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INDEPENDENT OFFICES APPROPRIATIONS FOR 1965
TUESDAY, APRIL 21, 1964
Washington, D.C. The subcommittee met pursuant to recess at 8:35 a.m. in room S-128, U.S. Capitol Building, Hon. Warren G. Magnuson (chairman) presiding.
Present: Senators Magnuson, Saltonstall, and Allott.
GENERAL SERVICES ADMINISTRATION
STATEMENT OF BERNARD L. BOUTIN, ADMINISTRATOR; AC
COMPANIED YB ROBERT T. GRIFFIN, ASSISTANT ADMINISTRATOR; JOE E. MOODY, GENERAL COUNSEL; WILLIAM P. TURPIN, ASSISTANT ADMINISTRATOR FOR FINANCE AND ADMINISTRATION; JESSE M. MERRELL, JR., DIRECTOR, OFFICE OF DATA AND FINANCIAL MANAGEMENT; AND WILLIAM A. BUTTS, DIRECTOR, BUDGET DIVISION-Resumed
FEDERAL SUPPLY SERVICE
STATEMENTS OF C. D. BEAN, COMMISSIONER; JOHN M. McGEE,
DEPUTY COMMISSIONER; LEWIS E. SPANGLER, ASSISTANT COMMISSIONER, OFFICE OF SUPPLY DISTRIBUTION; L. L. DUNKLE, JR., ASSISTANT COMMISSIONER, OFFICE OF PROCUREMENT; AND GEORGE W. RITTER,
RITTER, ASSISTANT COMMISSIONER, OFFICE OF STANDARDS AND QUALITY CONTROLResumed
FEDERAL SUPPLY SERVICE
OPERATING EXPENSES, FISCAL YEAR 1965 Senator MAGNUSON. The committee will come to order.
We have today for the record General Services Administration, the Administrator and other members of the staff, and yesterday we discussed the general field of buildings, operating expenses, construction, and the building program and expenses of procurement facilities.
The next item on the sheet is the operating expenses, Federal Supply Service, for which last year the appropriations were $46 million, The budget this year is $54,800,000, or a plus $8,800,000. Maybe you would like to explain that.
INCREASE REQUESTED IN 1965
Mr. BOUTIN. Actually, Mr. Chairman, the net increase that we are talking about is $5,805,000. We had funds in the amount of $2,380,000 transferred to us at the time the agreements were consummated with the Department of Defense for GSA management and supply of hand tools and paint, Government-wide. Part of that went to Federal Supply, part of it was allocated to the Transportation and Communications Service, and some of it, of course, went into the A.O. Fund.
Actually we had in this breakdown-
Mr. Boutin. Part 2, page 3, will give you the breakdown of the differences between last year and this year. You will notice that there is a net transfer from Defense of $2,134,000 to Federal Supply Service and then $146,000 from Navy.
DEVELOPING NATIONAL SUPPLY SERVICE
Actually, what has happened in Federal Supply is something that I am sure that this committee will applaud as we have, is the beginning of the development of a national supply system that will remove all of the duplication and overlapping between the civil agencies and the Department of Defense, one of the most significant breakthroughs that I think we have ever seen in this whole field going back to 1912 when the initial start was made on trying to bring some commonsense and efficiencies, as well as economies, into supply and procurement.
We have been negotiating with Defense since the takeover of handtool and paint which, by the way, resulted in a net reduction of employment Government-wide of 200 positions. Defense was using 700 to carry out their part of this responsibility. In taking it over we are doing it with 500 with a very, very substantial reduction in the inventory requirement to support this activity.
In the meantime we are talking about Defense, with FAA, with VA, with Post Office, with NASA, to bring to final fruition the entire goal here of removing from the Government scene these small duplicate supply systems and to incorporate them into either GSA or DSA.
The net outcome of this is going to be realized within the next 12 months, it is my belief.
One of the big problems yet to be fully resolved is whether or not Defense should serve the entire Government, both military and civilian, where they have a peculiar and unusual interest and capability. I am talking particularly about subsistence, perishable and nonperishable, medical, petroleum, electronics. Since Defense is the big user, there are duplicate supply systems in other agencies that may not be needed.
NEGOTIATIONS WITH FAA ON DEPOTS FAA has closed their Seattle and Honolulu depots. The FAA depot at Oklahoma City no longer stocks GSA items, but relies on GSA to procure and distribute these items. Administrator Halaby has been one of those most cooperative. We are working with NASA now and have a tentative agreement whereby they will depend on GSA and DSA for the items we handle, instead of stocking them themselves.
INCREASE IN VOLUME OF BUSINESS
We are talking about a net increase forecasted for fiscal 1965 in the area of procurement alone from $1,439,300,000 up to substantially in excess of $1,500 million. In our store sales, going from $310 million up to $375 million; a dramatic increase in stores direct delivery and nonstores procurement up to a forecasted $316.7 million, an increase to $371.9 million in stores procurement and utilization of the schedule program up to $890 million, for a total of $1,578,600,000, or an increase over fiscal 1964 of $139.3 million.
REDUCTION IN UNIT COSTS
All through this budget on Federal supply is reflected a reduction in unit cost. Even though we have this dramatic increase in business that has imposed a substantial workload at this time, we are forecasting reduction in unit cost for store sales, in the area of procurement, and Mr. Ritter in his shop has done a tremendously good job in trying to bring some sense and efficiencies into this whole area of quality control.
FEDERAL CATALOG SYSTEM I can also tell the committee that in 1965 at long last we can report that we are going to clean up the Federal catalog system on the civil side of Government. This has been advanced å full year over last year's budget projection. We were forecasting completion by the end of fiscal 1966 but, it will be complete by the end of fiscal 1965.
Senator ALLOTT. What do you mean by that statement, that last statement?
CATALOGING IN CIVILIAN AGENCIES
Mr. Boutin. Well, the big problem up to now, Senator, has been that many of the items carried on the civil side of Government were not cataloged. It was not a uniform system of having these items cataloged, identified, so that we knew precisely if there was duplication of items unnecessarily, where items could be reduced and taken right out of system, and where we had positive identification for procurement as well as distribution purposes, and this has been a long, hard row, and finally we have reached the point where we can say that a year from June 30 we will have the job done.
COOPERATION WITH DEFENSE
Now, this we do in conjunction with Defense. They handle military items. We handle the items for the civil side. And all of these are run through computers for item reduction wherever it is possible and put into the Federal catalog, system. This also is, of course, of immeasurable help to private industry because they can identify precisely what the Government is buying. It is part of the system. “And they can go through our catalogs and decide what items they want to bid on and know that the Federal stock number speaks for the whole Government, that they don't have to go to five or six or a dozen other systems for this information.
Senator AlloTT. I see.
ProCurtemi ENT AND OPERATIONS TOTALS
Senator MAGNUsoN. Well, you have got—of the $54.8 million, is there $30 million included in that for procurement?
Mr. BouTIN. The total for procurement in that, Mr. Chairman, is $10,642.000. . Senator MAGNUsoN. So that will leave you $34 million for operatIng.
BREAKDOWN OF OPERATIONS REQUESTS
Mr. BouTIN. I can give you the breakdown on that. $23,286,000 is for supply distribution. Now, that is essentially the warehousing system. $10,642,000 is for procurement. $7,442,000 is for quality control standards and the development of specifications, and speaking of specifications, we have given this program a shot in the arm because we are trying to get out of name brand or equal. $630,000 is for supply management. Service direction, which is essentially Mr. Bean's office and the o directors offices in each of the regions, $1.3 million. And Mr. Turpin's office, largely in support type activities, our computer operations, legal services, personnel services, training, et cetera, $11,500,000, which is a total of $54,800,000, less the $715,000 reduction submitted by the President on March 9, 1964, for a revised total of $54,085,000.
Senator MAGNUsoN. What I am trying to get at, you have to subtract the $10 million. That is for procurement.
Mr. BouTIN. Yes, sir.
Senator MAGNUsoN. That goes into the revolving fund?
Mr. BouTIN. No. That procurement is actually our cost of personnel and o in making the procurement for $1,578,600,000. This is Mr. Dunkle's operation.
Cost of OPERATIONs CoMPARED To ToTAL PRocuREMENT
Senator MAGNUsoN. What we are trying to get at is, and we have pursued this many times, what is your total buying in this service?
Mr. BouTIN. $1,578,600,000.
Senator MAGNUsoN. $1,578,600,000, and it is costing us $54 million to do this.
Mr. BouTIN. No. It is costing us to do the buying, $10,642,000.
Senator ALLOTT. Costing you what?
Senator MAGNUsoN. It is costing the Government $54 million to run this service.
Mr. BouTIN. The total service.
Senator MAGNUson. Total service, to give back to the Government $1,578,600,000 worth of products.
Mr. BouTIN. That is right.
COMPARISON OF FEDERAL SUPPLY SYSTEM WITH INDUSTRY
Senator MAGNUson. And then what we have always had in the record is how does this percentage of operation compare with a similar percentage of a private concern that was doing this amount of buying? Mr. BouTIN. Well, I perhaps can reduce it in simplest terms to this statement; that this operation of Federal supply saves the Government approximately $300 million in direct net savings because of the