a215  1134  24 Jun 88
AM-Pentagon Spending,0551
Pentagon Eases Spending Freeze for Supplies, Services
By NORMAN BLACK
AP Military Writer
    WASHINGTON (AP) - The Pentagon said Friday it would relax a freeze
on outside contracting for supplies and services during the last
three months of the fiscal year.
    Deputy Defense Secretary William H. Taft IV, in a memo to all
Pentagon offices, said he would begin allowing some new contracts to
be awarded for research, development and evaluation work and for
consultant services on July 1.
    But all other restrictions imposed last May in a money-saving move
will remain in effect through the end of the fiscal year on Sept. 30,
including a ban on purchases of office supplies, an end to overtime
pay and limits on civilian hiring, Taft wrote.
    Active-duty personnel and civilian employees also can forget
collecting their Oct. 1 paychecks a day early just because Oct. 1
falls on a Saturday, Taft declared. The Pentagon doesn't want any
extra outlays before the current fiscal year ends, he wrote.
    ''Managers throughout the department must take every available step,
within the provisions of law, to hold fiscal 1988 outlays to the
minimum achievable level and at the same time meet mission
requirements and maintain a strong defense posture,'' Taft wrote.
    In authorizing a resumption of spending on research and development
contracts and consultant services, Taft said he wanted ''special
consideration'' to be given to small and minority business
contractors and to companies that had been waiting since May for
payments.
    The Pentagon's No. 2 executive said he still wanted some controls on
the research and consultant contracts, however, specifying that
''total obligations during any month of the fourth quarter may not
exceed 75 percent of the average monthly obligations incurred to
date.''
    The ban on new purchases of office supplies and other equipment will
continue to cover everything from magazine and newspaper
subscriptions to TV sets, library materials, recreation equipment,
lawnmowers and furniture, tools, paint, lumber, air conditioners and
fork lifts, he said.
    Also still prohibited is any spending on new leases for cars, office
space or computer equipment.
    The spending restrictions originally were promulgated by Taft to
comply with a deficit-reduction compromise reached last November.
That compromise was crafted to control government outlays - the
amount of money actually paid out during the fiscal year.
    That approach causes problems for the Defense Department, because it
conducts most of its business based on what is known as budget
authority - the amount of money that can be obligated, regardless of
when it's going to be spent.
    For example, if Congress authorizes $100 million for the Navy to
build a new ship, the Navy has $100 million in budget authority but
might pay out only $10 million in outlays for work performed the
first year.
    That makes it difficult for the Pentagon to project precisely how
much it will pay out in a fiscal year; a contractor might get more or
less work done than originally expected.
    Based on spending reports compiled in March and April, the Pentagon
was paying out dollars that outlays by the end of the year would have
totaled $2.5 billion more than the authorized $277.3 billion. The May
restrictions were designed to slow that spending rate.
    
 
AP-NY-06-24-88 1423EDT
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