Assets Administration where we operated with the services where withdrawals were made by the services from our Government-owned stocks, that materials were being sold on bid sales that were needed by the maintenance divisions of another branch of the service. That has been my own personal experience.

Mr. HOLIFIELD. Well, the chairman can supplement that experience by one of his own. I was notified that a certain type of propeller was being offered at a ridiculous price at Kelly Field, and I took the matter up with the General Services Administration. The General Services Administration got in contact with the field in Texas that was offering these propellers, at bid sales, and stopped the sale, because it was on the wanted list of the Air Force at that particular time. This happened some 2 or 3 years ago. Of course, I cannot testify as to the extent of that sort of thing, but I know of that one instance.

Mr. TANSEY. I do know this, that in our operation for the refurbishing of bearings which is a very critical part at all times and extremely so today, I have been told that on certain line items they have as much as a 50-year supply, based on current usage.

At a meeting that we held with the Air Force and discussed the possibility of refurbishing bearings in the Air Force inventories that same statement was made, but no definite period of time was stipulated. There were excesses.

Aircraft material being so highly specialized will deteriorate, and it is to the advantage of everybody concerned that these materials be redistributed properly and as rapidly as possible. And, certainly, if they are not going to be redistributed at the very moment that they are received they should be maintained properly. We know there are many distributors who are highly qualified to carry out that job. We know of no other method by which that job can be carried out.

We have here an Air Force directory of facilities approved for automatic source inspection which is the terminology for surveillance inspection. A firm such as ours has been delegated the authority because of performance and inspection standards to act for the Air Force.

We put our inspection stamp on a part going out to an airframe manufacturer and it is the equivalent of an Air Force inspector's standing over the inspector's shoulder.

In order to earn that we have had to develop test equipment that was not available. We have spent many, many thousands of dollars in creating inspection standards, warehousing standards, maintenance standards with the result that the Air Force and the airframe industry trust the integrity of companies such as ours. And there are many companies such as ours in this. They do so to where they will accept that material without question.

In accepting that material they, of course, pay aircraft standard prices which we would receive if we went out and paid $18,000 for this $200,000 inventory, or whether we have this material on consignment from the Government.

Mr. HOLIFIELD. You would receive the standard market value?
Mr. TANSEY. That is correct, sir.

Mr. HOLIFIELD. If it was not your own material, if you had not bought it at bid sales, and if it had been transferred to you for sale, what would be your charge to the Government for handling it?

Mr. TANSEY. Well, during the last program we were one of the original agents under the Metals Reserve Murray Cook program. The fee we received was 30 percent, and that was increased to 40 percent and ultimately to 42 percent.

Mr. HOLIFIELD. Of acquisition cost?
Mr. TANSEY. Of selling cost.

Mr. HOLIFIELD. Of the selling cost?

Mr. TANSEY. Of the selling prices, because the acquisition cost, while it may be indicative, is not factual, depending upon the quantities.

Mr. HOLIFIELD. Changes in the market value, too?

Mr. TANSEY. Changes in the market value, and depending upon the quantity of material that an airframe manufacturer or even the Government may have purchased. If they purchased less than mill production run it costs them more.

Mr. HOLIFIELD. Do you testify that in the handling of that type of material the Government received a higher return, the taxpayer re- ceived a higher return on the recovery than through the bid sale arrangement?

Mr. TANSEY. I will swear to that. I know that during the time of the Metals Reserve, on materials that we sold, we returned to the Government approximately 66 percent of their acquisition cost. The acquisition costs were based on the accountability which we had to accept upon the receipt of the material. Actually, it was 70 percent of current market prices.

Mr. HOLIFIELD. And you sold not only back to the Government, but you sold also to private industry?

Mr. TANSEY. We sold to the airframe industry.

Mr. HOLIFIELD. Do you believe there is a failure at the present time to effciently redistribute excess materials among the aircraft manufacturers?

Mr. TANSEY. Among themselves?

Mr. HOLIFIELD. Yes.

Mr. TANSEY. Very definitely there is a failure. I would say you have to temper that. They are selling some material among themselves, but generally speaking, neither the airframe industry, nor the Government is equipped to render a distribution service such as qualified distributors are. There is a time element involved. We know that we ourselves, in order to build some of our customer requirements, must purchase or do purchase from idle and excess inventories. The length of time that it takes to route that material out of a warehouse, if it is there, after it has been purchased, is just impractical. It becomes very unwieldy.

The same thing applies even to Government, if you are able to get material out of the Government warehouses, a specific item. They are not equipped for it. The intent is there, certainly, but the performance cannot come up.

Mr. HOLIFIELD. How do these excesses accumulate?

Mr. TANSEY. Well, generally, they accumulate because of engineering changes, design changes, in some instances the necessity of the airframe manufacturer being required to buy a mill run when he just needs a few pieces. And, currently, of course, the flattening out of the production program, the extension of the production program.

Mr. HOLIFIELD. Would an airframe manufacturer ordinarily accumulate that material if it was Government-owned for credit at the termination of his contract, leaving it idle rather than to bother with trying to declare it and get it used by other airframe manufacturers? Mr. TANSEY. That would be hard for me to answer, Mr. Chairman. The only thing that I can say along those lines

Mr. HOLIFIELD. I am seeking to know what the present method is of handling this excess, because until the subcommittee knows whether the present method of redistributing excess is expeditious as a method, we cannot very well understand the problem.

Mr. TANSEY. The information that I have is that the procedure is something like this: Upon the generation of excesses which are Government-owned they are to report those excesses on a list to APRA at Wright Field. APRA then has the list screened by the various military services. Upon receipt of any requirements they notify the airframe manufacturer, the contracting officer there, to ship them the material required.

After that procedure APRA will then relist this material and send it out to some 500 airframe manufacturers and their subcontractors who, in turn, will screen the list against any known requirements they have.

Mr. HOLIFIELD. How do they buy that, at what price?

Mr. TANSEY. That would be hard for me to say, but I know that we have purchased materials from airframe manufacturers at any where from 40 percent of acquisition cost to 100 percent of acquisition cost, depending upon who you are dealing with, but the thing that comes about in these listings and screenings is the loss of time, for when an airframe manufacturer needs a part especially in small quantities he needs it today, and unless that part is available and especially in the hands of the distributor, it does oftentimes happen that there is a line shut down. So having these parts go through screening processes, listing processes, is not only costly, but time consuming. It does not add anything to the value of the part where needed.

Mr. HOLIFIELD. What do these inventories generally consist of? Mr. TANSEY. Well, they consist of raw stock, fabricated parts, instruments, engines, engine parts, propellers, allied parts-in general just aircraft.

Mr. HOLIFIELD. Are there companies in existence that specialize in divisions of this inventory, such as hardware and components or bearings or raw stocks?

Mr. TANSEY. Very definitely, Mr. Chairman.

Mr. HOLIFIELD. And they specialize, and some of them handle maybe all of these things, but there are breakdowns in the industrynormal breakdowns of specialists in each field?

Mr. TANSEY. Yes, sir. For instance, our company specializes in bearings and hardware or fastenings. I know of other companies who specialize in parts. That might be just a part of their business, but they are certainly specialists in that particular phase of it.

Mr. HOLIFIELD. If an efficient redistribution program was effected between this three services what would be the immediate benefit? Mr. TANSEY. Well, you would have accelerated plant clearance. Mr. BURNSIDE. You would get storage clearance, too.

Mr. TANSEY. That is what I am talking about.

Mr. BURNSIDE. You would not be short of all of the storage that the General Services Administration is trying to get for the services. Mr. TANSEY. We have ample storage.

Mr. BURNSIDE. You think that the Government has ample storage now?

Mr. TANSEY. I cannot tell you that.

Mr. BURNSIDE. I was thinking that it would clear the storage space now that the Government is quite short of.

Mr. TANSEY. That is correct. It would effect things such as this where an airframe manufacturer is asking for 12 pieces or 5 pieces or 500 pieces of a part to where they could get the part rapidly, if it was at all available. It would certainly alleviate the labor situation. It would bring a larger return to the Government. And it would handle aircraft material as aircraft material should be handled.

Mr. BURNSIDE. We had one statement from one of the witnesses yesterday that this was holding up a large amount of aluminum. Does he mean the raw aluminum? How is it holding up the aluminum? Mr. TANSEY. Yes, sir; he means raw aluminum. I have another inventory list here.

Mr. BURNSIDE. How would that be effected?

This

Mr. TANSEY. This is illustrative. Here is a list of steel. incidentally came from the A. C. Spark Plug people who are subcontractors to the airframe industry. Here are excesses in varying quantities. We have stainless steel of all types.

Mr. BURNSIDE. Is it necessary to keep that in stock like in the stockpiling program?

Mr.TANSEY. I do not follow your question.

Mr. BURNSIDE. You said you had a lot of excess steel there, stainless steel and aluminum. Is it the desire of the Government to keep that in stock like we have stockpiled so that they could put it into use for making new parts immediately?

Mr. TANSLEY. I do not think that would be the correct term, Mr. Burnside, because, for instance here

Mr. BURNSIDE. That is accumulating in the raw?

Mr. TANSEY. In the raw and at a distributor's plant.

Mr. HOLIFIELD. This material has been offered for sale?

Mr. TANSEY. Yes.

Mr. BURNSIDE. Offered for sale?

Mr. TANSEY. Yes, sir.

Mr. BURNSIDE. What about stockpiling? Are we not trying to stockpile those things?

Mr. TANSEY. I do not know.

Mr. HOLIFIELD. We are stockpiling certain raw materials, it is true, but these materials that are offered may be fabricated.

Mr. BURNSIDE. He said raw.

Mr. TANSEY. This is absolutely raw material, Mr. Chairman. I would like to point this out. You might read some of these. Here we start off with steel spring strip, 292 pounds; music wire, 902 feet; type 303 stainless steel rod, 50 pounds.

Mr. HOLIFIELD. That bears out what I said, it is odds and ends of fabricated materials. It is fabricated to certain specifications, is it not?

Mr. TANSEY. This is specification material; that is right.

Mr. BURNSIDE. It is not in the raw.

Mr. HOLIFIELD. We are not stockpiling specification material.

Mr. TANSEY. When you used the word "fabricated," it comes to my mind at being a part.

Mr. HOLIFIELD. "Processed" would probably have been a better word. It has been processed from the pig state to a specification state.

Mr. TANSEY. That is right; to a size and diameter.

Mr. BURNSIDE. Does the Government acquire some of that or require some of that type of material on hand for these manufacturers, so that in case of immediate orders, in case of attack, they could use it— is it an advantage to have it in that state?

Mr. TANSEY. Well, that would be a hard question to answer, Mr. Burnside.

Mr. BURNSIDE. I am just wondering if it is a policy of defense to have backlogs of that kind of material.

Mr. HOLIFIELD. There is no policy at the present time for stockpiling any type of processed or fabricated materials that I know of. Mr. BURNSIDE. Would you know about that type of question?

Mr. PETERKA. I know the answer to that. The Government does not stockpile that type of material for availability to aircraft manufacturers. They do stock it for their own use in maintenance and repair, but they do not stock it otherwise.

Mr. BURNSIDE. They would have that back in Government storage depots?

Mr. PETERKA. They would have it in their shops for maintenance and repairs, but not for the purpose that you brought up.

Mr. BURNSIDE. Thank you.

You would say this would be really a drag on the market or a drag on the space?

Mr. TANSEY. This material is in excess to the manufacturers' requirements. There is no question in my mind that it is needed and can be utilized at other aircraft manufacturers' plants.

Mr. HOLIFIELD. It is a matter of getting this excess from one spot where it is excess to the spot where it is in short supply?

Mr. TANSEY. That is correct.

Mr. HOLIFIELD. And you maintain that only specialists in the aircraft industry can perform that function and perform it quickly and efficiently?

Mr. TANSEY. That is correct, sir, very definitely, because with materials such as this the identity must be maintained.

Mr. HOLIFIELD. I would like to question you on that. Do you find there is a great confusion in identification at the present time of bearings and other materials, due to different methods of identification?

Mr. TANSEY. Of course, you have got to bear in mind that a standard part number is a standard part number if so utilized. A great number of airframe manufacturers use their own numbers. I think they are getting away from that quite a bit today. You will find manufacturers nomenclature listed as a part.

Mr. BURNSIDE. Is there an effort right there to use the new Government catalog?