State to dispose of it by public bid sale for the benefit of the Federal Government. That has not been generally a very substantial problem. You might wish to question some of the State representatives about how they feel on that.

Senator MUSKIE. I think there is another thing too. It costs the States money.

When I was Governor, we didn't hang on to the stuff any longer than we had to.

Senator GRUENING. It hasn't seemed to bother the Federal Governinent in the matter of agricultural surpluses.

Senator MUSKIE. I wonder if you could comment on this. I understand, first of all, the Department of Defense can dispose of a lot of its surplus. Is that correct?

Mr. GARVEY. The Department of Defense has certain service educational activities which they are authorized by law to furnish with surplus property. And this is another source of donations.

Senator MUSKIE. Is that controlled by statutory limitations?

Mr. GARVEY. This is done in response to statutory authority. I am not familiar with the extent to which that statute restricts the Department in any way.

Senator MUSKIE. You don't know the size of that program, dollarwise?

Mr. GARVEY. I would like to state, sir, subject to correction from the Department of Defense representative-my understanding was that was about a $20 million program in the past year.

Senator MUSKIE. We will pursue that point with the Department of Defense.

Senator GRUENING. If additional agencies should be aided, if the Congress should so legislate, have you any recommendations as to how the priorities should be established for them?

Mr. GRAY. Well, in our view it would be very difficult to administer any kind of a priority system. It seems to me that the only feasible thing would be to distribute it on a first-come-first-served basis, because when you get into priorities, you complicate the Federal problem, and you complicate the problem of the States who actually distribute the property within the States. And to attempt to operate a priority system becomes very, very difficult. In other words, you would be faced in the State, for example, with not being able to give property to a low priority group until you were assured that all of the higher priority groups had had an opportunity to acquire it. And with the extremely rapid turnover of this property which is coming and going in and out of the State warehouses every day, this creates a very extreme problem, if you try to set up a priority system. It creates the same kind of problem at the Federal level, in providing a period of time, so that each eligible with priority will have an opportunity to look at this property, but only after all of those who have a higher priority have looked at it. And that is why it would delay the disposal program.

Senator GRUENING. Do you share that view?

Mr. GARVEY. Yes, sir.

Senator GRUENING. Thank you very much, gentlemen.

The next witness will be Mr. Robert C. Moot, Staff Director for Materiel Management, Supply and Logistics, Department of Defense,

Mr. Alexis T. Bishop, Chief, Inventory Management, and Lt. Col. John F. Rey, Chief, Surplus Disposal Branch, Department of Defense. STATEMENT OF ROBERT C. MOOT, STAFF DIRECTOR, MATERIEL MANAGEMENT, SUPPLY AND LOGISTICS, DEPARTMENT OF DEFENSE; ACCOMPANIED BY ALEXIS T. BISHOP, CHIEF, INVENTORY MANAGEMENT, DEPARTMENT OF DEFENSE; AND LT. COL. JOHN F. REY, CHIEF, SURPLUS DISPOSAL BRANCH, DEPARTMENT OF DEFENSE

Mr. Moor. Mr. Chairman, my name is Robert C. Moot. I am the Staff Director for Material Management in the Office of the Assistant Secretary of Defense for Supply and Logistics. With me is Colonel Rey, who is the Chief of the surplus proporty disposal program, and Mr. Bishop, who is in charge of the inventory management program.

We have no prepared statement, but we would be happy to furnish any information we have for the committee.

Senator GRUENING. Have you any figures on the amount of surplus property there is annually?

Mr. Moor. Well, if I might take a moment and trace our surplus disposal property through for about 2 minutes, Mr. Chairman, I think I can give you the background and a specific answer.

As you know, and I am aware you have had a strong interest in our surplus disposal program--as you know, we have on our books in the Department of Defense personal property valued at an acquisition cost of approximately $120 billion. This property is somewhat over 90 percent highly technical military property. It includes, for example, all of our ships, our aircraft, our tanks, and all of our tactical vehicles. It is also approximately 70 percent in a used condition. When I say a used condition, I do not mean purely in the past tense. It is in active use, for example, our ships, our aircraft, all of our vehicles, all of our operating equipment are in constant

use.

For this reason, and for the same reason that any normal industrial operation develops excess and surplus property for exchange, we develop and will continue to develop a sizable surplus disposal program. As our equipment becomes old, wears out, needs to be replaced, as technology overcomes our current state of the art for military purposes, obsolescence occurs and we develop surplus.

This has been becoming increasingly more evident in recent years, primarily because of the efforts of the Department of Defense to identify specifically its needs under current strategic concepts, and to be sure that we are not carrying material and equipment which is either too costly to repair or for which there is no foreseeable need.

As a consequence, our total disposal program in terms, again, of acquisition costs, which gives no recognition to either the age, condition, amount of use, or repair necessary in terms of the original value of the material-our program, over the last several years, has increased sharply as we have attempted to purify our investment of that which is uneconomical to maintain.

For example, in fiscal year 1956 our disposal program, in terms of acquisition value of material, totaled $4 billion. In fiscal year 1958, it

totaled $6 billion. In fiscal year 1959, just closed, it will total $8 billion. We would expect that fiscal year 1960 disposal will probably reach, again in the same measure of acquisition cost, approximately $10 billion.

So in terms of the background of the type of equipment we have, the $120 billion of predominantly technical military property, this is the way our surplus program shapes up.

In fiscal year 1959, just finished, the $8 billion of surplus property was so predominantly military type and so predominantly the type that has become completely worn out, with no residual utilization, that 60 percent of it was expended to scrap. It was the only way we could dispose of it.

Now, in terms of the committee's specific interest today, it might be well if I restrict the figures I am giving you to domestic surplus, rather than confuse the picture by including the oversea surplus program.

For fiscal year 1959 our total dispositions of surplus domestically, within the area of Public Law 152, 203 (j), totals $6.3 billion. Of this total, we disposed of, as scrap, $4 billion-remembering again that I am talking acquisition costs only-which left us to dispose of, as usable property, $2.3 billion.

Now, of course, this usable property runs the gamut of age, condition, and all sorts and types of material.

Within this $2.3 billion, we disposed of, as salvage-that means we sold it as usable property, but really for only component value, rather than as a piece of usable equipment-or disposed of it as technical military equipment $900 million of the $2.3 billion disposed of as usable property-which left us with the figure that I think you are probably most interested in.

We disposed of, in the category that we call commercial type surplus property, $1.4 billion worth at acquisition cost for fiscal year 1959. And it is from this total that the donable property program reviewed and received its amount from the Department of Defense.

At this point I might mention that, as you have brought out in the previous testimony, there are two basic areas of the donable property program under Public Law 152. One is that which is classified as special interest to the Department of Defense, which includes the education systems, with approved military training programs, and such youth organizations as are approved as of special interest. And this total will approximate $20 million for fiscal year 1959.

The balance of our donation, of course, goes through the General Services Administration and the Department of Health, Education, and Welfare, and that will approximate $250 million to $260 million, with all of our reports not in at the present time for fiscal year 1959. This, of course, recognizes the fact that Government screening has taken place prior to this point. And of course there is a very active program which is well up in the hundreds of millions of dollars, either within the Department of Defense or between the Department of Defense working cooperatively with GSA for other Federal agencies, for the use of this material by Federal agencies prior to reaching this stage of surplus.

Senator GRUENING. What do you do with the surplus you cannot dispose of? What happens to that? Do you store it?

Mr. Moor. Well, we refuse, Mr. Chairman, except for restricted reasons, to recognize there is surplus we cannot dispose of. If it has become legally surplus, which means it has gone through all the steps necessary for utilization, and our final choice is sale, donation, or abandonment-in the case of military property which is dangerous to safety and health-we do one of the three.

The restrictions that are placed upon us are administrative restrictions, and we, in certain cases, accept-in fact, in most cases we accept any recommendation by the Department of Commerce, the Business and Defense Services Administration of that Department, which is a recommendation not to dispose of it because of potential_market impact in any one particular industrial area in the country. In those cases we have, in certain specific instances, held or withheld material from sale until there would be a lessening of market impact in its disposal. In other instances we have scrapped, rather than sold, because of the potential market impact.

Senator GRUENING. Have you any comment you would like to make on any of these bills-S. 2442, introduced by Senator Bartlett and myself, to provide for the disposal of surplus property to the government of Alaska?

We know there is a tremendous amount of surplus there, and much of it is very costly to transport outside of Alaska. A good deal of it, unless disposed of, is apt to stay there and just rust or deteriorate. Have you any comments on that legislation, favorable or otherwise? Mr. Moor. I am afraid mine is not a legal opinion, Mr. Chairman, with specific reference to the provisions of this bill. But I can say this from a Department of Defense position: We are primarily interested, when it is in the national interest, to move our excess and long supply and surplus property as rapidly as possible.

As you well know, it is a costly endeavor to carry material for which we see no immediate or foreseeable mobilization use in store. So we are consistently in favor of legislation which will allow us to move more rapidly the material which we would like to dispose of in any way which is in the national interest.

The Department of Defense has, for that reason, supported consistently the purpose and intent of the donable property program under Public Law 152.

On the other hand, the Department of Defense has not felt that it should be in a position of determining the merits of eligible recipients under the program, and has referred such questions consistently to the General Services Administration and the Department of Health, Education, and Welfare.

Senator GRUENING. How much of your Department of Defense property is disposed of under section 202 (b) of the Federal Property Act?

Mr. Moor. I don't think I have with me-and I think it would be a compilation job-to give you the answer under that specific subsection. I think I can give you an order of magnitude.

We have that same authority, and it is restricted to that same authority, in oversea donation. It is the only means by which we can make an oversea donation. Our oversea donable program, where there is no commercial value, or where the cost of disposing of it would be greater than the proceeds, in fiscal year 1959 approximated $4 million.

Translating that back into our domestic program, I would imagine that it is a very insignificant figure.

Senator GRUENING. These oversea donations, are those part of the foreign-aid program?

Mr. Moor. No, sir. The foreign-aid program operates much the same as the Federal agency screening and the State agency screening. The foreign-aid programs screen our long supply before it becomes surplus and our excess material very carefully, and we do transfer, either to military assistance programs or programs sponsored by the International Cooperation Administration, well over $100 million worth of property a year.

Senator MUSKIE. There are a couple of mathematical gaps in the figures that you gave us earlier in your testimony. Talking about a total of $8 billion for fiscal 1959, excess property-is this figure arrived at before or after consideration of the special interest program?

Mr. Moor. Senator, it is arrived at before we either transfer by donation to the special interest activities, to the Department of Health, Education, and Welfare, or to surplus selling. What has taken place prior to the determination of the $8 billion figure is the internal government screening, either within the Department of Defense, either between the Department of Defense and other Federal agencies, or between the Department of Defense and foreign-aid programs.

Senator MUSKIE. Now, in that area, do you, to your knowledge, contribute this property to other agencies-and it is a contribution, isn't it-it isn't a sale to other agencies?

Mr. Moor. Well, that is a yes and no answer. It has been partially by reimbursement up until very recently. And at the present time we are finalizing a directive which will make it completely nonreimbursable. In certain working capital fund areas where the historical position has been to maintain the integrity of stock funds, for example, there has been partial reimbursement required.

We are finalizing a directive which will eliminate that.

Senator MUSKIE. Does any of this go to other agencies which themselves are in a position to donate property to nongovernmental groups or institutions or agencies?

Mr. Moor. To the best of my knowledge, the answer is "No." To be perfectly frank, I think that we would have to check with General Services Administration and the Department of Health, Education, and Welfare. But I do not believe so, sir.

Senator MUSKIE. Now, of the $8 billion, you detailed the disposition of $6.3 billion. Now, the difference of $1.7 billion, as I understand it, was in the foreign field?

Mr. Moor. It was in the foreign field, in terms of disposals. And in some cases in the foreign field in terms of foreign aid.

Senator MUSKIE. Then you get this figure down to $1.4 billion. And at that point, I lost you a little bit.

Mr. Moor. All right, sir.

Senator MUSKIE. This $1.4 billion was described as commercialtype property. Incidentally, on this score, we have been talking about these billions. Although you have emphasized over and over again that this figure represents acquisition cost, I think it might be useful to get some idea of what the actual value of this property is. Mr. Moor. All right, sir. I wonder if I could just recap, so I can