Two

I am aware of three locally developed programs which provide asset visibility and the capability to redistribute materiel. programs were developed in USAREUR the Corps Asset Visibility (CAV) System and the Theater Critical Asset Visibility (TCAV) Program. At Ft Hood, a similar program to the CAV system was developed. In each case, the development costs were minimal. The programs consist of asset visibility files, loaded on a personal computer or mainframe, that compile asset data from supported units. This asset data is used to make redistribution decisions. The process is management intensive since it is accomplished off-line and requires manual processing of redistribution actions.

The Standard Army Retail Supply System (SARSS) will provide automated, on-line asset visibility and redistribution capability at the retail level. It is being developed by the Army Logistics Center. The eight year life cycle cost for SARSS is $926 million. The Selected Item Management System Expanded (SIMS-X) provides wholesale managers with Army-wide asset visibility of selected high dollar repair parts. Each transaction affecting asset balances is automatically generated by retail supply systems and forwarded to the wholesale manager. The Army Logistics Center has responsibility for software design of SIMS-X in the retail automated systems. The Central Systems Design Activity, an Army Materiel Command activity, has software design responsibility at the wholesale level. The design and implementation costs for SIMS-X in both the retail and wholesale automated systems are not separately identified. They are imbedded in the overall sustainment costs for each automated system.

The Objective Supply System (OSS) is a new Army program aimed at streamlining the supply system, reducing pipeline investment, and minimizing the administrative burden on our soldiers. The proof of principle test conducted from October to December 1988 cost $584,000. Funds in the amount of $4.5 million are programmed for continued prototype development and testing. Development and testing of OSS has been a joint effort by the Deputy Chief of Staff for Logistics, Department of the Army, the Army Materiel Command, and the Army Logistics Center.

Integration responsibility for these asset visibility systems is assigned to the Deputy Chief of Staff for Logistics. The lash-up of these visibility and redistribution systems is straight forward. The fielding of SARSS will eliminate the need for locally developed asset visibility systems. The capabilities designed in SARSS are automated, on-line, and exceed the capabilities of the local programs. SIMS-X reporting is imbedded in SARSS and requires no further integration. As discussed, OSS is undergoing further prototype development and testing. A decision on incorporating OSS in the Army's Standard Army Management Information Systems (STAMISS) will be made after testing and evaluation is completed later this year. The early participation of the Army's primary logistics design activities, the Logistics Center and Central Systems Design Activity, will assist in the integration of OSS in our STAMISS if the decision is made to proceed.

Mr. HOLTON. Thank you.

I would like to talk about some of the numbers that are being thrown around today. We are talking about 29 percent of Army inventory that is called inapplicable?

General MURRAY. Yes.

Mr. HOLTON. Other people might call it long supply or excess? I think you said-what-let us start with what does that 29 percent equate to in terms of dollars? What is 30 percent of your total Army inventory?

Mr. MILLS. Sir, the 29 percent equates to $3.5 billion.

Mr. HOLTON. The 29 percent equates to $3.?

Mr. MILLS. $3.5 billion.

Mr. HOLTON. $3.5 billion.

Mr. MILLS. Right.

Mr. HOLTON. Before, you said about 50 percent of that will eventually be used for something else.

Mr. MILLS. That is correct. There is—GAO——

Mr. HOLTON. Will develop some kind of use for about 50 percent. Mr. MILLS. Yes, sir. Half of that is held in what is called economic retention, and economic retention is, in fact, a demand based inventory level. It is based on the demands that we receive, but the fact that we have got assets that fully satisfy our authorized acquisition objective, but we have assets over and above that, and it says we have demand. It is cheaper to keep those assets, than throw them away because we are going to use them. They will draw down.

So half of that is in that economic retention, which is, in fact, a demand based determination.

Mr. HOLTON. OK. The other almost two billion, what is that?

Mr. MILLS. Part of it, sir, is 1.6 billion is in contingency retention. That includes things like Sergeant York assets held since the decision was made to not proceed with Sergeant York, that is—the Divad gun.

Mr. HOLTON. I understand the Divad gun. We are retaining parts for the Divad gun?

Mr. MILLS. Sir, they have not been disposed of. Sir, they have been held and been reviewed for application within the Department of Defense. For instance, on Sergeant York, there are some of the high cost components of Sergeant York that the Air Force is now going to use for some of their applications, and we will give those assets or sell them, I am not sure how the finances are worked out, but those assets are going to the Air Force. They are part of that 1.6 billion.

We have the old Sheridan reconnaissance vehicle that we use out in the National Training Center and we have a couple of other minor applications and we keep all the parts to support that Sheridan. The M-42 duster, goers, jeeps, etc., etc. The items are still used in the Army somewhere for some application, and we are retaining those assets to keep those fleets going without having to go out and buy more parts.

We will disassemble the engines when we need parts or we will do whatever, and that is part of 1.6 million of the balance. The rest of it is assets that we hold based on is a computer determination that says the end item will be in use somewhere in the Army for at

least 5 more years. That is what the balance of what is held. It is just a numeric level that says till we phase the end item out, we are going to keep these assets, and that is what all those assets are. Mr. HOLTON. I think I understand.

Mr. MILLS. All right, sir.

Mr. HOLTON. Although I am not sure.

If you would provide for the record also, maybe we can have a discussion over that.

Mr. MILLS. Certainly can.

[The following information was received for the record:]

There are three retention levels approved for above the Approved Force Acquisition Objective (AFAO). These are (1) Economic Retention Stock, (2) Contingency retention Stock, and (3) Numeric Retention Stock. Economic Retention Stock is that quantity determined to be more economical to retain for future peacetime issues instead of replacement by procurement. It is categorized as demand-based retention stock. Items in this category must have a reasonably predictable demand rate, and a cost to hold less than the future cost to procure.

Contingency Retention Stock is stock for which there is no predictable demand or quantifiable peacetime requirement. This stock would normally be allocated as potential excess stock, but specific considerations or potential use in contingencies justify retention. Examples of special considerations are assets retained to meet potential military contingencies for U.S. Forces, assets retained in expectation of foreign military demand not covered by Cooperative Logistics Supply Support Agreements, and/or special considerations involving non-military contingencies (that is, civil emergencies or natural disaster relief).

Numeric Retention Stock allows retention based on special management decisions. This recognizes unquantifiable economic reasons, potential use, market availability, weapon system application or storage capacity.

Mr. HOLTON. The final numbers I want to talk about are the $1 billion that were returned under the ASI Program, is that the right acronym?

General MURRAY. ARI.

Mr. HOLTON. ARI. Could you talk about that a little bit more, General? You said $600 million of that-what did you say? Give me an explanation.

General MURRAY. I said the $600 million of that would either be repaired or disposed of because it was determined upon inspection to be uneconomic or repairable. For every item that we repair, we have a maintenance expenditure limit. Maintenance expenditure limits is a monetary value based on the age and condition of the item to be repaired.

Mr. HOLTON. If these items had stayed at the base level or where they were supposed to have been repaired in the first place, would they have been repaired or would they have gone through this analysis, also?

General MURRAY. They would have gone through this analysis, also.

Mr. HOLTON. OK. So, we are doing this analysis at a higher level?

General MURRAY. Yes, that is correct.

Mr. HOLTON. OK. What about the other $400 million?

General MURRAY. Will be disposed of.

Mr. HOLTON. Why?

General MURRAY. They were returned during that era of the Property Disposal Office (PDO) freeze. They were returned back to us, to these depots, so that a disposal decision could be made at a

centralized and higher level, and they meet disposal criteria. We just did not want them disposed of in the field.

Mr. HOLTON. Because of the problems we have with the disposal? General MURRAY. Yes.

Mr. HOLTON. OK. Thank you, Mr. Chairman.

Mr. LANCASTER. Mr. Ray.

Mr. RAY. Yes, sir?

Mr. LANCASTER. Would you like to ask questions?
Mr. RAY. Yes, sir.

Thank you, Mr. Chairman.

General Murray, do the POMCUS sites come under your jurisdiction, the storage that we have for pre-positioned stocks?

General MURRAY. Yes, sir.

Mr. RAY. How many of those sites-that is not classified, I do not believe. Can you talk about it in open session? How many sites do we have?

General MURRAY. Sir, I believe the number is seventeen sites.

Mr. RAY. Seventeen. OK, sir. What are we doing? Are we continuing to rotate up to eight or use some of the material in those sites?

General MURRAY. Oh, yes, sir. The equipment contained in those POMCUS sites is exercised every year during the annual reforger exercise. When the units deploy from CONUS, Fort Riley, Fort Ord, etc., they move to those POMCUS sites, draw that equipment, inventory it, fuel it and move out and use that exactly as they would in a war time scenario.

When the equipment is returned, it is run through a maintenance cycle and returned to its storage.

Mr. RAY. OK. Can you, for the record, explain-take one site and explain generally what would be in that site, not in detail, but just in general terms.

General MURRAY. The equipment in a site are the major items of equipment and they mirror the equipment authorizations for the unit at Fort Riley, KS, for example.

That unit at Fort Riley has M-1 tanks, and it has M-1 tanks in its POMCUS site, to include all communications equipment, ammunition is located nearby, fuel is located nearby, radios, machine guns. It is go to war equipment. The units move carrying only their individual weapons by plane to an airfield, departure airfield in Luxembourg or Belgium, perhaps, and then are trucked into their sites, draw their equipment, and move out.

So, the equipment in those sites mirrors exactly what the unit has at Fort Riley, KS.

Mr. RAY. I happened to visit one of those sites in Germany about 1986, I believe it was, and the director in charge of the site had a good bit of problem with showing me any kind of list of what was in the site.

Is it computerized now or

General MURRAY. Yes, sir, it is.

Mr. RAY. So, you know what you have got there? You can update the

General MURRAY. Yes, sir.

Mr. RAY. I see.

General MURRAY. The on-hand inventories are computerized. In addition to that, the unit at Fort Riley, KS, has a list of the items that are in their storage sites, and they know that they must bring any items from Riley that are necessary but not in that site.

Mr. RAY. Yes, sir. This may not come under your general jurisdiction, but what sort of protection do we have for those sites? Would you know offhand, or would I need to go to somebody else?

General MURRAY. They are guarded generally by contract local nationals. We do not have any specific air defense cover over them, but they are guarded against terrorist acts.

Mr. RAY. I see. We do have, I think, in those areas, we have contracts with maybe the Government or Germany, contractors to keep our equipment in repair and so forth?

General MURRAY. Yes, sir, we do.

Mr. RAY. OK. On another question, depot officials told GAO representatives that it was cheaper to repair unserviceable components than to purchase some of the sixty million in excess serviceable assets that were in the supply system.

They seem to have a problem with that. It has been always my concern that we ought to-if we have got something that is serviceable and can be repaired-repair it. But they make an issue out of the fact that it may be cheaper from the depot's perspective to just use new parts and perhaps discard those repairable exchangeables. Would you comment on that?

General MURRAY. Sir, with your permission, I would like Mr. Mills to address that.

Mr. MILLS. Sir, Mr. Bilbray had asked that question before.
Mr. RAY. Oh, I am sorry.

Mr. MILLS. From the depot commander's perspective, they do have a problem. The depot's commanders are budgeted on a revolving fund, an industrial fund. If they program and budget to do 30 man years worth of work to repair an assembly, and then, all of a sudden, we say, no, we are not going to repair it, we are just going to replace it, and it takes him 2 man years to replace it, he is left with 28 man years worth of work that he has to pay people for for which he gets no productivity.

So, he loses money on that deal. When we finish our evaluation of what we want to do in that area, as part of it, we have to solve that problem, either by having a mechanism where we give him 28 more man years worth of work to replace that sort of thing.

From a depot commander's perspective, there is a problem to be solved, and that is what we are going to roll in to this study that we are doing.

Mr. LANCASTER. Mr. Ray, would you yield?

Mr. RAY. Yes, I will.

Mr. LANCASTER. For a follow-up on that?

If that is true, Mr. Mills, why cannot we just change the system? Why have you got to charge that 28 years? It would appear to me that there should be enough flexibility that why do you have to be hidebound to this 30 years and it only takes two and then you charge the twenty-eight?

Mr. MILLS. Sir, you do not necessarily have to. I mean, we can decide to just take that 28 man years and, if there is not workload to replace that, to charge that against overhead. We could pass