concerned, in the fields which are covered by this bill. At the same time, the importance of national defense is such that these problems must be met with a minimum of intervention. With this in mind, specific provisions have been made in pending legislation to recognize these problems, and I should like the committee to hear Mr. Gray in some detail on the specific exemptions covered in the bill.

Mr. HOFFMAN. I would suggest, Mr. Chairman, that we go along and then when the period for questioning comes along Mr. Anderson be allowed to speak.

Mr. ANDERSON. Mr. Chairman, I do not wish to impose on the committee because I will be here to testify next week.

Mr. HOLIFIELD. I think that the suggestion is very good that if you wish to participate in the questioning you may do so. We do want to have you come back before the committee next week.

Mr. HOFFMAN. Yes.

Mr. HOLIFIELD. We will hear from Mr. Gray at this time.

STATEMENT OF HON. GORDON GRAY, ASSISTANT SECRETARY OF THE ARMY, WASHINGTON, D. C.

Mr. GRAY. Mr. Chairman, my name is Gordon Gray and I am Assistant Secretary of the Army. I appreciate the opportunity of appearing before this subcommittee to state the position of the National Military Establishment on the pending bill. My views represent the coordinated position of the Departments of the Army, Navy, and Air Force.

I can also say that the Director of the Bureau of the Budget, with one exception to which I will advert as I go along, advises that there is no objection to the presentation of this statement.

Last year a thorough consideration was given in the Senate committee to certain portions of this type of bill relating to the Military Establishment and I should like to indicate briefly this morning some of the reasons for the position which the Military Establishment took in regard to that bill before the Senate last year.

The report of the Hoover Commission has been referred to previously in the course of your subcommittee's hearings. We would be in general accord with these recommendations also, although there are differences in approach, in that the present H. R. 2781 takes an over-all approach to the Government problem with what we interpret to be a very broad exemption for the Military Establishment on the basis of national defense, whereas the Hoover Commission proposes to centralize the system of general procurement among the civilian agencies of the Government with coordination of military and civilian activities at the level of the Administrator of General Services.

In connection with the bill H. R. 2781, I would like to turn first to the problem relating to the disposition of surplus property. The armed services must, of necessity, be looking forward; and we think that the consideration of the many factors which must be made in connection with the disposition of surplus property is well vested in a single agency.

In addition to provision for a central system of control, the military establishment would be in favor of providing an agency for actually effecting sales of surplus property, to take the place of the War Assets Administration, which it is proposed to liquidate.

The treatment of foreign excess property presents somewhat of a different problem, since the responsibility for its disposition is vested by the bill in the owning agencies, but the disposal of foreign excesses is so thoroughly affected by the Nation's foreign policy that numerous controls upon the activities of the owning agencies must be exercised by the Department of State to insure compliance with the foreign policy.

Mr. HOLIFIELD. Mr. Gray, may I ask you to pause for a moment there?

Mr. GRAY. Yes.

Mr. HOLIFIELD. Would you prefer to complete your statement or would you like to have questions as you go along?

Mr. GRAY. As you wish.

Mr. HOLIFIELD. Would you answer this question? You in effect approve the Hoover Commission report which gave no control at all on the part of the civilian procurement over items of common use in the Military Establishment. You therefore disapprove of section 107 of H. R. 2781 because it does provide that with certain exemptions requested by the Secretary of the National Defense that the agency we are setting up here, or the correlation of agencies, will be authorized to buy articles of common use for both civilian and military use? Mr. GRAY. Well, I think, Mr. Chairman, I will probably answer that question later on in my statement, but let me say this that I am not here opposing this bill. This bill simply follows a different approach, and that followed by the Hoover Commission would have been just as satisfactory. We are not opposing it, although I have a couple of technical amendments.

Mr. HOLIFIELD. Thank you.

Mr. GRAY. Your point will be covered as I proceed, sir.

The possible diversion of military personnel from their primary missions, for the handling of surplus which continues to be generated in overseas areas, presents some difficulties. In other words, our mission is not primarily that of disposing of property.

Mr. HOLIFIELD. May I ask you to pause for a minute there?

Mr. GRAY. Right.

Mr. HOLIFIELD. Is this property being generated in appreciable quantities at this time and is there a large residue of this property? What is the magnitude of the job?

Mr. GRAY. I might say, Mr. Chairman, that I regret that I learned of my expected appearance before this committee on such short notice, 10 minutes before 9 this morning, that I did not have time to develop those figures, but to give you an indication of the magnitude of the problem, perhaps I can give you some figures which I used a year ago.

Mr. HOLIFIELD. Now, unless those figures are up-to-date they would be useless to this committee unless they are brought up-to-date because we have had testimony from the State Department that the supply of surplus property under this control is down to a minimum.

Mr. GRAY. That is correct, there is not very much to be generated. One of our problems is dealing with perhaps negotiations relating to certain contracts that have already been entered into by the Foreign Liquidation Commission such as bulk sales to Chinese and Philippines for which, speaking very frankly, we would prefer not to have the responsibility. Negotiation was carried on in the past by the

F. L. C. As far as future generation is concerned, there remains perhaps very little unless there should come a great change in the international situation where there might be substantial surpluses and excesses.

The figure I was about to quote was one that would indicate how much of the total has been declared and how relatively little at the moment seems to be involved. You already have those figures in the record so I will not bother with them.

Mr. HOLIFIELD. I do not think it will be necessary because I believe that the State Department furnished us those figures in their testimony the other day.

Mr. GRAY. Well, Mr. Chairman, I indicated at the outset that with one exception this statement had been cleared with the Bureau of the Budget. I have no reason to believe that the Bureau of the Budget would have reason to object to this statement but they have not had opportunity to read it. With your permission I would like to read a statement which I read before the Senate committee which states the principles under which we would like to operate in the foreign excess property field.

Last year we had arrangements with the Bureau of the Budget after conferences with the President and other military services which established the following principles [reading]:

One, surplus property generated after June 30, 1948, not included under sales contract or negotiations in process shall be the responsibility of the owning agencies for disposal.

I might say that these dates would have to be changed to bring them up-to-date.

In other words, that is property to be generated in the future, would be the responsibility of the owning agency. [Continues reading:]

Two, surplus property generated prior to June 30, 1948, which is not included under sales contract or negotiations in process on June 30, 1948, will be the responsibility of the owning agencies for disposal.

Three, the State Department will not, after June 30, 1948, initiate any new negotiations for the sale of surplus property.

Four, negotiations initiated by the State Department and in process on June 30, 1948, will be concluded either by reduction to contracts or cancellation by December 31, 1948.

In other words, if the State Department was in June engaged in negotiations and had not concluded them by December by contract then the negotiations would be canceled.

Five, the State Department will expedite the completion of all contracts under its jurisdiction with a view that the maximum number of such contracts will be advanced to such a stage that they can be turned over to the Treasury Department for billing and collection.

Six, the State Department will administer any contracts entered into by the State Department prior to December 31, 1948. However, contracts which have not been turned over to the Treasury Department and which require continuing administration will be subject to review by the interested parties on or before December 31, 1948, to determine whether responsibility for the continued administration of these contracts should be continued by the State Department.

Then I also said at that time, and I would like to read it into the record here, if I may, as follows:

It is our hope that the Department of the Army, and of course the Navy and the Air Force, will never find itself in the position, as a result of this legislation, of having to deal with foreign governments in connection with the administration or renegotiation of bulk sales contracts already entered into by the FLC. We

recognize that these problems must be at all times considered in the light of the best interests of the Government as a whole; and, therefore, it seems unnecessary to impose any legislative limitations in this regard.

Mr. HOLIFIELD. What you are in effect objecting to is the utilization of the Army in what you consider nonmilitary functions actually?

Mr. GRAY. That is right, and functions which get over into diplomatic fields, for example, dealing with foreign governments and for another reason: that our people are not experienced, nor should they be devoting themselves to that type of function.

Mr. HOLIFIELD. Do you realize that the military forces have been burdened with a great job in the occupied territories which is principally a civilian function because the exigencies of the case have forced that.

Mr. GRAY. Right.

Mr. HOLIFIELD. There might be arguments very well presented that as long as the military forces are occupying some of those areas over there and could perform a function as long as they are not engaged in actual aggressive military action and as long as they are stationed. in these countries, but it would seem to me as though your service should stand ready to help the State Department rather than force Congress to set up a different organization over there.

Mr. GRAY. I would say, in answer to that, that I agree, Mr. Chairman, and I think the statement of principles which I have read into the record indicates that as to future generations of surplus we would be willing to take the responsibility, but we feel that some other agency ought to carry forward the ones that have already been reduced to contracts or which are in present negotiation.

Mr. HOLIFIELD. You are taking practically the same position you took before Senator Aiken's committee last year?

Mr. GRAY. That is right. I am not suggesting that there need be legislative limitations, but I would like to show that within the framework of this bill that is the procedure we hope to be followed.

Mr. HOLIFIELD. That is certainly acceptable for the record to have the attitude of the Military Establishment.

Mr. GRAY. Yes, sir.

Mr. HOFFMAN. All your position amounts to is that you do not want the Army going into merchandising?

Mr. GRAY. Štated in its simplest terms, that is it.

The CHAIRMAN. They are willing to go into it provided they do not have ot take over contracts already entered into.

Mr. GRAY. I would say that we preferred not to, but we would do

it under this bill and we are not opposing.

Mr. HOFFMAN. But you do not have any complaining along that line and your business is not set up for that?

Mr. GRAY. We would prefer not to.

Mr. HOFFMAN. We would need a commercial school established at Annapolis or at West Point.

Mr. GRAY. The Military Establishment recognizes the need for some central clearinghouse on the development of excesses to permit the widest use of materials and equipment on a Government-wide basis. However, we would like to point out that there is a vast difference in the concept of the accumulation of materials and equipment by the military services than that which is envisaged for the other departments of the Government. In the Military Establishment, reserves

against possible emergency are constantly being accumulated to permit the expansion of forces, should an emergency arise.

Mr. HOLIFIELD. Does that apply to common-use items as well as to strategic materials and implements of war?

Mr. GRAY. To some extent to common-use items and, for example, a 212-ton truck would be a common-use item. We do not have reserves of 212-ton trucks.

Mr. HOLIFIELD. But they are usually designed under military specifications and are not the common-use civilian-type truck?

Mr. GRAY. Generally speaking, that is true, although we do have a lot of vehicles; and I might say in that connection that we are putting every emphasis we can in the Military Establishment now in developing requirements and specifications toward relating them as nearly as possible to commercial specifications. We are trying to hold to a minimum the unnecessary refinements which I might say is very difficult to do if I may take a moment of the committee's time. Of course, ultimately, all of your matériel is procured for the user, taking the Army, for example, the Ground Forces. Sometimes there is some difficulty in reconciling what the user feels to be specialized requirements with this principle of attempting to meet what we understand to be commercial specifications.

We are in the middle now of a problem with some cross-country trucks. The average commercial truck is not a cross-country vehicle. The Ground Forces feel they need a particular type of vehicle.

On the other hand, there is a tendency sometimes to overrefine in their requirements and sometimes a tendency to engage in gadgeteering, and there is always a necessity for reconciling these conflicting interests. To the best of our ability, we are attempting to hold everything we can to what would generally be considered a commercial specification.

Mr. HOLIFIELD. I want to encourage that attitude because I think the Members of Congress have been given ample evidence of waste in procurement and particularly in the procuring of items which are of no commercial use when the war is over. I am speaking now of many of your types of trucks which are built on such specifications that, once the war is over, they are practically useless from the standpoint of the civilian economy. I realize that in defense you must have different specifications on many things, but I am of the opinion, and I think a lot of people who know more about it than I do, that many of the things that are used by the military forces could be among the spectifications that are used in ordinary commercial production.

Mr. GRAY. I agree with that, sir, and I assure you that there is a very real consciousness among the people who have the policy responsibility in the Military Establishment. The Munitions Board is monitoring the standardization of specifications as well as the cataloging project which Mr. Carpenter referred to, and among the criteria which are foremost in the minds of people engaged in standardization is this commercial applicability of the items being considered. In response to your comment about the waste, war is a wasteful business.

Mr. HOLIFIELD. I realize that.

Mr. GRAY. I would certainly be less than honest if I did not say that I am sure we could have saved many millions of dollars. I can assure