Statement to the Cabinet on Establishing a Formal Cost Reduction Program.

IN NOVEMBER 1963--and on many occasions since--I asked the heads of each department and agency to report to me on cost reduction actions taken and planned during the following year.

The results of your efforts have been most impressive.

Identifiable savings have been achieved in excess of $3.3 billion--including $2.8 billion saved by the Department of Defense in the last fiscal year and more than one-half billion dollars ($529 million) from the civilian agencies during calendar year 1964.

I am gratified by the record thus far this fiscal year.

--Federal civilian employment in the executive branch was 2,447,897 at the end of February, the lowest level since April 1962.

--Federal spending for the first 8 months of this fiscal year has shown the largest drop in a decade for the comparable period. Spending is $1.9 billion less than for the same 8 months last year. We have not had such a decline since 1955 when operations were being reduced following the Korean conflict.

I am particularly pleased by the response and performance of many of the civilian agencies. The NASA program continues to be outstanding, accounting for over $73 million or about 67 percent of the total for nondefense agencies. The Post Office and Agriculture reported about 9 percent each, with the remaining 15 percent divided among 25 departments and agencies.

Others with significant savings which I would like to commend were Atomic Energy, AID, HEW, Treasury, Commerce, Interior, Justice, and TVA. Two small agencies appear to have significant achievements--the NLRB and the Federal Home Loan Bank Board.

On many occasions I have urged you to study and adapt to your operations the effective techniques which have been used so successfully by Secretary McNamara in the Department of Defense. I am asking him this afternoon to review some aspects of the program with you.

But I want first to advise you of one action.

Last year the Task Force on Cost Reduction recommended that a formal cost reduction program be established in every agency and the Bureau of the Budget issue guidelines which would produce a common focus for these cost reduction efforts. I have accepted these recommendations and Budget will shortly issue the circular before you to implement the program.

The Budget circular, in brief, directs the heads of each department and agency to

--assume direct supervision of a formal cost reduction program;

--establish specific dollar cost reduction goals;

--initiate a systematic and periodic review of programs and operations from the standpoint of relative priorities;

--identify roadblocks to cost reduction which may require legislative action or cooperation from other agencies;

--subject every major proposed expenditure to searching scrutiny in terms of costs and benefits;

--employ independent means to verify reported savings;

--recommend high-priority uses of savings achieved; and

--make periodic progress reports to me.

I have instructed the Director of the Bureau of the Budget to review carefully the intended uses of all savings achieved and, where thoroughly justified, to permit you to use them for purposes you recommend. By reducing the cost of current activities wherever possible we will be able to carry out other high priority programs.

I will be reviewing carefully each of the reports you submit under this program. The savings you achieved during 1964 may have been the easy ones. Additional savings may require greater effort. We have done a good job. But I know we can do more.

The Bureau of the Budget, with your help, has just issued a booklet describing some of the results achieved in reducing costs and improving operations in the Federal Government over the past year and a half. The booklet is most timely as we launch our Government-wide cost reduction program. It is entitled "War on Waste," and I think the story it tells is most impressive. It doesn't attempt to portray a picture of perfection; it does show what can be done with ingenuity and hard work. I think it shows what happens when cost reduction is the personal goal of each worker. I think it shows that the small items are no less important than the large items. I think it also shows that there is no area of activity that cannot be tapped.

I want each of you, personally, to read this booklet and to have your employees read it. I hope the examples it cites will spur us on to greater efforts.