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Mr. WATERS. The biggest part of FRELOC were jeeps. We earmarked the jeeps that were available to Vietnam.

Mr. COPENHAVER. After you have a program for rehabilitation of equipment, this is then shipped to various countries for your on-going programs. Do you have any problems with regard to spare parts thereafter for the maintenance of this equipment? How do you go about obtaining spare parts for this equipment ?

Mr. WATERS. Spare parts has always been a problem, not only for excess property, but for all equipment provided in developing areas of the world. There is too little attention paid by people acquiring equipment in developing countries to this question of maintenance and part support.

So we are aware of and constantly are trying to tighten our regulations procedures, whether for new procurement or excess property which would require that parts are included in the original order.

We do have, however, people in the excess property regional offices who are under instructions to take parts support into account in approving transfer of equipment. We have special procedures in trying to encourage parts support. We notify the original manufacturer of the equipment when equipment is being introduced into a new area in the hope that they can establish parts support themselves.

We do require our missions in the field, and this is particularly true in the Latin American area. They have set up a special procedure asking for excess property to be used in a program to set aside as funds to buy new parts to support the equipment. So, we are constantly concerned with this parts problem in trying to keep the equipment from not being fully utilized because of lack of parts. Whenever we find that a line of equipment or a type of equipment or parts are not available from the original manufacturer, we just discontinue using that equipment.

Mr. COPENHAVER. Have you found a situation existing whereby the military will declare excess pieces of equipment, and yet have in their depots, perhaps, excess quantities of spare parts for the equipment which they have not declared excess? And if so, do you seek to get the military to declare that excess, also ? Or what do you proceed on?

Mr. WATERS. We go after parts as well as equipment, and it all depends. If the military is excessing out a certain line, if the excess is a result of phasing out a certain line of a year's model, that sometimes happens, then, we have more success in getting the old parts as well.

If it is individual pieces of equipment because of condition, but they are still making parts support for that line of equipment, they have use for these parts, we either have to turn to the manufacturer for parts, or turn to cannibalization of other pieces of equipment for parts, or just try to buy parts supports in the open market.

Mr. COPENHAVER. Finally, in regard to a question that Mr. Romney explored with you, do you have—do you maintain any inventory list of property which you have acquired through the excess property program stored at marshaling sites or other locations where you store equipment having been repaired which would show how long you have had this in inventory? For example, perhaps a crane which you have had in inventory for a year or 2 or 3 years which was either picked up by a want list?

Mr. WATERS. Yes. The turnover is rather rapid. We do keep the individual cards on the equipment. I think we could provide you with the average time held and the turnover of these items.

Mr. COPENHAVER. If in going through these lists you were to discover that you had a crane, for example, which you had in inventory for 2 or 3 years and you decided you probably would not have a want list requested for that piece of equipment, what would you do with it?

Mr. Waters. We would turn it back to the military. In other words, if we didn't have use for it, we would turn it back to the military. Then, it would be their determination, whether they declared it surplus or used it in some other activity. But we do—we would not hold this unduly.

In the first place, Mr. Woll is a pretty good businessman operating this program. Every time we hold equipment very long without having use for it, it ups our cost because we are paying for the space we rent for these marshaling sites. We want to keep the equipment moving. So, we find that when we have dead items that are not being moved, we have to write it off as a bad investment and turn it back to the military. This results in our being rather careful in our screening to make sure we have items we can use.

Mr. COPENHAVER. Has the military obtained any large amount of equipment from AID in the last year or two which they had formerly declared excess?

Mr. WATERS. They have required some back from us when they have discovered a particular need for something we had. I don't know the quantity of that. Mr. Woll could probably give us more information.

Mr. COPENHAVER. If you could supply it.
(Subsequently, AID provided the following information :)

SECTION 608 MATERIAL TO DOD

One-half fiscal year 1967. Advance domestic $16, 236 | Advance foreign

$467, 839 Defense Construction Supply

Department of Navy, 2 each Center, Columbus, Ohio

lox plants, total acquisition (electric motors) 14, 160 cost

462, 830 Defense General Supply Cen

SACASC-2, Texas acquisition ter, Richmond, Va. ($880,

cost

5, 009 pry bars; $1,196, cot adapters)

2, 076 No activity for fiscal year 1966 and fiscal year 1963.

Mr. WATERS. If I may add one comment to this. On the domestic side of this, if we had property which did not move which we found we did not have a need for that we anticipated we might have, we would return it to GSA. The GSA is our transfer point in the United States, back to the GSA. If the GSA found no other governmental user, it would be declared excess to our needs.

Mr. COPENHAVER. Thank you.
Mrs. HECKLER. I have a few questions.

I first of all wondered what type of facilities you have for warehousing, and how do you arrange this? Do you pay for the warehousing of these items!

Mr. WATERS. It is primarily open storage so far as the marshaling sites are concerned. Particularly, we have a fast turnover. We have some closed warehousing space for small items. But for construction equipment and things of that kind, it is primarily open storage. It is space we are renting in most instances.

Mrs. HECKLER. In other words, you just don't keep this material at the military site free of charge? It is necessary to separate it!

Mr. WATERS. That is right. It is moved out.

In looking for a rehab center, we have to look at a place where we can get rehab facilities and potential storage space and shipping movements in all one locality so we don't have a lot of movement going back and forth.

Mrs. HECKLER. I am interested in knowing a little more about your pricing structure. When you acquire items, obviously in certain cases you have to spend a certain amount to rehabilitate these same items. How do you finally arrive at a price or value?

Mr. WATERS. We went through great struggles on this in trying to set up a program to arrive at a fair basis. We discussed individually priced items, but we arrived at a figure of 15 percent of the original acquisition cost. So, when we offer property to our missions in support of a program or to volunteer agencies, we are offering it at 15 percent of the original acquisition value. That means that we have to handle our cost, rehab within that 15 percent, to preserve the integrity of our revolving fund. It doesn't mean that every item is repaired within that 15 percent. Some items go up, and some items we do better on, and are less. But we have to maintain that average to come out.

That is also a strong factor on reenforcing the careful selection of equipment. If you were having an open-end repair job, you might have selectors go out and find almost any piece of equipment and finally put more in the rehabbing than the equipment would be worth.

Then, you would have a real question in the mind of user as to whether to obtain used equipment in excess or whether to buy new equipment. So, we found in a practical way, 15 percent has worked out pretty well with our customers. And we have been able to do a good breakeven job and pick up more of the administrative cost of the program.

Mrs. HECKLER. Do you have a special group of individuals who have a responsibility for setting these prices or overseeing them?

Mr. WATERS. We run this price worldwide at 15 percent. We do a very careful review and keep monthly reports of our financial transactions that we relate to revolved funds.

If we make a decision to change, it would be a decision probably worldwide. We do feel that the uniformity of price offering so that the person can look at the acquisition value of the equipment and know what he can get it for is better than trying to have an individual price for each item.

Mrs. HECKLER. Well then, does your list state the acquisition value?
Mr. WATERS. That is right.
Mrs. HECKLER. So, this is immediately obvious to any purchaser?
Mr. WATERS. Yes.

Mrs. HECKLER. I have just one final question, Mr. Chairman. Obviously from the statement, the advance acquisition program seems to be the whole strength of the physical integrity of your program.

Mr. WATERS. Yes. For example, this year, out of some $31 million property moved in this advance acquisition program, we in effect show a profit of about $71,000. Well, that is trimming it fairly close. But we feel that we are able to break even. We are not trying to make money on the program. We are trying to do the best job we can do in trying to hold it at a break-even point. There will be little dips and little gains. But we are constantly watching the program to see if we can give an effective job within a given price range.

Mrs. HECKLER. You have discussed a few of your onsite screening processes, the excess property utilization officers and so forth. But in relationship to Vietnam, you talk about a special priority or screening procedure. Tell us something about that.

Mr. WATERS. Before we submit the property we have picked up to other missions in the field, before it goes in a general catalog, there is the advance notice of this to Vietnam. They have 1 month to decide whether they want that equipment. They have first crack on any of this equipment. We felt in view of the Government's general priority for meeting our obligations in Vietnam, we thought this was a correct way to proceed with this. However, if they don't ask for it within a month, then, it becomes available to circulate to all of our other missions.

Mrs. HECKLER. This means that they get the list a month early? Mr. WATERS. Yes.

Mrs. HECKLER. You talked about $14 million in 1967 for Vietnam. And you

said in relation to another question this is mainly for jeeps. Fourteen million dollars worth of jeeps ?

Mr. Woll. $14 million is the total equipment, and a good part came from the Japan center. Out of France in closing out FRELOC was primarily jeeps.

Mrs. HECKLER. What about the rest ?

Mr. WATERS. It is a pretty broad range of items. It is probably the broadest range of any one place to which we had programs: vocational training equipment, medical equipment, refugee equipment. It is a pretty broad range.

Mrs. HECKLER. Let me ask you this: Why couldn't you use other property than jeeps from FRÈLOC?

Mr. WATERS. We have used others. The majority that came out of there--probably because the jeeps weren't readily available in the past. When they saw the jeeps, they claimed the jeeps. They have a real need for jeeps.

Mrs. HECKLER. That is all.

Mr. MONOGAN. Is it now expected that there will be other substantial excess property generated in Europe?

Mr. WATERS. We think so. We have to follow military development.

Mr. MONAGAN. Even though it may have been moved from France to Germany without a declaration, there may still be other declarations of excess?

Mr. WATERs. And other changes are going on continually that do generate this.

Mr. MONAGAN. There has been an increase as you have indicated in both Europe and in Asia in the declaration of excess. I assume that this is due first of all to the movement in France; and then secondly to the military activity in Southeast Asia; is that right?

Mr. WATERS. That is right.

Mr. MONAGAN. So, in the first case, after a period of time, the volume would tend to go down, and in the latter we hope with the reduction of military activity?

Mr. WATERS. I feel, Mr. Chairman, on a continuing nature, we would probably have a higher portion of our program overseas than domestic because we are now geared to have it.

One factor that I am pleased about in this program is the feeling that we made good in our intentions we expressed earlier to this committee and other committees to try to develop a program that would not interfere with the domestic donable program. When we started this, most of it was called for to be out of the domestic programs in the United States. We have got this new machinery to work overseas. As you see, a great percentage of our program is now coming from overseas sources. That lessens the pressure on equipment coming out of the United States.

Mr. MONAGAN. Is it true, also, without going too greatly into detail, that most of the excess that is generated in Southeast Asia is used in that area?

Mr. WATERS. Yes, I think that is true. Occasionally a particular item shows up that is needed someplace else.

Mr. MONAGAN. And is it moved from South Vietnam to Japan, and then back to South Vietnan, for example?

Mr. WATERS. I am told that there are some instances. But I think it is rather small. I think in that case I would anticipate some day a rather substantial program in South Vietnam when and if peaceful conditions are restored in the country. But as of this time, it is making poor use of the equipment in the country. There is very little of it moved from there into Japan.

Mr. Monagan. Where does the Japanese center get its equipment?

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