68. Memorandum From the President’s Assistant for National Security Affairs (Scowcroft) to President Ford 1

SUBJECT

  • Strategic Stockpile Issues

This memorandum is designed to bring you up to date on strategic stockpile issues.

Background

In August 1975 an interagency study (NSSM 228)2 was initiated to examine alternatives to the current Strategic Stockpile Planning Guidelines (NSDM 203)3 issued by President Nixon in February 1973. The study was prompted by congressional refusal to consider Administration bills for disposal of material from the strategic stockpile and by the findings of an earlier study (NSDM 197)4 that current stockpile objectives may be inadequate in a few commodities. At the same time, you [Page 286]advised5 Chairman Charles Bennett (D–FLA) of the Seapower Subcommittee of the House Armed Services Committee that you were reexamining the stockpile planning assumptions. You also agreed to his request to meet with him to discuss stockpile issues. (Bennett’s committee has held up Administration stockpile disposal legislation since December 1973.) That meeting was scheduled last September but postponed at Bennett’s request pending completion of the Administration’s stockpile study.

The initial study report6 has been completed, but it is not yet a final product and lacks specific planning guidance alternatives. Chairman Bennett knows that the report has been completed and is aware of its contents. (He may now wish to reschedule his meeting with you.)

The Study Effort

The NSSM 228 study effort was chaired by Leslie Bray, Director of the Federal Preparedness Agency (FPA), and included representatives of State, Treasury, Defense (including JCS), Commerce, Interior, OMB, CIA, CIEP, ERDA, CEA, and the FRB. It is the most comprehensive and thorough study of the stockpile in ten years and, while further work is necessary, it will provide the basis for improved stockpile planning.

The most significant benefit of the study is the development of a new approach to planning which takes account of all significant factors which affect requirements. Current guidance specifies one set of assumptions which are applied across the board to all elements of the economy for a specified period of time. The new approach recognizes that different degrees of protection might be required for defense needs than for the needs of the civilian economy and that the degree of protection desired for early stages of a war might be different from that needed as a hedge against extended combat. This approach also provides a convenient means for setting priorities for disposals and acquisition programs.

The following table illustrates a three-year, three-tier stockpile planning alternative. It shows rough estimates7 of the stockpile values which would be associated with each tier-year combination if very conservative values were assigned to planning factors for defense needs in the first year and progressively less conservative values assigned to [Page 287]successive combinations. The figures in parentheses illustrate how disposal and acquisition priorities might be set.

Approximate Total Values of Stockpile Objectives ($ Million, March 1975 Prices)

Requirement Mobilization Year
First Second Third Total
Defense (1) 260 (2) 680 (5) 1210 2150
Essential Civilian (3) 980 (6) 630 (7) 1120 2730
General Civilian (4) 530 (8) 140 (9) 500 1170
TOTAL 1770 1450 2830 6050

For comparison, the market value at March 1975 prices of material currently held in the stockpile is roughly $7 billion. About $1 billion of this represents current objectives under the 1973 guidance; the other $6 billion is now termed “excess.”

All participating agencies agreed that the variable confidence level approach developed during the study is a considerable improvement over the current form of planning guidance and recommended that it be adopted as the basis for future stockpile planning. However, differing views emerged regarding the values to be assigned to specific planning factors and which tier-year sets should be covered.

The study team concluded, and the concerned agencies concurred, that follow-on work in several areas should be conducted within the NSSM 228 framework before specific recommendations are made to you. It was also agreed that the team should examine the feasibility of developing special sets of planning factor values for a few highly critical commodities, such as chromium ore, whose continued supply is subject to special circumstances.

One concept which will be examined closely in the follow-on study is an overall scheme for future stockpile planning. Based on long-term goals and priorities, annual acquisition/disposal programs would be developed and utilized in the budget planning cycle. The planning guidelines would be reassessed periodically by the NSC.

This approach would hopefully avoid the chaos and conflicts of the recent past and make the stockpile flexible and responsive to the Administration while building toward long-term objectives. It could also enhance our flexibility in commodity negotiations under way in various international forums.

I have asked the NSSM 228 study group to complete the necessary follow-on work this Spring, after which we will prepare specific guidance recommendations for your consideration.

[Page 288]

Congressional and Budget Dimensions

Leslie Bray of FPA has kept Chairman Bennett informed about the study as it has progressed, and Bennett has expressed considerable interest in the new ideas developed. He has also indicated that he will no longer insist on a return to the pre-1973 guidelines and would be willing to consider disposal and acquisition bills based on new guidelines. Of course, he will reserve judgment until he sees the new guidelines and related stockpile objectives.

While the study has been going on, two stockpile-related bills have been introduced in the Congress. Bennett has proposed in the House that any receipts from stockpile disposals go into a special fund for financing stockpile acquisitions, so long as there are unfilled objectives. While not inconsistent with the new planning approach outlined above, this bill would effectively obviate any short-term budget benefits which could otherwise be derived from disposal of some of the current excesses. The other bill, introduced by Senators Dominici8 and McClure, would prohibit any disposals from the stockpile for a year after enactment. This bill responds to the GAO suggestion in its stockpile report of March 19759 that disposals be stopped until the nation’s critical resource requirements are clarified.

At present there are several Administration bills pending with Bennett’s committee, but he is unlikely to consider any of them since they call for sizeable disposals based generally on the NSDM 203 objectives. He has informed you by letter10 that he will not consider any disposal bills until the planning guidance is changed to call for higher objectives.

The FY 77 budget projects receipts from stockpile sales of $870 million, about $750 million of which requires new disposal authority. The remaining $120 million is expected receipts from sales already authorized. FPA will prepare a new disposal bill containing only those quantities of material which we can reasonably expect to sell during FY 77 and which are clearly excess to any feasible stockpile options. (FPA and OMB estimate that there may be about $3.5 billion of material for which there is clearly no need given current supply and demand conditions, and that $700–800 million of this could be disposed of in FY 77.) There is at least a chance that Bennett would give such a bill serious consideration as an interim measure before you decide on new long-term objectives at the completion of the studies.

  1. Source: Ford Library, NSC Institutional Files (H-Files), Box 37, NSSM 228 (8). Secret. No drafting information appears on the memorandum. But E.C. Michael Higgins of the NSC Staff forwarded it to Scowcroft for signature under a covering memorandum, January 20. Ford initialed the memorandum.
  2. Document 56.
  3. Document 3.
  4. See footnote 2, Document 56.
  5. Ford’s August 28, 1975 letter to Bennett advising him thus is in the Ford Library, NSC Institutional Files (H-Files), Box 37, NSSM 228 (7).
  6. Jack Eckerd, GSA Administrator, forwarded the initial study to Scowcroft under a covering memorandum, December 10, 1975. (Ford Library, NSC Institutional Files (H-Files), Box 37, NSSM 228 (8))
  7. Figures based on recent market prices, not realizable cash values or costs of acquisition, which would vary greatly over time and be affect by stockpile activity. [Footnote in the original.]
  8. Senator Pete Vichi Domenici (R–New Mexico).
  9. Not found.
  10. Bennett’s April 16, 1975 letter to Ford is in the Ford Library, NSC Institutional Files (H-Files), Box 37, NSSM 228 (7).