15 SEPTEMBER 1987′′

Mr. JONES. For 1983 we requested $862 million spending authority. For fiscal year 1984 we requested $313 million.

Mrs. LLOYD. I know that the President in his statement of April last year said that the administration would rely primarily on strategic stockpile as the primary means for providing for national defense objectives. If he is really serious about this, Mr. Jones, why isn't GSA asking for more funds for implementing the President's policy?

Mr. JONES. I think what you are asking, ma'am, is why has not an appropriation been sought so that we are not funding the program with the disposals, and the only answer that I have been able to achieve is that these are policy decisions and that the presence of the overwhelming deficit we are currently facing has the decision

Mrs. LLOYD. When the President is making our national defense more of a priority with the 14-percent increase in the defense budget, and he is stating the strategic stockpile is the primary means of providing national defense objectives, it seems to me that is pretty important to the President, this administration. Do you not agree?

Mr. JONES. I am sure that is the case, ma'am.

Mrs. LLOYD. Let me ask you a hypothetical question. On the premise that nothing would change the organizational handling of the stockpile, including your agency committee, except that the personnel working on the stockpile would report to a single boss in the Department of Defense, would you object to this transferwould your objections be the same?

Mr. JONES. Yes, they would, maʼam.

Mrs. LLOYD. For what reason would they be the same?

Mr. JONES. Well, as I stated initially, it is my opinion and the opinion of the people that work in my service, that it is wrong to join together the policy functions and the marketing, buying selling function, because you create an atmosphere where there is a likelihood of conflict of interest in the dealings that are necessarily done by the policy people.

Mrs. LLOYD. Mr. Jones, I said if nothing, if they had the inneragency committee, except both of you would report to one single boss; I said, would you object to it under those conditions?

Mr. JONES. Yes, I believe if you got a single boss running both sections of the stockpile, it is our opinion that you create a situation which would give rise to a conflict of interest.

Mrs. LLOYD. On another subject, Mr. Jones——

Mr. BENNETT. Would you yield?

Mrs. LLOYD. I yield.

Mr. BENNETT. The Department of Defense acquires hundreds of billions of dollars of airplanes, ships and everything else, dealing directly with the people that provide. Why would you single out this particular thing as being particularly heinous?

Mr. JONES. Well, it is the opinion of Mr. Kulig, Mr. Knowles, and other people of my staff, in discussing just this, what results if we merge the two branches and what was

Mr. BENNETT. You realize most of the procurement in the Department of Defense is done that way. The airplanes are bought from airplane companies and ships are bought from Todd Ship

building and so forth like that, so the vast majority of funds that are appropriated that come to the Department of Defense do come the way in which you object. Maybe there is some argument to what you have said. It is of course not applied to anything else in the Government as far as I know. I don't know of any other Government agency that splits itself away from where it procures. I mean policy is decided in the Department of the Interior to have a park, and they acquire the land, either by condemnation or what have you, they don't have another agency after they decide to have a park acquire the land.

Mr. JONES. They ought to have our inspector general.

Mr. BENNETT. Well, they all have, every agency has an inspector general now. I think your argument has some merit to it. I think, however, it has to be looked at in the context-a vast majority of expenditures of all agencies are made contrary to that sanitation. Mr. JONES. Well, Mr. Chairman, I think that one thing is underlying all of the activities, the legislative activity, surrounding the stockpile, this year and last year. Last year, Senator Humphrey, over in the Senate had a bill in to create a stockpile commission with five commissioners, making it a very high level sort of thing. It all boils down just to the one underlying thing, money.

Mr. BENNETT. I did want to pursue that conflict of interest thing because I did see an analogy between this and all the other procurements by all other branches of the Department. Nobody else has this isolation. I guess we should throw away such an isolation, for whatever value there is in it. We are trying to acquire some of those commodities that are needed. I am sorry I interrupted you so much.

Mrs. LLOYD. I just have one final question for Mr. Jones.

It is my understanding that GSA is entering into a program to upgrade manganese and chromium ores, now in the stockpile, to ferromanganese and ferrochrome.

Mr. JONES. That is correct.

Mrs. LLOYD. How do you intend to carry out this program, is it going to be a direct procurement or is it competitive?

Mr. JONES. It will be competitive under the authority of the General Services Administration.

Mrs. LLOYD. Would you elaborate on your procedure.

Mr. JONES. I would ask that Mr. Kulig, who is on my left, since that particular transaction falls under stockpile management, to address the specifics of our plan.

Mr. KULIG. Would you like to go into how we are proposing to do this?

Mrs. LLOYD. Yes.

Mr. KULIG. As Mr. Jones pointed out, we intend to do this under a competitive procurement which I have to say is one of our more difficult procurements the last few years, because of the peculiarity of the directive. However, we intend to take what we call a twostep approach to this procurement. The first of the two steps would be go out with a solicitation, identifying those industries who have now or have had a demonstrated capability for this particular upgrading technique. After those companies were reviewed by our staff in-house, we would then go out with a second step, which would in effect be the actual conversion program itself. The com

modities or the two commodities in question together are located in approximately 27 States around the country. Because of the nature of the two ores in discussion here, we have two industries in question-it is our intent to take the country, if you were to look at a map of the country, and to divide that country into sectors, and allow the qualified participants to bid on one sector, a number of sectors, or the program in its entirety. The reason we do that, the reason we took that approach, is the number of sites on which we have the commodities located and the firms in general are located such that we probably incur a horrendous transportation cost if as an example we took a commodity which is located in Nevada and had it transported across the country to New York, had it processed there and reshipped to another location. For openers this was an exercise in keeping the transportation costs to a minimum, also giving an opportunity to more firms around the country to participate in a spirit of the directive to go into this program.

I might add that from a material handling standpoint, you have an approximate reduction program of 2 to 1, what I mean it takes 2 pounds of ore to get you 1 pound of upgraded ore in that equation, the total tonnage that you have is significant and you will have a material handling program which will likely require double handling. The source of the material, the site at which it is presently located, will not be the site to which the upgraded ore is returned. The reason being that once the ore is converted, it now has a different function or has a different life identification and will go to different locations to a firm or the proximate of a firm who will then be able to take that ore and use it for its ultimate objective. Mrs. LLOYD. Thank you very much.

PREPARED STATEMENT OF CARROLL JONES

Mr. Chairman and members of the Subcommittee, I am Carroll Jones, Commissioner of the Federal Property Resources Service in the General Services Administration (GSA). On behalf of the Administrator, Mr. Gerald Garmen, I wish to thank you for the opportunity to appear today to testify concerning H.R. 33, which would transfer the National Defense Stockpile to the Department of Defense.

GSA opposes the enactment of H.R. 33. We believe that the bill would (1) unnecessarily disrupt stockpile management functions, (2) destroy the present balance between policy and management responsibilities, and (3) concentrate stockpile authority in one stockpile-user agency, possibly to the detriment of other potential users. Section 6 of the Strategic and Critical Materials Stock Piling Act, as revised in 1979 by Public Law 96-41, grants to the President the authority to manage the National Defense Stockpile. Executive Order No. 12155 delegates that authority to GSA, where the responsibility for stockpile management has resided for the past thirty years. While the authority to designate appropriate commodities for the stockpile has frequently been passed among agencies, GSA has been acquiring and disposing of stockpile materials since the Korean War. GSA now has over three decades of experisence in all aspects of stockpile management, including the storage, inspection, maintenance and protection of the materials.

Mr. Chairman, the question of stockpile management is addressed in a report on the bill which became Public Law 96-41. The report which you submitted on behalf of the Committee on Armed Services states that “industry and other Federal agencies have applauded the GSA stockpile management." (Report No. 96–46, p. 5). In view of GSA's long experience and excellent record in managing the stockpile, we believe the transfer of those responsibilities to DOD or any other agency would hamper stockpile operations and, thus, be detrimental to national security.

Stockpile transactions, especially those involving international contracts, frequently require long periods of time for planning and negotiation. Even the reassignment of GSA's stockpile personnel along with the transfer of functions to DOD would not eliminate the inevitable disruption of both ongoing and future stockpile