mony before the Subcommittee on the Department of Defense, House Appropriations Committee, the Assistant Secretary of Defense indicated that these changes in enlistment terms would aid the AVF by requiring fewer accessions, requiring fewer permanent changes of station moves, and resulting in higher unit readiness through reduced turnover and increased experience.

Longer enlistment terms should lower overall accession requirements and thus reduce recruitment and training costs for the Active Forces. It has not yet been reflected in the cost data made available to us. However, additional costs are incurred by the reserves due to reduced numbers of personnel flowing from active duty to reserve status, causing recruiting problems in the selected reserves and shortfalls in the individual ready reserve.

Senator NUNN. You indicated that an outside group of 13 knowledgeable individuals reviewed your findings. I think the subcommittee would be interested in who these people were and what general role they played in the report.

Mr. STAATS. The general role of the commentators was to force us to consider many perspectives and positions regarding the AVF, particularly on the design of our study and on the report itself. They pointed out items for our consideration in both processes which added more balance and objectivity to the assignment. Although we considered their comments and suggestions, this report represents the analysis, findings, and conclusions of GAO.

A list of the thirteen individuals and their biographical sketches follows:

BIOGRAPHICAL SKETCHES OF COMMENTATORS

Gen. Conrad Allman, U.S. Air Force (Retired), Commander, Air Force Recruiting Service; Chief Policy Division, Directorate of Personnel Plans; and planned the Air Force transition to the AVF.

Karl R. Bendetsen, former Under Secretary of the Army; Vice Chairman, Defense Manpower Commission; and held various positions with rank equivalent to that of ambassador; current Chairman of the Board, Champion International Corporation.

Gen. William DePuy, U.S. Army (Retired), former commanding General Training and Doctrine Command; currently a commissioner on the President's Commission on Military Compensation.

Robert Froehlke, former Assistant Secretary of Defense for Administration and Secretary of the Army; current President, Health Insurance Association of America.

Adm. Clarence A. Hill, Jr., operational, combat, and staff experience in the Fleet, Department of Navy, and Secretary of Defense levels; authored a major article on law of the Sea.

Morris Janowitz, scholar on the military; currently Chairman, Department of Sociology, University of Chicago.

Roger Kelley, former Assistant Secretary of Defense, Manpower and Reserve Affairs; current Vice President, Caterpillar Tractor Company.

Marion J. Levy, Jr., expert on organization and management, has held various management and academic positions; current Chairman, Department of East Asian Studies, Princeton University.

William H. Meckling, former Executive Director, Gates Commission on the All-Volunteer Force; current Dean, Graduate School of Management, University of Rochester.

Adm. Gerald E. Miller, U.S. Navy (Retired), formerly commanded the Second Fleet, Sixth Fleet, and comparable NATO forces in the Atlantic and Mediterranean.

Gen. William W. Momyer, U.S. Air Force (Retired), formerly commanded Tactical Air Command, Seventh Air Force, Air Training Command, and served as Deputy Commander for Air Operations, Military Assistance Command, Vietnam. David P. Taylor, former Assistant Secretary of Defense, Manpower and Reserve Affairs; former Assistant Secretary of the Air Force, Manpower and Reserve Affairs; and current associate Hays Associates.

Adm. Elmo R. Zumwalt, former Chief of Naval Operations; Commander, U.S. Naval Forces, Vietnam; and current President, American Medical Buildings. Senator NUNN. On page 8 of the report, you refer to the DOD claim that the AVF is a "peacetime concept."

Do you think that American young people know that the AVF is designed only for peacetime?

Mr. STAATS. We have no data on which to base an opinion on whether young people know that the AVF is designed only for peacetime.

Senator NUNN. Mr. Staats, on page 9 of your statement, you say, "We consider the $500 million savings (from reinstituting the draft) a conservative estimate." How large do you think the savings could be relative to the kinds of costs you have attributed to the AVF?

Mr. STAATS. The amount that can be saved if the nation chooses to return to a draft, would vary primarily by what changes, if any, the Congress would deem appropriate in the compensation and benefits of junior officers and enlisted service people. The savings would also vary with what decisions are made as to (1) how many people DOD would rely upon to volunteer versus how many people should be drafted and (2) the makeup of the force as concerns the number of first termers.

The DOD estimate of $500 million is savings which would result from reduced recruiting programs and ending the enlistment bonus program. Additional savings would be realized with the elimination of the experimental enlistment bonus program for the Guard and Reserves. Other additional recruiting efforts are being considered by the Administration. During the House Appropriations hearings the Army requested funding for a Reserve Component Readiness Improvement Package. The Department of Defense is also considering various proposals to alleviate the manpower shortfalls in the IRR. With the return to a draft. these types of programs should not be necessary.

Senator NUNN. On page 17, you refer to the "AVF's apparent success during its first two years" as the basis for further reductions that were made in the Selective Service System.

Are you referring to a particular assessment of "apparent success"?

Mr. STAATS. This statement does not represent a conclusion of GAO, but rather is an observation made by the former director Selective Service is testimony before the House Committee on Armed Services, Subcommittee on Investigations in 1976. The director was testifying on the programs and future plans for the Selective Service.

Senator NUNN. On page 19, you attribute the cost of various "pay related" items of almost $2 billion to the cost of the AVF.

What are these pay related items?

Mr. STAATS. The pay related items, also referred to as drag alongs, mentioned in this report are: re-enlistment bonuses, continuation pay, Federal Insurance Contribution Act (FICA) payments, reserve and National Guard basic pay, separation pay, cadets and Midshipmen pay, death gratuity, dislocation allowance, family separation allowance, and reserve and National Guard BAQ.

These are called drag alongs because they are linked to an item of regular military compensation, usually as a multiple or fraction, and change automatically with the item to which they are linked.

Senator NUNN. On page 29 you attribute a net cost of $179 million to the AVF for staffing changes with costs for some civilian personnel and savings for other civilian personnel.

Would you explain your method here?

Mr. STAATS. The net cost of $179 million is the difference between the additional costs ($361.9 million) resulting from hiring civilians to perform housekeeping functions without reducing any military positions and the additonal savings ($184 million) resulting from replacing military with civilian personnel, thereby reducng the size of the active military force.

Senator NUNN. Mr. Staats, could you comment on the statement that only part of the $460 million saving that DOD attributes to the implementation of selective reenlistment bonus program can actually be attributed to AVF?

Mr. STAATS. To reiterate, the $460 million savings are attributable to:

(1) differences in the management of the bonus program as previously testified to by DOD and not in relation to the AVF:

(2) reduction in force sizes of about 200,000 personnel not caused by the AVF;

(3) changes attributed to the AVF which DOD says makes up the entire $460 million.

However, we could not determine how much of the $460 million is applicable to each one.

Senator BARTLETT. Mr. Staats. you say that the GAO used the "budgetary approach" to measure the costs of the All Volunteer Force. How does this method differ from other approaches you could have taken?

Mr. STAATS. We used the budgetary approach which reflects what the general taxpaying public pays to maintain a military force.

We believe that the budgetary method presents data with greater precision because future consideration are conjectural, data is not available, and estimates of the consequences of future events would necessarily lack precision. This approach differs from an economic cost approach which assesses the value of manpower employed by the defense establishment that is not available for use in other parts of society.

Senator BARTLETT. Mr. Staats, you have testified on page 4 that increases in costs attributable to the AVF be categorized as for pre-military service ($1.4 billion), military service ($15.1 billion), and post-military service ($189.5 million). Pre-military service reflects recruiting efforts and incentives while military service costs reflect mainly pay increases. Has the balance between these costs changed much during the period studied? Is there any reason to believe that the emphasis should be changed from pay increases to recruiting or vice versa?

Mr. STAATS. During the time period studied, there has not been any significant changes in the balance between these costs. Premilitary costs attributable to the AVF have averaged about 8 percent per year, while military costs have averaged about 92 percent.

We believe that any analysis of these costs and the balance between them should include the total funds for premilitary service and military service and not just those attributable to the AVF.

The amount paid to an individual service person is a matter for Congressional action, but the management of the force is the responsibility of DOD.

A more important factor in our opinion would be management attention on programs to reduce the costs and increase the efficiency of the force. Prior studies by GAO on management deficiencies and the recent study of the AVF by the Rand Corporation bear out our opinion.

Senator BARTLETT. Mr. Staats, on page 6 of your testimony you speak of “manmachine substitution and equipment modernization" as management costs associated with the AVF. Since the high cost of manpower under the AVF should promote more efficient use of manpower in part by obtaining more modern machinery, what costs of modernization do you attribute to the AVF? How were you able to determine this?

Mr. STAATS. We agree that the high cost of manpower should promote its more efficient use. However, we were unable to attribute changes or the cost of the changes to the AVF.

Senator BARTLETT. Mr. Staats, on page 7 of your testimony you describe postmilitary benefits for service as little as one day in some instances. Could you explain to us in detail what benefits a soldier receives for service as short as one day?

Mr. STAATS. The post military benefits received for as little as one day of service referred to in my testimony are testing, counseling, and placement services. Senator BARTLETT. Mr. Staats, would you say that improvements in conditions for the career force which attract better leaders have the indirect effect of improving conditions for new recruits, thus contributing to the AVF? Wouldn't you say that the widespread belief that military personnel benefits are declining, whether for the career force or not, would have the effect of making the military appear less attractive to the new recruits?

Mr. STAATS. If improvements in career force conditions attract better leaders they would have an indirect effect on improving conditions for new recruits. The second part of your question depends upon what factors motivate an individual to enlist. If benefits motivate a person to enlist, the belief about declining benefits could make military service less attractive to an individual.

Senator BARTLETT. Mr. Staats, would you say that pay and benefits now earned by junior personnel in the military are more or less than comparable civilian compensation?

Mr. STAATS. The answer to this question hinges on several factors such as definitions for benefits of civilian and military compensation. It also depends on linkage points between military Federal civilian compensation. While no military to civilian grade linkages have been recognized for purposes of determining work equivalence, the linkage points of E-3 and GS-3 and O-1 and GS-7 appear in the testimony on the bill, H.R. 6531, which became Public Law 92-129. We have not as yet performed an analysis that would answer this question, however, we are undertaking a review which will discuss military-civilian pay comparability and we will advise you of the results of that review.

Senator BARTLETT. Mr. Staats, do you have information on how many first term recruits actually use on-post housing for families?

Mr. STAATS. We do not have that information.

Senator BARTLETT. Mr. Staats, since many young people join the military in order to improve their education and experience, was the GAO able to determine the costs of military education programs not directly related to military skills? Mr. STAATS. No sir. Our review was to determine the changes in budgetary costs attributed to the All-Volunteer Force. As such we included increases and decreases in funds for training and education programs caused by the AVF. We did not analyze the cost of military education programs unrelated to military skills.

Senator BARTLETT. Mr. Staats, how would you be able to calculate savings made possible by the improved quality of personnel which the AVF is said to provide?

Mr. STAATS. Improved quality of people should result in higher productivity, less first term attrition and turnover, and a more effective force. However, attrition and turnover have not been reduced. Less than 15 perecnt of DOD's work force's productivity is measure and there apparently has been no study of related effectiveness. Consequently, although theoretically calculable, the actual savings have not been calculated.

Senator NUNN. Our next witness is the Honorable John White, Assistant Secretary of Defense for Manpower, Reserve Affairs and Logistics.

We are delighted to have you here. Before you address the GAO report, I would like for you to rebut, my final statement, if you would like to.

HON. JOHN P. WHITE, ASSISTANT SECRETARY OF DEFENSE FOR MANPOWER, RESERVE AFFAIRS, AND LOGISTICS

Mr. WHITE. No, I think you are right. I think we need to look at these costs like we do all other defense costs. I don't think there is any question about that. I think it is very important that we be explicit as to what the costs are and what we are buying and whether or not what we are buying is worth the cost. We ought to do that in R. & D.; and we ought to do that in manpower. I think you are absolutely right about that.

Senator NUNN. I know you have got a real challenge and you have inherited this situation, so I would hope you would address that issue because I think it is much more important that we face these costs and determine whether this Congress and the American people are willing to pay the costs. I think we ought to face an accurate projection of what it is going to cost in the next 10 or 15 years. If we are willing to pay, it should be added to the defense budget. It should not to be taken out of these other categories, otherwise we are going to see a tremendous erosion of our defense capability.

Mr. WHITE. Well, I think the costs ought to be projected. As you recognize, it is hard to do so; and, as you said before, and I agree, that we ought to be explicit about what our assumptions are. Once we make those then we can argue about whether those costs are warranted or not. I think at the same time we ought to always be concerned about the alternatives; and, if we don't like the AVF, do we truly prefer those alternatives?

Senator NUNN. I would accept that as a statement by DOD to start examining the alternatives which as far as I know, hasn't been done. Mr. WHITE. We are doing that, sir.

Senator NUNN. Thank you. You are now?

Mr. WHITE. Yes, sir. I am not so sure it will be everything you want it to be; but we have started doing that.

Senator NUNN. Who have you assigned to that and what is your time projection for having something?

Mr. WHITE. I am anticipating having something in the next several months. I can't be more specific with you, Mr. Chairman, without going back and checking with the staff.

Senator NUNN. This calendar year?

Mr. WHITE. Yes, sir.

Senator NUNN. Thank you, Mr. White, go ahead.

Mr. WHITE. I just have a brief statement, Mr. Chairman. It is a pleasure to be here this morning.

The All-Volunteer Force is a key defense program and the most fair and sensible way to employ our Nation's military personnel, and we are always pleased to discuss the All-Volunteer Force with your subcommittee.

I only wish to make a brief statement. The General Accounting Office report entitled "What Has Been the Additional Cost of Implementing The All-Volunteer Force" is a responsible and straightforward paper. The GAO lays out the costs they consider to be AllVolunteer Force associated, and their justification for them, in a clear and concise manner. We have carefully reviewed the paper and provided comments to GAO. Many of these were incorporated in the final draft. I only have a few comments specifically directed at the GAO study.

No one has ever argued that the transition to the All-Volunteer Force would have no effect on the Federal budget. We find that the GAO estimate for the budget cost of the All-Volunteer Force is not too different from the costs predicted by the Gates Commission in its 1970 report urging the adoption of the All-Volunteer Force. But even recognizing the effect the All-Volunteer Force has had on the defense budget, there are several specific points that I would like to make.

Senator NUNN. On that point, we heard the best estimate GAO has is the Gates Commission report which is underestimated by 80 to 100 percent. It seems to me that that is substantially different from the Gates Commission.

Mr. WHITE. Yes, sir, I think, as Mr. Shanefelter said, he didn't have the number in front of him. I think I would have to defer to him. I think he was in error in the sense the Gates Commission costs he is referring to are not constant dollar costs. If you take their constant dollar cost, for about a 2.1 million-man force, it is $1.9 billion per year; and the GAO costs for 1977, in number I have here are $2 billion; for 1976, they are $2.3 billion. So I don't think there is anywhere near that amount of disparity between Gates and GAO. The problem could be one of constant versus current dollars. Mr. Shanefelter didn't have the numbers in front of him. I am using their numbers.

Senator NUNN. Are you also adjusting for the numbers of people? Mr. WHITE. Yes, sir, that is why I say for the force of 2.25 million. Gates estimated that a force of 2 million would cost $1.8 billion in constant dollars, and 2.25 million would cost $2.1 billion.

Senator NUNN. Well, there is a pretty important difference here, it

seems to me.