Air Force Stretch-Out

While sweating out the budget-axing mood of Congress, plane and missile makers last week were shaken by the unhappy prospect of a still bigger cut by the usually friendly Pentagon. At hearings of a Senate appropriations subcommittee, the meaning of a directive issued by Defense Secretary Charles Wilson three weeks ago was spelled out for the first time. The directive, which outlawed military "installment buying" for all services, will hit the Air Force hardest. It threatens to slice existing and future Air Force contracts by $4.2 billion in fiscal 1958.

Wilson's order would end the Air Force system of awarding contracts for long-lead, hard-to-produce plane and missile components before Congress allocates funds for the production of the entire weapon. If the directive is rigidly carried out, protested Air Force Secretary James H. Douglas, "large-scale terminations and stretch-outs of contracts would be necessary." Douglas warned that for fiscal 1958 the directive would eliminate $3.4 billion in plane and missile contracts and $800 million in other Air Force orders.

Loophole. Missouri's Democratic Senator Stuart Symington, onetime Air Force Secretary, said the directive in fiscal 1958 could stop the purchase of all Convair B58 bombers and F106 jet fighters, halt the procurement of McDonnell's F-101B jet fighter, Republic's F-105 jet fighter and Lockheed's C-130 transport, might also slow down production of Boeing's KC-135 jet tanker and B-52 intercontinental jet bomber. It could cancel all fiscal 1958 orders for such missiles as Northrop's Snark, Bell's Rascal, North American's Navaho, and scrub some orders for Hughes's Falcon and Martin's Matador.

Some of these fears were calmed by Deputy Defense Secretary Donald A. Quarles, who told Senators that he had fought the ban on installment buying when it was under discussion while he was Air Force Secretary. But now, as Wilson's aide, he felt that the directive would not cripple air procurement if it were interpreted liberally. Reason: Wilson left himself the power to exempt certain yet-to-be-named weapons from the ban.

The Cost of Inflation. Quarles expressed far more concern over the cause for the ban, the Government's desperate battle to control soaring defense costs. Expenditures are running $2 billion over the $36 billion budgeted for fiscal 1957 (TIME, May 6) and threaten to wipe out the predicted $1.7 billion budget surplus. So worried is the Defense Department that Wilson also ordered the three services to reduce their buying by $500 million for the rest of fiscal 1957.

The spending spurt is due to inflation, which has greatly increased the cost of weapons started several years ago, plus the fact that Air Force programs are doing so well. Many planes and missiles are moving from drawing board to production line in a much shorter time than budget planners anticipated; e.g., the lead time on a B-52 bomber, formerly 30 months, is now only 15 months. Thus bills come due sooner than anticipated. While the shorter lead time has cut unit costs, the final bill for the year is higher because more planes are rolling out.

Since the Air Force has been ordered to trim its expenditures without reducing its force levels, it looks as if the Air Force will have to stretch out its programs even though it contends this will cost more in the long run.

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