The Department of Commerce recognizes the need for legislation in the property management field, particularly legislation which would result in the coordination and standardization of property management procedures. That portion of the proposed bill which seeks to establish an economic and efficient system for the procurement and supply of personal property, for the utilization of available property, and for the disposal of surplus property, would appear to be desirable. The Commission on Organization of the Executive Branch of the Government has proposed the establishment of an Office of General Services to accomplish these functions. The Department has supported this proposal. We are, however, more interested in the standardization of procedures for the formulation of uniform policies in the field of procurement and disposal of Government property than in the organizational location of such functions. We are not aware of any particular operating problems created by its present location.

There is attached for your consideration a memorandum from the Solicitor to me containing detailed comments and recommendations concerning specific portions of the bill.

If we can be of further assistance in this matter please call upon us.

In view of the urgency of this matter, it has not been possible for the Department to ascertain from the Bureau of the Budget whether or not there would be any objection to the submission of this report.

Sincerely yours,

MATTHEW HALE, Acting Solicitor.

CHARLES SAWYER, Secretary of Commerce.

DEPARTMENT OF COMMERCE

OFFICE OF THE SOLICITOR

MARCH 24, 1949.

Re a bill to reorganize and simplify the procurement, utilization, and disposal of Government property, and for other purposes

With regard to specific portions of H. R. 2781, the following comments and recommendations are submitted:

1. Section 102 (a) would give to the Federal Works Administrator certain exclusive powers which are exercisable "to the extent that he determines that so doing is advantageous to the Government in terms of economy, efficiency, or service, and with due regard to the program activities of the agencies concerned." Amongst these powers are those for prescribing methods of procurement and of warehousing, stocking, transportation, and distribution of the same. While the uniformity which results from the centralization of such functions is desirable, there are certain Government units such as the Inland Waterways Corporation, a Government corporation performing non-Government type functions, which have generally been exempt from requirements that they make purchases through regular governmental procurement channels. To establish an inflexible requirement would undoubtedly result in such corporations' purchasing problems becoming more difficult and costly.

In title III, General Provisions, it is noted that in section 302 (d) (1), the Tennessee Valley Authority is exempted from the provisions of the bill "with respect to nonpersonal services and with respect to any property acquired for or in connection with any program of processing, manufacturing, production, or force account construction." It would appear that the principle of the inapplicability of the provisions of the bill to agencies of the Government engaged in other than ordinary Government activities has been recognized and it is suggested that consideration be given to exempting Government agencies engaged in functions other than ordinary Government activity, such as the Inland Waterways Corporation.

I note that section 102 (a) provides for procurement of property, operation of repair shops, etc., where this is advantageous to the Government. It would appear that this exception is intended to provide for circumstances such as where the Inland Waterways Corporation operates its own shops for repair of its floating equipment or where this Department is buying specialized equipment for such of its bureaus as the National Bureau of Standards, the Weather Bureau, or the Civil Aeronautics Administration. It would be advantageous to the Government to have the operation continued by the Inland Waterways Corporation and the procurement of such items continued by the Department. On this basis the provision appears satisfactory.

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Further, if, as appears to be the case, subsection (IV) of section 102 (a), which reads "advise all executive agencies on traffic management and as to reasonableness of carriers' rates and charges, and represent all such agencies in negotiating rates and charges with carriers and in proceedings involving carriers' rates and charges before Federal and State regulatory bodies" is intended only to provide a simple means for protecting the Government's interest in the transportation of Government owned materials, there would be no objection thereto. If, however, it is also intended to encompass the control of Government agencies who are themselves carriers and perform such functions for them, I am of the opinion that an exception should be made for Inland Waterways Corporation for it must be free to negotiate rates and charges and to pursue with the Interstate Commerce Commission and State regulatory bodies any and all procedures which it finds necessary.

Similarly section 104 of the proposal would authorize the Federal Works Administrator to dispose of surplus property with authority in the Administrator to designate or authorize any executive agency in possession to dispose of such property. In my opinion it would be advantageous to the Government to have the responsibility for the disposal of surplus property of the Inland Waterways Corporation, including surplus vessels, continued in that organization.

In view of the concerted effect of the several sections of the proposed bill on the activities of the Inland Waterways Corporation in the performance of its transportation activities in a manner similar to private enterprise, either an express exception should be made to the proposal for the Corporation as would be done by present language in the bill for the Tennessee Valley Authority, or it should be recognized as a part of the legislative history of this proposed bill that special consideration should be given to corporations such as the Inland Waterways Corporation in making administrative determinations thereunder concerning the applicability of the act.

3. In addition to these rather specific comments on the section relating to procurement, there is an additional general observation which appears appropriate when considering the problem. I am of the opinion that consideration should be given to the inclusion herein of a provision which would apply the principles of the Armed Services Procurement Act of 1947 to buying by all agencies. Such authority is necessary to enable the National Bureau of Standards and the Civil Aeronautics Administration, for example, in pursuing their research projects, to operate in the most practicable manner. Although it may be the opinion of others that the inclusion of such a provision may be deemed inappropriate in this legislation, it is, nevertheless, our opinion that some consideration should be given to its inclusion.

4. Sections 104 and 105 propose new policies and methods for the disposition of surplus property. In general there would appear to be no objection to these sections. It is suggested, however, that in section 104 (b), the first line thereof reading "the care and handling of surplus property" be modified so that the term "care and handling" would not include transportation charges. Such a modification would avoid the possibility of a declaring agency being liable for expensive shipping fees which it may not be in a position to pay.

5. Section 107 would authorize the Administrator to make surveys of Government property and management practices, to establish and maintain a Federal supply catalog system and to establish standardized forms of procedure. In general I am in sympathy with such a proposal and believe that the proposed surveys and uniform regulations which may evolve therefrom would be desirable. 6. With regard to title II concerning foreign excess property, it should be noted that section 202 has a limitation on the disposal of agricultural commodities, food, cotton, and woolen goods prohibiting their importation into the United States unless the Secretary of Agriculture determines that such property is in short supply in this country or under certain other conditions specified. There is no comparable provision limiting the importation of foreign excess industrial property such as is presently contained in the Surplus Property Act of 1944. Assuming that the amounts still to be disposed of abroad are not excessive and would not therefore have a disruptive effect on the domestic economy, the dropping of the limitation on the return of surplus industrial property would be in line with the objective of freedom of international trade. However, if it is anticipated that the owning agencies abroad, such as the National Military Establishment may in the foreseeable future make surplus declarations of substantial quantities of automotive equipment, construction machinery and industrial materials, the dropping of limitations on their importation into the United States might have a serious impact on industrial producers here, particularly small and new enterprises.

So long as the needs of a full economy are equal to or greater than our ability to supply, with our present industrial machine, removal of these limitations would in general not have a serious impact on the economy although,individual spots might be disrupted to some extent. Should economic conditions change, however, any substantial imports of foreign excess property might have serious repercussions such as were visualized when the limitation on such importation was inserted in the Surplus Property Act of 1944.

It might therefore be preferable at this time to provide for such a limitation on the importation of surplus industrial products to which exceptions could be made as presently through a regulation similar to that issued by the OFLC of the State Department. Such a provision in the proposed act could be deleted by amendment at some later date when it was determined that the restriction was no longer needed.

In conclusion, I am of the opinion that there is a need for standardization of procurement, utilization and disposal of property methods. This bill is an attempt to provide authority for functions where no authority presently exists, to locate in one agency all procurement and surplus disposal functions, and to obtain some measure of uniformity in the administration of these activities. Since a general organization of the executive departments is now being studied, it is my opinion that the committee, when considering this proposal, should also give consideration to other proposals concerning the organizational location of these functions.

Chairman, House Committee on Expenditures in the Executive Departments,
House of Representatives, Washington, D. C.

DEAR CONGRESSMAN DAWSON: This is in further reply to your letter of February 19, 1949, asking for my views on H. R. 2781, a bill to reorganize and simplify the procurement, utilization, and disposal of Government property, and for other purposes.

It appears that the measure in its present form would enable the procurement and utilization of supplies needed by the various agencies on a more economical and efficient basis, provided handling charges are maintained at a reasonable level.

The consolidation and operation of warehouses, supply centers and similar facilities would, in my opinion, result in more effective storage and distribution of Government supplies.

I also believe that the provision whereby the Administrator would represent all executive agencies in negotiations of carrier rates and charges could result in the saving of an appreciable amount of money.

Although procurement, utilization, and related activities would, of course, be administered through the Federal Works Agency instead of through a proposed Office of General Services, as recommended in a report on Federal supply activities of the Commission on Organization of the Executive Branch of the Government on February 12, 1949, the general objectives of the measure with respect to such procurement and related activities would seem otherwise consistent with this report.

The Bureau of the Budget advises that it has no objection to the submission of this report.

Yours very truly,

MAURICE J. TOBIN, Secretary of Labor.

GENERAL ACCOUNTING OFFICE,
Washington 25, April 14, 1949.

Hon. WILLIAM L. DAWSON,

Chairman, Committee on Expenditures in the Executive Departments,

House of Representatives.

MY DEAR MR. CHAIRMAN: Further reference is made to your letter of February 19, 1949, acknowledged by telephone February 23, requesting an expression of my views as to the merits of H. R. 2781, Eighty-first Congress, entitled "a bill to reorganize and simplify the procurement, utilization, and disposal of Government property, and for other purposes," There have also been made available several suggested amendments developed in consultation with the staff of your committee, and my comments will be directed to the bill as thus modified.

The purposes of the bill, as set forth in section 2 thereof, are to provide for the Government an economic and efficient system for (a) the procurement and supply of personal property and nonpersonal services, including related functions; (b) the utilization of available property; and (c) the disposal of surplus property.

Briefly, the bill would provide for (a) the transfer of the Bureau of Federal Supply together with its functions, records, etc., to the Federal Works Agency; (b) the transfer for liquidation of the affairs of the War Assets Administration to the Federal Works Agency; and (c) the transfer to the Federal Works Administrator of the functions of the Director of Contract Settlement and the transfer to the Federal Works Agency of the Contract Settlement Act Advisory Board and the Appeal Board. The Administrator of the Federal Works Agency would (a) prescribe the policies and methods of procurement of personal property and nonpersonal services and of warehousing, stocking, transportation, and distribution of personal property; (b) operate warehouses, supply centers, repair shops, and other similar facilities; (c) procure personal property and nonpersonal services; and (d) advise all executive agencies on traffic management and represent all such agencies in negotiating rates, etc. As to property utilization, the bill would direct the Administrator of the Federal Works Agency to prescribe policies and methods for the maximum utilization of excess property by executive agencies and for the disposal of surplus property. The bill would provide for the establishment and maintaining of a Federal supply catalog system and for collaboration with the Department of Justice as to the applicability of antitrust laws to any proposed disposition of surplus property. The instant bill is substantially in the form of S. 2754 and H. R. 6276, introduced in the Eightieth Congress, which failed of enactment.

The need for an efficient businesslike system of property management has long been recognized, and various bills toward that end have been heretofore introduced in Congress. However, H. R. 2781, unlike some other bills heretofore introduced in Congress, does not create a new and independent agency but consolidates the functions of procurement, management, and disposition of property in an existing agency which already is performing some of the work covered by the bill. Aside from the fact that under such a centralization there should be achieved considerable economy and a greater degree of efficiency in the purchase, use, and disposition of property as engaged in by the various departments and agencies of the Government, it appears that the proposed system will facilitate the transfer of property-regarded as excess by one agency-to another agency for its use, which should result in considerable savings to the Government. Under the present system, a transfer of property between Government agencies has not been carried out to any large extent largely because of the lack of effective legislation. Viewing the bill as a whole, it is believed that its enactment would result in considerable improvement in the permanent system for the procurement, use, and disposal of Government property. Also, as a result of centralization in one agency of the procurement and disposal policies with respect to property, there will be available dependable property data required by the Congress and the President for policy and administrative determination processes, particularly with respect to new requirements.

While some question might be raised as to whether the scope of the bill should be extended so as to provide an agency to be superimposed upon the contemplated structure for the purpose of prescribing the policies to guide the Administrator and executive agencies in carrying out their respective functions under the bill, it is believed that ample provision to accomplish this purpose has been made in section 106 (a) of the bill which directs the President to prescribe such policies as he shall deem necessary.

Section 101 (b) transfers to the Administrator the functions of the Director of Contract Settlement and the Office of Contract Settlement, and to the Federal Works Agency the Contract Settlement Advisory Board and the Appeal Board under the Contract Settlement Act of 1944, the functions of which boards are to be performed by them under conditions and limitations otherwise prescribed by law. I desire to call the committee's attention to the repeated recommendations made by me for repeal of the Contract Settlement Act and to the limitations placed by the act on the General Accounting Office which made the Office powerless to prevent or correct, or even to question, over-liberal payments made in termination settlements. The audit by the General Accounting Office under the act-after payments had been made and based on such records as might be furnished-was limited to determining (1) whether the settlement payments to the war contractors were made in accordance with the settlements, and (2)

whether the records transmitted to it, or other information, warranted a reasonable belief that the settlement was induced by fraud. Notwithstanding the statutory difficulties in the way of the General Accounting Office in attempting to make any effective contribution in this field, there had been certified to the Justice Department up to December 31, 1948, more than 50 cases, involving over 400 settlements of terminated contracts, in which, in our opinion, reasonable belief was warranted that the settlements were induced by fraud. In addition, up to that date nearly 100 reports of overpayments, involving over 150 settlements of terminated contracts, had been reported to the departments involved and to your committee as part of a program of protecting the interests of the Government to the extent possible under the circumstances, even though the settlements were final and conclusive under the terms of the act.

It is noted that the analysis of the bill presented by the Federal Works Agency indicates that because of the almost complete liquidation of the contract termination program, the contract settlement functions are now routine and insignificant. It is hoped, however, that there will be no disposition to further extend or reenact the provisions of the Contract Settlement Act.

With particular reference to paragraph (iv) of subsection (a), section 102, regarding the representation of executive agencies by the Administrator in negotiations with carriers and other public utilities and in proceedings involving carriers or other public utilities before Federal and State regulatory bodies, this is a step in a direction the General Accounting Office has advocated for many years; that is, the centralization in some agency in the executive branch of responsibility for coordinating the Government's use of transportation facilities and securing the most reasonable rates obtainable therefor. Further discussion of this problem is contained in the attached copy of my letter of June 15, 1948, to the chairman of the Procurement and Buildings Subcommittee of the Expenditures Committee.

There is one important omission in the bill as it now stands. That has to do with the field of property accounting and audit. Like the whole field of property management, this aspect needs increased emphasis. Existing property accounting legislation is incomplete and largely antiquated. The general rules for the keeping of inventories in the executive departments are derived from provisions of section 197 of the Revised Statutes, last amended about 1913 (5. U. S. C. 109). Other provisions on property returns and accountability are included in an act of 1894 (31 U. S. C. 89–92). Section 309 of the Budget and Accounting Act, 1921, provides that the Comptroller General shall prescribe the forms, systems, and procedure for administrative appropriation and fund accounting in the several departments and establishments. However, it makes no mention of property accounting.

Largely because of the unsatisfactory state of property accounting in many Government agencies, the Congress adopted a provision in the Independent Offices Appropriation Act, 1948, which is now carried as section 108 of the Independent Offices Appropriation Act, 1949, as follows:

SEC. 108. No part of any appropriation or fund contained in this Act shall be available for installing or maintaining systems for administrative appropriation, fund, or inventory accounting except such systems as are prescribed or approved by the Comptroller General: Provided, That all agencies for whose activities provision is made in this Act shall hereafter maintain fiscal accounting control of all inventories of supplies, materials, or equipment which may be owned by or be in the custody of such agencies. While this provision covers some 25 independent agencies, including the Federal Works Agency, its application is not Government-wide and it is in the form of a limitation on the use of appropriations rather than of permanent substantive law.

The unsatisfactory situation with regard to property procurement, utilization and control had become so acute that in August 1947 the General Accounting Office, the Treasury Department and the Bureau of the Budget joined in a comprehensive survey and analysis of all of the problems relating to Government property. In conducting this survey and analyzing the facts ascertained, the joint staff gave special consideration to commercial practices through information collected from 20 selected business firms by the Controllers Institute of America especially for this project. The staff also considered pertinent information extracted from studies and reports of Government operations which had been made by the Congress, by management engineering firms, and by various