Evaluation of the Donable Surplus Property Program

It has been several years since this subcommittee has held comprehensive hearings on the effectiveness of the donable surplus property program. I am certain that it is generally known that under that program the Federal Government donates property which it no longer needs to qualified education, health, and civil defense agencies when such property is considered to be useful and needed for such purposes by the Department of Health, Education, and Welfare.

By way of background it should be stated that the Constitution itself vests the Congress with the authority to make all needful rules and regulations respecting the disposal of the Government's property. The theory behind this is that property is procured with the taxpayers' money, thus it belongs to all the people and the Federal agencies are merely custodians and users of property-never the owners. From the congressional point of view, therefore, a relatively simple standard governs; namely, that the long-term public interest should be served in disposing of surplus property. In other words, what is the best possible method of disposal in the public interest?

Through the years the Congress has recognized that the public benefit will best be served by donating property for public purposes― principally educational. From 1919 to the present time there have been 18 enactments for this purpose. I will place the complete list of these statutes in the record, without objection, at this point. (The list of statutes follows:)

LAWS RELATING TO DONABLE SURPLUS PROPERTY

1. Public Law 91, 66th Congress (H.R. 3143), approved November 19, 1919. 2. Public Law 615, 69th Congress (H.R. 12212), approved February 14, 1927. 3. Public Law 524, 70th Congress (S. 1822), approved May 26, 1928. 4. Public Law 249, 71st Congress (S. 3185), approved May 23, 1930. 5. Public Law 455, 74th Congress (H.R. 1381), approved February 27, 1936. 6. Public Law 460, 74th Congress (H.R. 8024), approved February 28, 1936.

7. Public Law 849, 76th Congress (H.R. 10412), approved October 14, 1940. 8. Public Law 292, 78th Congress (H.R. 2618), approved April 22, 1944. 9. Public Law 457, 78th Congress (H.R. 5125), approved October 3, 1944. 10. Public Law 697, 79th Congress (S. 2085), approved August 8, 1946. 11. Public Law 883, 80th Congress (S. 2554), approved July 2, 1948. 12. Public Law 889, 80th Congress (H.R. 5882), approved July 2, 1948. 13. Public Law 152, 81st Congress (H.R. 4754), approved June 30, 1949. 14. Public Law 698, 81st Congress (H.R. 6104), approved August 16, 1950. 15. Public Law 754, 81st Congress (S. 3959), approved September 5, 1950. 16. Public Law 61, 84th Congress (H.R. 3322), approved June 3, 1955. 17. Public Law 200, 84th Congress (S. 614), approved August 1, 1955. 18. Public Law 655, 84th Congress (H.R. 7227), approved July 3, 1956. Mr. MONAGAN. Of these statutes, Public Law 457, 78th Congress, known as the Surplus Property Act of 1944, was very important and recognized the needs for education and other public activities. This act was superseded by Public Law 152 of the 81st Congress, known as the Federal Property and Administrative Services Act, and provided originally for the donation of personal property only to educational institutions.

The next year Public Law 754 was approved permitting donations to health institutions. For several years the program proceeded quite satisfactorily but a major complication arose in 1954 when the Defense Department, under separate legislation, incorporated billions of dollars' worth of what was actually surplus and donable property into so-called stock funds. The donable program was seriously threatened and the public became thoroughly concerned. As a result, Speaker McCormack, who was then chairman of this subcommittee, held hearings on a bill which became Public Law 84-61 and which provided that surplus property might be donated without cost (except for costs of care and handling) for use in any State for purposes of education, public health, or for research, or any such purpose whether or not the property was capitalized in a working capital or similar fund.

This enactment reaffirmed the congressional position that the public interest is better served by donating surplus personal property when useful and needed for specified purposes rather than selling it for a few cents on the dollar.

During the same Congress, Public Law 655 was enacted to provide for donations for civil defense purposes.

Institutions in every State in the Union have benefited from the program and witnesses from the Department of Health, Education, and Welfare have been requested to place suitable statistics, by States, in the record of this hearing (pp. 9, 108).

Since the program is large and involves the cooperative efforts of 50 States, several executive agencies and tens of thousands of universities, colleges, schools, hospitals and civil defense units, it is to be expected that problems will arise from time to time. In fact, many problems have arisen during the past 7 years and all parties concerned have worked to resolve them in good faith. All parties are to be highly complimented for their necessary and genuine cooperation.

The hearings today are intended to evaluate the effectiveness of the donable program. Witnesses from the responsible Federal and State agencies and from donee institutions have been invited to express their views on the program and how it might be improved.

Gentlemen, the first witness is the Honorable Ivan A. Nestingen, Under Secretary, Department of Health, Education, and Welfare.

Mr. Secretary, we will be glad to hear from you as spokesman for the agency which is primarily concerned with administering the

program.

STATEMENT OF HON. IVAN A. NESTINGEN, UNDER SECRETARY, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE; ACCOMPANIED BY J. WENDELL GRAY, CHIEF, SURPLUS PROPERTY UTILIZATION DIVISION; AND MANUEL B. HILLER,

ASSISTANT GENERAL COUNSEL

Mr. NESTINGEN. Thank you, Mr. Chairman and members of the committee.

I might say I appreciate the opportunity of appearing before the committee to comment on a program which is a very worthwhile program and which has proved its worth many times over during the years since its enactment.

The benefits accruing to educational and health institutions across the country have been manyfold and we feel very strongly that the program has been most worthwhile.

I have information available, as far as statistical information is concerned, as to the amount of property that has been disposed of from 1955 to 1961, roughly. In addition to that, we have some suggestions with respect to pending proposals as well as some recommendations in our own right.

By way of observation, I have a written statement I would like to read at this time, if the chairman wishes.

Mr. MONAGAN. We will be glad to have you do that.

BACKGROUND AND STATUS

Mr. NESTINGEN. The surplus property donation program is carried out under authority of the Federal Property and Administrative Services Act of 1949, as amended. It was established under a basic premise that donations of usable Federal surplus property to health, education, and civil defense organizations would result in greater benefit to the public than would the sale of such property for a small cash return. A collateral purpose was to reduce the unfavorable economic impact of large-scale disposals by sale.

As a first step in evaluating this program, it is important to note the results that have been achieved. Through June 30, 1960, personal property allocations and real property transfers have totaled $2,004,362,000 in terms of initial acquisition cost. Personal property accounted for $1,867,673,000 of the total and real property amounted to $136,689,000.

The full impact of the program cannot be assessed in dollar values. It is significant to note that real property transfers have been made to more than 2,800 institutions. They have included more than 8,000 buildings and 21,000 acres of land.

In the health field, facilities have been provided for general hospitals, tuberculosis hospitals, mental hospitals, clinics, rehabilitation centers, nursing homes, research centers, and public health administration facilities.

More than 75 percent of the real property transfers have been to educational institutions. Utilization ranges from a one-room school

to a complete college campus. Facilities have been provided for classrooms, dormitories, gymnasiums, libraries, laboratories, shops, and maintenance activities. In many instances, because of spiraling enrollments, facilities would not have been available when needed, except for this source of supply. In all instances, the use of surplus land and buildings substantially reduces educational expenditures. Surplus personal property is providing an invaluable source of supplies and equipment to both the health and educational institutions. Substantial quantities of common-use maintenance and operational items continue to be available. Electrical equipment, plumbing supplies, building hardware, building materials, tools, kitchen equipment, vehicles, furniture, and office equipment and supplies are typical of the items distributed.

Over a period of years, the volume of surplus available has increased substantially. Allocations of personal property in fiscal year 1953 amounted to $63 million and in fiscal year 1960 had increased to $400 million. Since the peak year of 1960, there has been a decrease in the amount of property donated. Allocations totaled $376 million in fiscal year 1961 and it is estimated they will reach $386 million during the current fiscal year. This reduction has been brought about chiefly by adjustments in military requirements and a substantial increase in the use of excess property by Federal agencies.

Even with the substantial amounts of property which continue to be available, the State Surplus Property Agencies report that they are unable to meet the needs of the eligible institutions. This situation is readily understandable since there are at least 254,000 eligible institutions. This includes 97,500 elementary schools, 26,000 secondary schools, 1,900 institutions of higher education, 6,000 hospitals, and 123,000 civil defense units.

Educational institutions are the largest eligible group, and they are currently receiving about 73 percent of the property. Approximately 16 percent goes to civil defense units, and 11 percent to health facilities.

The available surplus property varies in condition from scrap and salvage to some that is unused. Since the Department of Defense is the source of more than 90 percent of the property, it includes many items of a specialized nature. As a result of these factors, the ability of eligible institutions to use the property is to a great extent dependent upon their ability to recondition and adapt the items to meet their needs. This places a premium on initiative and ingenuity and the institutions which benefit most are those which exert the greatest effort to help themselves.

The unique benefits of this program to the schools and colleges deserve special comment. It provides a substantial source of material useful in the classroom and in the technical and vocational education programs. Machine tools are being distributed at the rate of more than 10,000 a year. Large amounts of electronic and electrical equipment are made available for use in teaching general science, physics, and engineering. College research programs are enhanced by the availability of specialized equipment not readily obtainable from other sources, such as jet engines, radar, sonar, fire-control and navigation equipment, measuring instruments, recording devices, etc.

Much of the material distributed serves a dual purpose. It is repaired, rebuilt, or modified as a part of the training program, and the end item becomes a valuable piece of equipment for continuing

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