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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.

8. Conservation Engineers, Inc., with approval of the designated agency of the Government, will select agents and enter into contracts with said agents to handle the materials of categories (a), (b), and (c) of paragraph 5.

9. The selected agents will operate on a percentage basis, depending on volume of sales and the normal percentage of profit allowable to sales of like material.

NOTE.-Inasmuch as economy of operation will contribute to the eventual success of the program, it is anticipated that costs of both Conservation Engineers, Inc., and/or its agents will not exceed 40 percent of the market value of matériel affected.

Due to the experimental nature of a conservation program such as this, it is suggested that, for the immediate present, action be confined to the Los Angeles-San Diego areas.

Detailed operating procedures will be made available upon approval of this plan.

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Mr. HOLIFIELD. We thank you very much.

Mr. WOOD. Thank you.

Mr. HOLIFIELD. We will next hear from Colonel Carey of the Air Parts, Inc., at this time.

Identify yourself for the record.

STATEMENT OF JOHN H. CAREY, AIR PARTS, INC.,
GLENDALE, CALIF.

Mr. CAREY. My name is John H. Carey, and I represent Air Parts, Inc., of Glendale, Calif.

Mr. HOLIFIELD. Mr. Carey, have you had an opportunity to see the proposal of the Air Force that was presented to our subcommittee this morning?

Mr. CAREY. I have not seen a copy of the proposal, but I think it was pretty well reviewed here today and, perhaps, I could discuss it in whatever fashion you would wish.

So far as I can see, the only change in the old one and the new one was to substitute General Services Administration for corporation X, I think. Otherwise, it seems to me that it is practically the same.

Mr. HOLIFIELD. It has this chart in the presentation, with corporation X, whereas the Air Force had General Services Administration this morning.

Mr. CAREY. That is right.

Mr. HOLIFIELD. Apparently, the rest of the old one is the same as the new one. Would you care to testify on this plan as presented this morning, and your opinion as to the relative value of the plan as presented this morning and as presented before when a private corporation was given the task of screening and allocation?

Mr. CAREY. Yes; I would be happy to give you whatever I have there.

Mr. HOLIFIELD. You might tell the committee whom you represent. You gave the name, but what is that business?

Mr. CAREY. We are aircraft distributors within the aircraft industry, and have been for the last 21 years in this very business of supplying

Mr. HOLIFIELD. All kinds of aircraft parts?

Mr. CAREY. That is right.

Mr. HOLIFIELD. And you are agents for the manufacturers?

Mr. CAREY. We are distributors for Goodyear and Champion spark plugs, and so forth.

Mr. HOLIFIELD. You also obtain material on these surplus sales? Mr. CAREY. Yes; that is something we dislike. Frankly, we dislike to obtain materials that way, because we do not believe that the Government is getting the substantial return that the Government should get if those materials were properly channeled through industry, through the people who are doing it now, and have been used to doing that sort of job for a profit all of these years.

And now we feel that in the interest of the Government that material would bring a considerably better return if it should be so channeled, rather than through these big sales.

We do it; we do it because we have to.

Mr. HOLIFIELD. You are not advocating its going back to the manufacturer, but you are advocating that it go to a distributor who is experienced in the field of merchandising?

Mr. CAREY. That is right.

I heard the testimony of the gentleman from the Navy where they had had $12 million worth of this material. They had bid sales. In one instance, they had 20 or 30 of these announcements that went out and they received one bid. On another occasion they received no bid. On another one they received one bid.

You cannot sell that material that way. You have to have_men calling day after day, consulting with these people who need the material. You have to give them the benefit of your advice. You have to give them the benefit of the adaptability of the material and things like that. You cannot just sit back and write a letter or write an announcement and that sort of thing and sell it.

Mr. HOLIFIELD. Is it not true that the Navy in that type of disposal is using exactly the type of disposal that the War Assets Administration used in making a list of material and asking for people to come in and bid on it?

Mr. CAREY. That is right. Of course, the War Assets Administration had a dual method of disposal. One was by bid sales of that nature on which the recovery was little or nothing, as the Navy has said, 112 percent of Government cost. And, on the other hand, they did dispose of materials through an agency plan.

Mr. HOLIFIELD. The aircraft agency?

Mr. CAREY. That is right. An aircraft-distributor plan. However, it had many weaknesses.

This plan now, if properly administered, should prove to be a plan that has taken advantage of all of those mistakes that were made in that period.

As Mr. Priest said, one of the main points that should be stressed is to have distributors who are reputable, people who are reputably recognized in the business, and people who are not junk dealers and that sort of thing.

Then you will get the proper return. Not only that, but you will get the proper sales effort in that field.

Mr. HOLIFIELD. How would you suggest that this material be made available to qualified distributors-on the basis of a consignment with title remaining in the Government, accountability to the Government made on much the same basis as the previous aircraft-agency contracts were?

Mr. CAREY. I think that the Government should retain title to the material. It belongs to the Government. I think they should retain title.

I notice in this plan-that is, the former plan-that distributors would be consulted as to what of the material they would like. That is just one point there.

I think that the distributors would be very pleased to offer their facilities for all of the material and let them screen it for quality control and that sort of thing.

My thought is that you have a big problem; you have all of this material; that, while the baby is young, the baby is growing very, very fast. And, while you have all of that material, if the distributors are going to just select what they would like out of it, you will still have a problem. You will have a problem with the remainder, the rest of it. I think it would be much better for the distributors in a class to take components, for instance, that they would accept, and have them screen them and list them, identify them, all of these things that are necessary, prepare them for storage, and that sort of thing-all of the material, not just the residue, or leave the Government with the residue, because I think that is very important, because you want to dispose of all of this material. And I think in that way you will get a more complete coverage there.

Mr. HOLIFIELD. Would you suggest breaking the materials down into classifications such as Mr. Priest suggested, consisting of five or six or seven classifications?

Mr. CAREY. I think that they should be broken down to the point that they are broken down in the plan, at least, with raw materials and hardware and bearings and materials of that nature."

The components can consist of propeller parts, propellers, landing gears, gear parts, and that sort of thing.

Components is a pretty general classification, but there are people who have been in this business who are used to handling that general group of components.

Mr. HOLIFIELD. For instance, there are specialists in bearings and in propellers?

Mr. CAREY. That is right.

Mr. HOLIFIELD. And in engines?

Mr. CAREY. Yes. Some distributors are qualified to handle all of the components generally; but, when it comes to bearings and hardware, that is rather specialized.

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