Hardly a week goes by that we do not receive at least one copy of a bulletin in the mail from an individual corporation offering to sell surplus Government equipment. The copy we have just received we include with this letter. In view of the present high cost of military preparedness in the United States, I feel it is about time that Congress established a clearinghouse for all surplus equipment, allow no agency of the Federal Government to make purchase without first checking through the clearinghouse to see if another branch of the Government does not have it on a surplus basis. I feel it is certainly unfair to the taxpayers of the United States that all this Government surplus equipment is put up for such sales when I know as well as you know that various departments of Government are purchasing this same equipment new.

How about a little help to the taxpayers in this area by urging Congress to look into a plan whereby all purchases must clear and all such surplus must clear in order to utilize this equipment instead of this extreme waste which exists now by selling equipment 10 cents on the dollar of what the Government paid for it and the Government purchasing new the same type of equipment at the same time.

Here also is a letter of Jan. 15, 1960, from a large manufacturer of hand tools, Fayette R. Plumb, Inc., of Philadelphia, Pa. (The letter referred to follows:)

JOINT ECONOMIC COMMITTEE, The Capitol, Washington, D.C. (Attention of Mr. Ray Ward).

FAYETTE R. PLUMB, INC., Philadelphia, Pa., January 15,1960.

DEAR SIRS: We understand you are studying the subject of a coordinated purchasing policy covering articles of common usage required by various divisions of the U.S. Government. Our company has enjoyed business with many and various agencies of the Government over a long period of years. While we are at all times grateful for the business, we sometimes wince at the apparent waste caused by various agencies purchasing similar articles at approximately the same time. This division of volume increases costs. Another waste results from one branch of the Government purchasing an item when another branch has a surplus.

These purchasing practices seem inefficient and extravagant. If a single agency had the complete authority for purchasing tools such as we make, we feel that much of this waste could be eliminated. Our company is over 100 years old and our products comprise hammers, hatchets, axes, sledges, and files. All of these products are staple items of general civilian use. These same tools are also used by the military services and have in the past been purchased separately by various military agencies as well as Government civilian agencies such as the U.S. Treasury and General Services Administration. Such a practice has resulted in the Government dividing their volume into costly small orders thus resulting in a higher total cost than volume purchasing could procure.

In our opinion, coordinated purchasing by a single agency of the Government covering staple tools such as we manufacture would be a step in the right direction toward a desired reduction in the cost to Government.

Yours truly,

FRANK P. GREEN, Executive Vice President.

GARBAGE PAIL TECHNIQUE

Representative CURTIS. Mr. Chairman, I wonder if I could make this observation to follow the thread. We are making the point at this stage of the impact on our economy of the disposition of these vast surpluses. But at the same time we can through what I have described as the garbage pail technique ask why is this in the garbage pail. Look back to original procurement practice to find out what is wrong in our procurement system.

When we are dealing in sums of $26 billion of surplus it seems to me very obvious that unless there is good explanation for these amounts of surplus, our procurement practices, if tightened up, could be saving billions of dollars a year. I think we could use that as a premise.

67 MILLION YARDS OF SURPLUS CANVAS

Mr. WARD. If I may give you one more illustration, then I should like to go into the background of what you are talking about, Congressman Curtis. I have here a summary sheet on the disposition of surplus cotton duck.

Representative CURTIS. Cotton duck?

Mr. WARD. Canvas. Here are samples of the various kinds of canvas. An April 1959 declaration of canvas was 10 million yards. Webbing, 17 million yards; tape, 670,000 yards; and so on down. There were three batches of canvas that totaled 66,924,450 yards. I computed that would be about 40,000 miles.

The CHAIRMAN. These are excess stocks.

Mr. WARD. Excess stocks to the military needs. I have seen this canvas all over the United States in the surplus property depots of the State agencies where they distribute it to schools and hospitals who make very good use of it. It is a wonderful thing that they can get it. They need it. I looked on many and many a roll of it and it was all purchased in 1950 or 1951 during the Korean emergency. But it is nearly all in excellent condition.

The CHAIRMAN. The Defense Department could say that in 1950-51 that the Korean struggle would be isolated and there was an everpresent danger that it would expand into another world war. I think they could properly say they wanted to be prepared for that. Is there any answer to that defense?

Mr. WARD. I don't know just what the defense is, Senator Douglas, except that probably bad weather coming on, or something like that, and they wanted to be sure they had enough.

IMPACT ON MARKET WHEN CANVAS WAS PROCURED

I do know that we were having hearings at about the same time with the Bonner committee. Congressman Curtis will remember this. We were told by the Under Secretary of the Army, Mr. Alexander at the time, what an effort it was to get the canvas that they needed. It was necessary to convert a good many of the manufacturers of carpet at that time. I think you will remember that impact on the market at that time made the price of carpeting go way up. They were undoubtedly producing canvas at the request of the military.

The CHAIRMAN. Mr. Ward, do you have any evidence to indicate that the Defense Department with these huge stocks of canvas on hand has recently been placing orders for more canvas.

Mr. WARD. I don't know of any cases. It has just been impossible to check all of the records as far as our limited staff is concerned, Senator. However, I find that some Federal agencies wanted some of the canvas and could not get it since it would not be transferred to

See also p. 77, pt. 4, Department of Defense Appropriation Hearings, H.R. 1961.

them without payment under stock fund regulations. So they didn't get it. Usually if an agency needs something they can find the funds to go and buy it.

USE OF INDUSTRIAL DISTRIBUTION FACILITIES

Representative CURTIS. To again get to the canvas as an example, because these are only examples and we are not using them for anything more, there could be that argument. It is important for us to go behind to see whether that is a specious argument. Of course on its face is is obvious that they would have to buy more than they actually knew they were going to use. There are several ways of being ready with supplies. You don't actually have to have it in warehouses. If we have the plant capacity to turn out canvas as we need it, there is no sense of turning it out and warehousing it. So, in analyzing this problem, we must not just stop at the point where we think we might need so many yards of canvas. It has to be scheduled out. I think one of our witnesses, if I am not mistaken, is going to go into this method used in industry. Open end purchase, I believe it is called. Am I correct in that term?

Mr. WARD. Yes. Open end contracts.

Representative CURTIS. Open end contracts. Where some big company needs a lot of boots, they don't buy them all in one month. They allow the manufacturer to schedule the purchase over a couple of years.

May I ask this question: The Military Establishment does not use that open end purchase technique, does it?

Mr. WARD. Yes, I believe it does. They can tell you the extent that

it is done.

Representative CURTIS. Let us get back to our canvas. Did they do it in the canvas case?

Mr. WARD. I do not know what the nature of these contracts were. We were looking at it from the standpoint of the impact on the economy. We know from previous hearings that the procurement had a severe impact on the carpet industry and textile industry, and the disposal of surplus has an impact now. The webbing is listed as 91 million yards. That is about 54,000 miles. About 29 million yards of tape, which is about 17,000 miles. So we have total for canvas, webbing and tape of about 111,000 miles of this material if you hook it up end to end. It is quite a sizable amount.

We asked the Commerce Department with respect to this what recommendations they had made, and we have not received that report. When the data are received, it will be placed in the record. I don't know whether that part of the canvas not taken by the schools, hospitals, and civil defense will be sold. In some cases property is designated for sale overseas only.

Representative CURTIS. I see what you are getting at. You are limiting your presentation on this to illustrate the impact on the economy at the time of purchase and now again at the time of disposal and we will get into these other things later.

2 See pp. 69–74.

One point on this disposition. Even disposing of sizable amounts through our hospitals and schools, and so forth, which I am very happy we can do, even there it would affect the economy, would it not, because if they were going to purchase, normal channels of trade are disrupted. Mr. WARD. In most cases schools and hospitals haven't the money to go to the market. That is one reason industry favors the "Donable program." It is necessary that volumes like we have mentioned be referred to the Commerce Department where they are supposed to have qualified industry advisory groups who know what the situation may be in the particular industries and can give advice as to what best to do with this material.

Representative CURTIS. One other detail, if I may, on disposition. I thought the general law said that these dispositions were to be turned over to GSA. However, GSA in many instances refers it back to the Military Establishment for disposition. How would this canvas be handled?

Mr. WARD. Congressman, it works like this: Under the law, Public Law 152, if a particular agency has something that it does not need that is excess property. The Department of Defense makes these large composite excess lists once a month. These are lists of property excess to the individual agencies in the Department of Defense. The lists are circulated to all DOD agencies in an attempt to place the property elsewhere within the Department of Defense. If there is no use for it, the lists go to General Services Administration.

GSA tries to dispose of it to other Federal agencies. Maybe to Agriculture, Interior, State, or some other. If no one has any need in the Federal Government whatsoever, the property become "surplus property" to the United States. Then, under existing law, if it could be used for schools, hospitals or civil defense, it is turned over to qualified recipients by the Department of Health, Education, and Welfare.

Under the law, GSA has the authority over surplus disposal. They have, however, delegated this authority to DOD for other than classes of common property known as reportable property.

Representative CURTIS. GSA is under the law, I thought, the responsible agency for this process. As I understand this practice, they actually send some of it back to the Military Establishment and the military itself handles the sale, is that correct?

Mr. WARD. You were not here this morning. Senator Douglas questioned Mr. Floete about that. That is correct. Under the act the authority for the disposal of surplus property rests with the GSA.

Incidentally, at the time the act was being considered up here, the military people said they wanted it to be that way. They wanted to look forward, and not backward. They wanted to look toward the development of modern things and not be bothered with a civilian disposal job. However, in all fairness to everyone concerned, General Services has not been equipped with the staff to do this kind of job and has delegated its authority to DOD for the bulk of the disposal job.

Representative CURTIS. I am really driving home back to the point. If this canvas were turned back to the military once it was found to be surplus, and they actually are going to handle the disposition, then

the Military Establishment has to clear it through the Department of Commerce rather than the GSA. That is what I am really trying to get to. Is that correct?

Mr. WARD. That is my understanding from the letter from the Department of Commerce. They negotiate directly with the military in connection with those impact disposals.

If I may for a moment, I would like to go into the congressional efforts to improve supply management. Secretary Stimpson had said that during World War II it took 100 committees to bridge the gap between the Army and the Navy. With the creation of the Air Force as an independent agency, to bridge the various gaps that now exist there are something like 557 boards, committees, councils, groups, and so forth. Here is a list of them. It shows the geometrical development that takes place when you add another unit to what you already have.

DEPARTMENT OF DEFENSE BOARDS, COMMITTEES, COUNCILS AND GROUPS IN OPERATION BETWEEN JULY 1, 1958 AND MAY 31, 1959

OFFICE OF THE SECRETARY OF DEFENSE

Immediate Office of the Secretary: DOD Concessions Committee.

Assistant Secretary of Defense (Comptroller):

Contract Finance Committee.

Committee on Defense Participation in Joint Accounting Improvement Program.

Assistant Secretary of Defense (Health and Medical):

American Red Cross Liaison Group.

Interdepartmental Committee on National Blood Program Research.

DOD Ad Hoc Blood Program Committee.

Civilian Health and Medical Advisory Council.

DOD Dental Advisory Committee.

Dependents' Medical Care Advisory Committee.

Phase III Emergency Medical Care Panel.

Federal Council on Medical Education for National Defense.

Committee on Standardization of Medical Forms, Recording and Reporting Procedures.

Committee on Procurement and Utilization of Medical Service Personnel. Interdepartmental Committee on Nutrition for National Defense.

Ad Hoc Committee on Status of Veterinary Services in the Armed Forces. Assistant Secretary of Defense (Manpower, Personnel and Reserved): Alcoholic Beverages Continuing Committee.

Armed Forces Chaplains Board.

DOD Committee on Censorship Planning.

Civilian Advisory Council.

Defense Advisory Committee on Women in the Services.

Defense Advisory Committee on Education in the Armed Forces.

DOD Emergency Planning Committee.

Armed Forces Examining Stations Policy Board.

FRASCO-DOD Board.

Industrial Personnel Security Hearing Boards (New York, Chicago and
San Francisco).

Industrial Personnel Security Review Board.

Industrial Personnel Security Screening Board.

DOD Life Insurance Board.

Manpower and Personnel Council.

Military Advisory Council.

Armed Services People-to-People Committee.

DOD Ad Hoc Committee on "U.S. Personnel Overseas."

Reserve Forces Policy Board.

Advisory Panel on ROTC Affairs.

Ad Hoc Group on ROTC.

Industry Advisory Committee on Safeguarding Classified Information.