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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. HOLIFIELI). Thank you, Mr. Gray, for your time, your statement, and your presentation.



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

borhood of $10,000,000,000, not to mention the waste of critical materials and personnel; that freight losses per year alone may run into $100,000,000; and that it is impossible to provide adequate, competitive production facilities sufficient to supply our fighting forces.

Therefore, the importance of the provisions of section 107 of H. R. 2781 is paramount; and, without minimizing the importance of the other provisions of H. R. 2781, I will confine my testimony solely to the provisions of that section.

My object in appearing before your committee, Mr. Chairman, is to attempt to give you the benefit of the 2 years' work of the House Armed Services Committee and to provide your committee with any data or assistance you may need.

During the hearings conducted by this committee last Friday, the impression was given that this committee has two objectives in the preparation of legislation such as H. R. 2781:

First, to provide organizational units and operating procedures that can be used as building blocks by the Congress, in the event that it accepts the recommendations of the Hoover Commission. For example, the units described in H. R. 2781 would become bureaus in the proposed Office of General Services.

Second, to improve the efficiency and economy of procurement and supply functions in the Federal Government.

Section 107 of H. R. 2781 does neither. In fact, our studies disciosed that such provisions may be the reason why supply activities of the Government are in the sad state described in detail by the Hoover Commission.

Let us discuss the building-block idea first and see whether this legislation fits in. The Hoover Commission revealed that when we speak of “Federal supply” we are by almost any standard speaking of military supply. The reasons for this assumption are revealed in the Hoover Commission report :

First, military purchases in the peacetime year of 1918 constitute over six-sevenths of the entire purchases of the Federal Government for supplies, materials, and equipment. In wartime, the civilian purchases are trivial compared to the military.

Second, the value of the stocks maintained in military warehouses throughout the world is about $40,000,000,000. No exact value of the stocks carried in civilian warehouses could be obtained, but the military stocks are probably over a hundred times that of the civilian stocks.

Third, civilian supply is comparatively simple. On the contrary, military supply, involving the feeding and clothing, the housing and arming of our fighting men throughout the world, often against the stern resistance of an enemy, is a complex, gigantic task.

In addition to these comparisons, it would be borne in mind that military supply includes practically every item used by the Federal Government.

For these reasons, it seemed sensible to set up the machinery to have all the military supply operations controlled at one point, and this has been done under the National Security Act; also to have all the civilian supply activities controlled at one point, and this is the intent of H. R. 2641 in recommending the establishment of the Office of General Services.

H. R. 2611 states [reading]: The Administrator of General Services shall not have any jurisdiction or control in respect of personal property or nonpersonal contract services used or to be used by the armed services of the United States, but shall consult and maintain liaison with the various supply agencies of the armed services for the purposes of solving common problems and correlating his activities with those of the supply agencies of the armed services.

In contrast to this proposal to set up coordinating and correlating procedures between the civilian agencies collectively and armed services collectively are the provisions of section 107 of H. R. 2781 which delegates to the Administrator of the Federal Works Agency sole responsibility for the establishment and maintenance of the Federal supply-catalog system and directs that each executive agency shall utilize sich uniform catalog system. In other words, it places the responsibility for a function described by the Hoover Commission as the key to an efficient supply system solely with an agency whose supply functions even in peacetime constitutes a small fraction of the supply operations of the Federal Government and make the supply of our fighting forces, constituting the major portion of our Federal supply, dependent upon another agency.

Thus it is seen that this proposed legislation is not in accord with the building-block concept of this committee nor with the Hoover Commission recommendations to provide organizational units and procedures that may be included in such legislation as that pertaining to the Office of General Services.

Now let us consider my second statement that this proposed legislation may actually defeat the objective of increasing the efficiency and economy of supply operations. To show this, we have only to “look at the record," as a distinguished American has said.

” The Hoover Commission gives a factual record of the history of cataloging over the past 35 years. And it is a record of failure; of failure to develop a supply catalog system that does not even reflect the comparatively simple needs of the civilian agencies, and certainly does not even come close to meeting the needs of military supply functions. Cataloging and supply activities today are as bad, if not worse, than they were :35 years ago; the only difference appears to be that today we know more about the situation and how to correct it.

Congressman Brown, in attempting to portray some of the startling conditions revealed by the Hoover Commission told how one item had been duplicated over a hundred times by the incorrect assignment of duplicate names and stock numbers. Many items have been assigned hundreds of duplicate names and numbers and one has been found at the naval installation at Mechanicsburg with over 1,100 different names and numbers.

The Navy Department has described their project to analyze 50 million items now carried on their supply records with the objective of reducing them to 25,000. This is a reduction of 2,000 to 1.

During the war antifriction bearings became the most critically scarce item of supply mainly because some 9,000 different types of bearings were expanded into 300,000 different types.

When it is realized that whenever an unnecessary duplicate name is assigned to an item the production must be increased, critical material allocated to its manufacture, production facilities expanded, another stock bin opened in a warehouse, new and larger warehouses


must be built to contain the additional bins, additional personnel assigned to operate the warehouses, and so on; then the reason for enormous waste can be understood.

What has been done to correct this situation? Let us review the history of the armed services constituting a major portion of Federal supply. It is curious that the armed services did all right as long as they were left alone; it is only when other agencies intruded that progress was halted.

Back in 1914, the Navy instituted a supply catalog system that was a great help to the Navy during World War I. Shortly afterwards, the responsibility for federal cataloging, including naval cataloging, was transferred to a Federal Standard Stock Catalog Board dominated by civilian agencies and then the Bureau of Federal Supply was designated the agent to compile the Federal Stock Catalog. No explanation has ever been found why this responsibility for developing a catalog system to meet the needs of the complex gigantic supply system of the armed forces was transferred from the armed forces to an agency having a comparatively small, simple, supply system. At this time also the emphasis began to be placed on using the catalog system for statistical purposes instead of moving supplies to our fighting men.

The result was inevitable. The Hoover Commission reports that [reading]:

Some of the criticisms were that the Federal Standard Stock Catalog led to waste of space in warehouses; that the classifications did not provide for the groupings of related items and for further subdivisions of major classes; that common terminology was not always used ; that it was not sufficiently flexible nor expansible rapidly and completely to identify, classify, number, and list new items; that there were no standards by which agency personnel could judge the. adequacy of article description; and that it was not up to date.

However, the real reason was that it was designed too remotely from the supply system it was meant to serve and without consideration for the needs of that supply system.

The failure of the Federal stock catalog system was the greatest single reason for the supply confusion for which the armed services were criticized during the war.

As soon as it was realized that the Federal Standard Stock Catalog would not meet the needs of military supply, every commander of a supply installation in the armed services was forced to improvise a catalog system to enable him to receive, store, issue, maintain, and be accountable for personal property and equipment pouring into his installation. This more or less solved the situation at his installation; but it made for over-all supply confusion, as it meant that many supply languages were spoken in the same supply system, with identification numbers and names unintelligible outside the limits of each supply point.

It should be noted particularly that one technical service, the Army's Signal Corps, in a period of less than 18 months developed a catalog system that was used for communication items by all the armed services of the Allied nations except the United States Navy. With the help of this catalog system, the Signals Corps transformed their supply system from the worst in the Army to the most efficient.

The original Navy catalog operations became so perverted by the Federal stock catalog system that its supply system became a matter

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