Some of those piasters accrue to the Vietnamese Government. Then, depending upon the agreement, assistance-in-kind piasters, come back to the Embassy.

The Ambassador and COMUSMACY General Abrams have an agreement as to what share of those will pass to COMUSMACY for control, the objective being to spend them in the country and thus stimulate the economy. So any assistance-in-kind funds spent for recreation facilities in Vietnam have had the personal blessings of General Abrams.

Senator BYRD. I am not interested so much in who blesses them personally but I am interested in the fact that they begin as a U.S. commodity paid for by the taxpayers; isn't that right?

Admiral DILLON. Yes, sir.

Senator BYRD. So they are the same as tax dollars, as I see it.

Admiral DILLON. They also can be looked upon as income from an AID program.

Senator SYMINGTON. In addition to the cost of the war, we have given Vietnam more economic aid than any other country in the world, including India.

The AID program? I don't quite get that. It seems the Senator from Virginia's statement is correct. We are paying for this. There are no PX funds. What do you mean by AID program? All we want are the facts.

Admiral DILLON. The intent of my comment was to say this: AID being a part of State Department, they have their AID programs. In some of these programs the commodity or the aid is given outright. In the assistance-in-kind counterpart funds, there is income back to this Government in the form of piasters to spend for facilities in that country.

Senator BYRD. But it is not income in the sense of

Mr. SHILLITO. You are right.

Senator BYRD. It is money originated from the U.S. Government. Mr. SHILLITO. You are right. Based on the point that is made by Admiral Dillon, you are absolutely right.

Senator BYRD. I notice on page 2 of your report where you are requesting 50 percent more in dollars, $3 billion as compared to what was authorized last year, $2 billion. It is a 50-percent increase.

That is a very substantial increase. I assume that you feel it is necessary but that is a very substantial increase.

Mr. SHILLITO. Yes, Senator Byrd, it is a substantial increase and as I attempted to spell out in my statement, it is an increase that is tied heavily to comparatively few things. It is tied heavily to the "people" piece of our operations and it is tied significantly to a couple of programs, the ABM, the ULMS program, and so forth, but indeed it is a higher entry, a significant increase.

Senator BYRD. When we get to the point as we have now where out of every defense dollar, say, roughly 60 cents, goes to personnel or personnel-related costs, it seems to me it is going to be more and more difficult to finance these substantial increases in other programs such as we are speaking of there, and I think on page 10 of your statement is one which is quite astonishing.

You say the backlog of construction, the backlog remaining after fiscal year 1973 program, exclusive of family housing and Reserve

Force facilities, is presently estimated by the services at $26.5 billion Mr. SHILLITO. That is right, sir.

Senator BYRD. In other words, there is a deficit in the construction needs yet to be met of $26.5 billion?

Mr. SHILLITO. Based on the services' needs, this is if you were to accept everything that the services feel is required in the way of all construction requirements, it would add up to that deficit. That is right, Senator, and you can make quite a need for a significant percentage of each and every one of these items that we are talking about here but you end up with-when you get right down to the submittal of the total bill for a given year, and you take all of the priorities into consideration-a fraction of that, such as is the case in this 1973 request.

And, Senator, we agree with you completely as far as the percentage of our total defense dollar now that is going to people and at the same time we have been of the opinion that we have had to do this in order to move in the direction of the all volunteer force. We have had to do this for a number of reasons, especially in order to maintain the type retention we are talking about.

We know this is a record budget in many ways. No budget in the past 20 years has paid for fewer people, no budget has paid for fewer civil servants, in addition to fewer military, and no budget has consumed a smaller percentage of our gross national product in many ways or percentage of our total Federal budget, but at the same time it is a decided increase over what we are talking about.

Senator BYRD. Thank you.

Thank you, Mr. Chairman.

Senator SYMINGTON. Senator Dominick?

SAFEGUARD

Senator DOMINICK. You have on page 2, Mr. Secretary, the figures for the Army and you have in parenthesis for Safeguard $387 million, fiscal year 1973.

Mr. SHILLITO. Yes, sir.

Senator DOMINICK. These are construction costs for Safeguard? Mr. SHILLITO. Yes, sir.

Senator DOMINICK. At Grand Forks?

Mr. SHILLITO. Let us see. They are broader than just Grand Forks, Senator Dominick. I don't know that the data I have clearly shows the breakout between the Safeguard installations at Whiteman and Grand Forks.

Excuse me, Senator. There is no Grand Forks money in the $387 million. It is for Whiteman Air Force Base, Mo., and Warren Air Force Base, Wyo.. primarily, and the balance of the dollars involve principally community impact assistance which we discussed with these committees last year, too.

Senator DOMINICK. How much of the $387 million is for construction?

Mr. SHILLITO. About, let us see, it would be well over 95 percent of $387 million. The actual amount is $372 million.

Senator DOMINICK. And it is construction of barracks and sewage and things like that?

Mr. SHILLITO. That is a very small percentage of the total.
Senator DOMINICK. Which is?

Mr. SHILLITO. The sewage and these other things. The amounts we are asking here are primarily for the launch and radar facilities, these type installations become a heavy portion of the total cost. These totals include, however, remote launch and the personnel support facilities. Senator DOMINICK. Most of it is at Warren and Whiteman?

Mr. SHILLITO. Yes, sir.

Senator DOMINICK. We talked at some length on prior occasions on the potential of using relocatable houses or housing units, is a better way of putting it, which if a base is closed then could be moved and used to another base.

Are we still doing that or are we talking of housing units as permanent installations?

Mr. SHILLITO. We are talking here about the total housing segment of the military construction budget. But indeed it is our intent to move in the direction of more relocatables. I should mention that in looking at the George Air Force Base project and the Norton Air Force Base project, which I touched on, on page 5 of my statement, one of the things that does stand out as part of the lessons learned, particularly from George, is that these type industrialized housing constructed units can more logically be relocatable than they have been in the past. Are you talking about Safeguard or housing?

Senator DOMINICK. I am talking about military housing. Let me ask you a specific then.

Are we in fact putting any relocatable housing in in terms of the money that is being asked for here?

Mr. SHILLITO. Mr. Fliakas, can you answer that?

Mr. FLIAKAS. All of the units at the Safeguard sites will be relocatable. In this year's program there are 242 units for Malmstrom, ABM, Montana, and 218 at Grand Forks, ABM, North Dakota.

Also 150 units at San Vito, Italy, and 250 units at Incirlik, Turkey, will definitely be relocatable and we will provide relocatability in other areas as well, particularly when a programing level has been reached at an installation above 80 percent we will always consider the application of relocatable housing.

Senator DOMINICK. Thank you.

Senator SYMINGTON. Mr. Secretary, I have some questions the staff has drawn up. If Senator Brooke or Senator Dominick or any other Senator wants to ask questions, I will be very glad to yield.

I would ask these for the record. Some have been covered, some not. Senator BROOKE. Mr. Chairman, I do have to leave in the next 10 minutes and I do have several other questions.

Senator SYMINGTON. Do you want to leave yours for the record and have me start or do you want me to yield to you and

Senator BROOKE. I will leave my questions for the record, or ask them now, whichever you prefer.

Senator SYMINGTON. Whichever way you would like is fine.
Senator BROOKE. Iwill read them for the record.

Senator SYMINGTON. All right.

OFFSET AGREEMENT

Senator BROOKE. Mr. Secretary, I notice that, finally, after years of urging by the Congress, the Department of Defense has negotiated

a program with the Federal Republic of Germany to rehabilitate a number of barracks in Germany-I believe you call them Kasernesand that this program will amount to approximately $183 million.

There is pending before this committee a request by the Department of Defense that $6.1 million be reprogramed to allow the Corps of Engineers to oversee the Federal Republic of Germany's rehabilitation of buildings which stand on German land. The Germans say that they require 1.5 percent for supervision, inspection, and overhead. Why must the U.S. Government duplicate what the German Government is doing?

I notice that the present program provides for the rehabilitation of only 61 kasernes, leaving some 33 still to be rehabilitated. What is the American Government doing about negotiating with the Federal Republic of Germany to rehabilitate these 33 remaining kasernes?

Mr. SHILLITO. To my knowledge the FRG has not been approached relative to the need for additional funds to complete the barracks rehabilitation in the 33 remaining kasernes.

Senator BROOKE. Mr. Secretary, you say that the Army proposal represents a "very practical, reasonable, and the most advantageous solution to a complex problem."

I fail to see where spending $6.1 million of American taxpayers' money is an advantageous solution to a complex problem, and please explain why it is a complex problem.

Mr. SHILLITO. The problem of rehabilitating the Kasernes in Germany is complex for a number of reasons. The work itself is complicated in that it involves the rehabilitation of a variety of nonstandard structures in various stages of deterioration. Some of the defects are obvious while others are latent and cannot be fully measured until the project is underway. Decisions as to the extent and nature of the repairs to be made must be continually reevaluated.

These contracts are of unit price variety, the most difficult to supervise. The basis for payment is the measurement of the quantity of work accomplished. The rehabilitated item, once incorporated into the finished work may be covered over and indistinguishable from the general structure. It is essential, therefore, that inspectors be continually present to insure that such measurements made on a daily basis are accurate. To insure that full value is received for money expended; our proposed method for supervising this program provides that our inspectors will certify all contractor invoices before the FRG will approve payments.

Finally, the administration of the program is complex in that it involves German firms building to unfamiliar U.S. standards under contracts funded by the FRG. The fact that the contractors are foreign further complicates the decisionmaking and coordination functions discussed above while the fact that the program is funded with DM prevents a U.S. direct contracting arrangement from being adopted. The U.S. investment of $6.1 million is advantageous in that it will result in the greatest net amount of improved housing for our troops in Germany. If we were to have insisted that the German Government take on the sole supervision and inspection role, it would have cost, presuming they agreed to do so, about 10 percent for supervision and inspection plus, under existing procedures, a tax burden of about 11 percent for a total overhead cost of about 20 percent. Our proposal

involves a total overhead of 5 percent. The difference will fund the rehabilitation of about 12,000 barrack spaces. The welfare of the greatest number of our men is, in the final analysis, the main purpose to be served and was the goal of the Congress when it provided the $6.1 million in the fiscal year 1972 program.

Senator BROOKE. Mr. Secretary, under the NATO infrastructure program, will the U.S. Government receive any recoupment of funds from the tab vee program?

Do you see any possibility of getting the NATO countries to assume a greater proportion of the cost of infrastructure construction? We are now paying approximately 29.67 percent. This is almost one-third. Why can't the Department of Defense negotiate with some of these rich countries of Europe to assume a greater share of the construction costs? Why can you not negotiate for the European countries to pay more?

What happens to the money the United States recoups from the allies in our move out of France?

Mr. SHILLITO. We expect to be reimbursed some $54 million for the aircraft shelters and ancillary airfield protection facilities which are within NATO criteria and qualified for common funding.

As for getting the NATO countries to assume a larger share of the common defense burden, last year the EURO-Group (NATO less France, Portugal, United States, Iceland, and Canada) confirmed its offer of $420 million to the infrastructure program as part of the European defense improvement program. This will allow NATO to complete its aircraft protection program without depleting infrastructure funds, and should allow for a faster recoupment of the U.S. funds spent for TAB VEE. In effect, our allies have agreed to add these additional funds to the current 5-year plan without a U.S. contribution. This action increases the available funds by some 60 percent and can be said to reduce the U.S. cost share of the total by a corresponding amount. While this is only a start, and we would hope that future efforts by the Europeans, either in a similar manner or through "offset arrangements" as we recently concluded in Germany, it will reduce the U.S. defense burden in Europe.

With respect to recoupments, these funds, as indicated in the supporting documentation for the TOA request are used to reduce the request for appropriations. The funds are reapportioned to Army, which has been designated as the executive agent for NATO infrastructure, and these funds are used to supplement U.S. appropriations required to pay the U.S. share of the costs associated with the NATO infrastructure program.

BRAB REPORT

Senator BROOKE. Mr. Secretary, you say "There have been little substantive changes in DOD construction procurement policies and procedures planned or initiated as a result of the BRAB report."

What were the main points of the BRAB report that the Department disagreed with?

What were those points in the BRAB report that the Department agreed with?