STATEMENT-Continued

5. FUNCTIONS OF PROGRAM PARTICIPANTS

A. GSA: The basic function within the program is that of GSA, which— (1) Delegates authority to Air Matériel Command (hereinafter referred to as AMC) with power of redelegation to carry out their respective responsibilities under this plan.

(2) Contracts with distributors (agents) for such agents to effect distribution of matériel, either for use in available form, or as scrap, with compensation to be based upon sales.

B. Service representative:

(1) Action within the program will be initiated by the service representative at the plant level. In the course of general plant supervision, reports of available matériel will be made on appropriate forms. In this proposed program, only matériel considered by the service representative to have apparent use within the aircraft program will be reported pursuant to this procedure. Present existing reporting of all other matériel will be continued, and such matériel disposed of pursuant to existing directives.

(2) The forms will be prepared in triplicate. One copy will be sent to the service, and two copies will be retained by the service representative.

(a) If the service copy is not returned within 60 days from date of mailing, the service representative will send one copy of the form to GSA, after deleting therefrom all matériel shipped pursuant to service or Surplus Materials Division, Bureau of Supplies and Accounts, Department of the Navy (hereinafter referred to as SMD) direction, or direct sale arrangement.

(b) If the service copy is returned to the service representative within the 60day period, the retained copies will be conformed to the returned copy, by striking out the items deleted on the service copy, and one conformed copy sent to GSA.

(3) The service representative will pack and ship—

(a) Any matériel deleted from the service copy, as directed: (1) By the serv ice; (2) by SMD, or (3) upon direct contract sale, and

(b) All other matériel as directed by GSA, transferring accountability in accordance with existing directives. Shipment will be upon Government bill of lading except in the case of B (3) (a) (3) above.

C. USAF: The services, upon receipt of the forms, will screen the available matériel for any service use, will issue shipping instructions to the service representatives for all matériel accepted by the service, and will delete from the forms all matériel so accepted. The forms must be processed and forwarded to Redistribution Branch, Production and Resources Division, AMC, in 20 days from the date of mailing from the service representative. Existing service regulations will govern acceptance of this matériel.

D. Redistribution Branch:

(1) Upon receipt of the forms Redistribution Branch, Production and Resources Division, AMC, will

(a) Screen reported critical shortages against the available matériel shown on such forms;

(b) Advise the contractor reporting such shortages of the availability shown on the forms, and request the contractor to obtain the matériel directly from the reporting facility; and

(c) Strike from the forms the items on which advice has gone to the contractor, unless definite notice is received that the matériel is not desired by the contractor reporting the critical shortage.

(2) Not more than 5 days after receipt the Redistribution Branch, Production and Resources Division, AMC, must forward the forms, processed as above, to SMD.

(3) Redistribution Branch, Production and Resources Division, AMC, will, with the authority of GSA

(a) Coordinate functions of GSA and agents through appropriately located personnel. (b) Use GSA and agents to relieve critical shortages from warehoused matériel.

E. SMD: The functions of SMD will be as directed under Department of Defense conservation, utilization, and disposal policy memorandum dated March 14, 1951. All matériel for which shipping instructions are issued by SMD shall be deleted from the forms, and the forms returned to the service representative at the plant reporting the matériel.

(1) The total time from date of mailing forms from Redistribution Branch, Production and Resources Division, AMC, to the return of such forms, processed by SMD, to the service plant representative, shall not exceed 20 days.

(2) SMD will issue to the services and other governmental agencies such directives as are necessary to carry out this function.

F. GSA:

(1) Forms received by GSA from the service representative shall be processed by GSA in accordance with its determination of proper procedure, provided, however, that:

(a) Matériel reported on the forms shall be further reported to the agents, with instructions that GSA is to be notified within 5 days which items agents desire to accept. Within 10 days from the date of the receipt of the form GSA must supply the service representative with shipping instructions for all matériel reported.

1. Matériel requested by an agent may be shipped directly to that agent. 2. All other matériel must be received by GSA into storage reservoirs and held for possible acceptance or sale.

(b) Records of receipts must be kept, and reviewed periodically.

(c) All matériel held by either GSA or any agent for more than 6 months from date of receipt shall be reviewed to determine whether such matériel should be scrapped or salvaged or held for further periods. After consulting with an Industry Advisory Committee and obtaining approval from GSA it shall be determined either to

1. Declare the matériel to be scrap or salvage, or

2. Hold the matériel for a fixed period of time, not to exceed 6 months, and if not sold within such additional period it shall be declared scrap or salvage. All scrap arising under this program shall be sold by GSA or the agents pursuant to GSA regulations in effect at the time it becomes available for sale.

(2) GSA shall have basic responsibility, in its own functioning, and that of its agents, to-•

(a) Receive, review, and select all matériel for redistribution from service representative lists.

(b) Receive, count, and identify all matériel shipped.

(c) Maintain adequate stock records and handle all accounting and recording of matériel for the Government.

(d) Maintain adequate sales staff and accounting procedures (agents).

(e) Preserve and/or package for storage all matériel received.

(f) Reinspect, as required, matériel in storage over extended periods.

(g) Catalog and distribute lists of all matériel available for sale.

(h) Maintain approved inspection and quality-control procedures.

(i) Package and preserve for shipment all matériel sold.

(j) Charge for and collect on all sales, assuming all liability of credit sales. (k) Reimburse the Government on all sales.

(3) Financing for GSA will be supplied by GSA.

(4) GSA will act as an agent of the Government and will hold all matériel as agent for the Government, picking up accountability for all such matériel on behalf of the Government.

G. Agents:

(1) Agents shall be selected by the authority and with the approval of GSA and the coordination of Redistribution Branch, Production and Resources Division, AMC, from recognized industry representatives. Such agents shall have the qualifications and be subject to the controls set forth in paragraphs 6 (A) and 7.

(2) Agents' functions shall be those set forth in paragraph F (2) above, subject to the control of GSA.

(3) Agents shall act as agents of the Government, holding all matériel as such and picking up accountability for GSA.

6. QUALIFICATION AND COMPENSATION FOR ALL GSA AGENTS

A. Agents: The success of the program depends upon the qualification of the agents. The following qualifications are suggested, neither inclusive of all qualifications nor essential to each agent selected. Consideration must, however, be given to the sum of these qualifications in passing upon each selection:

(1) A history of business continuity of not less than 5 years in distributing or manufacturing the specific aircraft matériel for which he is applying.

(2) Financial responsibility evidenced by a listing with a recognized creditreporting organization.

(3) Adequate warehouse facilities and experienced personnel. (4) Approval of (3) by an inspection team from the services. Agents are to be compensated on a percentage basis, depending upon sales actually made. Basic compensation should be expected to run about twice the normal distribution discount for the particular matériel. For example, the normal current aircraft fastener distributor discount is 15 percent. Agents should receive 30 percent of the sales price of fasteners sold hereunder with appropriate adjustments for joint sales, sales to self, and scrap sales.

7. CONTROL OF AGENTS ACTIVITIES

A. Primary responsibility: The primary responsibility for activities of the agents shall be in GSA, and GSA shall delegate to Redistribution Branch, Production and Resources Division, AMC, such coordinating functions as may be required.

B. Pricing: GSA will be responsible for price policies for all sales hereunder, subject to applicable OPS directives. It is intended that, as a safeguard, agents will be required to sell reported matériel accepted by them at not less than the lowest price for the same commodity in the same quantity to the same class of purchase as is currently quoted in writing by a reputable manufacturer of the matériel.

8. CONCLUSION

This proposal is designed to accomplish the purposes set out above, using to the maximum degree personnel experienced in the field of distribution of aircraft matériel. The utilization of GSA as more than a mere bookkeeping agency is intended to assure continuity of operation of the program. On the basis of past experience, it is recommended that privately owned and operated organizations (agents) with experience in the field be changed with the operational functions of the program. It is recognized that under existing directives the legal authority of GSA to appoint agents may not be clear. Under such circumstances necessary authority and clarification must be sought. It is further recognized that this proposal deals with only a small segment of redistribution of excess matériel, and therefore, it is desirable to point out the fact that implementation of any additional segment of Government excess inventories could be handled within this general proposal without any major changes or modifications.

Mr. HOLIFIELD. Thank you, General, for this presentation.

Do the members of the subcommittee have any questions at this time to ask the general? Any further questions? If not we will recess until 2 o'clock this afternoon in this room.

(Whereupon, at 11:45 a. m., a recess was taken until 2 p. m. of the same day.)

AFTERNOON SESSION

(The subcommittee reconvened at 2 p. m.)

Mr. HOLIFIELD. The subcommittee will be in order.

FURTHER STATEMENT OF BRIG. GEN. KERN D. METZGER, CHIEF, INDUSTRIAL RESOURCES DIVISION, AIR MATÉRIEL COMMAND, AND CHAIRMAN OF AIRCRAFT PRODUCTION RESOURCES AGENCY; ACCOMPANIED BY MAX GOLDEN, DEPUTY FOR MATÉRIEL PROGRAMS, OFFICE OF UNDER SECRETARY OF THE AIR FORCE

Mr. HOLIFIELD. General Metzger, there are a few questions which I desire to ask you before we release you for the day.

What is your estimate of the amount of excess aircraft materials, which is now in evidence in these different areas of inventory?

General METZGER. Our estimate of Government-owned surpluses in the hands of our contractors is approximately $10,000,000 in value at this time.

Mr. HOLIFIELD. Is that raw material?

General METZGER. Purchased parts.

Mr. HOLIFIELD. Component parts?

General METZGER. Component parts, hardware, and raw materials. That is also over and above our termination inventories, which have not been developed at this point, inasmuch as termination action, partial or complete, is a very recent action.

Mr. HOLIFIELD. You have not reached that point in aircraft production yet where there is a great number of contract terminations? General METZGER. No, sir, we have not.

Mr. HOLIFIELD. But you will reach that point very soon, will you not? Many of the contracts that are now under construction will reach the point of termination?

General METZGER. No, sir; we do not contemplate that. It depends entirely upon the program, our procurement program. We feel at this time that the program will support very generally inost of our present procurement.

Mr. HOLIFIELD. I did not mean a final termination of the program. I meant termination of individual contracts and shifting to different types of planes, and so forth.

General METZGER. That shift is always under way, depending upon the change in our requirements and the planning of the Joint Chiefs of Staff. We do not, however, to answer your question directly, anticipate any large number or dollar value of terminations in the near future.

Mr. HOLIFIELD. Does your reference to the dollar value of matériel include raw materials—and I speak of raw materials in the sense of plate aluminum and copper tubing-and that type of thing? General METZGER. Yes, sir.

Mr. HOLIFIELD. As well as the manufactured parts?

General METZGER. Yes, sir.

Mr. HOLIFIELD. Are most of these materials of aircraft quality? General METZGER. Yes, sir. All are of aircraft quality, but may have some usefulness and acceptance in other production.

Mr. HOLIFIELD. Now, you are making efforts to redistribute these materials at the present time, of course?

General METZGER. Yes, sir; through the prescribed procedures and channels.

Mr. HOLIFIELD. But that redistribution has not been as effective because of the delay inherent in the present system?

General METZGER. That is correct, sir.

Mr. HOLIFIELD. And this new plan that you propose you think would speed that up?

General METZGER. I think it will speed that up. It would certainly prevent a pyramiding of surpluses, that is, the quantities to increase, which I certainly do not want, and it also will provide us, in our service stocks, which may be surplus or obsolete, with a merchandising organization to dispose of them.

Mr. HOLIFIELD. I believe you testified this morning that you thought that if experts in the handling of aircraft materials, either

in the raw material stage or in component parts, were employed to do this redistribution throughout the aircraft program, they would do a better job than leaving it to the individual services? General METZGER. I believe that, sir.

Mr. HOLIFIELD. Now, in the handling of these materials, I believe you further stated that you thought that people in private industry who had developed services and particular skills and particular knowledge would be more efficient in that redistribution than, for instance, a Government agency such as the War Assets Administration was before?

General METZGER. I certainly do feel that; yes, sir.

Mr. HOLIFIELD.. Do you think it is necessary to have legislation in order to get around the present methods of disposal of property through competitive bidding and spot sales, the type that is allowed at present? As I understand it, this APRA plan would envisage almost a consignment program.

General METZGER. That is correct.

Mr. HOLIFIELD. On the part of the Government, to these private industry people who would redistribute?

General METZGER. That is correct, sir.

Mr. HOLIFIELD. Now, is it your opinion that the present laws are inadequate to enable the Government to do that?

General METZGER. I believe that our present laws should be clarified. Now, the interpretation placed upon the powers of GSA may determine that the present responsibilities and authorities of GSA are sufficient to make those consignments. In our recommendation, of course, we propose to utilize the responsibilities and powers of General Services Administration to accomplish this consignment.

Mr. HOLIFIELD. On that point, do you believe that the General Services Administration should effect this redistribution through contracts with private firms rather than through their own allocation -set-up?

General METZGER. I certainly do feel that there should be a contractual relationship between GSA and the recommended distributors. Mr. HOLIFIELD. How could we insure fairness to industry in that type of arrangement? Would such a private firm be inclined to play favorites, or do you believe that you could get a private firm that would be objective enough in the initial allocation of these materials to agents to do the job thoroughly and objectively?

General METZGER. I believe that the agents are properly qualified and of a caliber and stature▬▬▬

Mr. HOLIFIELD. I am speaking about the organization that does the distribution to the end agents.

General METZGER. I believe that that organization should be GSA. Mr. HOLIFIELD. It should be GSA rather than a private firm?

General METZGER. I certainly do think so. And we in the Air Force-and I am sure those in the aircraft industry-will be very happy to recommend or to help review the qualifications of any of the agents who would be under consideration by GSA.

Mr. HOLIFIELD. You know that in the old program of aircraft agents, the title to the property was held in the Government's hands. General METZGER. Yes.

Mr. HOLIFIELD. Would you anticipate the transfer of title to agents?