We believe that this present House bill should receive your full cooperation as our State alone has saved hundreds of thousands of dollars, and benefited our Nation in every way.

Will you please do what you can to see that this bill is passed, so that we might continue to receive surplus materials we need to operate our school successfully?

Sincerely yours,

MIKE MARTIN, Director.

Mr. McCORMACK. Are there any other witnesses who are not connected with the Government, any person who desires to be heard? We do not want to deny anyone that privilege that is, the opportunity of presenting their views, if they desire to do so.

We will now be very glad to hear from you, Mr. Keogh.

FURTHER STATEMENT OF JOHN L. KEOGH, DIRECTOR OF STORAGE, DISTRIBUTION, AND DISPOSAL, OFFICE OF ASSISTANT SECRETARY OF DEFENSE, SUPPLIES, AND LOGISTICS; ACCOMPANIED BY RALPH C. SPENCER, STAFF DIRECTOR; JOHN W. SUNDSTROM, CHIEF, DISPOSAL DIVISION; JAMES P. NASH, ATTORNEY, OFFICE OF GENERAL COUNSEL; AND WILLARD 0. VICKERS, GENERAL COUNSEL'S OFFICE, DEPARTMENT OF DEFENSE

Mr. KEOGH. Thank you, sir.

Mr. Chairman, I should like to address myself, briefly, to section 1 of H. R. 3322 which provides that no property shall be sold as surplus until it has been determined by, or under regulations of the Secretary of Health, Education, and Welfare whether such property is usable and necessary for educational or public-health purposes.

The effect of this provision would be to require the Department of Defense, among other Federal agencies, prior to the disposal by sale of any item of surplus personal property, to await the determination of the Department of Health, Education, and Welfare that such an item is or is not property useable and necessary for educational or public-health purposes. No distinction is made as to the types of items on which such determinations would be made nor is any limitation set on the time which the Department of Health, Education, and Welfare would have in making its review.

The proposal would vest in that Department the authority to screen all surplus personal property indefinitely against potential donation requirements. This could result in greatly increased costs to the Department of Defense incident to storing and maintaining the property, awaiting a determination as to its donability, and could seriously slow up and possibly result in a stagnation of our present surplus property disposal processes.

Under the Federal Property Act, the Administrator of General Services presently has the authority to establish reasonable time limitations on screening excess property among Federal agencies, including the Department of Health, Education, and Welfare, and to determine the degree of screening necessary. Section 1 of the proposed bill would make the Secretary of Health, Education, and Welfare paramount in this area insofar as it affected the screening of property for potential donation.

To this time the present procedures established by the regulations of the General Services Administrator provide for what has been

considered adequate review by the Department of Health, Education, and Welfare of surplus personal property for possible donation. That Department receives listings of the most desirable surplus personal property, as reported to the General Services Administration, and has the opportunity prior to its being released for sale to identify that property which would be suitable for donation. The Department of Health, Education, and Welfare also has the opportunity to select for donation surplus personal property at camps, posts, and bases prior to its being advertised for sale. The latter constitutes 80 percent of all surplus personal property and is not reported to the General Services Administration for central screening under its regulations. Under present procedures there is a practical time limit when screening for utilization or donation of such property ceases, after which the property may be sold.

Therefore, insofar as the proposed legislation affects the donation of surplus personal property generally, it is recommended that section 1 of the bill be amended so as to leave within the Administrator of General Services the authority to establish reasonable screening procedures for determining the donability of such property. This can be accomplished by the suggested amendment to this section set forth in the Department of Defense report to your committee on this legislation.

Mr. McCORMACK. Do you want to ask any questions, Mr. Moss? Mr. Moss. Not at the moment.

Mr. McCORMACK. Mr. Jonas?
Mr. JONAS. No.

Mr. McCORMACK. The Defense Department is down now to one proposition?

Mr. KEOGH. Yes.

Mr. McCORMACK. Is it your construction of H. R. 3322 that it in any way replaces the existing power authority in law to establish reasonable time limitation in the screening of excess property?

Mr. KEOGH. The way I understand it, Mr. Chairman, no property could be sold until after it is screened by the Department of Health, Education, and Welfare. There would be no time limit on the screening.

Mr. McCORMACK. None of the other departments or agencies that were present seemed to think so. H. R. 3322 would present no difficulty in connection with that particular aspect.

Mr. KEOGH. Well, the bill provides, I believe, that nothing would be sold-no property would be sold until it is determined whether

or not

Mr. McCORMACK. Then, of course, the existing Federal Property Act provides for the establishment and issuance of reasonable limitations; does it not?

I was wondering where this bill affects any authority in relation to established reasonable time limitations on screening, and so forthwhere it affects in any way.

Mr. KEOGH. May I refer that to Mr. Nash, the General Counsel's office?

Mr. McCORMACK. Certainly; go right ahead.

Mr. NASH. My name is James P. Nash, from the Office of the General Counsel, Department of Defense.

Mr. Chairman, if we read this bill correctly, it would require, prior to the sale of any surplus property, that that property be reviewed by the Department of Health, Education, and Welfare, to determine whether it can be donated to schools, institutions.

The bill would amend subsection 203 (j) 2. Subsection 203 (j) 1 provides that such property may be donated at the discretion of General Services Administrator but we feel that if this legislation were enacted that it would be mandatory upon the Department of Health, Education, and Welfare, at least they would have the final say as to whether all property should first be submitted to them for donation.

Mr. MCCORMACK. I thoroughly respect your views and the views of what I assume are the views of the attorneys in the Defense Department, who have considered this question, but it does not seem to me that H. R. 3322 in any way prevents the establishment of regulations to provide for a reasonable time limitation for screening surplus property.

Mr. NASH. I think those regulations could be established but they would be established by the Department of Health, Education, and Welfare, as to the donable property.

Mr. McCORMACK. Do you realize, of course, that a considerable part of the excess property in the Defense Department, nobody would be interested in it, anyway?

Mr. NASH. Yes, sir.

Mr. McCORMACK. That, of course, has been taken care of in the past very quickly, has it not?

Mr. NASH. Yes. Under regulations of the General Services Administrator.

Mr. McCORMACK. I know of no intention to interfere with the orderly procedure of disposing of surplus property that is not usable under the donable program. I think that you are raising a question that certainly does not exist.

On the other hand, I respect that in your mind you do think it does exist.

Mr. KEOGH. That is our concern.

Mr. McCORMACK. It is worthy of consideration.

Mr. SUNDSTROM. I was here the other day when Mr. Pearson was speaking to this very point. He referred to it as a potential procedural delay which, in effect, would defeat what we are really interested in, in this bill, in getting the property identified more quickly and to the people who might be the potential donees. He referred to it as a "procedural delay."

Mr. McCORMACK. I am sure, but I want to find out from Mr. Pearson who has a very different mind of his own just what he meant by that phrase "procedural delay."

Let me ask you this: An amendment has been suggested. Have you a copy of the bill before you?

Strike out the first section (page 1, line 3, to page 2, line 7) and insert in lieu thereof the following: That paragraph (1) of subsection (j) of section 203 of the Federal Property and Administrative Services Act of 1949 is amended (1) by inserting after "other supplies" the following: "(whether or not capitalized in a working-capital or similar management-type fund)," and (2) by adding at the end thereof the following new sentence: "In determining whether or not property is to be donated under this subsection, no distinction shall be made

between property capitalized in a working-capital fund established pursuant to section 405 of the National Security Act of 1947, as amended, or any similar management-type fund, and any other property." And strike out section 4 (page 3, lines 5 through 9).

I might say, gentlemen, that the respective agencies and departments, without any of them committing themselves, have drafted that as the result of a conference with representatives of all the interested agencies, other than the Department of Defense. The reason they were not included is that primarily your testimony had not been completed. We intended that the Defense Department be consulted. That is, from the legal standpoint, what would be your opinion? Would your opinion be the same, assuming that the subcommittee was to adopt that amendment?

Mr. NASH. I think, Mr. Chairman, as far as the point that Mr. Keogh is addressing himself to, this amendment would take care of that.

Mr. McCORMACK. If that is so, assuming it is adopted, that seems as though the one point that Mr. Keogh has addressed the committee on would seem to concern the Defense Department, would be reasonably met; would it not?

Mr. KEOGH. That is correct.

Mr. McCORMACK. I am not asking you to go on record as favoring it. You could not do that, but it would be perfectly proper for you, in your testimony, to say that it meets the point without being construed that you gentlemen are commiting the Department to this proposed or suggested amendment being presented to you only this morning.

I say that to protect your position.

Mr. KEOGH. Yes, sir.

Mr. McCORMACK. That is a fair statement to make to protect you gentlemen in your appearance before the subcommittee this morning. Mr. NASH. Yes.

Mr. KEOGH. Yes, thank you.

Mr. McCORMACK. Is there anything else that either you or any of your assistants, those associated with you, would like to say? We would be glad to hear from you.

Mr. KEOGH. There was testimony as to the amount of donations, Mr. Chairman, and as to the merchandising methods or the quality of merchandising that has been done here.

I have some figures showing the trend of donations for educational and public health institutions by quarters starting in the fiscal year of 1954. You may be interested in those figures.

Mr. McCORMACK. It happens that my attention was concentrated on another matter. Would you repeat that for my benefit, please? Mr. KEOGH. This is the trend of donations of the Defense Department surplus property to educational, health, and welfare institutions, starting with the fiscal year 1954, which shows the upward trends.

Mr. McCORMACK. We have gone into that. I think everybody agrees that there was an upward trend in what you might term dollar value, but there was a downward trend in percentage value or percentagewise.

Mr. KEOGH. I think that Mr. Spencer has some figures on the percentage.

Mr. McCORMACK. If you want to, and you feel it is proper to put it in the record, of course you are entitled to do so.

Mr. KEOGH. The first quarter of 1954, the donations to educationalhealth institutions was $11,500,000; in the second quarter of 1954, $12,100,000; in the third quarter, $17,900,000; in the fourth quarter, $19,200,000.

In the first quarter, 1955, $29,400,000; in the second quarter, 1955, $28,300,000.

And for entire 1954, the fiscal year, a total of $60,700,000.

And for the first 6 months of 1955 it was $57,700,000, or an annual rate of $115,400,000.

Mr. McCORMACK. Is that the acquisition value or what?

Mr. KEOGH. Yes; that is acquisition value.

Mr. McCORMACK. What would be the fair value? Have you any determination on that?

Mr. SUNDSTROM. We do not have the fair value.

Mr. KEOGH. We would not know what the fair value is.

Mr. McCORMACK. You have given enough information. It is the acquisition value.

Mr. Moss. I have one question. I may lack familiarity that would answer it in my own mind. How do we know what the figures are for the second quarter of 1955 when we have not as yet completed the first quarter?

Mr. KEOGH. That is the fiscal year?

Mr. Moss. The fiscal year.

Mr. KEOGH. Yes.

Mr. McCORMACK. Go ahead.

Mr. SPENCER. I would like to give that. The percentages of donations of total surplus available during the calendar year 1951 was 5 percent; 1952, 5.2 percent; 1953, 5.1 percent; 1954, 6.4 percent. Those are the percentages of the surplus available that were donated in those years.

Mr. McCORMACK. I take it that the Department is not opposed to the bill or its purposes?

Mr. KEOGH. We are not opposed to donations; no.

Mr. McCORMACK. And your Department wants the cooperation to the fullest extent possible consistent with other necessities in the whole program?

Mr. KEOGH. That is correct.

Mr. McCORMACK. There has been, of course, difficulty the last year; you know that?

Mr. SPENCER. I think that we need to say, of course, in the matter of stock funds, the comptroller's responsibility for the integrity of the stock fund is of particular concern to him.

The whole concept of donation, as evidenced by what has been accomplished here on our part, would indicate that we are wholeheartedly in favor of doing all that can be done.

Mr. McCORMACK. We will not go into that. We have the picture. I might also state, gentlemen, that I would like to get your views as to some other amendments that have been suggested, and, I might say, have been carefully worked out.

The committee, of course, will consider them.

One reads as follows: