8. Conservation Engineers, Inc., with approval of the designated agency of the Government, will select agents and enter into contracts with said agents to handle the materials of categories (a), (b), and (c) of paragraph 5.

9. The selected agents will operate on a percentage basis, depending on volume of sales and the normal percentage of profit allowable to sales of like material.

NOTE.-Inasmuch as economy of operation will contribute to the eventual success of the program, it is anticipated that costs of both Conservation Engineers, Inc., and/or its agents will not exceed 40 percent of the market value of matériel affected.

Due to the experimental nature of a conservation program such as this, it is suggested that, for the immediate present, action be confined to the Los Angeles-San Diego areas.

Detailed operating procedures will be made available upon approval of this plan.

Mr. HOLIFIELD. We thank you very much.

Mr. WOOD. Thank you.

Mr. HOLIFIELD. We will next hear from Colonel Carey of the Air Parts, Inc., at this time.

Identify yourself for the record.

STATEMENT OF JOHN H. CAREY, AIR PARTS, INC.,

GLENDALE, CALIF.

Mr. CAREY. My name is John H. Carey, and I represent Air Parts, Inc., of Glendale, Calif.

Mr. HOLIFIELD. Mr. Carey, have you had an opportunity to see the proposal of the Air Force that was presented to our subcommittee this morning?

Mr. CAREY. I have not seen a copy of the proposal, but I think it was pretty well reviewed here today and, perhaps, I could discuss it in whatever fashion you would wish.

So far as I can see, the only change in the old one and the new one was to substitute General Services Administration for corporation X, I think. Otherwise, it seems to me that it is practically the same.

Mr. HOLIFIELD. It has this chart in the presentation, with corporation X, whereas the Air Force had General Services Administration this morning.

Mr. CAREY. That is right.

Mr. HOLIFIELD. Apparently, the rest of the old one is the same as the new one. Would you care to testify on this plan as presented this morning, and your opinion as to the relative value of the plan as presented this morning and as presented before when a private corporation was given the task of screening and allocation?

Mr. CAREY. Yes; I would be happy to give you whatever I have there.

Mr. HOLIFIELD. You might tell the committee whom you represent. You gave the name, but what is that business?

Mr. CAREY. We are aircraft distributors within the aircraft industry, and have been for the last 21 years in this very business of supplying

Mr. HOLIFIELD. All kinds of aircraft parts?

Mr. CAREY. That is right.

Mr. HOLIFIELD. And you are agents for the manufacturers?

Mr. CAREY. We are distributors for Goodyear and Champion spark plugs, and so forth.

Mr. HOLIFIELD. You also obtain material on these surplus sales? Mr. CAREY. Yes; that is something we dislike. Frankly, we dislike to obtain materials that way, because we do not believe that the Government is getting the substantial return that the Government should get if those materials were properly channeled through industry, through the people who are doing it now, and have been used to doing that sort of job for a profit all of these years.

And now we feel that in the interest of the Government that material would bring a considerably better return if it should be so channeled, rather than through these big sales.

We do it; we do it because we have to.

Mr. HOLIFIELD. You are not advocating its going back to the manufacturer, but you are advocating that it go to a distributor who is experienced in the field of merchandising?

Mr. CAREY. That is right.

I heard the testimony of the gentleman from the Navy where they had had $12 million worth of this material. They had bid sales. In one instance, they had 20 or 30 of these announcements that went out and they received one bid. On another occasion they received no bid. On another one they received one bid.

You cannot sell that material that way. You have to have men calling day after day, consulting with these people who need the material. You have to give them the benefit of your advice. You have to give them the benefit of the adaptability of the material and things like that. You cannot just sit back and write a letter or write an announcement and that sort of thing and sell it.

Mr. HOLIFIELD. Is it not true that the Navy in that type of disposal is using exactly the type of disposal that the War Assets Administration used in making a list of material and asking for people to come in and bid on it?

Mr. CAREY. That is right. Of course, the War Assets Administration had a dual method of disposal. One was by bid sales of that nature on which the recovery was little or nothing, as the Navy has said, 112 percent of Government cost. And, on the other hand, they did dispose of materials through an agency plan.

Mr. HOLIFIELD. The aircraft agency?

Mr. CAREY. That is right. An aircraft-distributor plan. However, it had many weaknesses.

This plan now, if properly administered, should prove to be a plan that has taken advantage of all of those mistakes that were made in that period.

As Mr. Priest said, one of the main points that should be stressed is to have distributors who are reputable, people who are reputably recognized in the business, and people who are not junk dealers and that sort of thing.

Then you will get the proper return. Not only that, but you will get the proper sales effort in that field.

Mr. HOLIFIELD. How would you suggest that this material be made available to qualified distributors-on the basis of a consignment with title remaining in the Government, accountability to the Government made on much the same basis as the previous aircraft-agency contracts were?

Mr. CAREY. I think that the Government should retain title to the material. It belongs to the Government. I think they should retain title.

I notice in this plan-that is, the former plan-that distributors would be consulted as to what of the material they would like. That is just one point there.

I think that the distributors would be very pleased to offer their facilities for all of the material and let them screen it for quality control and that sort of thing.

My thought is that you have a big problem; you have all of this material; that, while the baby is young, the baby is growing very, very fast. And, while you have all of that material, if the distributors are going to just select what they would like out of it, you will still have a problem. You will have a problem with the remainder, the rest of it. I think it would be much better for the distributors in a class to take components, for instance, that they would accept, and have them screen them and list them, identify them, all of these things that are necessary, prepare them for storage, and that sort of thing all of the material, not just the residue, or leave the Government with the residue, because I think that is very important, because you want to dispose of all of this material. And I think in that way you will get a more complete coverage there.

Mr. HOLIFIELD. Would you suggest breaking the materials down into classifications such as Mr. Priest suggested, consisting of five or six or seven classifications?

Mr. CAREY. I think that they should be broken down to the point that they are broken down in the plan, at least, with raw materials and hardware and bearings and materials of that nature.

The components can consist of propeller parts, propellers, landing gears, gear parts, and that sort of thing.

Components is a pretty general classification, but there are people who have been in this business who are used to handling that general group of components.

Mr. HOLIFIELD. For instance, there are specialists in bearings and in propellers?

Mr. CAREY. That is right.

Mr. HOLIFIELD. And in engines?

Mr. CAREY. Yes. Some distributors are qualified to handle all of the components generally; but, when it comes to bearings and hardware, that is rather specialized.

Mr. HOLIFIELD. Have you thought that through on the problem that we had before of the determination of material to be either usable or scrapped, and the safeguarding of the Government in regard to such declarations of scrap as we had experience with before?

Mr. CAREY. Yes, sir; I have. It is my thought, frankly, and I would like to see APRA take the place of corporation X.

Mr. HOLIFIELD. In other words, the representatives of the Defense Establishment to take the place of corporation X, so far as the declaration of usable and scrap material is concerned, or for the whole operation of allocation?

Mr. CAREY. The allocation, too. I would suggest that in that APRA group there would be a board consisting of a member of the Air Force, or two members of the Air Force, a member or two members of the Navy, a member or two members of General Services Administration, because they have a definite interest in this thing, and, also, two representatives of industry, top-level people, and I mean top-level people there, who would determine those things.

That is, matters of appointment of agents, matters of allocation of materials, and matters of scrap.

There would be no scrapping without proper authorization by all qualified; at least, to be directed by a qualified board that you could

trust.

Mr. HOLIFIELD. In other words, you would envisage setting up a definite standard of qualification for these agents?

Mr. CAREY. That is right.

Mr. HOLIFIELD. And then opening up the material for distribution to any private enterprise that could qualify under the standards set up by this board which you mention?

Mr. CAREY. That is right; of course, that would depend largely the volume of the material that would be allocated.

upon

Mr. HOLIFIELD. Of course, you recognize the problem we face on that. We would face the problem of charges of favoritism in allocation and all of that sort of thing, unless it was made in such fashion that that material was offered to them on a bid basis or on some type of consignment which would be fair to all comers.

Mr. CAREY. You could probably do it that way, but I do think that in industry, if we are going to do the same job in industry, we would select the people that we thought were better qualified to handle the job. We do not have the problem that you have nationally in that respect.

Mr. HOLIFIELD. We Congressmen have a political problem, Mr. Carey, of some firm in our district that feels they are highly qualified and should be on that list. That is one of the things we have got to consider, you know, in setting up any type of operation like this.

Mr. CAREY. There is no one better qualified to know that than I in that job that I had there with the War Assets Administration, but I am thinking about the best way of doing it. That is what I would do if I were confronted with this problem. I would pick not too many. I would pick the number that I thought was necessary to handle the job and pick the very best people in the field. I know it is difficult.

Mr. HOLIFIELD. Every junkman envisions himself as a tycoon of industry and fully qualified.