using in procuring green coffee at the present time and the quality control of the deliveries has been excellent and I am sure everyone in the industry will agree to that.

SUGGESTED METHOD

Now, that is one phase of it. The next phase is the question of roasting it, packing it, and delivering it to the various stations. This is just my own personal opinion, arising as we are discussing ithow would it be if the Government continued to purchase green coffee and had it tested, as done at the present time, and then set up 20 or 25 or the number of zones required in the United States, and had it roasted at nearby plants where it was going to be used, by a commercial roaster on a bid basis for possibly 6 months or a year or whatever was found suitable? The Government could ship the green coffee to these particular stations and draw from it so that it would never be more than a day or two away from the roasting plant. In other words, the procurement of green coffee would continue as it is at present, likewise the quality control, which has worked out so very, very well, and then the Government would still handle that green coffee, ship it to various destinations throughout the United States and then the coffee would be roasted under contract and shipped out to nearby camps, hospitals, stations, and so forth.

Mr. CURTIS. I appreciate your suggestion; that is what we are interested in.

NEED FOR GOVERNMENT INSPECTORS

Mr. WARD. In that case they would need to have inspectors at each plant; wouldn't they?

Mr. GRANICHER. They would be roasting their own coffee. They would have to determine themselves where their own coffee was roasted. I think the Army's experience in that respect has been very highly successful, and from then on there is no further inspection needed, because the coffee has been purchased by the Government and has been inspected and determined to meet the quality specifications, following which it would go to the various parts of the United States and be held there until required. It could be held for a week, 6 months, 8 months, or whatever time required and then it could be roasted and packed in these laminated bags or a vacuum can or any other manner found acceptable. It seems to me that this time lag we speak of where this coffee gets stale could be very greatly reduced and you would meet all the requirements necessary. You would have your quality control and use of the roasting facilities throughout the United States and the assurance that the ultimate consumer of that coffee is going to get as good a cup of coffee as is possible to obtain under these circumstances.

Mr. CURTIS. Thank you. Mr. Ward has some figures on the price that the Veterans' Administration has been paying under these new specifications. Could you read that in the record?

VETERANS' ADMINISTRATION PRICES F. O. B. HOSPITAL COMPARED WITH

MILITARY

Mr. WARD. We were interested in this method, because this is a f. o. b. hospital price of 64.1 cents-that is in the eastern part of the

United States and I will supply the other for this area-but those prices delivered seem to be considerably cheaper than the military prices and it is for a higher grade coffee. This is 60 percent Colombian and 40 percent Santos, which makes one wonder if the military way of buying the bean is as good as it might be.

GOVERNMENT DOES A GOOD JOB OF BUYING

Mr. GRANICHER. I am in a position to reply to that question. I am in the green importing business and we are selling every day to these gentlemen who are here with us today representing their various firms. They are all a pretty tough bunch of buyers. They buy competitively and green coffee is like any raw commodity in that alterations occur to market prices here and all over the world, hourly and daily, and we importers have got to be on our toes to sell any of these large firms who are represented by these gentlemen today. Therefore, on the face of it any of these high-grade coffees that we sell are absolutely on the market. The price you have quoted at which the Veterans Administration purchased coffee makes a determination, the result of which you can figure for yourself. There are certain facts which are self-evident. The coffee business is highly competitive, and the success of these roasting firms, doing a broad national and sectional business, indicates they are obtaining their green-coffee supplies at advantageous prices. At any time, a comparison between the Government and private buying reveals the favorable price base to the Government. Since 1942, the Government procurement and inspection program has been highly successful. As a citizen and knowing what I do about coffee, I can only hope that the Government. procurement of other materials and supplies is equally economical and advantageous to the Government.

GOVERNMENT SOLD COFFEE BACK TO INDUSTRY

I also want to say that after 1946 when the Government had surplus coffee on hand, which, incidentally, brings up another point; some of it was a year or a year and half old and they sold that coffee back into the industry very successfully. They paid 13, 14, and 15 cents for the coffee and they sold it back to the industry at 24, 25, and 26 cents. I do not know of any other surplus material that the Government was able to sell at such a profit-practically 75 or 80 percent profit. The other point I want to make is some of that coffee was considerably over a year old and it was absorbed by the industry.

Mr. WARD. Would you say then that the quality and quantity, taking into consideration the price that the military pays for coffee, is comparable to industry?

Mr. GRANICHER. Very much so. As a matter of fact, when these bids come out, frequently for green coffee, the results are watched with interest and very often comment in the trade is how can these suppliers sell the coffee to the Government at the prices that they do? Sometimes it is caused because the Government does not want to take delivery of the coffee before several months and the contractors hope that after they have put their low price in, they will be able to cover their commitments profitably. Sometimes they are not able to do it, but I would unquestionably state that over a period of time

the Government has bought its coffee pricewise to very good advantage.

Mr. WARD. Thank you very much; that is all I wanted to ask.

Mr. BONNER. I want the record to show that the committee is delighted to have Mr. Havenner, Congressman from California, an able Representative in the House, present with us today.

I want to thank you gentlemen for meeting with us here and for the contributions you have made to our efforts.

This subject is just one of the thousands of subjects that confront the Government with respect to procurement and the manner of procurement, and we have simply picked this one out as a test, you might say, to see how to work with it. There are others just as complicated and just as involved and perplexing with respect to Government going into commercial activities.

Mr. WILSON. Mr. Chairman, before you close, could I add one thought?

Mr. BONNER. Go right ahead, Mr. Wilson.

Mr. WILSON. To amplify some questions asked a while ago about the distributive system that we have, I think we might say that the distribution system of the coffee companies in San Francisco, who have distribution avenues into the intermountain States and into the Middle West, is based on vacuum packing and not on bulk packing in bags. I do not believe there is any great amount of industry capacity available between the Pacific coast, notably San Francisco, between here and Kansas City and Omaha and jumping from there over to St. Louis and Chicago and then clear on across to the east coast and to the South depending on civilian industry to fill the gap, which we have done when it has been necessary rather than going after it in normal times, that fact should have some bearing in relation to your quality study and your consideration of vacuum packing.

INDUSTRY HAS NOT COMPLAINED

Mr. KENNEDY. I should like to ask a question, Mr. Chairman, of the independent representatives here. Have any of the Pacific coast coffee producers and importers ever contacted the Army or Navy Departments to see if they might be able to get a contract at least for their marginal production within the last 3 years, and also, the second part of the question would be, have they ever made through correspondence any complaint with regard to the fact that the military services were engaged in or expanding their coffee roasting business? Mr. FOLGER. I believe the answer is "No" to both of those questions. Mr. WILSON. I can only answer for our company. We have not solicited Government business, but as Standard Brands did during the war (but not in the case of the Navy, because they had their own. facilities), we roasted several million pounds of Government-owned coffee and we packed for them, both in 50-pound bags and 20-pound vacuum cans. They asked us to help them, and we did.

Mr. FOLGER. I can answer this as far as our own company is concerned, when we do get bids mailed to us by the Veterans' Administration, or whoever it is, we bid on the invitation, but I do not know that we ever get any.

Mr. KENNEDY. Would it not be fair to say for the record, then, in view of the answer "No" to both of those queries, that the industry has

not solicited any contracts from the military services in coffee and they have made no complaints to the departments concerning their activities in the coffee-roasting field?

Mr. FOLGER. It could well be the reason that they have not done it is the reason they know they would not get any place with that. I do not believe any one person could answer that question for the industry; some individual companies might have written to the Army or Navy.

Mr. KENNEDY. I was only asking as to the representatives present.

NO POINT IN BIDDING AGAINST GOVERNMENT COMPETITION

Mr. FOLGER. When you stop to think that we are here in San Francisco and we know there is a plant out at Alameda cranking out coffee, we are not going to waste our breath trying to bid on it.

Mr. KENNEDY. Did you ever complain?

Mr. FOLGER. Well, we have so many other things to complain about, I guess not.

Mr. KENNEDY. The time to complain at least was when you note facilities being expanded. That is very true especially when an industry professes interest in making available its marginal capacity only.

Mr. BONNER. Mr. Wilson, how many plants does your company have?

Mr. WILSON. Two; one in San Francisco and one in New Jersey. Mr. BONNER. How many plants does Standard Brands have? Mr. COREY. We have one at San Francisco, Dallas, Birmingham, Hoboken, and Chicago at the present time.

GOVERNMENT SHOULD BE CAREFUL ABOUT ABANDONING PLANTS

Mr. BRANSTEN. I would like to add one thing more. I was going to say this: There were two points brought up here together. One, the expansion of existing Government facilities and then also it was mentioned, the abandonment of present Government facilities. I want to just comment on that with regard to this and that is the Navy and the Army have assets in roasting facilities right now which are not difficult to maintain. Before they were abandoned, or if any. consideration was being given to abandoning them, I should think it would be prudent on the part of the Government to survey civilian roasting facilities. I do not think it would be very difficult to make such a survey and I think it would be valuable knowledge for the Government to have right now in the case of a future emergency. Mr. BONNER. Thank you, sir.

Mr. BONNER. Mr. Havenner, do you have any questions you would like to ask?

Mr. HAVENNER. Thank you very much, Mr. Chairman. I do not at this time.

Mr. BONNER. That concludes the hearings.

(Thereupon, the subcommittee adjourned at 4:30 p. m.) (San Francisco Exhibits 1-4 follow :)

SAN FRANCISCO EXHIBIT 1

[COMMITTEE PRINT]

BRIEFINGS ON

SUPPLY RELATIONSHIPS BETWEEN GSA

AND THE DEPARTMENT OF DEFENSE

Friday, August 8, 1952

HOUSE OF REPRESENTATIVES,

INTERGOVERNMENTAL RELATIONS SUBCOMMITTEE

OF THE COMMITTEE ON EXPENDITURES
IN THE EXECUTIVE DEPARTMENTS,
Washington, D. C.

The subcommittee staff met at 10:30 a. m., in room 1015, New House Office Building, pursuant to notice by Thomas A. Kennedy, general counsel.

Present. Thomas A. Kennedy, general counsel; Ray Ward, staff member; Herbert Rotback, staff member.

Also present: Nathan Brodsky, Assistant Vice Chairman, Munitions Board, OSD; Commander Carl A. Raymond, Jr., Munitions Board, OSD; Russell Forbes, Deputy Administrator, GSA; J. Hervey Macomber, Jr., associate general counsel, GSA; Robert T. Daly, Assistant Director, P. and S. Division, Federal Supply Service; Lt. Col. Thomas L. McKnight, Munitions Board, OSD; R. T. Davis, Director of Legislative and Liaison Division, General Counsel's Office, GSA.

Mr. KENNEDY. The purpose of this conference is to obtain briefings for the subcommittee members with regard to the handling of common administrative items by GSA in California and the proposed test which is being studied and initiated.

It was felt by Mr. Forbes and Admiral Ring that the vast amount of information that would be forthcoming on this subject would be better served in Washington than in the field. For the convenience of the members and the record we are presented the spokesmen of these agencies this morning.

I think it would be well to call on Ray Ward first for a little background. He has had experience in this field, and we may as well start off with a member of the subcommittee staff.

Mr. WARD. We want to make a little background material for the members, so I thought I would review the history of the legislation and action taken to date very briefly. I can give the reporter the documents in order to make the briefings complete.

In the development of Public Law 152 in title II, section 201, on property management there was quite a struggle to find out how the civilian agencies would work with the military agencies in the common fields. There were dozens of revisions of that language trying to come to an understanding between the GSA and the military. We tried to split on the basis of technical supplies versus common items. Technical military supplies to be handled by the military. Some thought the term "combatant supplies" would be better. Then we tried to use tactical and military supplies, and other variations. But there is no fixed definition. There is no fixed definition within which you can stay because conditions change.

So finally a proviso was put in section 201 (a), and I am going to insert section 201 (a) entirely and read the proviso:

"Provided, That the Secretary of Defense may from time to time, and unless the President shall otherwise direct, exempt the National Military Establishment from action taken or which may be taken by the Administrator under clauses (1), (2), (3), and (4) above whenever he determines such exemption to be in the best interests of the national security."

When the President signed the act, Public Law 152, he sent a letter dated July 1, 1949, to the Secretary of Defense, the Administrator of GSA, and to the Director of the Bureau of the Budget, directing those agencies to get together and to try to work out diligently and amicably the relationships between them in this common field. That letter formed the basis for what is now known as the area of understanding program.

1 Name changed to Committee on Government Operations July 4, 1952.