Northrup requested at that time that we draw up the warehousing proposal to take care of some $300 million worth of material that they had on hand, or was in the process of coming into their plant. That was either new material, surpluses, excesses, machinery, et cetera.

As far as the actual categories of the material that they have taken into consideration in this account, I do not know. I have seen no lists of it. I do not know what it consists of, except that we did have a request from them for that type of activity.

Consequently, we drew up a proposal and presented it to them with. the understanding that we did have 300,000 square feet of warehousing space available. We also had some 23 acres of additional land on which we could build buildings for them.

After about 2 weeks the situation developed where they said they wanted, well, more elaborate detailed explanation of what our program consisted of. That we have submitted to them, and that, I understand, is right now at Wright Field.

Of course, we intend fully, from a private-enterprise_viewpoint, to pursue that to its end, whatever it may be. We intend to cooperate with them if there is any way possible that we can do it.

There has been some comment as to contract termination and excesses, and so forth, that have been available.

In drawing up a conservation proposal or redistribution proposal, we talked with some of the airframe manufacturers regarding the plan.

This plan that we propose herewith is one that has for a background the educational experience and the dependability of one of, I would say, very high level in the Douglas Corp. It has the experience of this individual who was so engaged in this same type of an operation for the Douglas Corp. during the last war.

Inasmuch as during the years 1943 to 1944, Douglas did not care to subscribe to the approved method as it was at that time they went into their own redistribution plan. In other words, they hired in Los Angeles the Union Terminal Warehouse and they warehoused their material.

They saved what they could, and they brought about a situation where they had this material readily available to themselves at all times.

During that process, I am informed that they had, at least, $28 million running inventory on material that they had in the warehouse. That was the material that was excess to them on one instance, but by the same token was not excess on the other instance.

In their plan and method of operation at that time, of course, it was strictly a company operation and they put it in and took it out at will.

In this plan that we are submitting now, which is comparable to what they have and, as I say again, somewhat similar to the APRA plan, it is tantamount that the operation be one in which the materials that are on hand as excess or contract termination materials be turned over to private industry on certificates of accountability, and the responsibility for the material will lie with the service's representatives.

There has been quite a lot of talk here this morning on various types of exchange as to how this can be done and brought about.

In our material flow chart the material, of course, would be generated by the aircraft industry contractors as the prime manufacturers, and when it was known that this material is excess or terminated material, it would be cleared through the services and through the Government agency.

And again we are like a lot of other people, we favor General Services Administration, because it is part of their operation. But rather than go into the General Services Administration as the clearing house, we propose and we are willing to follow through with our corporation as conservation engineers, to be the clearing house for the aircraft industry for the materials.

In that event, we would be in a position where we would propose that we could get out lists. We would screen; and we would see that the material is of a particular category in a limited amount of time.

Mr. HOLIFIELD. As I understand it, Mr. Wood, you are advocating a plan similar to the Air Force plan, but you think that there should be a private corporation, privately owned enterprise corporation, that should do the screening and the allocating?

Mr. WOOD. That is right, Mr. Chairman.

Mr. HOLIFIELD. How would you insure, first, that you would have fairness in the allocation and efficiency in the allocation if a private corporation took up that particular phase of the work, rather than the Government?

Mr. WOOD. Well, by private corporation taking over this particular activity, rather than the Government, I do not mean to cast any aspersions, but I think that private industry could perform the operation much more economically than could a Government agency.

Mr. HOLIFIELD. In other words, you would prefer the Murray Cook form of redistribution, such as was used after World War II, rather than the new form that has been proposed by the Air Force?

Mr. Wood. To the extent that the corporations engaged would be policed and governed entirely by activities of the services and the government agency. For that purpose, the whole situation, so far as this type of a conservation program is concerned, would have to be that all of the agents, as well as the clearing house or corporation X, as it may be called, must be, first, a quality control organization.

By quality control organization, I mean an organization that is operating under the quality control standards and procedures prescribed by the Air Force and the Navy.

In that way, the material would not lose its identity.

Just pursuing one level further, it is proposed that the clearing house would set up a material review board. We have had some discussion here this morning back and forth on who would control, who would determine as to whether it would be scrap or usable material.

This material review board, consisting of a representative again of General Services Administration or a Government agency, and the representative of the manufacturer as well as a representative of the services would pass on all of these materials that would pass through as excess, termination, and what not.

This materal review plan would classify the material either in aircraft usable status; and then, of course, it would go into the hands of various control agents who would be in a position where they could easily and readily identify the material. For example, if it were

aluminum sheet and it had been sold by Alcoa, their agents would act as agents in this particular regard where they would reidentify it, if the material had become contaminated to some extent, they would be able to remove the contamination and put it back into aircraft quality.

that

Mr. HOLIFIELD. Let me understand you. Do you mean to say there should be an attempt to get back into the hands of the primary manufacturer such materials as might be declared in excess?

Mr. WOOD. No, I am thinking now in the terms of distributors. I am sorry that I put in the word "Alcoa."

Mr. HOLIFIELD. Let us explore that point. Then you are indicating that all aluminum should be declared back to the Aluminum Co. of America, and they should redistribute it?

Mr. WOOD. I think it should go back to the distributor of that particular type of material, to the aircraft industry.

Mr. HOLIFIELD. I see. Let us say the agent for Reynolds, or the Aluminum Co., or Kaiser?

Mr. Wood. That is correct. And the same with the hardware and the component parts, and so forth. They should all go back to the various distributors.

I do understand that the Navy man was frowned upon a little bit because of that, but I think that I can qualify that to this extent.

The reason why I brought up these Cleco skin fasteners that we are working with is this: At the time that we started in the operation no one else wanted to do anything about it. They did not recognize the condition that existed. However, it did get to be a very vital item. You could have sold Clecos for anything that you wanted. The aircraft companies would have bought them at the time that we got into the conservation plan of Clecos. As I say, we have been in it since last August. We have saved a lot of Clecos. By the same token, we are negotiating right now with the manufacturer, in this instance, the Wedgelok Co., in North Hollywood, to turn them back to them, because they are beginning to recognize the necessity of reclaiming them, because they are unable to get new materials to make new Clecos with. So that operation will go back to the manufacturer. The manufacturer, in turn, will send them back to the aircraft companies.

By the same token, progressing down here on this material, so far as the flow of this is concerned, the scrap material that would be certified as scrap, of course, would go to certified scrap agents. The certificates of accountability, and so forth, would be given back to the material review board and it would find its way back into the aircraft industry.

The whole plan is one generally along the lines of APRA, but there it changes in two places.

No. 1, of course, is the setting up of this corporation X that will act as a clearinghouse.

No. 2 is that the material will change on certificates of accountability. And in that way it will relieve the aircraft manufacturer of having to carry on his list these terrific inventories which, of course, have no particular use to him.

There is another quality there that should be taken into consideration; that is, the idea of the material review board. The material review board will have the sole responsibility of classifying the material.

It is, also, considered that some of the material will not be of aircraft quality and it will go back into commercial usage and will be disposed of there on a commercial basis.

That, generally, is the idea of our proposal.

Mr. HOLIFIELD. If you have a brochure that you would like to leave with the subcommittee, we will be glad to receive it.

Mr. WOOD. I am very well prepared. I have about a dozen or so of these, if anybody would like to see them, and I shall appreciate having it in the record.

Mr. HOLIFIELD. If you have a prepared statement that you would like to present, then we will be glad to receive it, too.

Mr. WOOD. Yes. This covers all of "Industrial Aids" as related activity of "Conservation Engineers."

(The brochure entitled "Conservation Proposal" is as follows:)

CONSERVATION PROPOSAL

(Conservation Engineers, Inc., Compton, Calif.)

FOREWORD

Conservation Engineers, Inc., was formed from the original Industrial Aids, Inc. Industrial Aids, in its turn, was initiated for the purpose of conserving strategic aircraft materials by sorting and segregating such small parts as rivets, bolts, nuts, fittings, etc., in conformity with Government and manufacturers' specifications and requirements. In particular, the purpose of Industrial Aids is to fulfill a need which has existed in the conservation field since the inception of aircraft manufacturing by returning mixed stocks to production. Thus, valuable machine time is released for processing new materials which are so critically needed throughout industry.

Industrial Aids' operation consists of sorting and inspecting materials. No manufacturing of any kind is performed. Early in the program it was realized that many valuable parts acquired should, by reprocessing, servicing, or reworking, be again made available to industry. To date Industrial Aids has perfected a reworking and servicing of all Cleco fasteners and C clamps. Through research, it now has the approved processing method for replating elastic stop nuts and related items. Processes are presently being developed for the conservation of tools, bits, and files, etc.

Conservation Engineers, Inc., likewise, is dedicated to the principle of conserving all matériel, including all raw material, hardware, component parts, and related items used in the manufacture of aircraft, with the same intent and purpose as originally set forth in the program of Industrial Aids.

The need for expansion of the present conservation program has been realized for a long time, and this proposal is not the first, by any means. Programs of conservation were considered, adopted, and put into practice during World War II. It is felt that with the proper type of cooperation they would still be in operation. However, all such programs were found to be inadequate for various reasons: in some, the manufacturer sets up his own warehouse for this purpose. This plan proved more successful than another in which individual private corporations were set up, usually at great cost to the industry and the Government. The latter plan was weak in purpose, and due greatly to the selfish motives of its principals, who became involved in granting special privileges, received little or no cooperation from the industry.

Unlike past programs, the present proposal is one stressing conservation. Call it redistribution, warehousing and cataloging, surplus, or any other word, it is still conservation.

It is proposed that Conservation Engineers, Inc., assume the responsibility of acting as a clearing house or central agency for the aircraft industry in all matters pertaining to the conservation of material falling into the following categories: contract termination material; unrequired material; excess

material; commingled materials, and material designated by any other phrase or word applied to aircraft material not being used for its original intent and purpose by the aircraft manufacturer who originally purchased same. A pool will thus be formed, from which such unwanted material of one manufacturer may become available to all other manufacturers. In this manner not only would vast sums of expensive material be saved from diverse channels, in most instances relieving the producer of machine time to produce such items, but the program would also alleviate many critical shortage items. This fact has been proven by earlier programs of similar aim, although they may have fallen short of their objective.

Even though aircraft material may be in one of the unwanted categories as listed above, it can still retain its original aircraft quality if properly controlled.

For the purposes of this program, all materials in these categories are included, whether title for such material lies with the contractor (aircraft manufacturer), or with the Government, or with a specified branch or department of the Government.

Redistribution

CONSERVATION PROGRAM

1. Conservation Engineers, Inc., proposes a program to help solve the problem of redistribution of materials to the maximum extent possible at a minimum cost to the Government.

2. In handling the materials for redistribution in the proposed plan, the following classes of materials are excluded from consideration because of their peculiar design which would make them unusable in aircraft except for the specific models for which they were designed. These types of materials should be screened by the procuring agencies at the prime contractor level for possible retention for spares purposes, and if not required should be authorized for scrap so that the prime metals could be recaptured at the earliest possible moment.

(a) All parts manufactured to the prime contractors' drawings and specifications (except right-angle extrusions);

(b) All castings, forgings, and extrusions (except right angle);
(c) All rubber products;

(d) All name plates and decals;

(e) All paper forms.

3. All other materials will be handled by Conservation Engineers, Inc., acting as a clearing agency for the aircraft industries when they are declared as unrequired by them.

4. All materials transferred to Conservation Engineers, Inc., will be transferred on transfers of accountability forms for Government property. The allocability of such materials to the proper contract will be the responsibility of the prime contractor and cognizant contracting officer.

5. All material transferred to Conservation Engineers, Inc., will be checked by its inspection procedures and personnel under the supervision of one or more of the services' quality control sections to determine the quality of the material. All materials will be classified into one of the following categories, after which Conservation Engineers, Inc., will certify material to proper agency: (a) Aircraft quality;

(b) Commercial quality;

(c) Scrap.

NOTE. Where critical shortages are known to exist, Conservation Engineers, Inc., reserves the right to bypass agencies in the interest of the industry.

6. In cases of disagreement between Conservation Engineers, Inc., and the quality control of the services, such disagreements will be referred to a materials review board consisting of one representative of Conservation Engineers, Inc., one representative of industry, and one representative of a services' quality control. The quality control representative shall have the veto power of decisions. All decisions of the materials review board will be final.

7. Conservation Engineers, Inc., will operate on a basis not to exceed a nominal percentage of the market value of all material cleared through its operation, subject to periodic review.