Statement by the President Concerning a Cost Reduction Program in the Defense Department.

THE SECRETARY of Defense has reported to me on the progress that has been made since January 1961 on a broad and intensive cost reduction program in the Defense Department. Equally important are the goals he and the Service Secretaries have set for themselves in the way of cutting Defense logistics costs over the next five years.

Secretary McNamara's report shows that actions taken so far will produce an estimated $750 million savings in fiscal year 1963 which began July 1st. Within five years the Secretary expects that the cost of the department's logistical operations can be cut by $3 billion annually based on the present military force structure.

What is particularly encouraging is that the economies in defense procurement and logistics can be achieved without impairing operational effectiveness. While it is vital for us to maintain a military force structure that will insure our security and sustain our foreign policy commitments it is also vital to our economic health that we operate this force at the lowest cost possible.

The major part of the American taxpayer's dollar goes for defense. Seventy percent of every defense dollar is spent on logistics, such as purchasing, construction, operating depots and bases, maintenance, transportation and communication services.

Consequently, Secretary McNamara and his associates are concentrating their cost reduction efforts in these areas. As his report reveals they are buying only what they need at the lowest sound price. Through standardization and integration they are reducing operating costs.

A good start has been made and I congratulate Secretary McNamara and his staff. The Defense Department intends to continue this effort which is of the greatest importance. It reflects the desire of this government to provide the American people the most solid type of national defense with a minimum of waste.