In doing so we shall be pleased to give an account of the actions taken and the progress made by GSA with respect to those related matters, emphasized in the report of your subcommittee to the Congress of September 1964, such as the development of an efficient and effective national supply and services system; the standardization of supply items; the elimination of items from the supply system; shortself-life items; the utilization of Government-owned property to reduce Federal procurement expenditures, and the procurement and management of automatic data processing equipment in the Government today.

It is our firm conviction, Madam Chairman, that the foundation for building an efficient integrated national supply system is the elimination of the unnecessary_overlapping and duplication in the various supply systems of the Federal Government. To this end a tentative agreement was developed by the General Services Administration and the Department of Defense establishing criteria for assignment of management responsibility for items.

JOINT DOD/GSA AGREEMENT FOR NATIONAL SUPPLY SYSTEM

We are pleased to report that a test of the proposed agreement was conducted by GSA and DOD and revisions in the proposed agreement were made and the final agreement jointly executed with the Department of Defense in November and December of 1964. (See p. 83.)

This agreement provides for a more simplified coding structure, emphasizes and encourages transfers by group or class, and establishes a Defense Supply Agency and Federal Supply Service Management and Review Committee totally dedicated to implementing the agreement and accelerating the program.

We are confident that if the intent of this agreement is carried out, it will result in the orderly development of the National Supply System as contemplated by the Federal Property and Administrative Services Act of 1949 and as envisioned by this subcommittee.

DISPOSAL OF SURPLUS PROPERTY

Representative GRIFFITHS. It is by agreement with the Defense Supply Agency or is it by statute that you contemplate taking over disposal of the surplus property?

Mr. KNOTT. It is by agreement and based on the statute. That is, basically under the 1949 Federal Property Act it is the responsibility of the General Services Administration to sell surplus property which authority was delegated many years ago to the Department of Defense. This by agreement is in effect a withdrawal of that delegation of authority which we will discuss later.

GSA TO WITHDRAW DELEGATION OF AUTHORITY

Representative GRIFFITHS. You are now going to withdraw the delegation of the authority to the Defense Supply Agency? Mr. KNOTT. Yes. (See pp. 83, 131.)

Assignments by total Federal supply group or class are presently being developed and recommendations for class assignments to either GSA or DSA will be made to the Commissioner of our Federal Supply

Service and the Director of the Defense Supply Agency by the DSA/ FSS Management Review Committee.

TIMETABLE TO BE PREPARED FOR TRANSFERS OF RESPONSIBILITIES

When these class assignments are approved, the Review Committee will develop the timetable for transfer of management responsibilities to the appropriate agency. The remaining groups and classes which are not susceptible to total assignment will be subjected to item-byitem coding against the agreement criteria and assignments made to GSA or DSA based on the coding results.

DSA TO HAVE FEDERAL-WIDE RESPONSIBILITIES

The GSA/DOD agreement also provides for the Defense Supply Agency to perform supply management services for selected commodities for Federal agencies. Considerable progress has been made to date on the five commodities under consideration by DSA for support to all Federal agencies.

FEASIBILITY STUDIES UNDERWAY

During the past year, DSA has been evaluating the feasibility and desirability of assuming governmentwide support for petroleum, electronics, clothing, and textiles, nonperishable subsistence, and medical supplies.

STATUS OF STUDIES

Representative GRIFFITHS. May I ask, where are you now on these

studies?

Mr. KNOTT. I believe we can report on three of them.

Their studies indicate that it might be feasible to assume responsibility for petroleum, electronics, and clothing textile supplies. The Department of Defense recently gave them approval in principle to proceed with GSA in developing a plan for these three commodity categories. A review of identified costs and savings are to be included in this plan, which will then be submitted to the Secretary of Defense for his approval.

This has occurred within the last 30 days.

PLANS BEING DEVELOPED FOR PETROLEUM, ELECTRONICS, AND CLOTHINGTEXTILES

GSA is now actively engaged in DSA and the civil agencies in developing the plan for these three commodities. We will continue to work closely with DSA and the civil agencies in developing additional detail which will enable DSA to make a final determination with respect to medical supplies and subsistence.

SAVINGS BY GSA

In fiscal year 1964 our buying volume for distribution through GSA supply system and agency direct purchasing from Federal supply schedules reduced the Government's bill for commercial-type supplies by $270 million, and are estimated at $320 million for 1965

and $330 million for 1966. These savings to the Government are computed by comparing the prices which Federal agencies would have paid for supplies at the normal wholesale rate if they had not procured them through the GSA supply system.

Representative GRIFFITHS. How do you get a better price?

Mr. KNOTT. This is simply by bulk buying in the first place, and by the economies that are effected in the distribution system, our stocking and distribution system.

Representative GRIFFITHS. Why would the distribution help any?

Mr. KNOTT. It is largely a question of transportation cost. It depends on where you are stocking your supplies and where your customers are. The effect of an inventory management system on the redistribution or repositioning of supplies, meeting orders wherever they are needed.

Representative GRIFFITHS. Do you have more outlets than the agencies themselves would have? Are not the agencies actually buying the things when they are needed?

Mr. KNOTT. Let us take a small agency that has not a substantial requirement but some requirement for a particular item and not sufficient to have storage space or to stand the cost of storage space. This is one element in the cost of a supply system. Where all of these can be handled, stocked, and stored in the central distribution point, there are some economies to be effected from it.

Do you want to elaborate on that, Mr. Abersfeller?

Mr. ABERSFELLER. No; I think you have pointed it out very well. There is one point that might be of interest to you, that is the development of specifications on the part of the Federal Government in its procurement activities tends to increase competition and thereby drive the price down. As an example, a common office desk which wholesales for $114 is bought by us for $64. An automobile which wholesales in the neighborhood of a little over $1,800 is bought for us for $1,300.

TRADE-IN VALUES

Representative GRIFFITHS. Is this lower price because you have a trade-in value?

Mr. ABERSFELLER. There is no trade-in on the automobile we are buying.

Representative GRIFFITHS. What do you do with them?

Mr. ABERSFELLER. We sell them to the public. It is not a trade-in in the sense of trading.

Representative GRIFFITHS. How many do you sell annually?

THIRTY THOUSAND AUTOS SOLD ANNUALLY

Mr. ABERSFELLER. Approximately 30,000 annually are sold by the Federal Government.

Representative GRIFFITHS. I hope you are not some of those people who are objecting to the decrease in excise taxes?

Mr. ABERSFELLER. No. Our price includes that excise tax, I might add.

DISPOSITION OF PROCEEDS FROM SALES

Representative GRIFFITHS. Through this system do you then count the sale of automobiles as showing some element of profit in the way

you do business? What do you do with the proceeds from the sale of the automobiles?

PROCEEDS USED FOR MOTOR POOL OPERATIONS

Mr. KNOTT. The proceeds go back into our general supply fund and are available for the repurchase of automobiles that are used in our motor pool operations. The cars that we buy for use in our motor pools are driven 60,000 miles or 6 years, whichever comes first. And then we dispose of those. We dispose of them in principal areas around the country where we have surplus sales centers. Actually our experience varies widely depending on the area, the season, and the particular demand.

AS MUCH AS 33% % OF COST RECOVERED IN SOME AREAS

We have some areas in which the demand is such that we recover as much as 333 percent on our original investment in the cars, even with that age and that kind of mileage.

GSA VEHICLES NEVER BECOME SURPLUS

Representative GRIFFITHS. They are never declared surplus, are they? You never have a surplus automobile? You never declare an automobile surplus?

Mr. GREENBERG. GSA, because of its operation of the motor pool, does not declare its vehicles to be surplus. They are sold, the receipts are deposited in the general supply fund to be invested in new vehicles for continued operation of the motor pool system.

Mr. KNOTT. I don't believe, Madam Chairman, you are dealing with the question of technicality of surplus, are you?

Representative GRIFFITHS. He answered the question; they are never declared as surplus. That is if an agency writes in to me and asks where are the surplus cars, there are no surplus cars because you people are selling them.

Thank you.

(Supplementary information appearing below was later supplied by GSA:) (See p. 333.)

Hon. PAUL H. DOUGLAS,

GENERAL SERVICES ADMINISTRATION,
Washington, D.C., May 7, 1965.

Chairman, Subcommittee on Federal Procurement and Regulation,
Joint Economic Committee, U.S. Senate, Washington, D.C.

DEAR SENATOR DOUGLAS: With the exception of vehicles, records on property sold by the General Services Administration are maintained only on an overall volume basis in terms of original acquisition cost and proceeds by owning agency. To keep records in the detail necessary to provide the data requested in your letter of May 3, 1965, would, in our opinion, be prohibitive from a cost standpoint. During the 3-year period cited in your letter, GSA sold approximately 43,000 vehicles of all types, for which we received approximately $14 million. Enclosed is a listing showing, for each of the 3 years, the total number of vehicles sold by GSA and the proceeds received. The listing contains a further breakdown of this total to reflect the vehicles owned by GSA, those sold by GSA for the Post Office Department, and those which GSA sold for several other agencies. During the same period, a number of agencies, including the Department of Defense, sold their own vehicles, which are not reflected in these totals.

Our sales are conducted through our 10 regional offices and include all types and categories of property which become surplus or otherwise available for sale. Each year these offices conduct approximately 2,500 sales, resulting in a substantially larger number of individual contracts. At the conclusion of each

sale a report is received, but only on the total volume sold in terms of original acquisition cost and proceeds received. As a result, we do not have readily available the requested data on each type and class of vehicle and office equipment sold. Similar information by condition code would not be available as the latter is applicable only to the excess screening utilization program and not to sales.

To develop the detailed information on vehicles and office machines by types and classes would require a research of each sale case file and contract, which would be quite costly and require from 3 to 4 weeks. Therefore, we shall appreciate your further advice before proceeding with this task.

We trust, however, that the enclosed information on vehicles will be helpful to you.

NOTE. See appendix, p. 233, for further information on this subject.

NATIONAL INVENTORY CONTROL CENTERS

Mr. KNOTT. We are pleased to advise that GSA now has a National Inventory Control Center which gives us significant capability to manage stocks on a total system basis. During fiscal year 1966 we will fully automate this national center and such automation will improve the management techniques available for providing decisions more frequently and in a faster time frame. Long supply control and management through the use of automatic referrals to avoid repositioning of stocks and timely national demands analysis as well as automatic referrals of out-of-stock items for filling from national resources will be possible.