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rent fiscal year up through April. And we realized 13.1 percent on the usable and 1.5 percent on the scrap, sir.
Mr. HOLIFIELD. Very well. Let me ask you a question there.
If you had a plan which would allocate that $9,500,000 worth of material to private industry, giving them a chance to refurbish, or refinish, or renew these materials, would it be possible for the Government to obtain a better utilization and a better recovery?
Commander HEFFNER. Items that have any utilization at all, Mr. Chairman, are usually screened through Commander Barnett's shop. And if anybody feels
Mr. HOLIFIELD. Would you include in that area aircraft component parts and hardware?
Commander HEFFNER. No, sir. Just the common usage parts of aircraft components would be screened. The items peculiar to aircraft alone are not screened.
Mr. HOLIFIELD. What happens to them?
Commander HEFFNER. They are determined between the Navy and the Air Force whether or not they are required back and forth. If they are not, then they are sold right at the contractor's plant.
Mr. HOLIFIELD. And is that the element that you get a 13-percent recovery on, or 1.5?
Commander HEFFNER. The usable items, we get a 13-percent recovery on. But you must realize this, sir, that the acquisition is the only basis on which we can make our statistics. We will take an automobile, for example, that sold for $2,000. If we run it into a telephone pole and it is worth $10, and we still report it at $2,000, we may sell it for $10 as scrap. And our realization is very little.
Mr. HOLIFIELD. I realize that. But that is not an excuse for taking a bearing which cost $9, for instance, and getting 13-percent recovery on an expensive bearing that might, with a little refinishing, or proper identification, proper segregation, and so forth, be made usable for other parts of the industry.
Commander HEFFNER. That is true, sir.
Mr. HOLIFIELD. I happen to know that you are using the service. So I am not criticizing you on that point. But I am wondering to what extent you are using that service, how much of this material is going into scrap that could be refinished and used.
Commander HEFFNER. I might mention here, Mr. Chairman, that in 1951, the Navy had 12 sales of serviceable contractor inventory material. Now, these sales were made in New York, Philadelphia, and Los Angeles. In New York, 14 major aircraft manufacturers 'were circularized and no bids received.
In Philadelphia, as to the Philadelphia sales, six major manufacturers were circularized and one bid was received.
In Los Angeles, eight major manufacturers were circularized and one bid was received, which indicates that during this build-up time, when a little material is available, the aircraft manufacturers have not been using this as a means of obtaining material.
Mr. HOLIFIELD. Exactly, because it is inconvenient for them to do so. Commander HEFFNER. Yes.
Mr. HOLIFIELD. They would rather put orders with prime manufacturers and obtain it regardless of its cost.
Mr. BURNSIDE. Because there they are operating on cost plus.
to handle their business. The fact that you had no bids for this material does not necessarily prove that the taxpayer is receiving the benefit of an efficient method of redistribution.
Mr. BURNSIDE. I have one question right there.
Have you ever checked this scrap material, so-called scrap material, to see what it is used for?
Commander HEFFNER. What it is used for, sir?
Commander HEFFNER. We have what is called a scrap warranty in a sale which requires that the items that are sold as scrap actually are scrap
And up to the present time, sir, as of last week, all of our iron and steel scrap is being reported to the National Production Authority and is being allocated to the mills, and the aluminum out of aircraft scrap is being allocated through NPA and is going right to the smelters.
Mr. BURNSIDE. So there is no chance for that being used in private industry?
Commander HEFFNER. It is going right back to where NPA wants it for the national economy, sir.
Mr. HOLIFIELD. Are there any further questions?
Mr. BURNSIDE. Yes. I think it would be good for our record if each one of these gentlemen would tell of their background in each of these particular fields.
For instance, Commander Foley, you have been straight through in the service?
Commander FOLEY. Yes, sir, I have.
Mr. BURNSIDE. Admiral, you have, too? You have not been out in private industry for any length of time ?
Admiral HONAKER. That is right.
Mr. BURNSIDE. We will take the first commander here. What has been your time that you have given to this type of work? Has it been in this particular field, most of the time since you left the Academy! Were you in the Academy?
Commander FOLEY. Yes, sir.
Mr. BURNSIDE. And since you left the Academy, what percentage of your time has been given to this field?
Commander FOLEY. I spent 2 years as a line officer.
Commander FOLEY. Yes, sir; and supply school at Philadelphia. And since that time, I spent 18 months in disbursing duties and commissary duties, and since that time I have been in aviation work.
Mr. BURNSIDE. Have you been in aviation work for many years?
Commander FOLEY. No, sir. I have been pretty much around the clock, sir; that is, aboard ship, on a carrier, and an aviation supply
depot, on a staff, and the Air Training Command, and here in the Bureau of Aeronautics, sir.
Mr. BURNSIDE. Have you given much time to procurement?
Commander FOLEY. No, sir; I have not been in the procurement field as such directly, as far as making contracts. I have had some experience with surplus disposal as the supply officer in command of the Navy Supply Depot.
Mr. BURNSIDE. How long have you been in disposal?
Commander FOLEY. I have been in the Bureau of Aeronautics for approximately 21/2 years, and charged with the Bureau of Aeronautics policy on the disposal of surplus aeronautical material, and also 2 years in charge of an aviation supply depot. I was very much concerned with the field disposal of surplus property.
Mr. BURNSIDE. Have you any questions on that, Mr. Chairman.?
Commander BARNETT. My experience, sir, has consisted of 2 years as an instructor at the Naval Academy.
Mr. BURNSIDE. That is after your graduation?
Mr. BURNSIDE. So you went right into instructing?
Then I transferred to the Supply Corps, in 1942, sir. I assisted in commissioning the receiving barracks in Oakland, New Zealand, as supply and disbursing officer. I assisted in commissioning the advance supply depot in the Solomon Islands. I was supply officer of a cruiser; assistant supply officer at NATTC, Memphis. This was during the period 1945, 1946, and 1947. We disposed of quite a large amount of property during that period. That was a tour of duty that lasted 30 months. I was supply officer and later commandant at Argentia, Newfoundland, where we did have some disposal problems up there, routine field disposal problems. Then I have been on this present tour of duty for 2 years, sir.
Mr. BURNSIDE. And would they transfer you out after you gained this experience, or how many years after you gain this experience!
Commander BARNETT. I think that the average tour for a commander right now—the admiral probably can answer that better
Mr. BURNSIDE. Yes, I know.
Commander BARNETT. I think the average tour is about 3 years for a commander in the Bureau, sir.
Admiral HONAKER. That is right. And we have no present intention of firing Commander Barnett.
Mr. BURNSIDE. And your background, Admiral Honaker?
Admiral HONAKER. Naval Academy, 1926; destroyers, cruisers, battleships, supply and disbursing; then into finance, in 1942 setting up a field branch, Bureau of Supplies and Accounts at Cleveland; the new pay system; commanding officer of the naval supply depot and assisting in setting up the Navy Comptroller's Office last year, and I have been on this job 6 months.
Mr. BURNSIDE. That is all.
Mr. HOLIFIELD. The subcommittee wanted to ask you, Admiral, do you believe that a coordinated plan should be developed in which all the departments of Defense agree with there being a uniform way of handling this declaration of surplus, and in place of leaving it sectionalized in each department of the service, have it coordinated in some type of a central board for the purpose of clearing and screening?
Admiral HONAKER. I think the central agency is good, sir. Of course, we have it now. It is just a matter of what other materials we would want to put through there.
Mr. HOLIFIELD. You say you have it now?
Admiral HONAKER. No, sir. The Bureau of Supplies and Accounts has the responsibility now for the clearance of all surplus for the Department of Defense, and when Defense is through with it, we then clear it through General Services. They clear other departments, and then it comes back, and if they do not want it, it is then sold.
Mr. HOLIFIELD. So you might say that you are really operating at the present time as the central clearing agent for the three arms of Defense?
Admiral HONAKER. That is correct, sir.
Admiral HONAKER. We have an OSD delegation to carry on, sir. That is for all types of material, sir, and not aircraft or aeronautical alone. I think certainly there should be only one procedure for handling those materials. It would differ slightly by the category of material involved.
The difficulty here, as I see it, is that we would absorb the work of clearance with other Government departments which GSA now performs. Also I have just about 15 minutes—I understand that the transportation, packing, and handling of the materials under this plan would be borne by the owning service when they shipped to this corporation or to any sales agency. We have not budgeted for that, because we sell as is where is, and the buyer has to pay packing, handling, and crating costs, and the transportation from our activity to wherever it is delivered.
Mr. HOLIFIELD. Were the figures given by Commander Heffner, in your opinion, an accurate representation of your recovery on materials that are declared surplus?
Admiral HONAKER. Those are the figures that I have seen coming through the reports, sir.
Were your figures only for Air?
Commander HEFFNER. Yes, sir; contractor inventory which the Government has the responsibility for disposing of, sir.
Mr. HOLIFIELD. Do you ever at any time sell any of the contractorowned inventory?
Commander FOLEY. No, sir.
Mr. HOLIFIELD. Do you know how the contractor-owned inventory iş credited to their contracts? Is that a matter of adjustment between
what the contractor gets when he disposes of his inventory, or is he penalized if there is a loss in the disposal of his contract or inventory, or is it figured in on the contract !
Commander FOLEY. I believe, sir, that if it is a cost contract-your question was directed at me, sir?
Mr. HOLIFIELD. Yes.
Commander FOLEY. If it is a straight cost contract, I believe the contractor suffers for any misjudgment that he might have made in procurement for building an airplane. If it is a cost-plus-fixed-fee contract, I believe that the Government takes it over. But I believe that the cost-plus-fixed-fee contracts are not very frequent these days.
As I believe I mentioned, in the event of a termination at the convenience of the Government, the Government does assume responsibility for what portion of the inventory, of a contractor's inventory, may be caused by that convenience.
År. HOLIFIELD. That termination or change in engineering design? Commander FOLEY. Yes, sir.
I would like to say, sir, if I may, that the Bureau of Aeronautics does still have this APRA proposal under consideration. The Bureau certainly does not intend to imply that the plan is not worth studying that the Air Force has proposed. We realize that we have to have a coordinated plan, and we do not say, Mr. Chairman, that the plan under which we are now operating is perfect, by any means.
Mr. HOLIFIELD. Is there not an indication that the Air Force believes there could be a more efficient utilization of excess and possibly a better recovery from surplus disposal if peculiar materials and components of aircraft were declared directly to a special body capable of screening, and, also, that it would be better to get it back into the channels of trade through these merchandising agents?
Commander FOLEY. I believe so. I think the general mentioned the desirability of clearing up the contractor's plan of this material in order to permit him to utilize his additional space.
We do have, Mr. Chairman, some very fine comments from the service representatives as the result of the questionnaire that we sent out.
I might mention one in particular, if you are interested. That was the proposal of the supervisory inspector of naval material at Philadelphia, wherein he suggested the necessity for a law, possibly, to do this; but he proposed the permission being granted for the service representatives to sell directly to the prime manufacturer of the
particular item of hardware which was involved at a certain percent discount which this service representative stated had been done sometime during World War II with very great success.
I just bring that up, sir, to let you know that we have not closed our ears in the Bureau of Aeronautics to this thing.
Mr. HOLIFIELD. If I understand you on that point, you mean that you turned back to the bearing makers the bearings, and you would turn back to the hardware people the hardware ?
Commander FOLEY. Yes, sir.
Mr. HOLIFIELD. Did we not try that out in the machine-tool industry and was not the final conclusion of that that it was a mistake to give to the manufacturer articles which he had already manufactured for redistribution? It seems to me that we had quite a bit of experience which was disastrous.