Mr. CHURCH. The question is: Does that provision-and I don't even know the answer; maybe you can answer it-provide for materials which are not in excess; in other words, could we dispose of materials which are not in excess of our needs, Mr. Chairman, through that provision?

Senator HART. To a foreign interest?

Mr. CHURCH. To a foreign interest, yes. And I think that was our

concern.

Senator HART. Yes, that is a separate concern and we would want to take a look at the preparedness proposal. Your objection on page 5 relating to the authority of the President to release stockpiled materials for a natural disaster is noted, though I am not at all sure that the existing statute which says materials may be released for purposes of the common defense, would authorize use of stockpiled materials for a natural disaster.

To your knowledge has this ever been done before; that is to say, release of stockpiled materials as the result of a natural disaster? Mr. CHURCH. Not to our knowledge.

Senator HART. Would you tell the committee what formal mechanisms exist for a Department of Defense and GSA coordination of the stockpile and how many people are involved and how it works? Mr. CHURCH. I would like to ask my expert witness on that subject to respond to that.

Mr. DONNELLY. Mr. Chairman, we do have an interagency committee that is involved with the annual materials' plan. It is a committee that is chaired by the Federal Preparedness Agency. The Department of Defense provides representation to that committee. I am a member. There are two other people who also get involved from our Department, depending on what specific areas are being discussed. It is a formal mechanism. We would like to see the mechanism move forward at least through a trial period to see how well it works, Mr. Chairman, perhaps over the next year or two.

Senator HART. How do you determine for a specific commodity how much of that commodity will be needed for defense purposes for the stockpile?

Mr. DONNELLY. Mr. Chairman, the process for determining stockpile objectives could probably be better addressed by the Federal Preparedness Agency, and I am sure perhaps they will. However, the Department of Defense does provide information to the Federal Preparedness Agency as to what our budget would look like during a wartime scenario. That budget is then combined with other inputs from other departments to the Federal Preparedness Agency, and ultimately through an input, output model results in the establishment of stockpile goals.

Senator HART. It would be helpful for us if you would expand on that in some detail for the record, giving detailed calculations or assumptions you use-particularly for tin and copper and silver. Mr. DONNELLY. We would be pleased to do that, sir. [The information follows:]

STOCKPILE LEGISLATION

In the stockpile planning process the Department of Defense does not provide data to the Federal Preparedness Agency on individual commodities such as tin, copper, or silver. The DOD furnishes FPA estimates of budget projections for 3 years of a major war. The expenditure patterns are segregated into the following budget categories:

Key assumptions which are applied to the calculation process include: 1. Existence of a declared national emergency.

2. Authorization exists for increased application of certain national defense related statutes such as the expansion of production capacity authorities of the Defense Production Act.

3. DOD has top priority for industrial capacity and required raw materials. 4. The Draft will be reinstituted if necessary to man additional weapons and equipment.

The FPA modeling techniques for stockpiling calculations distribute DOD stipulated expenditures among 109 industry sectors of an input-output table. These demands are added for each industry to give the total direct defense requirements for components, partially finished goods, raw materials and services required to produce the final product through the whole production chain. The DOD requirements are then added to essential civil wartime needs. In the case of raw materials, where wartime demand exceeds estimated wartime supply an inventory objective or "goal" is established.

Senator HART. Now, I think we will have some additional questions perhaps in an executive session in a few minutes after we hear from Mr. Mitchell. So if you would remain available we would appreciate it. I would like to ask Mr. Joseph Mitchell, Director, Federal Preparedness Agency, General Services Administration, to come forward as well as Mr. Ronald Royal, Assistant Director for Civil Crisis Preparedness, Federal Preparedness Agency.

Would you like to introduce those people accompanying you? We would appreciate it.

STATEMENT OF JOSEPH A. MITCHELL, DIRECTOR, FEDERAL PREPAREDNESS AGENCY, GENERAL SERVICES ADMINISTRATION, AND RONALD ROYAL, ASSISTANT DIRECTOR FOR CIVIL CRISIS PREPAREDNESS, FEDERAL PREPAREDNESS AGENCY, GSA, ACCOMPANIED BY EDWARD ZABROWSKI, CHIEF, STOCKPILE POLICY AND OBJECTIVES DIVISION; AND PAUL KRUEGER; AND SEBASTIAN J. GIONFRIDDO

Mr. MITCHELL. Thank you, Mr. Chairman. To my left is Mr. Royal who is the Assistant Director for Civil Crisis Preparedness; and Mr.

Zabrowski under whose responsibility comes the stockpile policy, who is Chief of the Stockpile Policy and Objective Division; and Mr. Krueger on his left and Mr. Gionfriddo. Senator Hart, I want to thank you for the opportunity to appear today to testify concerning the strategic and critical materials stockpile.

The purpose of my testimony today is to discuss legislation affecting stockpile policy. Bills now pending before the Senate which would alter the statute forming the basis of the stockpile program include S. 1198, S. 1810, and S. 2575.

I would like to preface my specific comments on these bills with the following observations. First, we are in agreement with the intent of these bills to strengthen the contribution of the strategic stockpile to our national security.

Second, we are most grateful for the advice, cooperation, and help provided by Senator Hart, the Senate Armed Services Committee staff, and by Representative Charles Bennett, who for many years has demonstrated leadership on stockpile issues.

Third, the administration has no preference between amendments to the existing act or a completely new act. However, we have developed suggested changes to the language of S. 2575 which we feel are necessary. These suggested changes preserve important existing authorities, or provide the flexibility needed to insure an efficient stockpile program. We have consulted with yourself and the committee staff concerning several of these technical issues.

While I or members of the staff with me today are prepared to discuss each of these changes in detail at the conclusion of my statement, let me first highlight the main points.

First, and perhaps most importantly, S. 1198, S. 1810, and S. 2575 all propose the establishment of a stockpile fund. Basically, this fund would consist of the receipts from sales from the stockpile and could only be appropriated for stockpile-related activities such as acquisition, transportation, refining, processing, or rotation.

The administration suggests this language be revised to provide for the inclusion of receipts in the fund during the fiscal year received and for two succeeding fiscal years. Subject to this revision, the administration supports this provision. We believe this language change would be beneficial for two reasons:

One, it is a very simple and straightforward way to account for the fund; and

Two, it does address the legitimate concern of the Congress to assure moneys for stockpile acquisitions without segregating and reserving such moneys in perpetuity.

Second, all three bills contain provisions regarding the scope of the barter program. The administration supports the objective of these bills, but again suggests revised language to simplify paperwork and reporting requirements.

One other point worth touching on is the fact that S. 1810 contains provisions to reduce the variability of stockpile goals. We agree that goals not be changed unless such a change involves a variation of more than 10 percent. We have testified previously as to our opposition to S. 1810 as it presently stands and we remain so opposed for the same

reasons.

As a vehicle for suggesting these and other changes to Congress, we have prepared a modified draft of S. 2575 which we earnestly request this subcommittee and the Congress to consider.

Senator HART. We have that draft and will insert that in the record at this point so it will appear for the record. [The document follows:]

[ATTACHMENT 1]

A DRAFT BILL To amend and revise the Strategic and Critical Material Stock Piling Act

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Strategic and Critical Materials Stock Piling Act is amended to read as follows:

"That this Act may be cited as the 'National Defense Stockpile Act'.

"POLICY AND PURPOSE

"Sec. 2. It is the policy of the Congress and the purpose and intent of this Act to provide for the acquisition and retention of stocks of certain strategic and critical materials in order to preclude, whenever possible, a dangerous and costly dependence by the United States upon foreign sources for supplies of such materials in times of national emergency and to provide for the timely disposal of such materials that are excess to the needs of this Act.

"DEFINITIONS

"Sec. 3. For the purpose of this Act

"(a) The term 'strategic and critical materials' means those materials which are not found or produced in the United States in sufficient quantity to supply the military, industrial, and essential civilian needs of the United States during a national emergency.

"(b) The term 'national emergency' means a general declaration of emergency made by the President during which the national security of the United States is jeopardized by the threat or action of a foreign power.

"MATERIALS TO BE ACQUIRED: PRESIDENTIAL AUTHORITY AND GUIDELINES "Sec. 4. (a) Materials acquired and stored under this Act shall be collectively known as the 'National Defense Stockpile'.

"(b) The President shall determine from time to time which materials are strategic and critical materials for the purposes of this Act and shall determine from time to time the quantity, quality, and form in which such materials shall be acquired and stored.

"(c) The President shall make the determinations required to be made under subsection (b) of this section on the basis of the following principles:

"(1) that the purpose of the National Defense Stockpile is to serve the interest of national security only and is not to be used for economic or budgetary purposes;

"(2) that the quantities of materials to be stockpiled should be sufficient to sustain the United States during a national emergency extending up to three years; and

"(3) that a determination of the quantity of a material to be stockpiled may be revised from time to time pursuant to subsection (b) provided that: (A) the revised determination differs from the previous determination, up or down, by 10 percent or more; or (B) the Armed Services Committee of each House of Congress is notified in writing of the reason for the proposed revision thirty days in advance of such revision.

"CONSTITUTING THE NATIONAL DEFENSE STOCKPILE

"Sec. 5. (a) On and after October 1, 1978, the National Defense Stockpile shall consist of—

"(1) those materials acquired under this Act and contained in the so-called national stockpile on September 30, 1978;

"(2) those materials contained in the supplemental stockpile established by section 104(b) of the Agricultural Trade Development and Assistance Act of 1954 (68 Stat. 456, as amended by 73 Stat. 607);

"(3) those materials which the President determines to be necessary and appropriate for the National Defense Stockpile acquired under the provisions of the Defense Production Act of 1950 and contained in the so-called Defense Production Inventory on September 30, 1978;

"(4) those materials, determined by the President to be strategic and critical under section 4(b), acquired on or after such date pursuant to sec. 663 of the Foreign Assistance Act of 1961, as amended (22 USC 2423); and

"(5) those materials acquired under this Act on and after such date. "(b) Any materials that is (1) under the control of any department or any agency of the United States, (2) determined by such department or agency to be excess to its needs and responsibilities, and (3) required for the National Defense Stockpile, shall be transferred to the National Defense Stockpile without reimbursement to such agency. All costs required to effect such transfer may be paid or reimbursed from monies available under this Act.

"PROCUREMENT AND DISPOSAL AUTHORITY

"Sec. 6. Except for disposals and procurements made under the authority of sections 7(a)(3), (4) and (5) and 8(a), no procurement of any material may be made for, and no disposal of any material may be made from, the National Defense Stockpile unless such procurement or disposal, including in the case of disposal the quantity, has been specifically authorized by law.

"STOCKPILE MANAGEMENT

"Sec. 7(a) The Administrator of General Services (hereinafter referred to as the 'Administrator') shall have overall management responsibility for the National Defense Stockpile. In carrying out his responsibility under this Act, the Administrator shall

"(1) acquire the necessary materials for the National Defense Stockpile; "(2) provide for the proper storage, security, and maintenance of materials acquired for the National Defense Stockpile;

"(3) provide for the refining or processing of any material acquired for the National Defense Stockpile when necessary to convert such material into the form best suitable for storage and subsequent use, sale, or other disposition; "(4) provide for the rotation of any strategic and critical material in the National Defense Stockpile where necessary to prevent deterioration by replacement of such material with an equivalent quantity of substantially the same material;

"(5) provide for the disposal of materials in the National Defense Stockpile that he determines to be obsolete. For the purposes of this subparagraph a determination is by reason of obsolescence if such determination is on account of (1) deterioration or (2) development or discovery of a new or better material or materials; and

"(6) dispose in a timely manner of such quantities of strategic and critical materials in the National Defense Stockpile as are determined to be excess to the national emergency needs of the United States.

"(b) (1) Except as otherwise provided herein, all purchases and contracts for materials shall be made by public advertising, except that such purchases and contracts may be negotiated by the Administrator without advertising if— "(A) if determined to be necessary in the public interest during the period of a national emergency declared by the President or by the Congress;

"(B) if the public exigency will not admit of the delay incident to advertising; "(C) if the material is to be procured outside the limits of the United States and its possessions:

"(D) for materials for which it is impracticable to secure competition: "(E) for materials as to which the Administrator determines are such that the purchase or contract should not be publicly disclosed; and

"(F) for material as to which the Administrator determines that bid prices after advertising therefor are not reasonable (either as to all or as to some of the requirements) or have not been independently arrived at in open competition: Provided, that no negotiated purchase or contract may be entered into under this paragraph after the rejection of all or some of the bids received unless (i) noti