344. Memorandum From the Assistant Secretary of Defense for
Installations and Logistics (Ignatius) to Secretary of Defense McNamara1
Washington, June 27, 1967.
SUBJECT
For 14 important stockpile materials we have prepared a brief summary to
show the portion of the total requirement that is based upon direct and
indirect military use, compared with the portion considered by OEP to be essential for the balance of the
economy. We have also developed for your information a brief background
paper (Tab A), outlining recent history of stockpile actions.
[Page 820]
Additionally, for these materials, estimated supply is shown, indicating
the amount estimated to be available after applying “discount” factors
agreed to by the Joint Chiefs of Staff and the State Department,
compared with estimated availability as calculated by OEP in determining stockpile objectives by
applying further discount factors to eliminate all foreign sources
(except Canada, Mexico and the Caribbean). This OEP source discount assumption has been used since 1954 and
was reaffirmed by the President on February 24, 1964.2 We do not know
whether the President was aware that State and DoD had made different recommendations.
In the tables, which show requirements and source availability for both
2-year and 3-year periods, it is readily apparent that a change in the
supply source availability assumptions, along lines recommended by the
Joint Chiefs of Staff and the State Department, would result in “zero”
stockpiling needs for seven of the fourteen items and drastic reductions
in the other seven.
Additionally, it is obvious from the separate supporting detailed
summaries for each of the materials that generally the direct and
indirect military requirements are far less than the “essential
civilian” requirement.3 Admittedly, a substantial portion of the
“essential civilian” is, in fact, necessary for National Security and
required by the military effort. For example, transportation,
communications, and federal, state and local government all must
continue to operate effectively. On the other hand, preliminary probing
into the basis for the “essential civilian” estimate suggests that it is
far from austere and seems to assume continued heavy production of
luxury-type consumer goods.
We are not in a good position to challenge the validity of the “civilian”
estimate because our own figures are badly out of date and possibly far
from accurate. The latest complete DoD
materials estimate was made in 1963. Even though overall force levels
are reasonably comparable, there have been significant changes in
equipment and estimated consumption and attrition rates. Also, the 1963
computation omitted some important items. For example, there were no Air
Force bombs or airfield matting in the estimates. Recently, as you know,
we have attempted some rough approximations for a few basic materials.
Although probably acceptable “ball park” estimates, we must concede the
possibility of substantial error and would be hard pressed to defend the
validity of our estimates.
Senior working level people in Commerce and OEP are thoroughly familiar with the obsolescence of our
data and when pressed on their
[Page 821]
own “civilian” estimates tend to defend them as being necessarily high
to compensate for possible shortcomings in the military estimates. Since
this could become an issue in either a Presidential or Congressional
review of stockpiling, we should probably undertake a fairly
comprehensive review of our direct and indirect military material
requirements as soon as possible so that we can adequately justify and
defend our position.
Since our calculation of raw materials requirements would require
detailed mobilization production schedules which, in turn, would require
the development and issuance of extensive mobilization planning guidance
for the Military Departments and DSA, it is possible that a complete
DoD materials requirements review
could take from 6 to 12 months.
It should also be noted that the Senate Armed Services Committee has
shown considerable opposition to proposals to decrease stockpile
objectives and inventories. Also, Commerce Department, OEP, and State Department generally have
been opposed to sale or disposition of presently held stockpile
inventories. In view of this, you would probably want the support of the
Joint Chiefs of Staff for any recommendations you may wish to make
concerning reductions in stockpile inventories and objectives.
Conclusions
- —Need for stockpile (for many items) would be eliminated for many
items and drastically reduced for others by assuming some
availability of overseas supply sources as recommended by the Joint
Chiefs of Staff and State Department rather than no overseas
supplies as now assumed by OEP
calculations.
- —Substitution of 2-year planning factor rather than 3 would
further reduce objectives.
- —The above could be accomplished without the necessity of a change
in or review of “requirements” estimates for either military or
civilian purposes.
Recommendations
In view of expected opposition from some sources within the
Administration, as well as from the Senate Armed Services Committee, you
will probably want to review the above analysis with General Wheeler to
gain the whole-hearted support of the Joint Chiefs of Staff for
significant downward revision of stockpile objectives and inventories.
Assuming his concurrence and support, the following actions would appear
to merit consideration:
[Page 822]
- —Suggest to the President that he consider the advisability of
directing OEP to base their
stockpile objectives on the overseas source availability
recommended by the Joint Chiefs of Staff and State
Department.
- —Suggest to the President that he also direct a 2-year
planning period in lieu of 3.
- —Direct a comprehensive review within DoD of military requirements for materials. (This
will require that the Military Departments be furnished
mobilization planning guidance for developing detailed
mobilization production schedules to form a basis for material
calculations. This entire process could take from 6 to 12
months.)
- —Upon completion of DoD
material requirements review, suggest a re-examination of the
basis for calculating civilian requirements so that a new total
requirements estimate will be available as a basis for
determining stockpile objectives.
[Page 823]
TABLE I
ALTERNATIVE INVENTORY OBJECTIVES FOR SELECTED NATIONAL
STOCKPILE MATERIALS
A Comparison of Present Objectives (3 Year
Period Using OEP Supply
Assumptions)
With
Estimated Revised Objectives (2 Year Period
Using OEP Supply Assumptions and 3
Year or 2 Year Periods Using DoD/State Department Supply Assumptions)
See Annexes for Detail of Each Material
|
|
Stockpile Inventory Objectives |
|
|
OEP Supply |
DoD/State Supply |
|
Material
|
Unit
|
3 Years*
|
2 Years
|
3 Years
|
2 Years
|
| Aluminum |
1000 S.T. |
450 |
450 |
200 |
200 |
| Bismuth |
Mil. Lb. |
2.4 |
1.7 |
0 |
0 |
| Chromite (Met.) |
1000 S.T. |
2,970 |
1,971 |
1,571 |
1,038 |
| Cobalt |
Mil. Lb. |
42 |
27.6 |
0 |
0 |
| Copper |
1000 S.T. |
775 |
519 |
0 |
0 |
| Magnesium |
1000 S.T. |
90 |
89 |
0 |
0 |
| Manganese (Met.) |
1000 S.T. |
7,900 |
5,330 |
3,173 |
2,365 |
| Mercury |
1000 Fl. |
200 |
134 |
149 |
103 |
| Molybdenum |
Mil. Lb. |
40 |
27 |
0 |
0 |
| Nickel |
1000 S.T. |
20 |
18 |
8 |
6 |
| Platinum |
1000 Oz. |
335 |
226 |
0 |
0 |
| Rubber |
1000 L.T. |
130 |
90 |
0 |
0 |
| Tin |
1000 L.T. |
200 |
134.5 |
160.7 |
104.4 |
| Tungsten |
Mil. Lb. |
44 |
28.9 |
20.7 |
16.6 |
[Page 824]
Tab A4
STOCKPILE BACKGROUND
The National Stockpile constitutes a reserve of strategic and
critical materials which, by definition, would not otherwise be
available to the United States during wartime in the amounts needed
to support military and essential industrial and civilian
production.
The quantity of any material which needs to be stockpiled depends
upon three major factors:
- 1.
- The assumed period of conflict.
- 2.
- The total supply available to the U.S. from domestic
production and imports, by period, for the duration.
- 3.
- The total U.S. requirements, by period, for the
duration.
When the present law was enacted in 1946, the Army/Navy Munitions
Board exercised the central policy direction over the program. This
function was transferred in 1953 to the Executive Office of the
President and now is vested in the Office of Emergency Planning. The
Department of Defense is one of OEP’s statutory advisory agencies. The DoD direct functions are to provide (1)
information as to the quantities of materials needed to support
planned wartime military production and (2) guidance as to the
probable duration of a future major war and the geographic areas
which would be accessible to the U.S. as sources of imports. The
Department of State evaluates the political and economic
dependability of the accessible sources and determines appropriate
discount factors to be applied to normal availabilities of materials
from each source. The Departments of Interior, Agriculture and
Commerce furnish projections of potential supply, by source, and of
the non-military requirements.
From 1946 to 1958, the assumed duration was five years. In 1955 the
Department of Defense recommended a reduction to three years, but
this was not accepted by the other agencies until 1958. On December
13, 1965, a special group under Mr. McGeorge Bundy prepared a draft NSAM recommending further reduction to
two years.5 The Secretary of
Defense concurred in this on January 22, 1966 and reiterated his
concurrence in a letter of September 14, 1966 to Governor
Bryant.6 This
change has not yet been implemented and it is uncertain whether it
has ever been presented to the President for approval.
The Department of Defense has on many occasions forwarded to OEP its guidance relative to offshore
source accessibility. This guidance,
[Page 825]
developed by the JCS, has varied somewhat over the years but presently
considers all world areas accessible except the Communist Bloc, the
mainland of Southeast Asia and the Middle East. In past years DoD also has excluded most of Europe
and the north coast of Africa. This general pattern of accessibility
assumptions was applied to stockpile objective calculations from
1946 until 1954, at which time the President, acting on the
recommendations of a special Cabinet Committee on Minerals Policy
(not including DoD), authorized a “long term” stockpiling
program for metals and minerals. This program employed extremely
conservative wartime supply assumptions (access assumed only to
U.S., Canada, Mexico and the Caribbean area). At this time the
planning period still was five years. Hence, between 1954 and 1958
stockpile objectives of maximum historical magnitude were in force.
The DoD has consistently opposed
these extremely conservative supply assumptions, but thus far
without effect. The December 13, 1965 draft NSAM referred to above also called for adoption of the
DoD/State Department concept of
import availability.
A further supply discount is applied by OEP, even against U.S. capacities, where production
facilities are relatively concentrated and possible sabotage might
reduce the supply. DoD has protested
this also, and only recently has OEP
moderated, but not eliminated, this factor.
In regard to requirements, the latest DoD submission was in 1963. Lack of updated
mobilization production planning studies for end items has precluded
our revising these data on a current basis. Our 1963 data are known
to be obsolete, even though the planned force levels are relatively
unchanged since then. There have been many changes in equipment, as
well as in consumption rate allowances, since 1963. Furthermore, the
1963 planning did not include any Air Force bombs or airfield
matting, to name only two major omissions. DoD has recently attempted to update the mobilization
data for a few basic materials, using a rough factoring procedure.
The current relationships between materials requirements and
hardgoods production dollars were expanded to an assumed
mobilization production dollar level (approximately three times
current level). These data have been furnished OEP, however, they are approximations
only.
The non-military requirements included in the present OEP stockpile objective calculations
are felt to be generally excessive. They were computed on an
industry-by-industry basis, using historical relationships between
materials input and dollar value output, expanded to levels
representing that portion of the wartime GNP capability not taken up by military production.
Thus, they assume full employment and full utilization of
manufacturing capabilities. There has been a certain amount of
critical materials conservation and substitution assumed, but no
actual cutbacks in civilian production. These generous non-military
estimates
[Page 826]
generally tend
to offset any shortcoming of the military estimates; however, two
wrongs do not make a right. Furthermore, the offsetting inaccuracies
may or may not occur in the same commodities.
There is no question but that the requirements element of the
stockpile studies is badly in need of review. Until there is a
reasonably complete mobilization production plan, reliable
mobilization materials requirements data cannot be developed.
The analysis of the 14 stockpile items must be taken as generally
illustrative, rather than precise, for the following reasons:
- —The DoD/State system for
factoring supply has been dormant for 13 years; hence its
application without detailed commodity-by-commodity study is
not precise. The system inherently depends upon
identification of all import data to the true country of
origin, not a possible third country to which the material
may normally be sent for processing and eventual export to
the U.S. For example, crude South African platinum normally
goes to the U.K. for refining and that portion reaching the
U.S. shows up as an import from U.K., not South Africa.
Under the OEP system which
discounts all but very nearby sources, this element in the
data is academic and, therefore, has received no attention
in the OEP basic commodity
data sheets.
- —For most stockpile materials the DoD requirements are not computed directly but
can be reasonably inferred from relative military and
non-military data for manufactured materials derived from
the raw stockpile material. For example, nickel is used to
make alloy steel, stainless steel and various non-ferrous
and heat resistant alloys. We can reasonably infer the
military-generated demand for nickel by analyzing the data
for the further manufactured alloys and the amounts of
nickel needed therefor.
As noted in the earlier discussion, most of the OEP basic data sheets are 3 to 4 years
old and need updating both as to requirements and world-wide supply
capability.
