Communist countries. Furthermore, the influence of our
country in world affairs has been altered significantly by events
of the last decade. Now, in a universe of nations interdependent
more than ever, the United States must not weaken its ability to
communicate with and persuade others about the strength of our
values, the wisdom of our policies and the integrity of our
leadership.
The President
of the United States
-2-
USIA requested budget authority of $309.1 million. OMB
has allowed $246.1 million, a reduction of $63. 0 million (20.4%).
We believe that the results of a cut of this magnitude would be
damaging to the Administration and the nation.
We have searchingly reexamined our request and can find
ways to take a substantial cut but one with less drastic effects than
the OMB allowance. We propose for USIA a 1977 budget authority
of $274.6 million -- $34.5 million (11.2%) below our earlier request.
To achieve this reduction, we would defer all Voice of America
construction in Europe and modernization in the U.S. and forego
additional funding for new posts and new program activities.
In addition to the impact we foresee on the controversy
about detente, let me mention some of the other implications of a
cut of the size proposed by OMB.
It is not possible to take such a slash in USIA resources
without sharply cutting the Voice of America. We estimate that
perhaps 10 of the 35 languages in which VOA now broadcasts
would have to be dropped. Most of these language broadcasts
have the backing of determined and militant ethnic constituencies
with influential supporters in the Congress and the media. Protest
among these constituencies across the country would be severe if
it became necessary for us to drop several language services and
would ultimately be directed against the Administration.
The OMB proposals would also require that USIA cease
operations in as many as 20 countries. National priorities dictate
that these cuts would be concentrated in Africa and Latin America.
This would bring protests from the governments of those countries,
from the Black Caucus in Congress and from Black constituencies
in the United States. The charge would be made that this large
scale exit meant that the Administration did not care what happened
in those African countries and did not consider them important
enough to merit American attention. The same kind of reaction
would greet the closing of a substantial number of our operations
in Latin America and would echo through the Spanish-speaking con-
stituencies who are quick to protest that the government ignores
them.
-3-
The OMB proposal would impound funds already appropri-
ated to construct VOA relay transmitters in the Philippines and
deny 1977 funds requested for that purpose. While we accept the
fiscal need to defer VOA construction clsewhere, we respectfully
submit that aborting the Philippine project would have serious
consequences. These transmitters would replace the VOA facility
on Okinawa which is scheduled to close in May 1977 as a result of
the Reversion Agreement with Japan. The loss of those trans-
mitters, without replacement, would reduce the Voice of America
in China and elsewhere in Asia. This result could be seized upon
and exploited by critics of the Administration's foreign policy.
For all these reasons, I felt that I must appeal to you for
relief from the proposed cut of $63.0 million (20. 4%) in the USIA
1977 budget request. While the amounts we are considering here
are relatively minor in the whole U.S. budget, we believe we could
make an appropriate contribution to the cause of reducing the growth
in Federal spending if our request were cut by the amount we now
propose: $34.5 million (11. 2%).
Respectfully,
James Keogh Keogh
Board for Inter-
national Broad-
casting
BOARD FOR INTERNATIONAL BROADCASTING
Comments
The Board seeks on appeal its original request which
would maintain current Radio Free Europe and Radio
Liberty operating levels, improve pension plans ($1.2M)
and replace some old, low-powered transmitters with,
high-powered ones ($2.9M). In addition to denying
these increases, OMB recommends a cut in Radio employment
($1.2M) and a reduction because of recent appreciation
of the dollar against the deutsche mark, ($4.5M). The
Board argues there should be no employment cuts beyond
the 550 made since 1972 and that the deutsche mark is
unlikely to remain depreciated against the dollar.
Budget
Full-time
Authority
Outlays
permanent
(In thousands of dollars)
employment
1975 actual
49,800
49,858
6
1976 current estimate
64,500
64,499
7
1976 OMB employment ceiling
XXX
XXX
7
Transition quarter current estimate
17,968
17,968
XXX
1977 agency request
62,546
62,546
7
1977 OMB recommendation
52,160
52,160
7
Effect of OMB recommendation
on agency request
-10,386
-10,386
-
1978 estimate
56,300
56,300
7
BOARD FOR INTERNATIONAL BROADCASTING
United States of America
Suite 430
1030 Fifteenth Street, N.W.
Washington, DC 20005
202/254-8040
November 11, 1975
Honorable Gerald R. Ford
President of the United States
The White House
Washington, D. C. 20500
Dear Mr. President:
The Board for International Broadcasting is
cognizant of the fiscal problems and constraints with
which OMB must contend in its effort to stop the
spiralling increase in the cost of operations of the
U. S. Government. In recognition of this problem, the
Board reduced its final 1977 budget request by almost
four million dollars, or over 6 percent, when compared
to the amount authorized for fiscal 1976. However,
the additional cuts of almost 20 percent recommended
by OMB, coupled with those generated by the Board,
would reduce RFE/RL to an inefficient operating level.
Throughout the Board's Congressional hearings and
during Floor debates, repeated references were made to
expanding the role of the Radios to broadcast--as would
an uncensored local station--to other countries and
areas of the world where there is a restriction in the
free flow of information. The Board believes that
discussion of this nature reflects Congressional support
for and understanding of the mission of the two Radios
and underlines the necessity for at least maintaining
the status quo.
The Radios face some unique problems that arose
because of previous operating decisions. These problems
must be resolved to insure the Radios' ability to
effectively function. They fall into three major areas:
antiquated and underpowered transmitter equipment;
operational dependence on the valuation of one foreign
currency; and labor unrest stemming from a large number
of recent terminations and the lack of improvements in
pension plans.
- 2 -
1. Funding authority for new transmitter equipment
was received in fiscal 1976, marking the first time new
hardware was purchased in over a decade. During this
same timeframe, jamming of the Radios continued at a highly
sophisticated and powerful level in four of the six target
countries. Other broadcasters increased their power
dramatically with stations which had been on the air with
50 or 100 kilowatts, building 1,000 kilowatt or even larger
facilities. In addition to the power increase by other
broadcasters, many new countries entered the field with
very powerful equipment, thus causing interference due to
crowding of the band and power overlap. The funds requested
this year ($2,900,000), coupled with those of last year
($3,080,000) would provide installations on politically
stable soil (West Germany). It should be noted that the
situation on the Iberian peninsula, the single overriding
point which generated favorable response to the FY 76 request
for equipment, has not stabilized. The ability of the Board
to increase its transmitter strength in West Germany would
strengthen our position, should anything happen at either
site in Iberia. Moreover, it would put us in a position to
help USIA/VOA if problems arose for them in Morocco or
Greece. As it stands now, if there were a loss of facili-
ties in Iberia, there are no adequate facilities available
within a reasonable period and the Board would be dependent
upon the use of USIA/VOA facilities for an interminable
length of time.
2. The Deutsche Mark/Dollar relationship of 2.6742 to
1 used for our budget request appears extremely optimistic.
As you are aware, and as has been pointed out during the
last few years of Congressional testimony, the Radios are
uniquely vulnerable to currency fluctuations, as more than
70 percent of their expenditures are in Deutsche Mark. The
average for the DM/$ ratio so far this fiscal year has been
2.55 to 1, with the average for last year being 2.45 to 1.
It would be very stabilizing and helpful to the operations
of the Radios to have the legislation specify the level
actually authorized. Such language was incorporated in the
House International Relations Committee Report 94-329 in a
letter from Comptroller General Staats to Congressman Slack
suggesting that a specific reserve to cover possible
currency devaluation would insure a stable operating level
and allow management to concentrate on management without
worrying about currency fluctuations. There still seems to
be some reservation among Congressional staff members as to
whether, in fact, the wording of our current legislation
allows for authorization of a supplemental appropriation
request to cover currency devaluation. There is general
is
FORD
GERALD
LIBRARY
- 3 -
concern among Radio management and our Board about this
operational stability in the event there is a currency
decline, and it would be most helpful to have this very
major point clarified.
3. Almost 80% of the Radios' operational costs are
related to staff salaries and benefits. Consequently,
any budget cuts would result in further reductions in
staff. During the last three years, more than 550 people
have been terminated by the two organizations, nearly all
at the middle or lower levels--a reduction in staff of
25 percent. The last round, in June 1975, was accompanied
by a near-strike and continuing litigation.
Staff reductions of this magnitude cannot and should
not be continued within an organization that is not only
expected to maintain the level of its mission but has
received funding authority to increase programming.
A sizeable increase in funding pension costs was
approved in fiscal 76 to allow the Radios to make minimum
compliance with the pension reform legislation covered in
ERISA (Employee Retirement Income Security Act). The
funding level requirements of this legislation have put
an increased burden on the financial resources of the
Radios which is being spread over the next few years. The
present pension plans in force at both Radios have not been
upgraded in line with the rest of private industry in over
five years. The modifications in the pension plans requested
in the fiscal 1977 budget presentation are of a "catch-
up" nature, allowing the Radios' plans to become more in
line with similar organizations and private industry as a
whole.
In closing, I would like to make a short comment
about the Board's own budget. With the steady inflationary
rise in all areas, even a small cut will cause more problems
than one might anticipate. In order to fund the October
legislated pay raise, the Board has been required to request
that its budget authority of $400,000 for fiscal 1976 be
increased by $10,000. We are aware that our office rental FORD
increased by 15% to 20%; the service support contract
&
with GSA has increased by 10% to 15% and we can assume
inflationary increases in telephone, air travel, etc.,
LIBRARY
all of which makes even a minor budget reduction difficult
to absorb. It should be noted that the House International
Relations Committee Report covering the authorizing legis-
lation for Fiscal 1976 called for an increase in the Board's
oversight responsibilities.
- 4 -
The Board . believes that, in light of present circumstances,
the budget request for fiscal 1977 as presented to OMB merits
approval.
With warm regards,
Sincerely yours,
David M. Abshire
Chairman
BRAR,
Overseas Private
Investment
Corporation
OVERSEAS PRIVATE INVESTMENT CORPORATION
OMB
Comments
Agency requested personnel ceiling increases
of 9 in 1976 and 14 in 1977 to expand and
reorient its program. Agency requires no
budget authority and outlays are usually
negative. OMB mark would allow no personnel
increases. Agency has appealed OMB mark.
(Narrative attached)
Budget
Full-time
authority
Outlays
permanent
(In thousands of dollars)
employment
1975 actual
-
+ 12,307
120
1976 current estimate
-
- 24,574
117
1976 OMB employment ceiling
XXXX
XXXX
130
Transition quarter current
estimate
-
- 2,751
XX
1977 agency request
-
- 35,214
153
1977 OMB recommendation
-
- 35,690
130
Effect of OMB recommendation
on agency request
-
(-) 476
(-) 23
1978 estimate
-
- 41,220
130
FORD is LIBRARY
OPIC Personnel Increase
The Overseas Private Investment Corporation provides:
- insurance to U.S. investors in developing countries covering losses from currency inconvertability,
expropriation, and war; and,
- direct loans and loan guarantees to encourage U.S. investment under its finance program.
Congress has mandated that 1) the insurance program be shifted to private-sector auspices with OPIC serving
only as a reinsurer; and, 2) the finance program be shifted to another agency after 1979 while concentrating
more on small U.S. businesses and the poorest developing countries. In requesting increased positions, OPIC
primarily cites the desire to increase the size of the finance program in order to give it a fairer test of
its potential. OMB doubts that a larger program is necessary to permit evaluation of its effectiveness. In
fact, OMB questions whether OPIC programs should continue at all and plans a study of them during the next
year. For the interim, the agency has 13 vacant positions which can be filled to meet any priority workload
increases.
Agency Request: A ceiling increase of 9 positions for 1976 and an increase of 14 for 1977.
OMB Recommendation: No ceiling increase for 1976 or 1977.
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LIGARAY
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Arms Control and
Disarmament
Agency
ARMS CONTROL AND DISARMAMENT AGENCY
Comments
Agency requested increases primarily for additional
research contracts on safeguards applications. OMB
recommends the expanded safeguards research, but
not other marginal research and personnel increases.
Agency will not appeal OMB mark.
Budget
Full-time
Authority
Outlays
permanent
(In thousands of dollars)
employment
1975 actual
9,410
9,726
167
1976 current estimate
10,500
10,200
175
1976 OMB employment ceiling
XXX
XXX
167
Transition quarter
current estimate
2,700
2,800
XX
1977 agency request
11,900
11,300
178
1977 OMB recommendation
11,645
11,100
175
Effect of OMB recommendation
on agency request
-255
-200
-3
1978 estimate
11,900
11,300
175
FORD LIBRAST
GERALD
?
FORD
Office of th
Representati
Trade Negoti
Special Representative for Trade Negotiations
Comments
Agency requested 17 additional personnel to
carry out provisions of the Trade Act of 1974.
OMB mark would allow a 1977 ceiling increase
of 15 persons. Reductions are expected after
trade negotiations terminate. Agency agrees
to OMB mark.
Budget
Full-time
authority
Outlays
permanent
(In thousands of dollars)
employment
1975 actual
1,850
1,471
45
1976 current estimate
1,980
1,971
45
1976 OMB employment ceiling
XXXX
XXXX
45
Transition quarter current
estimate
495
545
XX
1977 agency request
2,650
1977 OMB recommendation
2,490
62
2,500
Effect of OMB recommendation
2,400
60
on agency request
- 150
- 90
-2
1978 estimate
2,500
2,500
60
GERALD FORD FIBRARY
Council on Inter-
national Economic
Policy
Council on International Economic Policy
Comments
DK
Agency requested funds to continue programs
at last year's level. OMB mark would reduce
personnel ceiling by 1 in 1976 and 2 in 1977.
BA and outlays at requested levels would
allow Agency to absorb 1975 pay cost increase
for 1977. Agency agrees to OMB mark.
Budget
Full-time
authority
Outlays
permanent
(In thousands of dollars)
employment
1975 actual
1,600
1,379
28
1976 current estimate
1,650
1,724
30
1976 OMB employment ceiling
XX
XX
29
Transition quarter current
estimate
412
520
XX
1977 agency request
1,670
1,452
30
1977 OMB recommendation
1,670
1,452
28
Effect of OMB recommendation
on agency request
0
0
-2
1978 estimate
1,670
1,670
28
FORD LIBRARY & 02
Inter-American
Foundation
INTER-AMERICAN FOUNDATION
of
Comments
Agency has proposed increased reliance on
Latin American currencies, generated by
earlier U.S. assistance, to finance
overseas program costs. This allows
program growth within a dollar budget of
$7.0 million in 1976 ($3 million below
the budget request) and 1977. OMB mark
reduces 1977 personnel ceiling by 4.
Agency concurs in OMB mark.
Program
Full-time
Limitation
Outlays
permanent
(In thousands of dollars)
employment
1975 actual
6,497
7,732
62
1976 current estimate
7,000
7,940
71
1976 OMB employment ceiling
XXX
XXX
74
Transition quarter current
estimate
1,750
1,601
74
1977 agency request
7,000
8,159
74
1977 OMB recommendation
6,936
8,098
70
Effect of OMB recommendation
on agency request
-64
-61
-4
1978 estimate
6,936
7,224
70
GERALD FORD LIBRARY
Foreign Claims
Settlement
Commission
FOREIGN CLAIMS SETTLEMENT COMMISSION
Decrease in 1977 reflects completion of Micronesian
and Hungarian claims programs. The reduced staff
will conduct residual activities of past programs,
and compile an overall index digest of Commission
decisions. Current negotiations with East Germany and
Czeckoslovakia may result in additional activity.
Ok
Budget
Full-time
authority
Outlays
permanent
(In thousands of dollars)
employment
1975 actual
1,260
1,271
62
1976 current estimate
1,400
1,673
67
1976 OMB employment ceiling
XXX
XXX
67
Transition quarter current
estimate
375
630
XX
1977 agency request
775
870
19
1977 OMB recommendation
775
870
19
Effect of OMB recommendation
on agency request
XXX
XXX
XXX
1978 estimate
540
685
16
GSRALD FORD
Selective
Service
System
SELECTIVE SERVICE SYSTEM
Comments
Agency is requesting $26 million annually to
maintain a military mobilization manpower plan-
ning capability and to conduct a one-day regis-
tration each year. OMB mark would disestablish
the agency and require the Department of Defense
to assume the planning function within available
resources. Emerging from a similar posture just
prior to World War II, the military services
were able to induct or recruit men at rates
that exceed those required under current plan-
ning contingencies.
Budget
Full-time
authority
Outlays
permanent
(In thousands of dollars)
employment
1975 Actual
45,000
48,465
2,121
1976 current estimate
37,500
39,500
1,325
1976 OMB employment ceiling
XXX
XXX
1,707
Transition quarter current
estimate
8,300
9,000
1,325
1977 agency request
27,200
27,000
1,094
1977 OMB recommendation
0
0
0
Effect of OMB recommendation
on agency request
-27,200
-27,000
-1,094
1978 estimate
0
0
0
GERRAL & FORD
Issue Paper
DEPARTMENT OF DEFENSE
1977 Budget
Selective Service System
GERALD
Statement of Issue
Should the Selective Service System be disestablished?
TORO
Background
Last year you directed major program adjustments in the System. Local board operations are being
phased down in 1976 while a new standby draft system is designed and tested and an annual registration
procedure is evaluated.
The new system is totally dependent upon an annual registration for young men born in a given year.
This annual registration will provide the data necessary for a central computerized record of registrants
from which initial mobilization requirements would be met basically by accelerating the induction of
non-resisting draftees.
The registration and its related services to registrants make up the major part of the 1977 budget
request calling for $27 million and 1,100 people. The steady state costs of maintaining the standby
system would be similar and are considerably higher than an OMB estimate last year of $18 million and
400 people.
The new system represented a middle ground decision by you last year between the Selective Service
System recommendation for active operation of local boards and an OMB recommendation for no registration
and retention of only a planning function. The middle ground position was supported by DOD as the minimum
level to meet its mobilization requirements.
Alternatives
#1. Continue planning for a once a year registration as part of a standby draft system. (This is
consistent with your decision of last year and is the initial agency request.)
#2. Eliminate pre-registration but retain the Selective Service System in a deep standby as a
separate agency with planning and reserve training functions only. Minor changes in law would be required.
(This is Director Pepitone's preference and is acceptable to DOD.)
#3.
Eliminate pre-registration and the Selective Service System as an independent agency and assign
residual planning and reserve training functions to the GSA Federal Preparedness Agency. Major changes in
law would be required. (This is also acceptable to DOD.)
2
#4.
Abolish the Selective Service System completely and require DOD to absorb residual mobilization
planning functions within existing resources. Major changes in law would be required. (OMB recommendation)
Analysis
GERALD
R.
1976
Alternative
FORD
Jul 1-
Employment
Budget Authority/Outlays
1975
1976
Sep 30
1977
1978
1979
Levels
($ Millions)
LIBRARY
BA
0
BA
0
BA
0
BA
o
BA
0
BA
o
1977
Alternative #1
45
48
38
40
8
9
27
27
26
26
26
26
1,094
Alternative #2
45
48
38
40
8
9
8
8
8
8
8
8
200
Alternative #3
45
48
38
40
8
9
6
6
6
6
6
6
100
Alternative #4
45
48
38
40
8
9
0
0
0
0
0
0
0
The Selective Service System is well along in planning a one day nationwide registration at over
50,000 temporary registration sites on March 31, 1976, utilizing over 100,000 uncompensated volunteer
registrars. A major publicity campaign with nationwide advertising would precede the registration and
provision is made for a make-up registration. The Advertising Council has agreed to undertake this
campaign and a contract has been signed. National support has been pledged by such organizations as the
American Legion and VFW. Director Pepitone asserts that other alternatives were carefully studied,
including a 2-3 day plan and a registration-by-mail plan. He is convinced that the one day registration
will succeed and is by far the best approach.
DOD and OMB believe that a one-day registration is not a good idea, whose implementation would
jeopardize the standby draft system, for the following reasons:
- Requiring 2 million young men to appear at a designated place on a designated day is a major
Government intrusion for a purpose that may not be too clear to the individuals involved.
- One day could be inconvenient to registrants, could be adversely affected by weather in local
situations and could result in long lines of impatient young people at some sites with a high potential
for disturbance.
- A poor turnout could result in adverse publicity with headlines focusing on the number who failed
to register.
- The high visibility could also awaken latent hostility toward the Government and foster counter
demonstrations, particularly at the large universities, where thousands of young men will have to
register.
3
Because of these reservations, the case for a standby draft system with pre-registration has been
reevaluated. DOD mobilization requirements for recruits and trained soldiers under worst case assump-
tions involving major combat in Europe lasting beyond 90 days were compared with actual World War II
experience in which there was no pre-registration and the Selective Service emerged from a War Depart-
ment planning activity. It was determined that while pre-registration provides a 30-45 day lead time
in delivering draftees, the extensive use of volunteers in the early days of a major conflict can be
anticipated to meet stated DOD requirements.
There would appear to be relatively little national security risk in moving to a deeper standby
system and eliminating the annual registration. This view is consistent with the likelihood that any
major war would be preceded by a period of growing world tension which might in itself require reacti-
vation of Selective Service.
As a related matter, the Selective Service System is deeply involved in operating the alternate
Service phase of the clemency program. This program must continue until those persons promised clemency
in exchange for alternate service have had the opportunity to perform their service. Residual activities
concerning this program will continue in FY 1977 and would need to be transferred elsewhere, probably to
the Labor Department, under Alternative #4. Actual workload involved at that time will be minimal.
Agency Request: Alternative #1. During the 1976 budget deliberations, both the Senate and the House
Appropriations Committees requested the Armed Services Committees to review the need for a Selective
Service System. It appears that hearings will be held early next year by the Armed Services Committees
and it would be well to defer action until after those hearings.
DOD Recommendation: Alternative #2 or #3. Some planning is essential to assure an orderly mobilization
if one is ever required. There was a significant amount of planning that preceded the successful World
War II reinstitution of the draft.
OMB Recommendation: Alternative #4. Most Americans believe the Selective Service System is a prime
example of a Government agency clinging to life when its mission is gone. There is a more than even
chance that the Congress will virtually eliminate the agency next year. By taking the initiative now,
we can demonstrate the seriousness of our purpose in cutting back unnecessary Federal Government activity.
GERALD
R.
FORD
LIBRARY
American Battle
Monuments
Commission
AMERICAN BATTLE MONUMENTS COMMISSION
Comments
Agency requested an increased level of maintenance and
two new construction projects. OMB mark deferred the
two projects and held maintenance to last year's
level. Agency has accepted OMB mark.
Budget
Full-time
authority
Outlays
permanent
(In thousands of dollars
employment
1975 actual
4,808
4,756
391
1976 current estimate
5,405
5,285
392
1976 OMB employment ceiling
392
Transition quarter current
estimate
1,457
1,407
--
1977 agency request
6,740
6,314
392
1977 OMB recommendation
5,855
5,814
392
Effect of OMB recommendation
on agency request
-885
-500
--
1978 estimate
5,855
5,800
392
FORD LIBRARY is BERALD
U.S. Soldiers'
and Airmen's
Home
U. S. SOLDIERS' AND AIRMEN'S HOME
OK
BERALD FORD
Comments
The Home's request reflects a level program
of 2600 members but includes budgeting for
future inflation. The OMB mark would pre-
clude budgeting for inflation. The Home
accepts the OMB mark.
Budget
Full-time
authority
Outlays
permanent
(in thousands of dollars)
employment
1975 actual
15,224
15,580
943
1976 current estimate
15,520
15,054
981
1976 OMB employment ceiling
---
---
1014
Transition quarter current
estimate
3,869
3,776
---
1977 agency request
15,453
15,321
966
1977 OMB recommendation
.
15,228
15,180
966
Effect of OMB recommendation
on agency request
-225
-141
0
1978 estimate
15,228
15,228
966
National
Security
Council
NATIONAL SECURITY COUNCIL
Comments
Agency requested 7 new positions for activities required
by the Freedom of Information Act and Declassification
Order. It also requested increased funding for contract
research, and for overhead and travel costs. The OMB
mark would allow additional part-time/temporary personnel
to be hired for FOI/Declassification workload but provides
no increase in permanent positions. It also allows modest
funding increases for overhead and travel, and partial
restoration of previous contract funding levels. The
Agency has agreed to the OMB recommendation.
Budget
Full-time
authority
Outlays
permanent
(In thousands of dollars)
employment
1975 actual
2,980
2,621
72
1976 current estimate
3,030
3,120
72
1976 OMB employment ceiling
XXXX
XXXX
72
Transition quarter current
estimate
650
780
XX
1977 agency request
3,480
3,550
79
1977 OMB recommendation
3,210
3,280
72
Effect of OMB recommendation
on agency request
-270
-270
-7
1978 estimate
3,210
3,210
72
CORO LISRARY &