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Mr. HOLIFIELD. Do you wish to make a concluding oral statement?

Mr. GRAY. Generally the main portions of my observations have to do with sections 102 and 107.

Mr. HOLIFIELD. We do not want to touch your testimony at all. If you feel you would like to be here, we will be glad to have you come back.

Mr. GRAY. I should be glad to come back, Mr. Chairman.

Mr. HOLIFIELD. We will conclude your presentation today with the understanding that we will invite you back again.

Mr. Gray. Very good, sir. I would appreciate, if I may respectfully suggest, a day's notice, although I do not imply that you did not give it today; however, I was not notified.

Mr. HOLIFIELD. Before we adjourn if there is not objection, I have a short statement here of clarification of previous testimony given by the State Department, mostly technical in nature, and I would like to have this incorporated in the record, if there is no objection.

(The statement is as follows:)

STATEMENT OF HON. GORDON GRAY, ASSISTANT SECRETARY OF THE ARMY, ON THE

BILL (H. R. 2781) To REORGANIZE AND SIMPLIFY THE PROCUREMENT, UTILIZATION, AND DISPOSAL OF GOVERNMENT PROPERTY, AND FOR OTHER PURPOSES

Mr. Chairman, 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.

The Director of the Bureau of the Budget advises that there is no objection to the presentation of this statement.

Thorough consideration was given in the Senate committee last year to certain portions of that bill relating to the Military Establishment, and it is my purpose this morning to exnlain to the committee the reasons for these changes and what we believe their effct to be.

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 interepret to be a very broad exemption for the Military Establishment on the basis of national defense, whereas the Hoover Commission proposes to (entralize 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 aff ed 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. The possible diversion of miiltary personnel from their primary missions, for the handling of surplus which continues to be generated in overseas areas, presents some difficulties. We have doubts that we will be able to demonstrate greater economy and efficiency in this function than would result through the continuation of functions under the cognizance of the Department of State.

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. In many instances, property which loses its strategic value may become of value to other departments of the Government and may effectively be utilized through the procedures established for the screening of such materials by the Federal Works Administrator.

Perhaps the most significant aspect of this bill from the point of view of the National Military Establishment is the provision in section 102 relating to procurement, warehousing, and traffic management. The function of the National Military Establishment is distinct from that of any civilian Government agency. It maintains integrated groups of personnel in many parts of the world and is responsible for feeding, clothing, and transporting them. Its functions in time of peace are only to prepare for possible future emergency. If emergency arises, the logistics support of the armed forces must be accomplished without delay or interference or unnecessary intervention. Its supply activities are integrated from the manufacturer down to the ultimate user and are designed to obtain the maximum volume which it is possible to obtain from the facilities of American industry. To this end, the statutory responsibility of the Munitions Board in the National Military Establishment includes mobilization planning, which extends to an examination of the entire production output of the country; the availability of all types of materials and end products; and the allocation, in cooperation with the National Security Resources Board, of the maximum production output of the Nation on the basis of complete use of the Nation's resources.

No realistic effort can be made to distinguish between peacetime requirements of the armed services and mobilization requirements in time of war. When the hot breath of disaster is upon you, it is too late to attempt to reorganize along lines of maximum efficiency. Therefore, in keeping with the statutory mandates of the Congress, the peacetime efforts of the Military Establishment are directed toward the planning and establishment of the most effective organization for war. This organization can only be effective if it is maintained in peacetime on the broadest possible basis which will permit rapid expansion from an experienced nucleus in each field in which the requirements of the armed forces must be sought. This fundamental fact was repeatedly recognized by the Hoover Commission.

The procurement organization of the Military Establishment represents a complex of peculiarly necessary skills to fit the available material or equipment to a particular need. For instance, an Army gasoline engine may be subjected to grit and dust, whereas a Navy gasoline engine may be subjected to salt corrosion. An ordinary work shoe may require only comfort and durability, whereas a paratrooper's boot must be designed for ankle support under severe impact.

We do not wish to be denied the right to have the Federal Works Administrator procure items for the Military Establishment in those cases where such procurement would result in greater economy or efficiency. However, we would be less than frank if we indicated an expectation that any great volume of procurement for the military can or should be effected through this central procurement system. Our industrial organization must be built up in time of peace on the broadest possible basis. The procurement group which procures trucks today, in time of war may be required to handle a vastly increased volume of business and turn its skills to the procurement of tanks or guns or other purely military types of equipment from the same manufacturer. This type of organization may find itself procuring items for which other Government agencies may have related requirements. No economy would be served by the imposition of a further layer of administrative activity between these determinations and the procurement of the particular equipment; and, in fact, from the logistics point of view, the military services could not afford to reduce the personnel employed in mobilization planning and the organization for the meeting of complete wartime requirements, regardless of the establishment of procurement activities imposed upon these rather complex determinations of requirements.

The peculiar needs of the armed services have been considered by the Congress on a number of occasions within the past several years. The Armed Services Procurement Act, approved February 19, 1948, provided a complete and integrated set of procedures for meeting the military needs. This statute is based upon the peculiar needs of the armed forces, and it provides for methods of contracting intended to serve the needs of national security and to effect the maximum possible economies. It provides for activities solely of a nationalsecurity nature; for instance, it makes provision for the letting of contracts on the basis of standardization or on the basis of retaining the productive capacity of particular industries. Of great significance and perhaps the most forward looking, are the provisions with reference to research and development, the material benefit from which cannot, in the course of the project, be demonstrated dollarwise. This statute is implemented by a detailed and thoroughly considered set of regulations to govern the entire procurement of the armed services.

Under the National Security Act of 1947, in addition to the responsibility for industrial mobilization planning, to which I have previously adverted, the Munitions Board is charged with the assignment of procurement responsibility among the military departments. . Assuming allocation of appropriations on the basis of the 1949 military budget, procurement assignments are now in effect which would result in the purchase through joint, collaborative, or single-service procurement, of 80.7 percent in dollar value of all military requirements. This procurement, of course, represents the major volume of procurement accomplished by the entire Government at the present time (approximately five-sixths, according to Hoover Commission studies), and there is little room for accomplishment of further economies in military procurement by refinement beyond this point. The Congress, in connection with discussions on the National Security Act, rejected the concept of a single procuring agency for the armed forces in favor of coordination of methods and assignment of purchase responsibilities.

I have previously adverted to the progress made in the promulgation of a single armed services procurement regulation under the Armed Services Procurement Act. Similar progress has been made in connection with the program of standardization. Standardization must be understood to include not merely the promulgation of a joint formal specification but the agreement to recognize as standard the specifications of one of the three departments. In this connection, I would like to discuss cataloging. The studies of the Hoover Commission indicated that approximately 98 percent of inventories of consumable goods on hand in the Federal Government are armed services inventories. Upon completion of the cataloging project, which has been undertaken by the Munitions Board Cataloging Agency in cooperation with the Bureau of Federal Supply, the cataloging project for the Federal Government will be substantially 100 percent completed. If the military cataloging project in and of itself were completed without regard to civilian requirements, it is estimated that 85 percent of the entire Government project would be completed. From the logistics point of view, the treatment of cataloging has some peculiarities in that consideration must be given not solely to inventory control with the resultant economies, but also the maximum efficiency in the conduct of logistics operations; for example, an effective method of identification must be developed for the supply of a carburetor to an overseas operations base on the basis of a communicated description, from a supply depot anywhere in the United States or elsewhere.

I have taken some time in an effort to demonstrate for the committee the longrange objectives of the Military Establishment which are peculiar to the Military Establishment, and in an effort to demonstrate for you the necessity for the exemptions granted in this bill to the Military Establishment. As I mentioned before, it cannot be expected that a substantial volume of procurement will be accomplished by other agencies of the Government for the Military Establishment. For this reason, the proviso was added to section 102 of page 9 of this bill providing: “That the Secretary of Defense may from time to time and unless the President shall otherwise direct, exempt the National Military Establishment from action taken or which may be taken by the Administrator whenever he determines such exemption to be in the best interests of the national security.”

Although this procedure places the burden upon the Secretary of Defense to make findings relating to the orders of the Administrator from time to time, we can operate within the framework of the present bill. The approach of the Hoover Commission would be less cumbersome from our point of view because of the separation into categories of military and civilian procurement, with integration of programs by the two at the level of the Director of General Services.

I would like to emphasize that the exemptions recognized in section 102 relating to procurement, warehousing, and traffic management, and in section 107, relating to surveys, standardization, and cataloging, are considered by the Military

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Establishment to be the absolute minimum provisions compatible with the exercise of effective logistics operations by the military departments. It would be greatly preferable to the National Military Establishment, however, to be wholly exempted from section 102, except as the Secretary of Defense may request the Administrator to undertake particular purchase functions for the services.

We recommend certain technical amendments for the consideration of the committee. Under section 302 (d) it is suggested that subsection (5) be amended to read as follows:

(5) The Secretary of Defense, the Munitions Board, and the Secretaries of the Army, Navy, and Air Force with respect to the administration of the Strategic and Critical Materials Stockpiling Act.”

The reason for this suggestion is that the Munitions Board administers this program by delegaiton of authority from the Secretaries of the Army, Navy, and Air Force, in whom function is vested by the statute.

It is suggested that there be added to section 302 (d) the following subsection :

“The Secretary of Defense with respect to the administration of the National Industrial Reserve Act of 1948."

This statute effects the disposal of surplus industrial property and was passed subsequent to the prior consideration of the present bill.

It is suggested that a further exception be added to subsection 302 (d) covering the Armed Services Procurement Act of 1947.

We have submitted a number of suggestions for minor technical changes to the committee by memorandum.

In conclusion, I would like to state that we are fully aware that the President's program contemplates a centralized system of procurement, management, and disposal of property, with certain limitations; and we are, of course, in accord with this program, which we think may be accomplished by H. R. 2781 consistently with the continued vital control of logistic support of operating forces in the military departments, and consistently with the policies of the Congress already enacted in the Armed Services Procurement Act and the National Security Act of 1947.

Mr. HOFFMAN. If it is convenient, they could give us those statements on the prepared testimony.

Mr. HOLIFIELD. These gentlemen here?
Mr. HOFFMAN. The other witnesses coming here.
Mr. HOLIFIELD. Copies?
Mr. HOFFMAN. Yes, if convenient.
Mr. HOLIFIELD. Fine.

Now we have Mr. James Reid of the National Committee State Educational Agencies.

STATEMENT OF JAMES L. REID, COCHAIRMAN OF THE LEGISLA

TIVE COMMITTEE OF THE NATIONAL COMMITTEE, STATE
EDUCATIONAL AGENCIES FOR SURPLUS PROPERTY, WASHING-
TON, D. C.
Mr. HOLIFIELD. What is the nature of your testimony, sir?

Mr. REID. All I want to do, sir, is to present a written statement that was referred to in Mr. Moore's statement of last Thursday when he appeared before the committee.

Mr. HOLIFIELD. Does that have to do with the suggestion that was made that the matter under their consideration be handled in a separate bill rather than in this?

Mr. REID. It referred particularly to this bill under the disposal of property.

Mr. HOLIFIELD. Does it ask that the matter that you are interested in be taken up in this bill?

Mr. REID. Yes.

Mr. HOLIFIELD. Due to the lateness of the hour, we are going to have to postpone your appearance until we can hear you at a future time, if you desire to be heard on it rather than put it in the record.

Mr. Reid. I can put it in the record because I think the statement was made by Mr. Moore at the Thursday meeting and covers it very well.

Mr. HOLIFIELD. This is just a clarification?
Mr. Reid. That is right.

Mr. HOLIFIELD. If there is no objection, it will be printed in the record.

(The statement is as follows :)

STATEMENT OF JAMES L. REID, COCHAIRMAN OF THE LEGISLATIVE COMMITTEE OF THE NATIONAL COMMITTEE STATE EDUCATIONAL AGENCIES FOR SURPLUS PROPERTY

Mr. Chairman and members of the subcommittee, the several States each have a State educational agency for surplus property. These agencies have formed an association based on the six Army areas and the District of Columbia, and from these areas have selected representatives and formed the National Committee of State Educational Agencies for Surplus Property, the membership of which includes representatives from every section of the Nation. I am appearing before your committee in behalf of the said National Committee of said State Educational Agencies for Surplus Property because of the keen interest of those agencies in the proposed Federal Property Act of 1919.

In consideration of the Federal Property Act of 1948 by the Senate Committee on Expenditures in Executive Departments, a statement was made on April 1, 1948, by C. H. Overman, then chairman of the national committee, and on April 5, 1948, by Edwin K. Dole, chairman of the legislative committee of said committee, and the contents of those statements apply almost equally as well to the provisions in the bill under consideration, H. R. 2781. At that time, our national committee was seeking to preserve the rights and privileges given by Congress to the educational institutions of the United States under the provisions of the Federal Property Act of 1941. My purpose in appearing before you today is to again call your attention to the benefits which accrued to the educational institutions under the provision of the Surplus Property Act and to request amendments to H. R. 2781 which will assure the continuance of these benefits to educational institutions.

The public-benefit allowance in the disposal of surplus properties is covered by section 13 (a) of the Surplus Property Act of 1944. The United States Office of Education report, dated February 28, 1949, shows that these public-benefit allowances resulted in the transfer for educational utilization a total of over 91,000 acres of land and over 22,000 buildings with an acquisition value of $444,000,000 and a fair value of about a fifth of that amount for a total return to the Government of over $3,000,000. These transfers have benefited the school systems of nearly every 1 of the 49 States, and without this provision of the law it is very unlikely that any appreciable amount of these properties would have been put to educational use.

Under said section 13 (a) of the Surplus Property Act of 1944 discounts were given for educational and health institutions. These discounts, being substantial, enabled health and educational institutions of the various States to purchase large amounts of Government surplus properties and did to that extent render great aid to the institutions to meet the heavily increased student load.

The sale of these surplus properties to educational institutions at a discount prevented the property from falling into the hands of speculators and probably being resold to public schools at greatly increased prices. Also, the educational institutions, having limited funds, were able through these discounts to secure many items which otherwise would not have been available to them.

In order that the schools may have the benefits of section 13 (a) of the Surplus Property Act of 1944, it is respectfully requested that H. R. 2781, printed bill, be amended as follows:

On page 30, section 302, line 10, before 13, insert the following: “13 (a) and”.

The committee also feels that in the disposal of real estate 13 (a) of the Surplus Property Act has been and is of great benefit to the educational institutions of the Nation and will continue to be of considerable benefit in the years to

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