Department of the Army Historical Summary: FY 1970


Management, Budget, and Funds

Organizational Developments

There were several organizational developments in diverse areas during fiscal year 1970. To capitalize on rapid advances being made in sensor, automatic data processing, and communications technology, an Army surveillance, target acquisition, and night observation (STANO) management structure was established on July 15, 1969. It consists of four elements: a STANO steering group headed by the Army's Vice Chief of Staff and including heads of departmental staff agencies and deputy commanders of major continental U.S. commands to provide broad guidance; a STANO systems manager and office within the office of the Army Chief of Staff to direct, co-ordinate, and expedite staff and major command actions in the STANO field; STANO offices within the departmental staff and major continental U.S. commands to centralize STANO activities within these organizations; and an operationally oriented test and evaluation facility at Fort Hood, Texas—Mobile Army Sensor Systems Test, Evaluation and Review (Project MASSTER) —established on October 1, 1969, with testing getting under way in February 1970. Under Project MASSTER, field tests of materiel and related systems are to be conducted to evaluate the potential of hardware and determine its impact on organization, concepts, and doctrine in the land combat system.

A STANO division was also established in the Office of the Chief of Research and Development to supervise research and development in connection with night vision, radar, sensors, and special purpose detectors (see chapter 9).

In another organizational development, the Assistant Chief of Staff for Intelligence requested and was granted relief of certain operational responsibilities connected with supervision of a number of class II activities. To permit the Army's top intelligence office to concentrate on staff functions, seven class II activities were transferred to the U.S. Army Intelligence Command during the period September 12-December 31, 1969. Another five were consolidated into one activity called the Intelligence Control Group on January 15, 1970, and on April 15, 1970, the U.S. Army Liaison Office of the Tactical Air Reconnaissance Center was discontinued,


leaving only three class II activities under the Office of the Assistant Chief of Staff for Intelligence.

Two independent Army studies made in 1968 and 1969 pointed out the need for the Comptroller of the Army to improve his organization in the Washington area in order to reflect the growing impact of automatic data processing and management information technology on financial management and reporting systems. In addition, manpower strength reductions were directed in fiscal year 1970. As a result of these influences, the U.S. Army Finance and Comptroller Information Systems Command was established on May 24, 1970. This command is a class II activity under the Comptroller of the Army and represents a consolidation of selected departmental elements within the Office, Comptroller of the Army, and two of his class II activities. The command provides central direction to finance and accounting functions Army-wide, prescribes applicable policies and procedures for financial management systems, operates a central bank for financial management data, provides automatic data processing (ADP) support to selected staff agencies, and provides finance services to Department of the Army military and civilian personnel.

Management Programs and Systems

In essence, resource related planning has as its mission the task of insuring that all possible program alternatives are explored and that the Army's resource management system provides necessary guidance. In the past year, potential budget levels were examined, and alternative investment and manpower programs that could be funded were developed and reviewed by the Army Staff. By the close of the fiscal year it appeared that the hoped-for phaseover from a Southeast Asia-oriented Army budget to a peacetime budget permitting a reasonable rate of modernization of the Army's equipment had been aided by resource related planning.

During 1968 it had become clear that defense expenditures in general, and Army funding in particular, would begin to feel the pinch as the United States phased down its Southeast Asia role and as domestic needs were accorded higher and higher priority. To evolve a sound analytic approach to the problem of developing a total Army budget during the expected period of constrained funding, the Secretary of the Army in January 1969 chartered a special study group in the Office of the Chief of Staff to examine the impact of reduced postwar budget levels. This effort, which came to be known as resource related planning, began to have application in late 1969, and in early 1970 it served to provide over-all guidance


in the development of the Army's program for the fiscal year 1972-76 period.

In addition to earlier and improved analysis of funding choices, substantial procedural revisions were made in the Army's resource management system. These revisions had first application in the analysis of the fiscal year 1971 budget and the fiscal year 1972-76 Army program, but it is anticipated that lessons learned will be profitably applied in the continuing effort to develop Army programs that make the best use of available funds.

An ad hoc Army financial management committee was convened during the period January 15-27, 1970, to examine and recommend improvements in Army organization and procedures for financial management. The Comptroller of the Army chaired the committee, which included representatives of the offices of the Assistant Vice Chief of Staff, the Deputy Chief of Staff for Personnel, the Deputy Chief of Staff for Logistics, and the Assistant Chief of Staff for Force Development.

In its analyses, the committee placed particular emphasis on the Army's ability to respond rapidly and effectively under the revised planning, programing, and budgeting system (PPBS) that became effective January 1, 1970. The revised system curtails the use of the program change request (PCR) as the primary vehicle for submission of recommended program changes, and provides that each military department will submit a program objective memorandum (POM), which will express program requirements within fiscal and logistic guidance issued by the Secretary of Defense.

Changes in Army financial management, stemming from the committee's recommendations, will accomplish the following improvements:

1. Formalize and document the direction of the programing function; retain it in the Office of the Assistant Vice Chief of Staff; redesignate the Director, Force Planning Analysis, as Director, Planning and Programing Analysis; and improve the analytical staff of that office to facilitate continuing critical analysis of the total Army program.

2. Replace the Program Budget Advisory Committee with the Select Committee, which has membership at the Deputy Chief of Staff level and is supported by two new subordinate committees—the Program Guidance and Review Committee and the Budget Review Committee—to enhance and expedite decision-making in the area of resource management.

3. Broaden the authority of the Director of the Army Budget to address all Army appropriations; establish a new resource review


and analysis group to provide the ability to effectively challenge budget submissions; and, concurrently, transfer responsibility for direction of the operation and maintenance, Army (OMA), appropriation from the Director of Army Budget to his Assistant Director for Operations.

The Keystone Management Systems Steering Committee, composed of general officers and chaired by the Assistant Vice Chief of Staff, continued efforts to improve the Army's basic resource management systems. The committee centered its attention on systems that affect authorizations and related personnel and equipment asset reporting.

The Weapon System Acquisition Improvement Program was directed toward preventing cost growth in the life cycle of weapon system acquisition by improving estimate procedures, controlling changes, assessing technical risk, exercising competitive procedures, and improving test and evaluation procedures. Immediate improvement was sought in all of these areas, while long-range attention was directed to the validation of cost estimates, project management, system definition, source selection, contractor performance measurement, and contract changes.

Selected acquisition reports—comprehensive, quarterly status reports of major systems managed within the Department of Defense—are the key recurring summaries received by the Secretary of the Army on the progress of designated systems and are the vehicles by which this progress is reported to the Office of the Secretary of Defense and to the Congress. They are prepared by project offices within the Army Materiel Command and are reviewed by the Department of the Army Staff and the Office of the Assistant Vice Chief. When the final report is forwarded to the Office of the Secretary of Defense, copies are returned to the originator, thus completing the management loop.

Selected acquisition reports summarize current estimates of operational and technical performance levels, milestone completion dates, and program costs. These current estimates are compared with the original plan and current program and any variance, such as schedule slippage or cost growth, is identified and explained. The selected acquisition report, although not a decision document, is a management tool designed to uncover problems and focus attention on matters which require decision by top management. It provides rapid insight and fosters greater understanding of complex systems which take years to develop. A selected acquisition report highlights program changes, funding requirements, and cost overruns, among other things.


In the past, estimates have varied from week to week and from agency to agency. The selected acquisition report now forces servicewide agreement on a unique set of estimates at a particular point in time. It provides a common reference point which makes it easier to reconcile one document with another.

Because of the increasing use of automated data processing in management activities, the Army in October 1969 published a master plan for the design and development of Army management information systems. This plan sets forth in some detail the framework within which all Army ADP (automatic data processing) management systems will be developed in the 1970-80 decade, assigning developmental priorities and employing a pyramidal model to emphasize the multidimensional problems associated with this development.

During the past year, the Army continued to develop a cohesive logistic management information system. Within this system are four guidance and reporting subsystems including the Supply, Maintenance, and Readiness Management Information System; the Integrated Transportation Management Information System; the Integrated Support Services Management Information System; and the Integrated Facilities Management Information System.

In the area of supply and maintenance, efforts were concentrated on expanding the design project to establish an integrated supply, maintenance, and materiel readiness reporting system into an approved plan for Army-wide implementation. Under this plan, the flow of management information from unit level up through intervening echelons to Headquarters, Department of the Army, would be dependent upon the collection, processing, and storage of management data and the output to management at all echelons. The implementation plan was published and co-ordinated within the Army Staff. The comments received as a result of this co-ordination were being evaluated as the year closed.

Further progress was also achieved in the development of the three other subsystems of the over-all Logistics Management Information System. Through a project designed to provide increased Army management at selected transportation echelons, the Stanford Research Institute provided support by conducting a study to determine the essential elements of information and management indicators required for the effective management of Army transportation. In the mission area of the Chief of Support Services, work continued on the development of functional system requirements for the property disposal portion of the Support Services Management Information System. The purpose of this system is to provide


information to measure performance, budgeting, and management of various logistic services, including food service, commissary operations, clothing sales, clothing issues, laundry and dry cleaning operations, and property disposal. As the year ended the functional system requirements for the property disposal portion of the over-all system were being staffed within Headquarters, Department of the Army, and with the major Army commands.

Development continued during the year on an integrated facilities system capable of providing accurate and timely information on Army real property resources and programs. Such information is needed by the Army Staff to develop costs associated with various courses of action, to reach decisions related to force structure, force readiness, and facilities planning and programing, and to provide functional managers and commanders at all echelons with the information required to manage real property.

In March 1970 the Warehousing Gross Performance Measurement System (WGPMS) and the Defense Integrated Management Engineering Systems (DIMES) were integrated. With this integration, manpower performance and utilization became an integral part of the total work planning and control, accounting, manpower, and budget systems. The integration places increased emphasis on method improvements and improved productivity. Army implementation delineates policies and responsibilities and applies to activities engaged in providing products and services such as supply depots, maintenance depots, inventory control points, terminals, shipyards and arsenals, industrially funded activities which utilize standard cost methods and engineered performance standards, and other selected activities determined by each Department of Defense (DOD) component. Subsequent to this action, DOD components indicated that the benefits and savings from the DIMES effort had not received proper recognition. As a result, in addition to examples of tangible savings which were rejected by the auditors for the cost reduction program, the Office of the Secretary of Defense was provided with examples which were not submitted because local interpretation considered they would not meet the criteria. Also, criteria were furnished that could be uniformly applied and result in more DIMES savings and benefits applicable to the cost reduction program.

In the last quarter of fiscal year 1969 the Department of Defense initiated a comprehensive servicewide system, called the Logistics Performance Measurement and Evaluation System, to improve the management of Defense installations and logistics. The system is a procedure for evaluating performance, identifying prob-


lems, initiating corrective actions, and setting goals. During fiscal year 1970, the first complete program year, the Army evaluated performance in twenty functional areas worldwide relating to materiel, procurement, maintenance, transportation, and facilities management. Where deficiencies were identified, actions were taken to redistribute the work load and adjust resources so that they were applied to the more essential activities.

Although the primary missions of installations vary, certain functions are common to them all. Installation commanders in every case are responsible for industrial-type operations involving real property, supply, maintenance, and other logistic services, and for city-manager-type activities such as dependent schools, service clubs, open messes, and recreational facilities. To promote efficiency and economy in installation operation, the Army in fiscal year 1970 developed basic doctrine, philosophy, procedures, and controls for installation management and standard organization for each type of class I installation. With post support and community activities standardized, the Army will have a common basis for training and assigning personnel to garrison duties, uniform command management standards for installation comparison, and a foundation for professional competition between installations.

The closeout of a number of installations under the general retrenchment related to American withdrawal from Vietnam left some installation commanders without adequate local resources to fulfill logistic support commitments. The impact upon the Interservice Logistic Support Program was substantial and led to a comprehensive study of the policies and principles of interservice, interdepartmental, and interagency support, which will be completed in the coming fiscal year.

The Army Commercial and Industrial Activities Program was also affected by the general curtailment. The necessity to conserve funds and manpower led major commands to re-evaluate installation support programs and select means that were less costly to the government. These actions generated increased interest in commercial and industrial activities and resulted in numerous inquiries from congressional committees, employee unions, and trade associations for justification of actions taken to convert activities to other methods of operation.

A deficiency identification system was implemented in the past year to make audit results useful on more than an individual report basis. The system includes the publication of automated print-outs, which highlight functional areas with the greatest concentration of deficiencies disclosed in audit reports, their monetary impact, and


those that are repeats. The presentation of data in this format enables staff agencies and commands to identify problem areas at a glance and schedule corrective actions in order of priority and where the greater economies may be achieved.

An evaluation of the Army Study System was completed during the fiscal year and recommendations were implemented on January 1, 1970. New procedures were developed that will make the system more responsive to the needs of Army managers, identify subjects that should receive early study attention, insure that adequate resources are assigned to priority studies, and improve the over-all management of the study system.

Budget and Funds

The Army's budget request for regular appropriations for fiscal year 1970 totaled $30,050.9 million in new obligational authority. Following reviews by the Office of the Secretary of Defense and the Bureau of the Budget, the President requested $25,929.5 million for the Army, and the Congress appropriated $22,446.2 million. The chronological development of this budget is traced in the table on the following page. A later supplemental budget produced an additional $1,134.9 million.


(In thousands of dollars)


Fiscal Year

Fiscal Year

Fiscal Year

Military personnel, Army




Reserve personnel, Army




National Guard personnel, Army




Operation and maintenance, Army




Operation and maintenance, ARNG




National Board for the Promotion of Rifle Practice




Procurement of equipment and missiles, Army




Research, development, test, and evaluation, Army




Military Construction, Army




Military Construction, ARNG




Military Construction, AR




Army Stock Fund




Army Industrial Fund




Army Management Fund



Consolidated Working Fund




Miscellaneous expired accounts







Army trust funds




Trust revolving funds




Miscellaneous receipts




Total budget outlays




The central fiscal agencies of the federal government continued to emphasize the need for priority attention to accrual accounting and reporting. The General Accounting Office and the Office of the Secretary of Defense conducted separate surveys within the military



New Obligational Authority a
(In millions of dollars)

Program Element

to OSD





(PL 91-171)


Military personnel, Army





Reserve personnel, Army





National Guard personnel, Army





Operation and maintenance, Army





Operation and maintenance, Army National Guard





National Board for the Promotion of Rifle Practice




Procurement of equipment and missiles, Army





Research, development, test, and evaluation, Army





Subtotal excluding construction






(PL 91-142)


Military Construction, Army





Military Construction, Army Reserve





Military Construction, Army National Guard





Subtotal, construction accounts





Total new obligational authority





a Figures may not add due to rounding.


departments to determine the propriety and effectiveness of implementation procedures and to identify and resolve problem areas. These and other related actions should result in achieving the ability to present and support the budget for fiscal year 1972 on the basis of accrued revenues and expenditures.

The Army placed increased emphasis on cost analysis in evaluating alternatives among weapons systems and forces. A systematic examination of the costs of interrelated activities and equipment makes it possible to determine the relative costs of alternative systems, organizations, and force structures. The Army applied cost analysis techniques to such areas as weapon and support systems, communications systems, force structures, and force units, as well as to materiel systems, theater Army, and total Army costs. Such analyses have been conducted in connection with a Safeguard system review; with the publication of handbooks related to redeployment and force change costs; with the surface-to-air (SAM-D) projects; with planning operations such as the joint Strategic Objective Plan; and with estimating methodology. To improve the technique, training courses were developed or improved at Defense and Army levels during the year.

Economic analysis also received increased attention. In 1969 the Department of Defense issued instructions covering economic analysis of proposed Department of Defense investments, which substantially broadened the range of problems on which a formal economic analysis is required. The Army issued its implementing regulation in June 1969, and in late 1969 extended the requirements for economic analysis into the fields of weapons systems and research projects for the first time. Economic analysis played an important role in the evaluation of base closures, such as the case of the Army Pictorial Center. It will make a substantial contribution to the Long-Range Stationing Study, under way at the end of the fiscal year, and was applied to major construction, fuel conversion, and such management systems as the integrated facilities system.

Based on data collected in Vietnam, the U.S. Army Field Operating Cost Agency provided the Army with detailed information on the operating costs of the 25th Infantry Division and the 1st Cavalry Division (Airmobile), including their normal slice of combat support and combat service support for fiscal year 1969. Selected Vietnamese units and U.S. units in Korea, Germany, and the continental United States were similarly analyzed.

Despite fiscal constraints, career attractiveness and the soldier's standard of living remained matters of major concern and attention. Some twenty personnel support programs were reviewed to


determine the impact of financial restrictions, and it was found that services had been reduced or temporarily suspended in a few instances. Indications were that deterioration would continue unless corrective measures were taken immediately. Three activities were chosen for immediate attention: medical service, commissary store operations, and laundry and dry cleaning services. These activities provide significant financial advantage to the individual and affect a large portion of the dependent and retired population. About $35 million in additional support was directed to these three major areas, and the Army Staff was directed to plan longer range improvements involving management, construction, and renovation of facilities. Support of these programs was to be governed by certain principles: services at acceptable standards must be supplied to all eligible personnel; appropriate funds and personnel spaces must be earmarked for these programs and the integrity of the earmarked resources preserved; resources support of these activities must be removed from competition with support for mission-type activities; and living standard requirements must be considered as the fixed cost of supporting a soldier, on a par with pay and not subject to reduction below acceptable levels.

Curtailment of resources had an effect on statistical information in the Army, and a number of services had to be reduced or eliminated. The Army Pocket Data Book was eliminated, and statistical surveys, sampling methods and techniques, and special statistical studies and consultative and advisory services had to be reduced.

As a part of the program of the Secretary of the Army to improve weapon system acquisition, the Army initiated Project ICE (improved cost estimates). This project has the dual purpose of providing valid cost estimates on specific systems and developing methodology and expertise for use in formulating estimates on other systems.

In the first phase of Project ICE the Army established five special task groups at separate commodity commands of the Army Materiel Command to perform life cycle cost estimates on selected systems. The first five systems were Lance, the M-60A1E2 tank, the armored reconnaissance scout vehicle, the Army area communications system, and the utility tactical transport aircraft system. The end products of these task groups were being reviewed and validated as the year closed, to assure a life cycle cost estimate with pertinent information for management decisions.

The second phase of Project ICE included seven additional systems and more deeply involves the project manager in preparing the estimate. Systems included in this phase are the heavy lift


helicopter, the improved Hawk, the mechanized infantry combat vehicle, the Bushmaster, and TACFIRE.

The recently begun third phase of Project ICE includes eight systems and is being carried out by the project managers. By performing the estimate, the project manager will be better able to relate the estimate to future managerial decisions. Systems included in phase three are the Cobra, the mobile assault bridge, 152-mm. ammunition, the TOW antitank missile, the Gama Goat, the Dragon antitank missile, the XM198 howitzer, and selected night vision equipment.

The Army phase of the joint Uniform Military Pay System (JUMPS-Army) progressed satisfactorily toward its implementation date of January 1, 1972. JUMPS is applicable to all components of the Department of Defense. However, each service will develop its own system and use data processing equipment peculiar to the unique characteristics of that system.

All pay accounts for military personnel on active duty with the Army will be maintained on magnetic tape at the Finance Center, U.S. Army (FCUSA), Fort Benjamin Harrison, Indiana, from the time an individual enters the Army to the time he is separated from the Army. Changes in pay will be forwarded to FCUSA via electrical communications from the member's station. Automatic data processing equipment will be used to post pay changes to individual accounts, to produce payrolls, to issue checks, and to prepare statements of leave and earnings.

Active pay accounts have been tested using the JUMPS procedures during the past five years. Actual payments, in check or cash at the option of the individual, have been made based on computations by the JUMPS computer. Definitive savings cannot be identified until all pay accounts are under JUMPS-Army. The peculiarities of processing incidental to the extraordinary movement of accounts into and out of the test environment preclude a factual determination of savings until such unique conditions are removed.

To an increasing extent the Army relies on independent, management-type, internal audit as a reliable means of appraising the effectiveness of its use of resources. In fiscal year 1970, with guidance provided by the Army Staff Audit Priorities Committee, the U.S. Army Audit Agency (USAAA) emphasized the programing and performance of audit work oriented toward specific problems.

In Vietnam, the requests of Army commanders were a primary consideration in audit scheduling. To take maximum advantage of limited audit resources, a policy of restricting audits to ninety


days elapsed time was followed. It is expected that audit activity will continue at a high level. Cessation or reduction of hostilities and the withdrawal of U.S. troops will initially increase rather than decrease audit requirements.

As a part of the problem-oriented approach, the Army Audit Agency increased its use of flash reports whereby commanders directly concerned were notified immediately of audit findings and recommendations where prompt corrective action was advisable. These flash reports frequently resulted in significant savings in dollars and improvements in operations.

In the area of cost reduction, the Army Audit Agency continued to validate savings claimed in operations by Army activities in order to assure that savings were accurate in accordance with Department of Defense standards.

During the year, the rate of change from manual to automated management systems, both on department and command levels, continued to accelerate. Many of these systems provide the primary source of information on which the management of Army resources—men, money, and materials—is based. Due to dependence upon the computer and the trend toward standardized computer systems, audit methods are undergoing major change. The Army Audit Agency recognized that an automated management system has to be reviewed during its design stage to assure that management needs are met and an efficient and responsive audit approach is developed. Accordingly, a systems audit division was established in Headquarters, USAAA, for the purpose of implementing audit participation in the development of major Army management and automatic data processing systems.

Also during the year, the Army Audit Agency performed a study of alternative means of auditing officer and noncommissioned officer open messes on a worldwide basis. In the future, open mess audits, which traditionally have been command responsibilities, will be conducted alternately by public accounting firms and by the Army Audit Agency.

Cost Reduction Program

Progress in the cost reduction program continued during fiscal year 1970, when $441.8 million was saved against a goal of $341 million. The actions taken in fiscal year 1970 were estimated to have a three-year savings of $843.8 million for fiscal years 1970-72 against a goal of $675 million. Several examples illustrate how the program has operated.

The Army saved $135,200 by obtaining a change in government


specifications for containers used to ship ammunition within the United States. After the specification change, the Army was able to utilize stock which had previously been considered excess.

Delay assemblies were being rejected in acceptance tests for excessive burning time and then scrapped. A value engineering study revealed that the units could be disassembled and the primer section replaced. Fiscal year 1970 savings will total $543,000.

Finally, the nose body assembly for the M126 bomb was previously cast from magnesium by a permanent mold method. An engineering study disclosed that savings amounting to $696,300 could be achieved in fiscal year 1970 by producing the nose assembly from extruded magnesium.

Because of the current period of austerity, greater emphasis has been placed on the need to obtain maximum efficiency from available resources.

Watervliet Arsenal, New York, was selected by the Office of the Secretary of Defense (OSD) to receive an outstanding unit award, and the Vice President of the United States made the presentation during the OSD cost reduction and management improvement program awards ceremony held on October 28, 1969. Selection was based on the outstanding support given the cost reduction program by the arsenal's top management, good program administrative practices, a low audit invalidation rate (2 percent) , and significant savings in relation to size, mission, and operating budget.

In addition to the outstanding unit award, individual awards were presented by the Vice President to Lieutenant Colonel James R. Vance of Fort Rucker, Alabama; Lionel P. Hernholm of the U.S. Army Combat Developments Command, Fort Belvoir, Virginia; and David E. Ciruli of the Pueblo Army Depot, Pueblo, Colorado. Seven individuals were nominated but not selected by OSD for awards, one individual was selected for special consideration, and two Army organizations were honored at a Chief of Staff awards ceremony on February 10, 1970, to recognize over-all excellence of unit cost reduction programs as well as noteworthy individual savings accomplishments.


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