way we buy as against what it would cost agencies to do it themselves if each were buying and warehousing individually, and this is very conservative. Senator ALLOTT. How do you Senator MAGNUSON. Well, I still have not-it is still costing us $54 million to run this service. Mr. BOUTIN. Yes, sir. Senator MAGNUSON. And for that we are getting, for the Government, $1,500 million plus of products. Mr. BOUTIN. That is correct, sir. Senator MAGNUSON. So percentagewise what would that be? Mr. TURPIN. On the total it is-it figures out to $3.22 per hundred. Senator MAGNUSON. Per hundred. Senator ALLOTT. Well, that is 3 percent; 30 percent. Senator MAGNUSON. Three-plus percent. Now, is that comparable to what would happen in other businesses doing this amount of total business? Mr. BOUTIN. This is better than Senator MAGNUSON. This is what we want in the record. Mr. BOUTIN. And it is better, and just to be perfectly candid, because of the volume. This is the big item. Senator MAGNUSON. Now, of course, some of these items can even be reduced from that because part of the $54 million is because you are moving into this field so fast Mr. BOUTIN. That is correct. Senator MAGNUSON (continuing). That you are not in a real static condition where you could figure the cost of operation down to the penny because a lot of it you have to-you are talking about future standards and service direction and all these things, and you are moving all the time. Mr. BOUTIN. Well, there are some things, too, Mr. Chairman, that private industry would not have to contend with; small business set-asides, for example; depressed area awards. And things like that. Senator MAGNUSON. You might consolidate warehouses, and it would take a couple of years the initial cost might be there in this item. In a couple of years you start to show the benefits rather than right away. Mr. BOUTIN. That is correct. Senator MAGNUSON. So we are to understand that it is costing the Government $3.22 per hundred. Mr. BOUTIN. That is correct. Senator MAGNUSON. To buy $100 worth of goods. Mr. BOUTIN. To buy, stock, and distribute it. Senator MAGNUSON. Yes; distribution and everything else. Mr. BOUTIN. Right, also inspection. REVOLVING FUND Senator MAGNUSON. I was going to say, then, how much is in the revolving fund? Mr. BOUTIN. Actually as of right now in the revolving fund, Mr. Chairman, we have $197.7 million of appropriated capital. 31-706-64-pt. 1--17 Senator MAGNUSON. And is that included in any of the items entered in the $54 million? Mr. BOUTIN. No, it is not. Senator MAGNUSON. Are you adding to that, or is that enough? Mr. BOUTIN. No, we are not asking for additional capital. Senator MAGNUSON. We used to have to appropriate to build that up. Now that is starting to take care of itself. Mr. BOUTIN. That is correct, and one of the ways we have been able to do this without asking the Congress for any additional funds is we have gone to the agencies we have served and where we have receivables all the time, we have asked them to give us advances equal to a certain number of days business. Good sense Senator MAGNUSON. In other words, you are not taking a lot of slow paper from them. Mr. BOUTIN. That is correct. Senator MAGNUSON. All right. Mr. BOUTIN. $77.2 million is our estimated advances for fiscal 1965. Senator MAGNUSON. So we are to understand that the revolving fund is now sufficient at least for your projection for next year. Mr. BOUTIN. That is correct. Senator MAGNUSON. So there is no direct appropriation needed to add to that. Mr. BOUTIN. That is correct. SUMMATION OF APPROPRIATIONS Senator MAGNUSON. And all we are talking about in this service is the $54 million which is required to be appropriated this year to make these purchases of $1,500 million-plus. Mr. BOUTIN. That is correct. Senator MAGNUSON. Deliver them, service them, test them, whatever you have to do. Mr. BOUTIN. That is correct. Senator MAGNUSON. And that amounts to $3.22. All right. Senator MAGNUSON. Yes. I am all through. I just wanted to get this-maybe I oversimplified it. PROBLEMS OF PROCUREMENT Senator ALLOTT. Two or three things occurred to me. First of all, I understand how you can save a certain amount of money by collectivizing your catalog and all this sort of thing. Do you not reach a point of no return in your purchases as to how much you can save on your purchases? I am thinking of a common article like, well, the kind of cars you purchase for use throughout the Government. GSA uses them, and the military uses them. Take the standard six-cylinder sedan, Ford or Chevrolet or whatever, Plymouth. Do you reach substantially a point of no return as, for example, the difference between a 500 purchase and a 3,000 purchase? Mr. BOUTIN. I do not think so, Senator. I suppose you couldSenator ALLOTT. I am talking about purchase price alone, you understand. WORK WITH PRIVATE INDUSTRY Mr. BOUTIN. Yes. In certain categories. One of the real attractions to private industry to bid on our requirements in some of these areas, perhaps tires would be a good example-we were talking about this before because we go on a multiple-award basis on tires. We will go out and get bids and then allow all of the manufacturers to meet that low bid, and arrange so they can plan for our requirements, and they are not hit with a big order all at one time. They can plan ahead. The automobile manufacturers plan ahead on our requirements in bidding because we do not require delivery all at one time. We try to take delivery during their slowest time of the year. So it is not just a question of volume buying. The point I am trying to make is to plan the time you are buying and to have that phased into the production of industry. Handtools is a very large item where you have to plan carefully, or the manufacturers just increase the costs to a point with overtime, and so forth, that our costs are increased. REASON FOR LOW BIDDING BY INDUSTRIES Senator ALLOTT. Well, to use your example of tires-what incentive is there for a man to bid low, then, if the bid is going to be split up among all the manufacturers? Mr. BOUTIN. Well, they do bid low. Lloyd, do you want to talk to that? You have more experience than any man in the Government on how this actually works. This is Mr. Dunkle. Mr. DUNKLE. We handle this, as Mr. Boutin stated, on a multipleaward basis, and we negotiate contracts on the basis of getting the best offer and having others meet the offer. The problem here is to make sure this price is a good price. What we now get in the way of price is approximately what the manufacturers of the vehicles pay for tires on new cars. Mr. BOUTIN. Like General Motors with all of their requirements. Mr. DUNKLE. And what we are able to do under these circumstances is to negotiate a favorable price which compares with the price of the original equipment manufacturers and also put at the Government's disposal the complete distribution systems of each of the manufacturers so that the Government does not need to maintain stocks of tires but can get delivery through the local outlet of the manufacturer, whoever it may be, and this gives us complete flexibility and avoids warehousing. AMOUNT OF COMPETITIVE BIDDING Senator ALLOTT. The point I was making, then, is that under this particular system you do not have really a competitive bidding system. Mr. BOUTIN. We do on a great many of our requirements. Some of the items, like tires, it is competitive to the point of negotiating with all of the manufacturers to establish a low plateau and then an opportunity to match by the other manufacturers for the same grade of tire. Senator ALLOTT. Yes, but I am not necessarily critical of it. Senator ALLOTT. I am just trying to get the picture, but you do not have a true competitive bid here. Mr. BOUTIN. Not advertised competitive bids. Senator ALLOTT. In this particular instance. Mr. BOUTIN. As far as being a sealed bid type of offer. Senator ALLOTT. I just wanted to get that thing straightened out in my mind. SURPLUS PERSONAL PROPERTY Now, we constantly read in the various papers of surplus sales, Mr. Boutin, and I can understand it-we have been through the sisal thing and the commodity thing. When I saw a lot of these items advertised, I wondered how the Government ever got them in surplus in the first place. I do not have a specific item in mind because it is just from casual reading over a year or so. What are the amounts of surplus disposal of the Government for, we will say, this last year; the last full year which would be the year of 1963? Mr. BOUTIN. In personal property only? Senator ALLOTT. In personal only, leaving the real estate side out. Mr. BOUTIN. It would amount in acquisition to about $3 billion. Correct, Mr. Greenberg? Mr. GREENBERG. That is a little high, Mr. Boutin. Mr. BOUTIN. Well, I am thinking of including scrap, everything. Mr. GREENBERG. Total Federal Government. Mr. BOUTIN. Total Federal Government. Mr. GREENBERG. About $3 billion. Mr. BOUTIN. About $3 billion. Now, of course, a lot of this is airplanes that are scrapped, and so forth. Mr. GREENBERG. That is right. Mr. BOUTIN. Our part of it alone, more the common-use-type items, would be how much? Mr. GREENBERG. In personal property, about $900 million, in 1963, including utilization, disposal, and rehabilitation. Mr. BOUTIN. About $900 million at acquisition cost. Senator MAGNUSON. You say your part. Could I get this clear? If the Government is disposing of approximately $3 billion a year, your part is about $900 million? Mr. GREENBERG. Approximately. Senator MAGNUSON. Who gets rid of the balance? GSA PROPOSAL FOR SALE SCREENING RESPONSIBILITY Senator MAGNUSON. But there are only two major disposal units of surplus in the Government, Defense and GSA, isn't that correct? Mr. BOUTIN. Correct, Senator, and we hope there is only going to be one. Senator MAGNUSON. I was going to say, you are moving up more in that field, aren't you? Mr. BOUTIN. We have an agreement right now pending before the Bureau of the Budget signed by Defense and GSA as a result of an exhaustive study that I ordered 2 years ago requesting permission from the Executive for us to take over the entire responsibility for screening and utilization of excess and the disposal of surplus property. We are waiting for a decision from the Bureau of the Budget. We can save a substantial amount of money by doing it. I am convinced of it, and so is Defense. The letter to the Bureau was signed by Tom Morris and me. REUTILIZATION BY ASSIGNMENT, 1965 ESTIMATE When someone declares an office full of furniture as excess, we screen it with all other agencies of the Government. The reutilization by reassignment estimated for fiscal 1965 will be what, $575 million? Mr. GREENBERG. $555 million. Mr. BOUTIN. $555 million, which means instead of going out and buying new, it can be obtained by reassignment. This program has changed dramatically. In the last 3 years it has increased tremendously, hasn't it Mr. Greenberg? Mr. GREENBERG. It has increased about $190 million in the last 3 years. REASONS FOR SPECIFIC ITEMS IN SURPLUS Senator ALLOTT. Well, let me ask you this question, Mr. Boutin: How do we happen to see such relatively common-use items as generators in surplus disposal? Tools, advertised surplus in their original package? These are not tools that have been used or marked. This is the thing that has always seemed like an enigma to me. How do we happen to see these items advertised in the Wall Street Journal and in newspapers throughout the country, advertised in surplus? For example, I can remember 1-kilowatt generators and 5-kilowatt generators and 10-kilowatt generators. These are items for which there is always a demand, particularly in Defense. How do they get into the surplus market? Mr. BOUTIN. They get into the surplus market largely because of a change in the technology in the military system itself; a change in weaponry. Occasionally we will get tools that are brand new in the original package that were designed to work on a certain aircraft engine. As that aircraft engine is phased out-and these tools were bought at the time the engines were bought and are not now required, because that aircraft engine will be taken from the defense systemthen there is no further requirement for some of these tools. You almost never see an ordinary handtool that would be in the original package, new, that would be sold, or even in equal to new condition. But highly specialized tools that were designed for a certain part of the weaponry of the Department of Defense are sometimes sold. INDISPOSABLE ARTICLES Senator MAGNUSON. Well, of course, the refuge of the Defense Department for years when somebody makes a mistake and overbuys is that there is something new and we cannot use it any more. This goes on. And you are faced with that when they give it to you. Mr. BOUTIN. Yes. For instance, we had some parts for an old Beechcraft aircraft, which goes back sometime. This had about a |