and we must know that we have a reasonable expectation of obtaining the necessary material to meet military requirements which arise out of these strategic plans.

Mr. HOLIFIELD. Of course, all of the knowledge about production, inventory, plant location, and so forth is available to you just the same if it is functioning through a civilian procurement agency as it would be if it were functioning through your own agencies.

Mr. GRAY. No, sir; I do not think it is. There must be a definite relationship between current procurement and the mobilization plan. Mr. HOLIFIELD. Excuse me, please, for interrupting, but I know that you want to get to another committee meeting.

Mr. GRAY. I am at the service of this committee.

Mr. HOLIFIELD. I am afraid that this discussion has gone far afield. We are waiting to hear Mr. Anderson, so maybe we better proceed with the rest of your statement.

Mr. GRAY. May I interrupt just 1 minute and give you an example of a current situation? I see that I have done a very bad job of expressing myself to this committee.

Mr. HOFFMAN. That may be due to some of our dumbness, we concede, but it appears that you are never going to get out of the idea that nobody can buy except the Military Establishment. Now, if my wife sends me down to the store for a loaf of whole-wheat bread, I can get it as well as she can after she tells me what to get. I think you people can do it also through a civilian organization by telling them what you want.

Mr. HARVEY. Mr. Chairman, I would like to ask the witness a question.

Mr. HOLIFIELD. Go ahead, Mr. Harvey.

Mr. HARVEY. You do have a large group called G-4 within the Army that has been devoting itself to problems of procurement and supply; that is true, is it not?

Mr. GRAY. Yes, sir.

Mr. HARVEY. And you have been doing a great deal of work since even after the end of the war with regard to uniform packaging, shipping, and that sort of problems, have you not?

Mr. GRAY. That is right, sir.

Mr. HARVEY. Now, those are mostly civilian employees, are they not, that are devoting themselves to that problem?

Mr. GRAY. No, sir. When you say "mostly," I do not know what you mean by mostly.

Mr. HARVEY. Well, are not the majority of the personnel involved in that civilian employees?

Mr. GRAY. No, sir; I would not say that they are.

Mr. HOLIFIELD. They are during wartime.

Mr. GRAY. A civilian who is in the service of the Army. Are you distinguishing between Regular Army officers and a civilian who is a Reserve officer, for example?

Mr. HARVEY. Well, you have men down there, I know, in the Pentagon Building that are former servicemen that have been discharged. They have Reserve commissions, but are in the employ of the Army. Mr. GRAY. That is right.

Mr. HARVEY. I would call those civilians.

Mr. GRAY. Yes; I would agree with that. I wanted to get your definition.

Mr. HARVEY. And that is being carried on by those men, and I presume they are highly skilled in their own particular field.

The thing that I think I agree with our chairman and Mr. Hoffman on is that whether they happen to be located in one place or another is irrelevant, and maybe the Division of Procurement and Supply could well use much of that talent that has been developed. The thing that has appealed to me is that simply because they are civilians, whether they are working in one office or another, it does not necessarily mean that the same skill and talent could not be used for many other fields of procurement.

Mr. GRAY. I would not agree with that part of the premise, that the majority of these people who are doing this work are civilians. That is an invalid premise.

Mr. HARVEY. Even so, what you are saying is that regardless of how many people are actually employed to do it, the direction should be or must be under the absolute control of the Army before they can

do it well.

Mr. GRAY. Well, I say before they can do it in the ultimate best interests of the national security.

Mr. HARVEY. Well, that is the same thing.

Mr. GRAY. I would base the distinction not on who can do it well, but whether the military can do it more effectively in the interest of national security.

Mr. HARVEY. That is the inference I have drawn. Maybe I am wrong.

Mr. HOFFMAN. Not only that, but those in the Army are the only ones who can do it.

Mr. GRAY. May I give you an illustration on that? At the present time we are in procurement of certain 22-ton trucks. The Army has been given as a single-service assignment, the procurement of all trucks. For example, we are negotiating with five different manufacturers in Detroit, or wherever they are located. We are negotiat ing with five different automotive manufacturers for the procurement of these trucks.

We are receiving complaints now that there are smaller companies which would like to get into the business of furnishing these trucks.

One of them in particular that I have in mind did not make trucks during the war, and is not a supplier to whom we would probably look in time of another emergency for trucks, but he wishes now to furnish some of the trucks on this current procurement. That is what I mean by tying in current procurement with the mobilization plan.

It is extremely important that the people who are going to be looked to in time of war to produce hundreds of thousands of trucks be the ones who in peacetime retain their know-how.

I submit to you that if you put this procurement into a centralized civilian agency which will be concerned primarily, I would judge, with getting trucks at the most economical price and in quantities and on delivery schedule, the current procurement of these trucks would not be related to our long-range plan which looks toward the source of these trucks in time of emergency, and as I have said, our problem is to be prepared for war. We have no other mission.

If you divorce from current procurement your procurement planning and an emergency strikes, then the Military Establishment on M-day, whenever it comes, would find itself in the situation of hav

ing to start from scratch and developing a source of supply, and determine then who could produce, and in what quantities they could produce, whether the particular manufacturer would turn to weasels, trucks, or tanks, or some other type of military material, so that the relationship between current peacetime procurement and emergency procurement is a very real problem, and one that I think cannot be divorced.

I wanted to make that point if I could.

Mr. HOLIFIELD. Without accepting the validity of your argument, and without refuting several of the statements to which I feel opposition arguments could be made, in the interest of time we must go ahead.

I want to say that we will analyze that portion of your statement carefully in the consideration of the bill.

Mr. GRAY. All right, sir, very good.

Mr. HOFFMAN. Mr. Chairman, if he is coming back anyway, why not let him put the rest of his statement in the record?

Mr. HOLIFIELD. This is the second time he has been here. We have promised him we would let him finish his statement this morning. Mr. HOFFMAN. I am willing to let him put it right into the record. Mr. HOLIFIELD. You may proceed, Mr. Gray.

Mr. GRAY. I am willing to put the remainder of the statement in the record, Mr. Chairman.

Mr. HOLIFIELD. I will leave that to your decision. We promised you that you could make your statement this morning, but if you want to get over to this other committee meeting and place the rest of your statement in the record, that is agreeable to the committee.

Mr. GRAY. I would be glad to do it so that you could analyze the statement, and if you care to call me back, I will be happy to be at your service.

Mr. HOLIFIELD. We will accept it on that basis.

(The statement submitted by Mr. Gray is as follows:)

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 national security 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, the procurement assignments which have been made, when fully implemented, will 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

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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. It is estimated that the cataloging of military items represents about 85 percent of the entire Government project. 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 oversea 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 catgories 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 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 Stock Piling Act."

The reason for this suggestion is that the Munitions Board administers this program by delegation 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. HOLIFIELD. Thank you, Mr. Gray, for your time, your statement, and your presentation.

STATEMENT OF HON. JACK Z. ANDERSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. HOLIFIELD. We will next hear from Congressman Anderson, of California, a member of the Armed Services Committee, who has had a great deal of experience on this question of procurement, probably more particularly in regard to military procurement. He has a bill, H. R. 321.

Mr. Anderson, the committee will be pleased to have your statement at this time.

Mr. ANDERSON. Mr. Chairman and members of the committee, I think perhaps I can be of some help to the committee on this question you are studying. I have a prepared statement; and in view of the lateness of the hour I would appreciate it, Mr. Chairman, if I may complete my statement without interruption, and then I will be glad to answer any questions which the committee may wish to ask.

Mr. HOLIFIELD. You may proceed in that manner, Mr. Anderson. Mr. ANDERSON. Mr. Chairman, I would like to express to you my appreciation for the opportunity to appear before your committee to discuss H. R. 2781.

Last Friday my colleague, the Honorable Clarence Brown, in his excellent presentation before this committee, laid great stress on the importance of your studies of the functions described in H. R. 2781, particularly those relating to procurement and supply. He stated that the importance of these functions, not only for the economic stability of the Nation but for its defense, places them above and beyond partisan politics.

As you know, I was chairman of the Procurement Subcommittee of the House Armed Services Committee that for 2 years studied the procurement and supply activities of the armed forces. It is remarkable how the findings and conclusions of that committee and the findings and conclusions of the Hoover Commission agree, not only as to the conditions existing in the procurement and supply field but as to the means by which such activities may be improved. Both groups discovered that cataloging is the key to an efficient supply system for the Government and that it is the principal deterrent to effective property utilization in the Government. Unless cataloging functions are put on a sound basis, no other procurement and supply function of the Government, including research, development, purchasing, storage, transportation, traffic management, requisitioning, maintenance and disposal, can be carried on efficiently or economically, or may even be improved beyond certain limits.

Our studies and those of the Hoover Commission revealed that because of the absence of sound catalog procedures the unnecessary cost to this Nation during the recent war may have been in the neigh