Section 10 (b) imposes on the departments and agencies complying with the Commission's directives responsibility for all expenses and charges connected with the storage and shipment of Government-owned machine tools.

Section 12 states that the act shall take effect immediately.

The War Department is opposed to S. 1609, in principle, because the creation of a separate agency to dispose only of surplus machine tools is inconsistent with the basic policy of the Department that one central agency should handle the disposition of all surplus property. If there is justification for a Federal Machine Tool Commission, there is equal justification for a separate commission for each category of surplus property. A number of disposal agencies, each separately created in a particular statute, each with its own policies, rules, and regulations, will inevitably cause conflicting policies and administrative confusion. The War Department should not be forced to run the gantlet of a long line of agencies and commissions in order to dispose of its surplus property.

In general, S. 1609 conflicts with the following principles which the War Department considers essential to the sound operation of a central agency:

(a) Surplus property would be defined as including all real estate and improvements thereof, all industrial materials and equipment, all military supplies and equipment, and all items of scrap and salvage, which the Department reports to the central agency as no longer required to meet the needs of and responsibilities vested in the War Department.

(b) The War Department would not declare as surplus any real estate, plant, industrial materials, or industrial equipment needed for its own operation (including reserves and stand-by facilities and equipment) or in the operations of contractors or subcontractors engaged in war-production, items which may be disposed of as a part of contract terminations under policies established by appropriate authority, items of property held overseas which are determined by appropriate authority as desirable for disposal there and not for return to the United States, nor any items of property required for such relief measures as are necessarily a part of military operations.

(c) The War Department would report promptly to the central agency such items as become surplus under the above definition. The central agency would thereupon take possession, accountability, and full responsibility for any further maintenance or utilization, removal, protection, storage, sale, or other disposition of the property, the central agency to consult with the Department as to disposition of any property of special military significance. The Department would retain the right to remove and store materials and equipment which must be promptly removed from its own premises or those of its contractors or subcontractors to permit immediate conversion of such premises to other uses, if and when the central agency was not prepared to move and store such property. The central agency would be authorized to utilize existing War Department facilities for the conveyance of title to surplus real estate and improvements thereof.

(d) The War and Navy Departments would retain for the duration of the war the right to exchange stores and property as they may determine necessary in prosecuting the war.

In particular:

Section 4 is objectionable in that it vests in the Commission sole and conclusive authority to make the initial determination which machine tools are surplus. The War Department feels that it must have authority to determine what is surplus to the needs and functions of the Department. In last analysis, responsibility for national defense is lodged with the War and Navy Departments; such responsibility cannot be exercised fully and properly, if an outside agency is permitted to say which facilities or which tools are no longer needed for war production and for national defense.

Section 5 (a) contains the confusing language that all tools specially manufactured for the production of military "equipment and which the Commission shall find are not readily replaceable from the open market" shall be retained or redistributed among Government agencies as the Commission shall prescribe, such machine tools to be retained no longer than 20 years. Does this mean that a machine tool cannot be retained if the Government can buy another in the open

market? Does it mean that, no matter how unnecessary the tool, it cannot be disposed of, if the tool cannot be readily replaced from the open market? Must a tool be sold at the end of 20 years, no matter how excellent the tool and regardless of the tool's condition?

Section 5 (b) states that the Commission shall not allocate or dispose of Class A or class B machine tools to Government arsenals, navy yards, maintenance and repair facilities, shore establishments, and similar installations until the Commission first determine that the total is superior in design or condition to the tool it is to replace. This is open to the same objection as section 4: The Department must be the final judge of the design and utility of a machine tool used in war production. Moreover, enactment of such legislation would allow the disposal agency to interfere in questions which are primarily matters of internal management.

It is considered that the preference established in favor of veterans and the extension of credit to veterans, in section 5 (c), are not proper subjects of legislation in such a bill. It is suggested that a carefully worked-out program of aid to veterans, embodied in a comprehensive statute, would be sounder legislative policy that the sum total of piece-meal measures such as that set out in section 5 (c). So far as the preference is concerned, the War Department agrees with the purpose of fostering sales to veterans, but the provision is couched in mandatory language which would make administration impracticable; such a requirement would be expensive, burdensome, lead to delays, and deprive the agency of the discretion and flexibility essential to efficient management. So far as extension of credit is concerned, it is thought that credit functions belong in a separate agency. Similarly, it is believed that the extension of credit to small metal-working concerns provided in section 5 (c) should be handled as a problem of industrial reconversion in general and not as an adjunct of property disposition. In any event credit should not be limited to certain classes of purchasers, since a credit arrangement may be just as desirable for nonpreferred purchasers as for preferred purchasers.

The definition of a "smaller metal-working concern" in section 5 (c) as "any independent, unaffiliated manufacturing enterprise" is inadequate, unless the terms "independent" and "unaffiliated" are qualified.

Section 5 (d) gives the Commission powers over local education hitherto unenjoyed by any such Federal agency. It is, at least, questionable whether the Federal Machine Tool Commission should have authority "to prescribe suitable terms and conditions concerning the scope, character, and duration of the courses to be given" in every public school anxious to use surplus machine tools.

Section 5 (e) allows the disposition of tools to friendly nations and their nationals if authorized by a license from the State Department, but no standards fr the issuance of a license are provided in the bill.

It is pointed out that section 5 fixes an inflexible priority in favor of (1) Government agencies, (2) small metal-working concerns, (3) public schools, and (4) friendly nations. The bill makes no provision for the acquisition of surplus machine tools by anyone else, notwithstanding a prospective purchaser's need for such tools in reconversion and notwithstanding the fact that the very tools sought to be acquired may have been employed by the purchaser in his contribution to the prosecution of the war.

Under section 6, the existence of the Commission is limited to 3 years following the termination of hostilities and, within 60 days after the final report, all machine tools remaining on hand shall be broken up and sold as scrap. It is suggested that this may be a rash and radical rule to lay down. In view of probable needs for war reserves, as well as other important considerations which may exist, it is not considered advisable to legislate an inflexible provision for scrapping all surplus tools on hand at any specified time in the future. Provisions as to accountability in section 10 (a) and other sections appear to be unnecessary in the light of existing laws relating to accountability.

Section 10 (b), making the individual agencies responsible for all expenses and charges connected with storage and shipment of any Government-owned tool runs counter to the War Department's concept of a disposal agency. The

central agency takes and disposes of the surplus property; the central agency should be responsible for storage and shipping charges.

As worded in section 12, S. 1609 takes effect immediately upon enactment. In order to preserve the War Department's present authority to dispose of property in furtherance of the war effort, it should be made clear in S. 1609 that prior to the termination of hostilities, nothing therein contained shall alter or amend the existing disposal powers of the War Department. Even after cessation of hostilities, the War Department must have final authority to determine what is surplus to the needs of the Department. The Bureau of the Budget advises that there is no objection to the submission of this report.

DEAR SENATOR REYNOLDS: Reference is made to your request of February 3, 1944, for comments on S. 1680, a bill to provide for disposition of surplus war materials. The War Department is opposed to the enactment of this bill.

The bill relates to the disposition of all kinds of surplus property except land, buildings, or other real property, and provides that at the end of every 60-day period each Government agency shall transmit to Congress a detailed report on the amount of materials it has determined to be surplus, and that thereafter each agency shall proceed as quickly as possible to dispose of such surplus. The bill states that before disposing of surplus property each agency must circularize the other agencies to determine whether the property can be utilized by them. It is then stated that the agency holding the surplus property may assign it to any other governmental agency that may apply for it.

The bill also states that if no other agency is interested in the surplus property it shall be sold at a public sale to the highest responsible bidder after public advertisement. It is specifically provided that no property shall be disposed of at a price less than the cost to the United States of acquisition of the property.

The principal objections to the bill are (1) that it does not set up adequate administrative machinery to handle the problem of disposing of surplus property, and (2) that the price restriction contained in the bill prohibiting sales at less than the cost of acquisition, is impracticable and unworkable. The bill contemplates that excess materials will continue to be held in the possession of the procuring agencies and that disposition of the property will be made by them. The real need is for a central agency to take possession of surplus property and assume accountability and responsibility for maintenance, utilization, storage, and disposition of the property. It is not enough to require an agency to report surplus property, circularize other agencies before disposing of such property, and sell the property at public sale to the highest bidder.

One of the most important aspects of the surplus property question is the impact which release of a vast amount of Government-owned property will have on the civilian economy. The position of the War Department is that war materials can be infiltrated into our national economy with a minimum of disruption to the price structure and to independent business enterprise, if over-all supervision in accordance with uniform policies can be exercised by a central disposal agency. A central agency for the disposal of surplus property has been set up by the terms of Executive Order No. 9425, and this agency, or some agency similarly constituted, is best equipped to supervise the disposal of all surplus property. The proposed bill would, in effect, allow each agency to dispose of surplus property as it sees fit, except as to price. The inevitable result

will be lack of uniformity of policy among agencies, dumping where prices permit, mounting stocks where prices do not permit, and competition among Government agencies resulting in lower realizations to the Government and discrimination among purchasers.

Another important objection to the bill is the fact that restriction to sales at prices not less than cost is impracticable. The character of war production makes it inevitable that many items will cost far more to produce than they could possibly be worth for civilian use. When, as a result of changes in war strategy or improvements in weapons and matériel, contracts are changed or terminated or supplies on hand are rendered surplus or obsolete, many articles will have little use in their existing form. Many items will not bring their original cost because they were made for a specialized purpose not existing in general commerce, or were made of more valuable materials or required more precise and careful workmanship than are necessary for equivalent items in normal civilian use.

No good purpose would be served by holding and storing highly specialized items of property which can never be sold for a price equal to their cost. In fact, considerable harın can be done to the productive capacity of the Nation if material that could be used to meet post-war production demands is allowed to lay idle because it will not bring a price equivalent to its cost of production.

During the war the handling of surplus property is vitally related to war production. It is necessary for the War Department to utilize its manpower and its facilities to the maximum extent on matters directly related to the prosecution of the war. Any diversion of its personnel or facilities to storage and maintenance of surplus property, not salable because of a price restriction, would have an adverse effect on the performance of the procurement program.

The War Department is unable to estimate the fiscal effect of enactment of S. 1680.

The Bureau of the Budget advises that there is no objection to the submission of this report.

Sincerely yours,

HENRY L. STIMSON,
Secretary of War.

Hon. ROBERT R. REYNOLDS,

Chairman, Committee on Military Affairs,

DEPARTMENT OF COMMERCE, Washington, February 21, 1944.

Senate Office Building, Washington, D. C.

DEAR SENATOR REYNOLDS: This is in response to your request of February 3, 1944, for an expression of my views on S. 1680, a bill "To provide for the disposition of surplus war materials."

Section 2 of the bill requires, within 60 days of its enactment, a report to the Congress by the head of each agency of such war materials as are determined "to be surplus to its present and future needs," and further provides for the disposal of such surpluses "as rapidly as possible" under the provisions of the bill. I believe that it would be impossible in the time specified to determine the materials which would be surplus to future war requirements. Also, the rapid sale of tremendous quantities of surplus materials, as contemplated by this section of the bill, would be highly dangerous to our national economy. Established trade channels, especially small-business enterprises, might be injured beyond repair, and industry seriously handicapped in its effort to reconvert to peacetime production. Employment problems thus would be unnecessarily aggravated. Section 3 of the bill requires each agency, after an effort to determine possible use of its surpluses by other Government agencies, to sell at public sale to the highest responsible bidder, but in no event at a price which is less than the cost to the United States of the acquisition of such material. While it is necessary that the financial interest of the Government be protected to the extent possible, it is believed that in many instances materials produced at high cost under the pressure of war requirements could not be sold by the Government without loss.

This would certainly also be true with respect to used materials. It would appear, therefore, that although section 2 provides for rapid disposition of materials the provisions of section 3 actually would operate to freeze the bulk of surplus materials now in the custody of the various Government agencies. In view of the above, I cannot recommend enactment of the bill.

MY DEAR MR. CHAIRMAN: The bill S. 1680, "To provide for disposition of surplus war materials," was referred by your committee to the Navy Department with request for a statement of views with respect thereto.

The purpose of the bill is to require each Government department, establishment, or agency to transmit to Congress, within 60 days after the date of enactment of the bill and every 60 days thereafter "a complete and detailed report” showing the amounts of war materials in its custody or under its control which are determined by the head of the agency to be surplus to "its present and future needs." The bill broadly defines "war materials" to include any Governmentowned supplies, equipment, materials, or other tangible property other than real estate, acquired, held, or utilized for military or other purposes "directly or indirectly related to the war effort and suitable or adaptable for civilian use." Upon reporting to the Congress, each agency would be required to proceed as rapidly as possible to dispose of the surplus war materials so reported. Before disposing of war materials, the agency would be required to circularize other agencies and to assign the war materials to any agency applying therefor.

Section 3(b) of the bill would require that any war materials not assigned to other agencies shall be sold by the agency having custody or control, at public sale to the highest responsible bidder, upon such terms and after such public advertisement as may be deemed in the public interest, but no such material shall be disposed of at a price which is less than the cost to the United States of the acquisition of such material.

Section 4 of the bill would require that all proceeds of sales made pursuant to the provisions of the bill shall be deposited in the Treasury of the United States to the credit of "Miscellaneous receipts" and a full report thereof shall be submitted annually to the Congress.

The definition of war materials contained in the bill is imprecise insofar as such materials are to be suitable or adaptable for civilian use. Almost any

personal property acquired by the Navy may be adapted to civilian use, although the degree of adaptability would vary. Certain types of property, if scrapped, could be adapted to civilian use. Presumably, “civilian use" would include industrial use, but such is not clear from the bill and on the whole the definition needs considerable clarification.

The requirement that property be sold at competitive bidding at an amount not less than the price at which the material was acquired by the Government is particularly objectionable. This requirement of competitive bidding, with no authority to negotiate sales to specific purchasers, would nullify the present existing authority of the Navy Department to dispose of property where it is most needed to facilitate the prosecution of the war. Apparently, section 3 (b) of the bill would eliminate the Navy Department's authority under the First War Powers Act to sell property to contractors and others when necessary to facilitate the war, because the bill would require that the Navy Department dispose of "surplus" property only in accordance with its terms.

The absolute necessity that the Navy Department retain authority to dispose of property freely during wartime is set forth at some length in the letter of the Secretary of the Navy to the chairman of the House Committee on Expenditures in the Executive Departments, dated March 31, 1943, with reference to the bill H. R. 1610. A copy of that letter is enclosed.