DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, Mr. HOWARD GREENBERG, Commissioner, Utilization and Disposal Service, General Services Administration, Region 3, Washington, D.C. DEAR MR. GREENBERG: We have reviewed the proposed amendments to subchapters E and H of the Federal Property Management Regulations enclosed with your letter of October 28, 1965. The benefits which inure to property management activities as a result of the use of Section 201 (c) of the Federal Property and Administrative Services Act, as amended, and the adverse effects upon the donation program, under Section 203 (j) of the Act of the utilization of that section by all agencies and departments should be measured and equated. We would urge that searching consideration be given to the question of the relative merits of the statutory authorization to the detriment of the health, educational, and civil defense purposes served by the donation program and whether the public interest might not be better served by modification or repeal of Section 201 (c). In the meantime, we do not interpose any objection to the issuance of the proposed revision of subchapters E and H since they represent a tightening of the procedures governing use of Section 201(c) and, to that extent, reduces the adverse impact upon the donation program which unlimited use of Section 201(c) would otherwise cause. Thank you for the opportunity to review this material. DALE S. THOMPSON, Director of General Services. GENERAL SERVICES ADMINISTRATION, Hon. PAUL R. IGNATIUS, Assistant Secretary of Defense (Installations and Logistics), DEAR MR. IGNATIUS: By letter of May 7, 1965, Honorable Paul H. Riley, Deputy Assistant Secretary of Defense (Materiel Requirements), requested General Services Administration's comments on a proposed revision of the current Department of Defense Instruction entitled "Policy and Procedures Relating to Non-excess Personal Property to be Sold or Exchanged for Replacement Purposes.' As you are aware, the present executive branch implementation of subsection 201(c) of the Federal Property and Administrative Services Act of 1949, 63 Stat. 383, as amended (40 U.S.C. 481) is under review by House and Senate subcommittees. In this connection, GSA advised the Senate Subcommittee on Foreign Aid Expenditures of the Senate Government Operations Committee earlier this month that this agency is in the midst of a complete review of the policies in its government-wide exchange/sale regulation. In view of the present situation, we suggest that the DOD delay any action with respect to its proposed revised Instruction until a draft of a revised government-wide regulation has reached final form. We anticipate that by August 1, 1965, the GSA draft will be made available to Government agencies and interested non-Federal groups for official comment. As soon as we are able to furnish DOD with a discussion draft, we would appreciate the opportunity to discuss it with you and members of your staff. Sincerely yours, Mr. LAWSON B. KNOTT, ASSISTANT SECRETARY OF DEFENSE, Acting Administrator, General Services Administration. DEAR MR. KNOTT: On September 1, 1964 a meeting was convened by this Office for the purpose of reviewing DOD Instruction 4160.1 dated July 14, 1955, subject: "Policy and Procedures Relating to Non Excess Personal Property to be Sold or Exchanged for Replacement Purposes", and instructions issued by the Department of Defense on this subject in the form of memoranda. Representatives from the military services, the Defense Supply Agency, Office of the Assistant Secretary of Defense (Comptroller) and Mr. G. L. Price from your office were in attendance. Since that time, considerable effort has been directed by personnel of this Office and the other interested offices towards appropriate revision of the 1955 policy. In accordance with present DOD policy, it is mandatory for exchange/sale property (69) categories to be made available for utilization by Federal Agencies without reimbursement and for donation to authorized recipients. Information received from your reports reveals the following transactions for the 16-month period March 1, 1963 through June 30, 1964: Assuming an average return of 5% was realized from the property sold (after deducting total cost of sale), $2,125,915 would have been deposited to the exchange/sale account, or a return of approximately 1.9% from the total program. As you realize, the application of the proceeds received from exchange/sale property is a very important means of financing similar replacement items for authorized buy programs. The results of the current guidance clearly indicate that the program is not progressing in the best interest of the Government, and therefore, requires revision. The enclosed proposed revision 1 of the current DOD Instruction is presently being circulated among the Military Departments and the appropriate Defense offices and Agencies for comment, by June 1, 1965. It would be appreciated if you would provide us with your comments by that date also. Sincerely, PAUL H. RILEY, Deputy Assistant Secretary of Defense (Materiel Requirements). FEBRUARY 3, 1965. Memorandum for: The Assistant Secretary of Defense (Installations and Logistics). Subject: Exchange/sale program. Recently your office proposed that the Defense Department implementation of the exchange/sale authority be revised so that all authorized proceeds can be realized for Defense appropriations. Such a revision would conform the implementation with the position which this office has consistently held, and we agree that it should be made. As explained in our memorandum of March 14, 1962, we believe that the "first choice" which the present implementation gives to other federal agencies 1 Enclosure previously printed in subcommittee's hearings on "Evaluation of the Donable Property Program," June 8 and 9, 1965, pp. 89 ff. and authorized donees fails to carry out the intent of the statutory authority because it does not obtain all authorized sales and exchange proceeds for application towards financing the cost of replacement items. Unless the existing statutes are changed in this regard, the Defense Department implementation should be modified as now proposed, even though it will not continue the accommodation of other federal agencies and authorized donees who are now receiving most of the eligible property gratutiously. Under your proposal the first action would be issuance of a memorandum which would supersede the existing implementing memorandums. Rather than continue implementation by memorandum, we recommend that the change be made by a formal revision to DOD Instruction 4160.1. A formal change need not delay the effective date of implementation, and is more certain of necessary dissemination. To reduce the cost of administering this authority the Defense Department should also explore with the GSA all possibilities of reducing the number of exchange/sale categories. Consolidations of the existing categories will reduce the accounting and administration workload which results from the requirement that proceeds must be applied to finance replacements in the same exchange/sale category. CHARLES J. HITCH, Assistant Secretary of Defense (Comptroller). ASSISTANT SECRETARY OF DEFENSE, INSTALLATIONS AND LOGISTICS, Memorandum for: The Assistant Secretary of the Army (Installations and Logis- REFERENCES (a) Deputy Secretary of Defense Memorandum, Subject: Department of Defense Use of the Exchange/Sale Property Disposal Authority dated August 7, 1962 (b) DOD Instruction 4160.9, "Policy Governing the Utilization Screening of Excess Personal Property Under Control of the DOD" (c) GSA Personal Property Management Regulations, Title 1, Part II, Section 213.00 (d) DOD Instruction 4160.1, "Policy and Procedures Relating to Non-excess Personal Property to be Sold or Exchanged for Replacement Purposes" (e) DOD Instruction 4215.17, "Exchange or Trade-in of Machine Tools under the Machine Tool Replacement Program" This memorandum provides guidance for use of the exchange/sale authority as required by reference (a). Additional guidance will be provided relating to financial matters by the Assistant Secretary of Defense (Comptroller). Personal Property in the 69 categories which are designated in the inclosure will be subjected to the criteria and the reporting procedures which are prescribed in reference (b). All personal property in the exchange/sale categories which meets the prescribed reporting criteria will be reported directly to the cognizant GSA Regional Office for a 60-day simultaneous DOD-GSA utilization screening and a 15-day donation screening. All items in the 69 categories of exchange/sale property, less authorized exclusions, which are reported to the GSA for simultaneous screening will be reported on a Standard Form 120, "Report of Excess Personal Property." Such reports will clearly identify the property by insertion of the following statement as the first entry in Block 18b, "This property is designated as eligible for exchange/sale." Property which is selected for utilization and donation purposes will be determined to be excess or surplus as appropriate, and transfer or donation will be effected in accordance with existing procedures prescribed in reference (b). Property which is not selected for utilization and donation purposes will be designated as exchange/sale property. Except as specifically indicated above, property will be processed for exchange/ sale in accordance with the procedures prescribed in reference (e). Reference (b) and (d) are in process of revision, and reference (e) is being cancelled. Pending promulgation of the revised issuances, it is requested that any implementing instructions issued by the Military Departments and the Defense Supply Agency provide for the following, as a minimum: 1. All items of property in the 69 categories except those in (a) new and unused condition, or (b) scrap condition are eligible for exchange or sale and will be reported for utilization and donation screening in accordance with the foregoing. 2. Property which is designated as eligible for exchange or sale and published for utilization and donation screening will be immediately available for transfer to a requisitioning activity, subject to the above prescribed screening periods. 3. Property which is eligible for exchange/sale and is selected for utilization or donation will be declared excess or surplus at the time of selection. All residual property which is not selected will be designated and disposed of as exchange/sale property. 4. All items of property determined to be eligible for exchange/sale, regardless of line item value, will be processed through the GSA Regional Offices as prescribed in reference (b) for reportable excess property having a line item under $3,000. 5. Items will be sold unless the responsible procuring activity determines that exchange would be more advantageous to the Government. 6. Existing procedures for disposition of excess property owned by stock and industrial funds are not affected by the provisions herein. Property which is located in overseas areas will be screened for utilization purposes as prescribed in reference (b); following such processing, determination as to exchange/sale status will be made. Reports of excess property will be annotated in Block 18b of Standard Form 120 as follows: "This property is designated as eligible for exchange/sale.' It is requested that each of the Military Departments and the DSA furnish this office with two copies of its implementing instructions by September 14, 1962. ROSWELL L. GILPATRIC. DEPUTY SECRETARY OF DEFENSE, Memorandum for: The Secretary of the Army, the Secretary of the Navy, the Further reference is made to my memorandums of January 29 and March 21, 1962 concerning the above subject. The matter of Defense department use of the exchange/sale property disposal authority has been reviewed on the basis of pertinent studies of our property disposal program, and in light of careful consideration of the interests of the various beneficiaries of the property utilization and donation programs. Based on such review, equitable arrangements have been concluded with the Administrator, General Services Administration. These arrangements will permit the Defense department to make reasonably effective use of the exchange/sale authority under procedures which provide for exchange or sale action only after the applicable property has been made available for utilization or donation through the existing GSA property screening system. For your immediate information, Inclosure 1 outlines in sequential step form the method for carrying out the arrangements concluded. Effective October 1, 1962, the exchange/sale authority will be utilized throughout the Department of Defense in accordance with inclosure 1. Within their respective areas, the Assistant Secretaries of Defense (Comptroller) and (Installations and Logistics) will proceed immediately with the issuance of such further procedural instructions as are necessary to accomplish that implementation. ROSWELL L. GILPATRIC. SEQUENTIAL OUTLINE OF THE PROCEDURAL STEPS FOR DISPOSAL OF PERSONAL PROPERTY WHICH QUALIFIES FOR EXCHANGE OR SALE UNDER A DOD SYSTEM DESIGNED SPECIFICALLY TO ACCOMMODATE THE INTERESTS OF THE BENEFICIARIES OF THE UTILIZATION AND DONATION PROGRAMS Step 1. Make a determination to dispose of an item of personal property. Step 2. Determine whether the item meets the conditions prescribed by GSA Regulations which make it eligible for exchange or sale. Step 3. If the item is determined to be eligible for exchange or sale, announce promptly, through the existing channels and procedures for effecting utilization, to the other DOD components and other Federal agencies that the item is scheduled for disposal, and that they may request it for utilization on a nonreimbursable basis within 60 calendar days. NOTE. To this point in the process, none of the actions taken (i.e., Steps 1, 2 or 3) include or involve a declaration of the status of the item in terms which would establish a method of disposal. Further, the announcement referred to in Step 3 covers all items of property determined to be eligible for exchange or sale irrespective of their line item value, and will be effected in all instances through the existing channels and procedures now in effect with the GSA for the processing of line items of excess or surplus property having a line item value under $3,000. Step 4. If another DOD component or Federal agency requests the item within the 60 day period, declare the item excess and process it accordingly under the existing procedures so that it reaches the particular DOD component or other Federal agency for utilization. Step 5. If the item is not requested for utilization within the 60 day period, immediately upon expiration of such period announce through the existing channels and procedures for effecting donation that the item is scheduled for disposal and is available for a period of 15 calendar days for request by an authorized donee. Step 6. If the item is requested by an authorized donee within the 15 day period, declare the item surplus and process it accordingly under the existing procedures so that it will be given to the particular donee. Step 7. If the item is not requested by an authorized donee within the applicable 15 day period, immediately upon expiration of that period designate the item for exchange or sale and promptly proceed to effect such exchange or sale. Process the proceeds of the exchange or sale so that they will be applied towards financing the cost of replacement as provided by the Exchange/Sale authority. Hon. THOMAS D. MORRIS, GENERAL SERVICES ADMINISTRATION, Assistant Secretary of Defense (Installations and Logistics), DEAR MR. MORRIS: This will refer to Mr. Paul H. Riley's letter to me of February 26, 1962. In it, he advises of the plans of the Department of Defense to undertake a broad application of the exchange/sale provisions of GSA Regulations, Title I, sections 1-II-213.00 and 1-III-202.00 to all of the authorized categories of DOD property, with complete coverage being effected not later than July 1, 1962. Mr. Riley provided with his letter a copy of a proposed DOD Directive on this subject, enclosure 2 of which proposed modification of the provisions of the aboveidentified regulations to consolidate 69 categories of property eligible for exchange or sale into 33 broader categories for the purpose of simplifying accounting. The policy changes made by the Department of Defense in the use of the exchange/sale authority are of major significance with possible broad consequences as they affect other related programs. The changes already have been made the subject of a strong protest by the Department of Health, Education, and Welfare in their letter of February 23, 1962, a copy of which is enclosed. Also, the proposed modification of existing GSA Regulations to establish 33 broad property categories appears to us to involve policy considerations and affect the responsibilities of other agencies of Government. Accordingly, we are re-examining existing GSA Regulations relating to the exchange/sale authority, the pertinent law, legislative history and applicable decisions of the Comptroller General. Prior to arriving at a decision as to what if any action we should take concerning existing regulations, or determining our position on the DOD modification proposal, we intend to confer with other affected agencies, the Comptroller General, and appropriate Congressional Committees. Undoubtedly it will not be possible for us to make a definite reply to Mr. Riley's letter by March 23, as requested. Sincerely yours, BERNARD BOUTIN. |