At Robins Air Force Base, which I believe is the first one we shall refer to, they had standards after June 25, 1950: (a) Normal housekeeping waste; (b) obviously obsolete property; (c) property beyond repair; (d) property specifically authorized for disposal by Headquarters AMC. [Reading:]

The standards for determining this generation of property should be studied. Sales to the public appear the central method. The report stated that due to the nature and condition of such property, disposals through transfer and donation are reduced to a minimum.

The point I am stressing there is: The minute that it was discovered that we were interested in the donable program, which I will explain a little later, with all its paper work and the possibility of committee inquiry, it appears they immediately began to channel their activities into outright sale where they had no need to account to anyone.

Now the disposals made prior to June 25, 1950, were, of course, by different standards: (1) Obsolete property, as determinded by aircraft research; (2) property beyond economical repair; (3) property beyond requirements. [Reading:]

Items (2) and (3) would bear looking into; "economical repair" especially whether based on commercial specifications or combat requirements.

In other words, the heavy-duty combat truck would not be used around the base to deliver mail. After all, a commercial-type truck like the station wagons they have on the base would be better employed, and that combat vehicle truck should be made available to some training command or for shipment overseas.

Also we were interested in this: In requisitioning for a station wagon the Army quite often would set up divergent standards, for the springs, for instance. They would say, e. g., "We would like a Ford station wagon, but we want the rear springs to be tested to 5,000 pounds." No material going in it is going to weigh that much, but they just insist on the very finest. As a result, in travel they have never been exposed to conditions like that, and to eliminate those deluxe specifications are important.

if

I would like to mention another type discovered in the specifications, and that was cans. For instance, tomatoes and peaches were put in certain type cylinders; that is, they were quite large. Of course, the canner made that particular type of tin and if the Government renegotiated a contract or if it canceled, he was not able to dispose of that to the average grocery or wholesale establishment because it was not the commercial size. By trailing it down, we were able to find out that in one activity about 10 years ago they had an eccentric who had an old refrigerator, and it was the only one these cans would fit. So he asked for a couple of dozen of them to be made specially, and then the standard set tripped from one department into another; finally it became agency-wide, and then the other agencies emulated it. Mr. SHELLEY. And that became a standard specification? Mr. KENNEDY. For that particular type of can.

Now with regard to the specifications, you can see there is quite a wide field. I just brought out those examples to show the fact that simply because they roll out trucks there, it might be interesting to ask them exactly what the utility of the truck is and whether it conforms to the purpose for which it was built.

Referring again to this:

The committee might well observe what is being destroyed and what the process "abandonment" encompasses. Public Law 152 has provisions regulating sales of property; however, it is not listed as surplus property nor is it offered to agencies or for donation. Public Law 152 permits moneys gleaned, to be deposited to a special account for later replacement of similar property.

At the time that act was passed it was valid as a consideration; it remains valid today; but it needs a policing up. It is quite possible, for instance, down in Houston they would run out of trucks, we will say, of a certain type, and they need replacement. Well, these trucks should possibly be sold off at that point in Houston because it would be uneconomical to drive them to New York where they might get a hundred dollars per truck more, but the cost of sending them up would be greater. However, there have been instances where they have disposed of them down at Houston and then they purchase them in New York and drive them right back down to Houston for replacement. Yet the replacement funds which were generated from the sale at Houston are also used by the Defense Department. [Reading:] From April 1 to October 26, 1950 awards were made on surplus sales totaling in excess of $798,000. In connection with this, aluminum scrap involving 50,000 pounds was disposed of October 9, 1950, together with 50 gross tons unprepared iron and steel scrap, light sheet iron, 75 gross tons, alloy steel scrap, 75 gross tons, mixed paper, 40 N. T., etc. for the sum of approximately $13,000.

The base director of supply stated that no new equipment had been disposed of or other new property authorized to replace disposed-of surplus; however, this official and others distinguished between new property and old unused disposable property. In connection with this the following conversation is quoted:

"Only aircraft engines tagged as repairable and those which have been condition condemned have been disposed of by Robins Air Force Base, Ga. The repairable engines that have been disposed of have been transferred to salvage by authority received from headquarters, Air Matériel Command. Some of these reparable engines are unused, but they have been subjected to various storage conditions and as a result corrosion has formed to varying degrees necessitating maintenance work on these engines prior to their use."

In that connection it would be well to state that change of circumstances would now make this economic repair, whereas under the old directives, when they were operating with no Korean War, and storage and warehousing expense and space that they were using, why, it might be very proper to have disposed of them at that time. But today we can all understand that every effort should be made.

I think possibly it might be well to explain the donable program at first and then to carry through for the rest of the bases that we will

visit.

The donable program was generated out of considerations during the days of the Surplus Property Act of 1944. After all the Federal taxpayer is really the local citizen, and when he contributes to the Federal Government and the Federal Government buys equipment and that equipment is used, and has no further use in the Federal establishment, then it was the feeling of Congress that this equipment which could no longer be made available for general Government use, should possibly revert to the States. Now not to the States for general use, but to the States for educational training. It is comprehensible that a lathe, for instance, that was used in the Federal Government might not be quite good enough for the Federal Government's continued use today, but if it went back to the States and was assigned to

a college where students were learning the lathing process, it would be good enough to learn on to become skilled lathe operators. They received this property for nothing. That was the genesis of the program.

Now this Surplus Property Act was repealed in large measure by Public Law 152 which created the General Service Administration, called the Federal Property Act and Administrative Services Act of 1949. In Public Law 152 we gave to the educational institutions the right to receive this property for educational purposes. Later Mr. Bonner held hearings, and Mr. Bonner and the subcommittee reported to the full committee that this principle should be extended to health institutions; so that today in your respective States there is an agency which receives from the Federal Government for nothing any surplus property which is no longer of use to the Federal Government. That State agency will refer this property to the respective universities and medical centers for use therein.

We have discovered certain abuses in this program, and I will outline those later. That gives you an idea of the donable program. Distinguished from the donable program is the discount program.

The discount program generated also under the Surplus Property Act and was carried into the Federal Property Act of 1949. The discount program allows you to purchase for so many cents on the dollar-you are permitted to buy, for instance, a chair which would be worth $100 for $5. That would mean you were allowed a 95 percent discount. However, the distinguishing difference between the donable property and the discount property is that after 3 years the discount property becomes the property of the person who purchased it. In other words, the statute of limitations runs against the discount program. However, it is a moot point on the donable program that it does not so run. And the use to which it is put and the necessity for having it determines the title in the donable program. Those words were written into the Property Act as a result of Mr. Bonner's hearings.

A university, in order to receive property under the donable program, must establish, first, that it is usable, secondly, that it is neces

sary.

Our investigations which are presently under way have shown that they are applying an interpretation to that clause that is different than was the intent of the Congress. With that in mind, we can refer to donable property here.

The administrative paper work connected with the donable program in the Robins Air Force ase is not being carried out. Correspondence indicates that property pick-ups were solicited and without regard to the "usable and necessary provisions of Public Law 152."

One Air Force letter reads:

"It is requested that you furnish this office proper authorization for donation of 9,925 each small tools, 5,000 pounds; 115 pieces office furniture, 8,600 pounds; plywood, 2,000 pounds. The above-requested authorization would cover both material delivered this date and that remaining on hand at the present time."

They wanted, it is alleged, in some of these bases to have the university representatives just leave the blanks there ahead of time and as the material arrived they would make disposition of it. Of course, you know there are varying pressures. Certain commanding officers just come down to second lieutenant and say, "Get this stuff off the

base. That is an order." Well, a junior officer does not inquire of standards, and so forth.

Mr. CURTIS. Does this apply to any public institution? Would that apply to churches, too?

Mr. BONNER. No.

Mr. KENNEDY. No, sir; just education and health.

Mr. CURTIS. Just education and health?

Mr. KENNEDY. Yes. That is originally defined in the Property Act of 1949, and it is determined by the action of the Federal Security Administrator and the General Services Administrator.

That is not the flaw that is in the act. The flaw basically is in determining the usability and necessity.

Mr. CURTIS. It was just for general information that I asked that question.

Mr. KENNEDY (reading):

The GAO investigator visited a number of the local training schools receiving property from the Air Force base under the donable program. It was disclosed that a good deal of property was being held in school warehouses for which there was no particular or immediate need, and that it was contemplated that eventually the school would dispose of such as junk. One school did hold two sales of donable property in the spring of 1950 from which $4,000 was realized. This amount was used to purchase a machine more in keeping with their requirements than the machinery received under the donable program.

That was a $20,000 lathe which the Government had constructed, for which there was no further purpose in the Federal establishment. This machine, they said, would have possibly in a hurried sale been sold for $7,000 if it had been available nationally. However, the school received it under the donable program, and they took it to their school and decided it was incompatible with the size of their program since it was such a big lathe. They disposed of it in the locality for $4,000.

Mr. SHELLEY. That was not out in California, was it?

Mr. KENNEDY. No, sir.

Mr. BONNER. Yes; we will get to California. It has how manyfour warehouses?

Mr. KENNEDY. Six warehouses and $650,000 of "profit."

Mr. SHELLEY. It is very profitable.

Mr. BONNER. How much profit?

Mr. KENNEDY. $650,000 in 3 years as distinguished from $40,000 for 3 years for your State.

Mr. LANTAFF. That is the State itself?

Mr. KENNEDY. Yes, sir.

Mr. SHELLEY. We do things big out there.

Mr. KENNEDY. As a matter of fact, in some States I might remarkthe State educational agency has been known to go to the State treasury, receive a loan from them, then go to the air base, pick up the automobiles and just drive them right to the used-car lots.

Now you each have copies of the rest of them. The idea is the same. They have all been broken down. It would not be practicable at this time to read them.

Mr. LANTAFF. On the donable property, does the title always remain in the Government?

Mr. KENNEDY. It does. Expert testimony discloses there is a shadow because there is some belief that if it is put to the proper use and

it is necessary and they use it for enough time to become affixed, you might say, to the university, in effect, for all purposes it is theirs.

I might tell you how they got that word "usable" in there. They felt they were getting a lot of junk. Then we put in the word "necessary" because out in a certain State we discovered there was a classroom that had 60 students in it, all under the sixth-grade category, and the board of education put in for 5,000 ball-peen hammers which were at a base and received them because there was no clause in there that said they had to be necessary in school. So they were able to hang on to those for 2 or 3 years and then dispose of them.

Of course, it has been a very poorly administered program because of lack of personnel. The Federal Security Agency has one man in the field to tend this particular project.

And as Mr. Bonner pointed out, each State has become a member of a national organization. The national organization had its meeting at the Statler Hotel last year. It coincided with Mr. Bonner's hearings on the health donable program quite by accident. He invited members of this group. Then I was detailed by the chairman of the full committee, Congressman William L. Dawson of Illinois, to go and observe at this convention.

Their program at present recognizes generation of surplus of last year and the year before of $90,000,000 per school month; in other words, $10,000,000 a month per school year of surplus property. As you can see, the national organization regards this as big business. And the bigger the State, the better the State-level organization.

Now California is one of the leaders in this group. They have, as we cited before, six central warehouses, I believe, all generally located near Air Force and Army bases where the property would be accessible. In their operations their statement of accounts showed what we term a profit of $650,000 for the period 1947 to 1950.

Mr. SHELLEY. Where do they put that money?

Mr. KENNEDY. Well, Mr. Shelley, it is a remarkable thing, but it is not a "free" program. What they do is they get, we will say, this chair from the Federal Government. It is shipped out to a State warehouse, and the State warehouse says, for example, "Well, we cannot give you that for nothing because we have to haul that from Pasadena to San Francisco, so we will charge you 12 percent of its cost," which is on a 100 dollar chair $12. They think that is pretty reasonable. Then the State agency says, "What will we do after that when the program comes to an end?" "Why, you can share in the fund created by such means."

In the meantime, however, the State is having its warehouse painted, or it is having these State employees paid out of this fund.

For instance, there is a man whose salary runs about seven or eight thousand, and the telephone bill runs $5,000. We were interested in his conducting other State business in a warehouse devoted to educational purposes.

Mr. LANTAFF. Is any of that money recoverable, or does the Federal Government have a claim against the State?

Mr. KENNEDY. Mr. Bonner was very adamant in his stand that all realty surplus property when transferred contain clauses of reverter and recapture, and as a result Mr. Bonner and Mr. Rich of Pennsylvania during the Eighty-first Congress, were able to effect great savings in that regard.