Mr. KLAGSBRUNN. That is in a large measure for plant clearance. We have worked diligently with the Army and the Navy for the development of a plant-clearance and warehousing program, so that the plants, when no longer needed for war work, will not be cluttered up with termination inventory. The aggregate figures received to date from the Army, the Navy, and D. P. C. for warehousing requirements are a little over 25,000,000 square feet of enclosed space. First of all we will be storing property to get it out from the plants and, secondly, disposing of it from the warehousing centers.

In our program we have a very extensive scrapping and marketing service that we supply to the owning agencies such as the Army and Navy. They have been requested to notify us of the date of termination of a contract or earlier, if possible, and we would go in and advise them as to what property should be scrapped and marketed immediately as scrap, right from the contractor's plant, so that there will be no handling charges involved, and no storage needed for that scrapped material. Secondly, we advise them on pricing and methods of marketing termination inventories which they may dispose of during the 60 day period before the plant must be cleared. So that we get down to as small a residual inventory as we can for warehousing and disposal as surplus. These warehouse space estimates here are based on what will be required to house that surplus property which is left over after the owning agencies have completed their marketing activities.

Mr. WIGGLESWORTH. You have $35,000,000 here for warehousing, and $9,000,000 for freight and handling; but will not both of those figures depend on the over-all policy, and how much you junk and how much you do not junk?

Mr. KLAGSBRUNN. It will on the individual determinations. You see, whether or not property in one plant is junked may depend on what stage it is in in the course of manufacture. You see, we are dealing with many unknowns in this question, but this is based on the best estimates and the best experience we have had, and on the opinions of those who have dealt with the subject that we could possibly put together.

Mr. DIRKSEN. Does that include the building of warehouses and also the renting of warehouse space in bonded warehouses?

Mr. KLAGSBRUNN. No, sir; we are not contemplating renting any space in bonded warehouse, because the rental of that space comes very high. The $35,000,000 we have here is the operating cost of the warehouses. In addition there are, of course, in here about $3,500,000 being amounts equivalent to depreciation for the construction of warehouses and purchase of handling equipment.

Mr. DIRKSEN. It does not represent, however, the total cost of the warehouses?

Mr. KLAGSBRUNN. No, sir, it does not.

Mr. DIRKSEN. How much does that amount to? .

Mr. KLAGSBRUNN. These figures are from 10 percent to 16 percent, and the total warehouse space will come to about, as I said, 25,000,000 square feet, at about $1.25 per square foot. That is between $30,000,000 and $35,000,000.

Mr. DIRKSEN. Irrespective of whether it is a cost of $35,000,000, $40,000,000, or $50,000,000, what will be the source of those funds? Mr. KLAGSBRUNN. The Defense Plant Corporation.

Mr. DIRKSEN. The Defense Plant Corporation?

Mr. KLAGSBRUNN. Yes. The figure is between $30,000,000 and $35,000,000. That is the figure which I should have given you in the first place.

CONVERSION OF UNUSABLE AND DISCARDED PLANES

Mr. LUDLOW. You spoke about, as I visualize it, a rather extensive program of conversion of unusuable and discarded planes to usable planes. Have you any idea of the unit cost of conversion?

Mr. KLAGSBRUNN. No; we do not have that yet, sir. If I gave you the impression of the program as being very extensive and very costly, I did not present it correctly.

Mr. LUDLOW. I am not saying that it is going to be costly, as I do not know. I was trying to find out what your estimate of the unit cost is.

Mr. KLAGSBRUNN. We just do not know yet, because that is going to depend on the results of many of these checks that we are going to make.

ESTIMATED COSTS OF DISPOSAL AGENCIES

Mr. LUDLOW. This $60,000,000 is described as a token appropriation. How long do you think it would last? That contemplates, of course, coming back for a deficiency later.

Mr. MCNAMARA. We concluded that it would last at least 4 or 5 months, that is, at the rate of the estimates of the disposal agencies. Mr. LUDLOW. Going ahead at full steam it would run for 5 months? Mr. MCNAMARA. That is right.

Mr. LUDLOW. Has there been any contemplated break-down of allocations of this, or is that in the justification, Mr. McNamara? Mr. MCNAMARA. No. We have the estimates as to what it is expecred that each agency will require.

Mr. LUDLOW. You have it for the R. F. C. Can you give us the other break-downs of that?

Mr. MCNAMARA. I can give it to you in that form, Mr. Ludlow. Those are round figures, for the most part.

Mr. LUDLOW. I do not see any totals. It is totaled up here, is it? Mr. MCNAMARA. Yes, sir; it is totaled in the last column here. Mr. LUDLOW. Would you have any objection to that going into the record?

Mr. MCNAMARA. No, sir; I have no objection to it going into the record.

Mr. LUDLOW. Let us put that in the record, then.

(The matter referred to is as follows:)

Estimate of costs of disposal agencies (excluding expenses of Office of Surplus Property, Commerce Department) in the care, handling, and disposition of surplus property declared to them by other agencies

(Estimates have been reviewed by Surplus Property Board and, in some cases, adjusted downward)

Reconstruction Finance Corporation, 1946..

Maritime Commission.

War Food Administration.
National Housing Agency

Federal Works Agency 1.

1

$140, 000, 000 3,500,000 2, 000, 000 500.000 500, 000

1 No definite amounts were requested by these agencies but notice was given to Surplus Property Board that reimbursement of audited expenses would be expected from consolidated fund. Estimate of amounts made by Surplus Property Board.

Estimate of costs of disposal agencies (excluding expenses of Office of Surplus Property, Commerce Department) in the care, handling, and disposition of surplus property declared to them by the agencies-Continued.

Department of Interior...

Department of Agriculture (Farm Mortgage Corporation).
Foreign Economic Administration__

Reserve for future allotment (new disposal agencies and services of
other Government agencies and corporations in aiding disposal
program)

Total

Reimbursement to Government-owned corporations for 1944 and

1945 expenses..........

Total..

Requested in this estimate...

VALUE OF AIRCRAFT AND RELATED EQUIPMENT TO BE HANDLED FOR

DISPOSAL

Mr. TABER. You have on hand property that is supposed to have cost somewhere around $900,000,000, or $1,000,000,000 in aircraft and related equipment, have you not?

Mr. KLAGSBRUNN. Including nonsalable property, that is correct. Mr. TABER. Including nonsalable property?

Mr. KLAGSBRUNN. Yes, sir; that is correct.

Mr. TABER. Out of that billion dollars' worth of property at the present time, $850,000,000 to $900,000,000 is not salable?

Mr. KLAGSBRUNN. That is correct.

Mr. TABER. Now, you are anticipating that there will be turned over to you, in addition to that, $1,500,000,000 more ultimately of that same type of property?

Mr. KLAGSBRUNN. More than that, sir.

Mr. TABER. How much?

Mr. KLAGSBRUNN. Our own figures have been on the basis of about $1,000,000,000 of components alone for the fiscal year 1946. Colonel Harding gave you some more extensive figures on that.

Mr. TABER. Now, how much did you say you were figuring you might have?

Mr. KLAGSBRUNN. Our own figures have been based on about $1,000,000,000 in aircraft components during the fiscal year 1946, and probably close to that figure in the case of aircraft themselves.

Mr. TABER. And the aircraft components would probably be about 90 percent nonsalable, would they not?

Mr. KLAGSBRUNN. We made, as I stated, just a rank guess that we would hope, and, perhaps, expect to recover about $100,000,000 out of that billion, but that was based on no experience, and purely on guesswork at this stage.

Mr. TABER. Out of this $1,000,000,000 that you have now, how much of it is component parts, and how much of it is planes?

Mr. KLAGSBRUNN. Most of it is planes.

Mr. TABER. Only a little bit parts?

Mr. KLAGSBRUNN. That is correct.

Mr. TABER. And that is about all there will be until the final bust up, and in all probability that will amount to how much?

Mr. KLAGSBRUNN. We are advised by the Army and the Navy that very substantial amounts of components will be declared surplus

in the near future. They will be opening up certain pipe lines of goods and material and declaring it surplus in the near future. That will be spare parts and components of that sort, but we still have to get it.

Mr. TABER. Now, you have a picture where your gross cost to date has been about $3,000,000.

Mr. KLAGSBRUNN. About two and a quarter million on aircraft. Mr. TABER. Two and a quarter million?

Mr. KLAGSBRUNN. Yes, sir.

Mr. TABER. Have you inventoried all of these planes and parts that you have taken over?

Mr. KLAGSBRUNN. The planes have all been inventoried and the parts are in process of being inventoried.

Mr. TABER. And are pretty well in process of being inventoried? Mr. KLAGSBRUNN. Yes.

Mr. TABER. So that you have been able to inventory and look after a billion dollars' worth of property with two and a quarter million dollars, and for another $2,000,000,000 worth, or nearly $2,000,000,000 worth, with a possible recovery of $150,000,000, maybe, and that is a pretty liberal figure, is it not, you anticipate wanting in the neighborhood of $100,000,000 to handle it? That is a thing I cannot understand. It just does not go together with what looks like businesslike management.

Mr. KLAGSBRUNN. In the case of components what we have done to date is to undertake inventorying and marketing and merely meeting the quick demand. Ahead of us we have problems of segregation, marketing, and physical handling over long periods as distinguished from the short periods we have had to date in the handling of components. Then, as to the planes themselves, we have been fortunate in cutting our eye teeth on the most marketable of the planes, these personal type aircraft, which are exceedingly popular. We believe that the law of diminishing returns will operate as we go on with these other planes, and further programs of segregation and scrapping will have to be initiated.

COST OF SALES OF SURPLUS AIRCRAFT EQUIPMENT TO DATE

Mr. TABER. Now, according to this set-up, you have a total of reported items in March, and I do not know what they were in previous months, but probably not a great deal different, of a little under $100,000,000, and they average through the 10-month period declarations of $100,000,000. Now, you have handled all of that and moved a total of $15,000,000 worth, and kept up with the parade, as far as you could, on $2,250,000.

Now, to handle twice as much as that, it ought to take $4,500.000, according to my arithmetic. Now, I just do not see where the fault is in my arithmetic.

Mr. KLAGSBRUNN. Perhaps I could explain it thus: Under the Surplus Property Act, the Surplus Property Board was authorized to require the owning agencies to do all of the handling of surplus property until the disposing agencies could obtain the manpower and the materials and facilities to do it. These surpluses that have been declared are not at this time shipped to us. We have inventoried them. We have made some inspections of them, but they are still all being handled at the present time by the Army and Navy.

We are told that the disposing agencies must take over the physical handling of all of these surpluses in the near future, as soon as we can get the necessary manpower and materials to do it, which, in turn will save the Army and Navy from doing it. We propose to do so as soon as possible. All of this is in addition to the other factors that I have mentioned here and are expenses we have not had to date, and they account for the difference in our estimates that we have before you.

Mr. TABER. You mean you have not had any handling expense at all up to this time?

Mr. KLAGSBRUNN. We have had on aircraft, but not on aircraft parts. The aircraft are delivered to us, and we handle those.

Mr. TABER. How much have you realized out of the aircraft parts that have been disposed of, if anything?

Mr. KLAGSBRUNN. The sales have been negligible. I think they have not exceeded, according to my latest figure-they have not exceeded $20,000 or $25,000 on aircraft components.

Mr. TABER. So you have not any experience at all on that. That is purely a shot in the air.

Mr. KLAGSBRUNN. As I have stated, we have had no adequate experience yet on aircraft components.

POLICY, RE WAREHOUSING OF SURPLUS AVIATION EQUIPMENT

Mr. TABER. You are not going to be obliged to move these planes, or these parts out of the Army warehouses that they are now in, are you?

Mr. KLAGSBRUNN. Well, that question is up now for consideration. We are trying to determine first what should be scrapped, by broad categories, and beyond that determine what would have likely uses and how much of it we would be able to sell from the Army warehouses, so that we can both get those warehouses cleared and have a minimum of handling charges. Both the Army and ourselves are working busily on that. Some of those Army warehouses are in locations where they could be used for production, and there is a great demand for those facilities, to keep employment going in those communities. So, we feel that it is incumbent upon us to make some very early decision on that.

Mr. CANNON. And if you could do that accurately it would mean a great saving.

Mr. KLAGSBRUNN. Yes, sir; if we could do it only partially accurately it would still mean a great saving.

DISCUSSION OF WISDOM OF PROVIDING AMOUNT OF ESTIMATES

Mr. TABER. What you are asking us to do is to provide you with these funds as kind of a shot in the air. That is really about the size of it, without any idea of what it is to be used for, or whether you need it or not. That is about the picture; is it not?

Mr. LUDLOW. But they have to set up some sort of an organization to handle this.

Mr. TABER. This is really a shot in the air, is not that correct, without any idea of anything to go by?

Mr. CANNON. If you were in charge what would you do other than this?