Mr. HOLIFIELD. We will just postpone your answer until you get to it on your presentation.

General METZGER (reading):

(2) Flow of reporting: This chart indicates the manner in which the availability of the matériel is reported, in turn, to the service for and under whose contract it was required, to other governmental agencies, and, finally, to civilian distribution agencies.

(3) Flow of redistributable matériel: This chart outlines the paths that matériel may follow in passing back into productive use, either in usable form or as scrap and salvage.

Contractor Owned Inventory

(Direct negotiation between Contractor and Agent)

General METZGER. Chart 2 answers that question that you asked, I believe, Mr. Chairman.

The aircraft contractor and the service representative live in the same house, so the service representative reports on behalf of the aircraft contractor and reports to the Air Matériel Command all surpluses which our Air Matériel Command will screen for service use. And the Production Resources Division of the Air Matériel Command will screen those surpluses for critical shortages against critical shortages which have been reported by our contractors and draw off or recommend to the contractors having critical shortages spots where they may go to have them relieved as against these consolidated surplus lists.

AMC, of course, in the block above, will draw off for service use those quantities which are needed to support and replenish or satisfy authorized stock levels.

After those requirements have been satisfied the balance will be reported to the Surplus Materials Division of the Bureau of Supplies and Accounts of the Navy which has the responsibility for Department of Defense surpluses to a certain extent. That Division will screen for other Government agency use; in fact, everyone in the Defense Department, all defense activities will have an opportunity to pick up and satisfy their requirements from these surplus quantities as reported to us.

The balance, after all such requirements have been satisfied, will be forwarded to General Services Administration for recording, cataloging, and reporting to the distributors, so that General Services Administration becomes a supervisory executive organization engaged in recording and cataloging and for reporting the availability to the distribution chain whom we recommend.

Mr. HOLIFIELD. And no legislation is required for that-that is their authorized responsibility at the present time, is it not?

General METZGER. That is a point, sir, which I am not qualified to comment on. If that authority does not exist we merely recommend that some authority be granted General Services Administration to engage in this.

Mr. HOLIFIELD. I think from my understanding of Public 152 that their responsibility is approximately defined there. The cataloging function has been delegated to the Munitions Board. Of course, they have the authority to dispose of surplus, to report availability to the distributors. There might be some additional legislation needed, although I doubt it, for the adoption of a plan such as this. I think they have that authority now. I am not passing any judgment on the plan. I do not know whether it is desirable or not, because we want to hear both sides of this question.

General METZGER. At this point, I would like to comment that in recommending that General Services Administration become an executive organization not engaged itself in merchandising through its own personnel, which the chairman so clearly and forcefully brought out in his remarks to Congress on the 13th of May, we are again recommending that such distribution and merchandising be engaged in by those qualified to merchandise financially, organizationally, and with experience.

Mr. HOLIFIELD. In other words, in place of building another great Government bureau like the War Assets Administration was with 40,000 people, you are recommending that existing businessmen be given the responsibility and the opportunity to do this job in which they are specialists?

General METZGER. Yes, sir.

Mr. HOFFMAN. With that I am in full accord. The only difficulty I find with that thing is fixing the fee that they should get.

Mr. HOLIFIELD. The customary, fees of distribution in private industry might well be followed with such adjustments as are necessary to take into consideration the fact that they do not have their own money invested in the inventory. I think a formula could be worked out similar to that which the aircraft agents had after World War II.

I am not saying identical, but similar to that, recognizing existing principles of business and existing payment for services rendered. General METZGER. I would think

Chart 3 is rather complex.

So, sir.

Mr. HOLIFIELD. Will you desist for just a moment? The staff has called to my attention the authority to which I referred. It is in section 202 (a) of Public Law 152, Eighty-first Congress, and reads as follows:

In order to minimize expenditures for property the Administrator shall prescribe policies and methods to promote the maximum utilization of excess property by executive agencies, and he shall provide for the transfer of excess property among Federal agencies.

And of course there is other authority.

Section 203 (b) states that the care and handling of surplus property pending its disposition and disposal, may be performed by the General Services Administration or when so determined by the Administrator by the executive agency in possession thereof or by any other executive agency consenting thereto.

It might well be that Congress would have to give them additional authority to go beyond disposal by an executive agency, to dispose of it by private qualified enterprises. That point might well require the attention of this subcommittee.

Mr. GOLDEN. At that time you might clarify the right to sell by the advertising route which is I think a matter that the General Services Administration has brought to your attention.

Mr. HOLIFIELD. That is correct.

Mr. GOLDEN. That may be involved here when you talk about diverting to an aircraft manufacturer that needs it.

Mr. HOLIFIELD. That is right. The problem of negotiated versus competitive bidding would come in there and some legislation might have to be adopted for this specific purpose.

You may now proceed.

Mr. PILSON. May I ask one question for purposes of clarification? Mr. HOLIFIELD. Yes.

Mr. PILSON. On this chart, General, what is the existing situation? Is that not the present procedure except with respect to the distributors, the agents-is that not the present system as developed by the General Services Administration?

General METZGER. Yes, sir.

Mr. PILSON. So the only thing new you have added is the idea of distribution through commercial agents?

General METZGER. That is correct, sir.

Mr. HOLIFIELD. I think that is not quite correct.

General METZGER. I was going to make one exception, sir, that is, that General Services Administration has qualified aeronautical property as nonreportable items and relegated the disposal of aeronautical items to the services.

Mr. HOLIFIELD. That is the point I object to. I object to it on the same grounds that you did, General, that the services are not merchandising experts.

General METZGER. That is correct.

Mr. HOLIFIELD. Their primary purpose is not in merchandising. I understand why the General Services Administration redelegated this,

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because, as I say, they have no method of handling it at the present time due to lack of appropriations.

General METZGER. That is correct.

Mr. HOLIFIELD. And the services must do the job, but that does not mean that a method cannot be worked out whereby experts in the line can do the job.

General METZGER. That is exactly the point.

Mr. HOLIFIELD. You will pardon me for interrupting, but I thought that authority should be cited.

Mr. CURTIS. Could I ask a question for information?

Mr. HOLIFIELD. Yes.

Mr. CURTIS. Since 1942 has not the private aeronautical industry manufacturers and the distributors grown considerably, so that in the private field there is a lot more know-how than formerly existed, say back before 1942?

General METZGER. Unquestionably.

Mr. CURTIS. And a lot of this is that we are just growing up with the new industry, are we not?

General METZGER. Yes, sir.

Mr. CURTIS. It seems to me that some of that will solve a lot of our problems here.

General METZGER. Perhaps, sir.

Mr. MCVEY. In what position is the General Services Administration in reference to this program in view of the fact that Congress did not continue appropriations for the General Services Administration? Can it carry out this program without that appropriation? General METZGER. I am not familiar with the appropriations, sir, for the General Services Administration, nor have we proceeded here beyond the planning stage. We have not explored the questions of cost and the implementation of our recommendation.

Mr. HOLIFIELD. I will say to the member of the subcommittee that we will have the General Services Administration to testify on that point. It is an important point.

You may proceed.

General METZGER. In chart No. 3 the most important point is the distinction between contractor-owned and Government-owned surplus. Here we attempt to bring out that the aircraft industry contractors in that widely wavering line may deal directly with the distributors who are operating under the supervision of the General Services Administration and employ them in this disposal of contractor-owned property, if they see fit. We are attempting to indicate here that the services, the Air Force, will in no way engage directly in the disposal of contractor-owned surpluses except to the extent that those surpluses may fit into our depot stock requirements or as presented in the previous chart in the solution of critical shortages among other contractors. (See chart No. 3 on p. 25.)

The flow of material is substantially the same as presented in the other chart, but indicates that specialized distributors shall be appointed. And by specialized we mean companies or individuals presently engaged in the field of merchandising, such as hardware, materials, components.

That generally covers that chart. [Reading:]