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PROVISIONS OF MEASURE

This measure would make immediately available amounts, which the agencies potentially could use, up to approximately $822 million for the procurement of needed supplies, materials and equipment, including trucks, and passenger-carrying motor vehicles for replacement purposes, which normally would not have been procured until after the beginning of the new fiscal year on July 1, 1958. The amounts actually utilized would be considerably less. Nevertheless, this would have the effect of advancing the timing of planned Government purchases without increasing the appropriations for that purpose. The amounts made available would subsequently be charged to the applicable regular appropriations for the fiscal year 1959, after their enactment into law by the Congress.

I shall take time only to outline this measure since its details are well covered in the report of the House committee on the resolution (H. Rept. No. 1583). It would generally make available, for each appropriation affected, an amount equal to one-half of the amounts shown in the schedules in the 1959 budget for supplies, materials, and equipment under the object classes "08" and "09." We have furnished to the staff of your committee a tabulation showing, for each appropriation account, the maximum amount which would be made available. Use of the funds would be limited to direct procurement costs and incidental expenses of procurement are not included.

LIMITATIONS

It would not make funds available for appropriations for which detailed estimates were not included in the President's budget; that is to say, no amounts would be made available for the mutual security program, or for any other programs which are dependent on the enactment of additional legislation. No funds would be provided for any organization or appropriation account if there was no appropriation for such organization or account in the current fiscal year. Also, funds would no longer be available after the regular 1959 Appropriation Act has passed either House without provision for the pertinent appropriation.

Because of the limitations imposed by lack of storage space, the necessity for seasonal buying of certain commodities, and similar factors, it will not be possible for the agencies to make full use of this authority. Also, since the amounts to be made available are necessarily based on the amounts shown in the budget schedules, the Atomic Energy Commission and the Tennessee Valley Authority are not expected to use all of the amounts which technically would be available. In the case of the Atomic Energy Commission, we do not believe it would be entirely feasible to speed up the purchase of uranium. In the case of the Tennessee Valley Authority, the timing of the receipt of their income will affect their ability to accelerate procurement. However, we estimate that these two agencies will be able to obligate a total of $35 million in the fiscal year 1958.

ESTIMATED OBLIGATIONS

We estimate that a total amount of $200 million would be obligated during the remainder of this fiscal year, by all of the agencies included.

In addition to granting authority for this advance procurement, the enactment of this measure would allow a general acceleration of the entire procurement effort of the civilian agencies throughout the fiscal year 1959. This proposal complements the President's policy, conveyed to the civilian agencies by the Director of the Bureau of the Budget on March 25, to accelerate procurement in the fiscal years 1958 and 1959 from funds now available and to place orders, to the extent possible, in areas with a substantial labor surplus. This policy is expected to result in the earlier placement of about $500 million in orders for domestic supplies and equipment during the fiscal year 1958. Altogether, we believe that the effect on the economy will be timely and substantial.

This resolution does not include funds for the military functions of the Department of Defense. The procurement for these objects in the defense area of the budget, particularly in the no-year appropriations, is primarily for long lead-time items of military equipment.

The timing of the procurement of these items necessarily involves military program considerations of substantial magnitude. With respect to procurement under the annual appropriations to the military departments, it is accomplished, for the most part, through the medium of stock funds. We believe these funds now have adequate working capital and obligational authority available to them to maintain the stock levels required for planned operations.

We do not expect that the accelerated Government procurement resulting from these appropriations would necessitate additional appropriations for the fiscal year 1959 beyond those which would otherwise be required. The objective of the administration is to speed up planned procurement of items needed for governmental operations, but not to increase the total requirements.

QUESTION OF WASTE AND INEFFICIENCY IN PROCUREMENT

Chairman HAYDEN. You anticipated in your statement some of the questions I wanted to ask.

If the proposal to make available for obligation now 50 percent of the amounts estimated in the 1959 budget for the procurement of supplies, materials, and equipment for the various civilian agencies is approved, will it result in any waste and inefficiency in the procurement of these items?

Mr. MERRIAM. No, sir.

In our opinion, it would definitely have no such effect, and should not. It would be our intent, Mr. Chairman, should the Congress approve this proposal, through the General Services Administration and through the procurement processes, to make certain that only those things which are needed would be obtained.

Chairman HAYDEN. In other words, do you contemplate an orderly, efficient plan for the obligation of these funds, or will they be obligated in a hit-or-miss fashion?

Mr. MERRIAM. No, sir.

We believe it can be done on an orderly basis. General Services Administration has considered its share of this program already in anticipation of the possibility of developing some regulations to make certain that only those things are bought which are needed.

NEED FOR ITEMS

Chairman HAYDEN. Is there a real immediate need for the items that will be procured, or will the advancement of the procurement result in stockpiling a lot of supplies, materials, and equipment, thereby creating problems of storage and warehouse space, deterioration, et cetera?

Mr. MERRIAM. It is our proposal, Mr. Chairman, that only those items be bought which are needed and which can be utilized within the immediate future. There will not be a stockpiling of items based on a potential future use. In other words, this proposal is based on what we have already said was needed for 1959, and it is only a question of timing as to the procurement.

Chairman HAYDEN. Do you foresee any problems that may be created?

Mr. MERRIAM. No, sir.

We believe this can be done in an orderly manner, in such a way as to expedite the procurement without causing us any after effects.

NECESSITY FOR DEFICIENCY APPROPRIATIONS

Chairman HAYDEN. Can you assure this committee that as a result of this resolution, deficiency appropriations will not be necessary in fiscal year 1959 because of this stepped-up purchasing?

Mr. MERRIAM. Mr. Chairman, if I may, I will say to you the same thing I did to the House committee. I have not been in Washington very long, but I have already learned never to make any positive assurances on any such subject; however, let me say that it is our intent, and we shall do our level best to live up to it, that there be no additional deficiency appropriations because of this enactment.

Chairman HAYDEN. I noticed you stated that the design was to channel these funds into areas of labor surpluses or unemployment. Now, how do you go about that?

Mr. MERRIAM. If I may, I would like to ask Mr. Bean, who is the Commissioner of the Federal Supply Service of the General Services Administration, to give you that answer. He has already worked out some details on that and can fill in for me.

CHANNELING OF MERCHANDISE INTO LABOR-SURPLUS AREAS

Mr. BEAN. We have an order, Mr. Chairman, which I believe will be signed by the Administrator tomorrow, on channeling merchandise into labor-surplus areas, which will in effect make a set-aside, and we are shooting at a minimum of 50 percent, into labor-surplus areas, and more where it can be done.

The set-aside will go into surplus labor areas and the first call on this will be small business, then it will be big business in the laborsurplus area, and then, if we cannot get the entire amount of goods that are needed in that particular area, then it will go to small business in the non-labor-surplus area.

Where prices are concerned, where you have a set-aside; for instance, if you were to buy a thousand pieces of something and you might set aside 500 for labor-surplus area and 500 for competition, you would then bid; you would take the lowest bidder on the competitive bidding scale and, we will say that that was a dollar, then to small business

in the labor-surplus area you would offer these goods to anyone who wanted to take them.

Senator BRIDGES. In no case would we pay more than the lowest competitive bid for the parts submitted?

Mr. BEAN. That is correct.

Senator ELLENDER. Would the bid be on the whole amount?

Mr. BEAN. The regulations provide if it is a minimum quantity that, of course, we could provide it. It is only if there is a reasonable production run left that we can make a provision.

TYPES OF MATERIAL TO BE PROCURED

Senator ELLENDER. And this is related to supplies only?
Mr. BEAN. That is right; supplies and equipment.

Senator ELLENDER. I would like to be a little specific, if I may.
What type of supplies will be purchased from the appropriations,
Department of Defense, "Civil functions," "General investigations,
$200,300, and "Construction, general," $4,000,000?

Mr. BEAN. Mr. Merriam might answer that better than I.
Senator ELLENDER. That is on page 9.

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Mr. MERRIAM. Now, I cannot give you the specific details, Senator, of each of these items.

Senator ELLENDER. Well, will that be for supplies or is it for contractural services?

Mr. MERRIAM. No, sir; this is only supplies and materials and equipment. But it could be equipment the corps purchases for various kinds of uses. It will be office equipment, and the like. Senator ELLENDER. Yes.

RELATION TO ORIGINAL BUDGET REQUEST

And this is to be in addition to the $171 million that was only released just recently.

Mr. MERRIAM. No, sir.

Senator ELLENDER. This is in addition [indicating]?

Mr. MERRIAM. This applies only to the amounts that were in the original budget request, so it would be separate from that.

Senator ELLENDER. You mean, original budget, or do you mean for the coming fiscal year?

Mr. MERRIAM. Yes, sir; for the fiscal year 1959.

Senator ELLENDER. Yes.

And it does not take into consideration moneys previously appropriated?

Mr. MERRIAM. No, sir; it does not.

Senator ELLENDER. Then this, in fact, would be in addition to what the civil functions of the Department of Defense was authorized to expend on a recent order from the President?

Mr. MERRIAM. Yes, that was a speedup of the 1958 appropriation. Senator ELLENDER. I understand. In other words, it was releasing money that had been tied up by the Budget Bureau?

Mr. MERRIAM. Yes, sir; without getting into the details of that, which is a separate subject.

Senator ELLENDER. Yes; which is what it amounts to. I am glad to see that. It should have been done long ago.

EFFECT ON DEFICIT

Senator BRIDGES. May I ask this: The effect it will have is, it will increase the problem of the deficit; will it not? I mean, we have already passed the housing bill, $1,800 million; and the road bill, $1,700 million; and now we have this community facilities bill, $1 billion.

We have increased the debt limit $5 billion. The President proposed the approximate balance of the budget. This showed a little surplus, but that does not take into account all of the military spending, which was additional. This will push against the debt limit and the deficit; will it not?

Mr. MERRIAM. I think you have to look at it this way. These expenditures were planned and have already been calculated in our 1959 estimates.

Now, it is true that by accelerating procurement you will move some of the expenditures into fiscal 1958 and therefore add to the fiscal 1958 expenditures by that amount. However, you could deduct from the fiscal 1959 expenditures the same amount.

Actually, our calculations are that while we think we could obligate about $200 million in fiscal 1958 of the 1959 procurement money, actual expenditures in 1958 would run somewhere in the neighborhood of $50 million. That is actual cash expenditures.

Senator BRIDGES. Now we have before us the 1959 budget. In it are these items which you are asking to accelerate today?

Mr. MERRIAM. Yes, sir.

Senator BRIDGES. Therefore, if this is passed the budget will be affected to that extent; will it not?

Mr. MERRIAM. To the extent that the expenditures are pushed into fiscal 1958, the 1959 expenditures will be less.

METHOD OF HANDLING 1959 ITEMS

Senator BRIDGES. How is this committee, when they pass on the budget, going to know what has been utilized this year and what should not be included in 1959?

Mr. MERRIAM. Well, of course, as you know, you are passing on the appropriation. The appropriation request will remain the same. It will just be that we will credit the actual amount spent against the appropriation after it is enacted, and the amount available to the agency will be the appropriation minus what they have already spent. So that there is no change in the total.

Senator ELLENDER. Even though we appropriate this money now, it does not affect the debt until it is actually spent.

Mr. MERRIAM. That is correct.

Senator ELLENDER. So you can obligate now, but you will not have to pay out funds until after June 30, thus this year's debt will not be affected.

Mr. MERRIAM. That is correct.

Senator YOUNG. By the time you get around to contract for these items, it will be the midyear or the season of the year when you have the highest employment; and next year, when the bad employment situation comes around in the winter, which you might well have, you would not have as much to place under contract?

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