several methods by which this might be accomplished, but the one vital factor is that there must be one decisive voice at the top who can give his entire time to problems of war directions. This same policy must apply in every major theater of war. Mere integration of war direction, however, is not sufficient. Particularly for the individuals of the professional forces, who must in any event furnish the greater part of the higher tactical and strategical direction of war, there must exist a unification in thought, purpose and training that must begin in the earliest periods of their service. Every possibility must be exploited to produce mutual understanding, common devotion to a single purpose, and individual and collective friendliness among the whole mass. (d) Always remembering that speed in full mobilization after the war starts is the surest way of minimizing cost, it is obvious that as much as possible of this task must be accomplished in peace. But any attempt to carry out this task through maintenance of large professional forces or of looking upon the individual's training period as anything else but a period of necessary education, would build up the cost so as to be insupportable. The whole concept of organization should be one involving the "citizen forces" idea. Sincerely, DWIGHT D. EISENHOWER. QUALITY OF DEFENSE PROCUREMENT Mr. WARD. The statement of the Comptroller General this morning and the reports of the General Accounting Office reflect the quality of the defense procurement program, particularly with respect to negotiated contracting. The Comptroller General emphasized that the reports are typical, or we might say, a sampling of all contracts. He could not, with his limited staff cover every contract. SCOPE OF DOD SUPPLY ACTIVITIES These figures on the chart indicate the magnitude of the DOD supply program. I don't know whether you can all see it or not, but it shows as of June 30, 1959, that the holdings of the DOD in real and personal property were $150 billion. It shows the acquisition cost of personal property to be $117 billion worldwide. It shows, as the chairman mentioned this morning, covered storage worldwide of 585 million square feet. I might add that is about 21 square miles of covered storage space. That would be a depot roughly 411⁄2 miles on the side. Senator O'MAHONEY. Mr. Ward, what is the source of this information? Mr. WARD. The information that I am giving you, Senator, comes from a report that is annually made by the Government Operations Committee of the House. It is compiled from the statistics received from the executive agencies, in this case the DOD. Senator O'MAHONEY. Is there any dispute about these figures? Mr. WARD. I don't believe so because the military people themselves use these figures. (The table referred to follows:) Mr. WARD. I would be glad, if there are any errors, to correct them. If there are any errors, Secretary McGuire and his people can correct them when they testify tomorrow. Representative CURTIS. It says, "Source, Department of Defense." Mr. WARD. Yes. The total procurement was $23.8 billion. Number of procurement actions, 6.7 million. Then the breakdown on type of contracts which was given this morning. Then it shows surplus, excess and long supply stocks of $26.7 billion. Might I say that is much more than either our annual export of goods or our imports. Representative CURTIS. On that point, may I ask, is it $150 billion including the $26.7 billion? Mr. WARD. Yes. Representative CURTIS. In other words, of supplies, which are $47 billion, 40 percent of 26 is roughly what, $10 billion or $12 billion? $12 billion out of $47 billion are surplus in the supply area, and not talking about obsolete aircraft and ships? Mr. WARD. That is correct. Congressman, Mr. Newman is going to discuss in considerable detail a recent report that was made by the Office of the Secretary of Defense, Supply and Logistics, and will go into the common areas in great detail when I get through. Representative CURTIS. So we can ask him those questions. SURPLUS SALES AT $10 BILLION ANNUAL RATE Mr. WARD. Yes. The surplus property sales are estimated-this is acquisition cost-at about $10 billion. May I say that I called up the people who worked with the War Assets Administration to get the figures on the disposal during the days of War Assets. The Surplus Property Act of 1944 continued until the General Services Act went into effect in 1949, a period of 42 years. They disposed of personal and real property, $24.4 billion; or an average rate of $5 billion a year. The rate we have attained now is approximately twice the average rate under the War Assets Administration. CURRENT SURPLUS DISPOSALS COMPARED TO WAR ASSETS May I point out this difference: At that time,-1944-49-the market was very hungry for goods because of the war. We are now increasingly reaching the point where many industries are feeling the impact of the disposition of this material. I have tried to bring what I thought you would be particularly interested in after listening to the discussion this morning. $26.7 BILLION IN LONG SUPPLY According to testimony of the Assistant Secretary of Defense, Supply and Logistics, before the House Appropriations Committee on March 23, 1958, the total of our surplus property in process together with our known excess and long supply was $26.7 billion, and it costs the DOD $112.5 million per year to carry $22.5 billion excess and long supply in inventory. This cost figure is based on the assumption that direct costs, storage, accounting, and control of such material approximates one-half of one percent of the inventory value per year. USE OF RECEIPTS FROM DISPOSALS More recent statements indicate that the annual disposal may be as high as $12 billion a year. In order to accelerate the disposal program, the last Congress in the annual military appropriation act, Public Law 86-166, section 611, granted authority for the military to use the receipts from the sale of surplus property to reimburse appropriations for operation and maintenance for all expenses involved in the preparation for disposal and for the disposal of such property. From the data submitted to the Congress, the receipts are expected to be $260 million. Representative CURTIS. Will you relate that to the acquisition cost? Mr. WARD. $10 billion. Representative CURTIS. And realizing $260 million gross, subtract your cost of $75 million. Mr. WARD. That is right. DILEMMA OF FAST DISPOSAL VERSUS IMPACT ON INDUSTRY The surplus property program is faced with a dilemma. While an accelerated program is desirable to reduce storage and other costs, it is found that some of the disposals of individual items are so large that they have severe impacts on some industries in the opinion of the Commerce Department. I have here, Mr. Chairman, a letter that the Commerce Department sent to you. I shall not read it all, but this section is on "Department of Defense, domestic surplus." Representative CURTIS. Would you give the date for the record? Mr. WARD. Yes; December 9, 1959. It is addressed to the chairman. Senator O'MAHONEY. Mr. Chairman, I suggest that the whole letter be put in the record and that Mr. Ward read such parts as he wishes. The CHAIRMAN. Without objection that will be done. (The data referred to follow :) Hon. PAUL H. DOUGLAS, Chairman, Joint Economic Committee, THE SECRETARY OF COMMERCE, DEAR MR. CHAIRMAN: This is in further reference to your letter of October 2, 1959, which was acknowledged October 8, 1959. We have now assembled the detailed information requested in your letter. In transmitting this material to you we wish to take the opportunity to describe the duties and responsibilities of the Department of Commerce relative to the various Government surplus disposal programs. The Business and Defense Services Administration of this Department furnishes information and advice as to certain aspects of disposal problems to Government departments and agencies which are charged by law with disposal responsibilities, involving various classes of property including national stockpile, supplemental stockpile and Defense Production Act inventories and surplus personal property of the Department of Defense and the Atomic Energy Commission. A description of BDSA's responsibilities and functions for each of these programs follows. NATIONAL STOCKPILE DISPOSALS The Director of the Office of Civil and Defense Mobilization is responsible for all stockpiling policy and programing under the authority of the Stockpiling Act of 1946, and Reorganization Plan No. 3 of 1953. In making policy determinations with regard to the sale of surplus or obsolescent materials, the Director generally consults with the OCDM Interdepartmental Materials Advisory Committee on which the Department of Commerce has representation in the person of the BDSA member. The General Services Administration has been charged by OCDM with responsibility for developing disposal plans in relation to particular disposals. Agencies concerned are consulted about the feasibility of such plans, the potential impact of the sales on the domestic market and on the interest of producers, processors and consumers. BDSA industry contacts are an important resource in evaluating the acceptability and soundness of such plans. SUPPLEMENTAL STOCKPILE strategic and other material acquired through barter with agricultural surpluses and which are not needed for defense are placed in the supplemental stockpile. Legal restrictions on disposition in a nonemergency period are now identical with those of the national stockpile. However, no disposals have been made from this stockpile nor have they been under consideration. DEFENSE PRODUCTION ACT (DPA) Under Executive Order No. 10480, OCDM has been delegated responsibility for administering most of the Defense Production Act activities including the acquisition and sale of strategic materials obtained through the operations of expansion programs. Under the provisions of the act, these materials are for "Government use or resale." In practice, materials would be sold to the national stockpile at market if needed for defense or held for other disposition in the DPA inventory. The only legal restriction on resale of materials to industry is that such sales must not be made at less than the current domestic market price. Defense Mobilization Orders V-3 and V-7 issued by the Director of ODM (now OCDM) set forth a disposal policy similar to that applied to disposals from the national stockpile in requiring among other things that the sale would not cause serious economic disruption. As in the case of stockpile surpluses, BDSA's knowledge of market situations is called upon in considering OCDM disposal policy determinations and, in reviewing the practicalness of GSA selling plans. DEPARTMENT OF DEFENSE (DOD) DOMESTIC SURPLUS Under an agreement between the DOD and the Department of Commerce, BDSA conducts investigations on request or on BDSA's own initiative in order to ascertain the impact which planned disposals by DOD of significant amounts of domestic surplus property may have on a given segment of industry. BDSA's role in these disposals is purely advisory and is non-statutory except as it follows naturally from the basic statutory duty of the Department to foster, promote and develop the commerce of the United States. BDSA furnishes the DOD recommendations and advice resulting from such investigations. The DOD may accept or reject BDSA's recommendations. Significant amounts have been defined as being the aggregate of surplus items in a proposed sale where the acquisition costs exceed $250,000. ATOMIC ENERGY COMMISSION SURPLUS DISPOSALS The agreement between the AEC and the Department of Commerce regarding disposal of major surplus property items parallels the DOD-Commerce agreement. That is, the AEC, in advance of each sale provides our staff with auction catalogs, or special communications describing the surplus property in those cases where only a few items are being offered for sale. Notifications include sales to be conducted by sales agents of the AEC. The sales lists are examined by industry experts in BDSA and appropriate recommendations made to the Commission. FOREIGN EXCESS PROPERTY The Department's responsibilities with respect to foreign excess property stem from section 402 of the Federal Property and Administrative Services Act of 1949. This section provides that such "*** property may be disposed of by exchange, lease, or transfer-upon such terms and conditions as the head of the executive agency concerned deems proper, but in no event shall any (such) property be sold without a condition forbidding its importation into the United States unless the Secretary of Agriculture (in the case of any agricultural commodity, food, or cotton or woolen goods) or the Secretary of Commerce (in the case of any other property) determines that the importation of such property would relieve domestic shortages or otherwise be beneficial to the economy of this country." The Secretary of Commerce is granted no jurisdiction over the disposition of foreign excess property but must determine whether it may be imported into the United States. For this reason, actions taken by BDSA, our delegate agency under this act, on individual applications to import foreign excess property are regarded as outside the scope of your request. Policies and problems respecting importation of foreign excess property have been the subject of hearings in 1958 and 1959 before the Executive and Legislative Reorganization Subcommittee of the House Committee on Government Operations. We are currently engaged in cooperating with the members and staff of that committee in an effort to achieve improved solutions of the numerous problems existing in this field. The specific answer to your queries are contained in the attached reports submitted by the respective Business and Defense Services Administration Industry Divisions. In general you will note that spaces are left blank where information was not known or not available. In cases where the degree of impact on industry was insignificant no recommendation or action entry has been made on the form. Because of the wide variety of products covered in these studies, |