the Subcommittee staff showed that this screening had resulted in the retention of considerable quantities of equipment which otherwise would have been disposed of. Considerable savings will come from this action as the screening continues.

DISPOSAL OF EQUIPMENT BECAUSE OF AGE, REGARDLESS OF USAGE OR CONDITION

A major criticism during the May, 1966 hearings involved the automatic disposal by the military services of equipment even though it had received little nse and was in good condition. Criteria established by the military services sharply limited the repair costs which could be incurred to maintain equipment as such equipment became older regardless of how much usage the equipment had received.

For example, dollar limits had been established for vehicles, construction equipment, electric generators and other types of equipment based on the age of the equipment. If repair costs were estimated to exceed these limits, the equipment was disposed of regardless of usage or condition. Large quantities of good and usable equipment with relatively little usage had been disposed of because of strict adherence to this policy.

The Army's new instructions correct this situation by providing that"In determining the disposition to be made of principal items reported as uneconomically reparable, NICP's (National Inventory Control Points) will specifically consider the age and condition of the equipment and the cost factors used in arriving at repair costs. Prior to authorizing disposal of items, NICP's will insure that such action is in the best interest of the Government in consideration of overall economy, current or anticipated future world-wide requirements for like or similar items, asset position, technological changes, repair parts supply and other pertinent factors."

I consider these instructions to be a major step in the direction of conserving and utilizing useful equipment in the military service inventories, provided it is effectively implemented. Adherence to these instructions should prevent the disposal of equipment solely because a newer model with little or no technological improvement has been developed, because the equipment has reached a set age regardless of use or condition, or because unrealistic cost factors, used in determining that the equipment was uneconomically reparable, were accepted at face value.

The objectives of the Subcommittee investigation will have been substantially met if these instructions are effectively carried out. The Subcommittee plans on conducting additional visits and inspections in the near future to ascertain whether these new policy guidelines are being carried out in an effective manner. NEED TO SCREEN MILITARY SURPLUS STOCKS ACQUIRED BY THE AGENCY FOR INTERNATIONAL DEVELOPMENT

During the visit to AID repair facilities in Europe and the Far East in the latter part of 1965 and in March, 1966 I became convinced that that Agency had obtained a great deal of good equipment from military excess and surplus stocks for repair and shipment to foreign governments under the economic assistance program which the military services should not have disposed of but which should have been retained and utilized to fill critical shortages in Vietnam and elsewhere. On returning from my trip to the Far East in March, 1966 and after obtaining specific data on the shortages of equipment by our combat forces in Vietnam, I sent you a message suggesting that you screen the large inventory of AID-acquired surplus equipment against the needs of the military services and reacquire such items as were currently in short supply.

Information obtained from AID's Excess Property Office in Europe by the Subcommittee staff disclosed that about $500,000 of equipment had been identified as being needed and was in the process of being returned to military inventories. IMPROVEMENT IN MANAGEMENT OF PROPERTY DISPOSALS IN OTHER AREAS REQUIRED The visit to military facilities in Europe by Subcommittee staff disclosed several additional matters in which substantial savings can be realized if prompt action is taken.

1. A visit to a number of Army facilities disclosed that there exists a widespread practice of "cannibalization" of major end items before such items are disposed of which involves stripping parts and components from such end items.

This is done to obtain needed parts to repair the items that are being retained by the military services.

We found, for example, that M-series vehicles had been stripped of engines, transmissions, carburetors and other major components. The remaining shells had little value when offered for sale and were entirely inadequate for acquisition by the Agency for International Development to meet the needs of countries receiving economic assistance. Discussions with responsible officials at Headquarters, Communications Zone, U.S. Army, Europe, and data obtained from these officials disclosed that such cannibalization had not been authorized. Lists of parts authorized for cannibalization for M-series vehicles had been established but these did not include the types of major components referred to above. Further, discussions with Air Force officials responsible for redistribution and marketing activities in Europe, which include the responsibility for disposal of all Army excess property except that in France, revealed that at the same time that cannibalized vehicles were turned over to them for disposal by the Army, substantial quantities of the same parts and components were also turned in for disposal as had been stripped from the cannibalized vehicles.

These Air Force officials furnished, at our request, numerous examples of vehicle shells turned in for disposal, at the same time the parts were also disposed of. I recognize that stripping a vehicle to be disposed of to obtain parts to repair equipment that will be returned to service is an approved and economical procedure especially where insufficient repair parts are available from stocks on hand. I cannot understand, however, why the Army's supply management controls in Europe permit this stripping of equipment parts at the same time as the parts are being disposed of in separate lots as surplus. The data complied by Air Force officials are enclosed for your use in investigating this matter.

2. Discussions with the Commander, Naval Forces, Spain, and with the Commanding Officer, Naval Station, Rota, Spain, disclosed a need by the Navy for the items which the Agency for International Development had acquired from military excess stocks and had repaired for shipment to countries under the economic assistance program. For example, we noted a substantial construction program under way at Rota in which a private contractor was utilizing his own construction equipment while similar equipment was on hand ready in the AID holding area in Rota. Navy officials agreed that such equipment, if it was made available to them, could be turned over to the construction contractor as government-furnished equipment with commensurate reductions in contract costs. The Navy officials pointed out other instances in which AIDheld equipment could be utilized. These officials advised us, however, that under existing policies they could not obtain needed equipment from AID inventories even though such equipment had been acquired by AID from military excesses. I am not entirely clear as to why this situation exists.

The Navy officials with whom we discussed this matter agreed that they received lists of excess property from other military services in Europe before such excesses were disposed of and could acquire it before AID did. Apparently they were reluctant to do so because they did not have the capability to send qualified personnel to the sites in Europe where the excesses were being held to inspect the equipment, to determine whether it was economically reparable and to arrange for the shipment to Navy facilities where it could be repaired and put into service. AID has established such capability in both Europe and the Far East, and, as you know, has been acquiring very large quantities of military excesses which it has had repaired overseas.

I can readily imagine that many military commanders perusing lists of excess property would be reluctant to acquire such property even if it were needed because of their inability to establish whether it is economical to repair the items, their lack of repair capability and the general tendency to requisition new replacement items. I hesitate, however, to make any firm recommendations for a solution to this problem without further study.

You may want to consider as an interim measure, however, initiating discussions with AID leading to arrangements whereby the Department of Defense could obtain, as a routine matter, lists of equipment AID has acquired from military surplus stocks and which it has repaired, before it ships the equipment to foreign governments. These lists could be circulated to the subordinate commands in each theater and needed items could be reacquired from AID stocks. On a more long-range basis there is an apparent need for strengthening the redistribution and marketing functions in Europe, and perhaps elsewhere, to provide for the centralized screening of excess items for need and to determine

whether such items are economically reparable. If such function could be combined with the capability to undertake repairs on usable and needed equipment. it is likely that very large quantities of excess equipment now being disposed of would be retained for further use by the military services.

In this connection, you may want to consider the need in the Department of Defense for an organization similar to that which AID has established. AID's Excess Property Office is doing a very effective job in acquiring military excess equipment and repairing it at very moderate costs. A Department of Defense agency in each of the overseas commands might well be able to effect the utilization through appropriate screening and inspection techniques and through repair capability of items of equipment which are now being disposed of which individual military commanders need but which they are now reluctant to acquire. 3. As you know, my primary focus has been to point out opportunities for greater utilization of useful property by the Department of Defense. Of equal concern to me is the need of State health, education and civil defense agencies for the kind of property which the Department of Defense inevitably finds excess to its needs. In this respect I am concerned that AID's rapidly-growing program for acquiring military surpluses will cause further serious inroads in the quantities available to State agencies. The hundreds of letters I have received indicate a great need for the type of equipment and supplies which are surplus to the Department of Defense. I am of the firm conviction that the economic aid program to foreign governments should not benefit through the acquisition of valuable surplus property at the expense of local agencies and institutions in our own country.

I would like you to consider, therefore, the return to the United States of property considered excess in an overseas theater to the maximum extent possible so that the needy State agencies might have a fair chance of acquiring any items not required by the Department of Defense. This might prove to be especially feasible where ships carrying supplies to our forces overseas are returning with empty or partially empty bottoms.

I would appreciate your comments on the foregoing matters after you have had time to study them.

With best wishes, I am,
Cordially yours,

Enclosure.

ERNEST GRUENING,
U.S. Senator, Chairman.

3. LETTER TO SENATOR ERNEST GRUENING, CHAIRMAN,
SUBCOMMITTEE ON FOREIGN AID EXPENDITURES

(From Paul R. Ignatius, Assistant Secretary of Defense, Installations and

Logistics)

ASSISTANT SECRETARY OF DEFENSE,

INSTALLATIONS AND LOGISTICS, Washington, D.C., September 13, 1966.

Hon. ERNEST GRUENING,

Chairman, Subcommittee on Foreign Aid Expenditures, Committee on Government Operations, U.S. Senate.

DEAR MR. CHAIRMAN: The Secretary of Defense has asked me to express his appreciation for your thoughtful and comprehensive letter of August 17, 1966, reporting on your recent follow-up visit to Europe to check on the excess and surplus property program. We are pleased to learn that you found that our management procedures reflect improvement since your earlier visit. As I stated when appearing before your Subcommittee in March, we deeply appreciate your counsel and solicit your continuing advice and support.

I am pleased that you are aware of the revised Department of Army instruction applicable to repair of equipment at overseas locations. Comparable instructions have been issued by the other Services, and I am sure we will see great improvement in this area. We have taken two additional steps in order to provide for greater uniformity, where feasible, among the Services in the establishment and use of economic repair expenditure limits. We are preparing a Department of Defense (DoD) Instruction which will provide for uniform criteria for repair cost estimates to be used in determining whether an equipment repair is economical. This is designed to eliminate certain inconsistencies found among the Services in the elements of cost included in repair cost estimates. Issuance of

this Instruction is scheduled for October. In addition, we have established an Ad Hoc Group to review expenditure limits among the Services for commercial design support equipment to determine if further uniformity is feasible. Although it is too early to predict the findings of this Group, since a detailed review is planned, we are hoping to achieve some beneficial results.

I note that one of the areas in which you believe improvements are still required is the reportedly widespread practice of cannibalization of major end items. You state further that substantial quantities of the same parts and components being removed by cannibalization are being turned in for disposal. I agree that any unauthorized and/or unnecessary cannibalization and stripping of parts and components is improper and should be discontinued. To this end, I have requested the Department of the Army to take immediate action to review their policies and procedures and take aggressive action to preclude unauthorized cannibalization and stripping of parts. I am advised that this action is already underway.

You mentioned the potential savings which might be achieved through reclaiming from the Agency for International Development (AID) certain construction equipment repaired by them, and providing it to contractors as Government-Furnished Equipment (GFE). I have no knowledge of the "existing policies" which were reported to you as preventing the acquisition of AID equipment by the Navy in Spain, but I can advise you that the Naval Engineering Command (as Construction Agent) does not generally favor providing GFE to its construction contractors even when such equipment is available. Experience has shown that GFE tends to dilute the contractor's responsibility because it enables him to blame imperfect work or delays in his work on the quality and performance of the GFE. This is much more apt to occur if the equipment furnished has been used and repaired rather than being new. In Spain, as in other foreign countries, there is the added factor that the foreign contractor and his employees may be accustomed to performing the work with types and sizes of equipment different from that of United States manufacture; consequently, requiring him to use our equipment may not be in the best interest of the United States Government.

You have suggested that we consider initiating discussions with AID leading to arrangements whereby DoD could obtain, as a routine matter, lists of equipment AID has acquired from military surplus stocks and which it has repaired, before such equipment is committed to foreign governments. In this connection, we are working very closely with AID officials both in Washington and in foreign countries, and I am sure our improved liaison will have beneficial effects. As you know, we have already reacquired some items of needed equipment from AID. I appreciate your concern over the amount of military surplus property being acquired by AID, and your feeling that much of this property could be returned to the United States to fill civil agency and donee requirements. As you know, for the donation program to apply to foreign excess property, new legislation would be required. We note, however, that consideration of the necessary packing, crating and transportation costs would raise some doubt as to the extent that domestic donees would benefit from such a program.

We are in the process of developing a more comprehensive utilization screening of military excesses in Europe. When these revised procedures are implemented, we anticipate achieving the same excellent results we have achieved with our "PLUS" operation here in the continental United States.

Your personal interest in our surplus property disposal program is gratifying, and you can be assured of our continued cooperation in improving it in every way feasible.

Sincerely,

PAUL R. IGNATIUS, Assistant Secretary of Defense (Installations and Logistics).

4. AGREEMENT BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE FRENCH REPUBLIC CONCERNING THE SYSTEM OF COMMUNICATIONS AND DEPOTS OF THE UNITED STATES ARMY IN METROPOLITAN FRANCE

The Government of the United States of America and the Government of the French Republic,

Considering their respective obligations within the framework of the North Atlantic Treaty;

Recalling that, pursuant to an Agreement of November 6, 1950, certain facilities had been granted to the Government of the United States for the establishment of a line of communication across France for the needs of the United States forces in Germany;

Considering that this line of communication has by degrees been modified so as to change it into a system of communications and depots established on the territory of Metropolitan France and that its legal status should be defined; Have, to this end, agreed on the following provisions:

ARTICLE I

a) The Government of the United States may continue to utilize and operate, for the duration of the present Agreement and in accordance with the provisions of the present Agreement as well as the provisions of technical agreements entered into or to be entered into between the competent authorities of the two Governments, the facilities provided heretofore in France between certain agreed points of the Atlantic coast of France and the French-German frontier for the logistic support of United States forces in Europe.

b) The Government of the United States may in addition request of the Government of the French Republic the establishment and operation of other installations. These requests for supplementary installations will, except for unusual cases, be the subject of a consolidated program drawn up semi-annually and submitted for the approval of the Government of the French Republic at least three months before the expiration of the six-month period.

c) On their side, the French authorities reserve the right to present, for certain United States installations previously agreed, proposals for review, modification, or transfer, such as may appear desirable from the French point of view.

d) The Government of the United States may maintain in France forces of the United States Army. The maximum level and general location of such forces will be fixed from time to time by classified exchanges of letters between the two Governments. The United States military authorities will furnish a quarterly report of force levels to the Central Liaison Mission for Assistance to the Allied Armies.

e) The provisions of the Agreement signed in London on June 19, 1951, between the Parties to the North Atlantic Treaty concerning the Status of their Forces govern the status of the United States Army forces stationed in France.

ARTICLE II

a) The Government of the French Republic will make available to the United States Army, without any charge to the Government of the United States, all land areas available from the domain of the State (including their already existing improvements in the state in which they are found) necessary to the installations which have been agreed and which the Government of the French Republic assigns for this purpose, with the rights of way, easements, and appurtenances relating thereto.

b) The Government of the United States will assume responsibility for the costs of construction and maintenance and for such incidental costs as have been and as may be agreed from time to time between the two Governments.

ARTICLE III

a) The flags of the United States and of France will fly over the principal installations of the United States Army in France.

b) The French territorial command will continue in the general area where installations are placed at the disposition of United States forces. However, the operational command of such installations will be exercised by competent United States authorities.

ARTICLE IV

a) All removable facilities erected by or on behalf of the United States Army at the sole expense of the Government of the United States and all equipment and material imported into France or purchased in France by or on behalf of the Government of the United States for the construction, the development, the operation, or the maintenance of the installations and facilities covered by the