The Bureau of the Budget advises that there is no objection to the submission of this report. Sincerely yours, HENRY L. STIMSON, S. 1815. TO PROVIDE FOR DISTRIBUTION OF SURPLUS WAR MATERIALS THROUGH DOMESTIC LEND-LEASE TO STATES AND THEIR POLITICAL SUBDIVISIONS AND INSTRUMENTALITIES THEREOF Will C. Clayton, Administrator, Surplus War Property Adminis tration. Hon. ROBERT R. REYNOLDS, OFFICE OF WAR MOBILIZATION, Chairman, Committee on Military Affairs, United States Senate, Washington, D. C. MY DEAR SENATOR REYNOLDS: By letter dated March 31, 1944, you have requested the views of this Administration with regard to S. 1815-to provide for distribution of surplus war materials through domestic lend-lease to States and their political subdivisions and instrumentalities thereof. The principal purpose of the bill is to require that surplus war property, if not needed by any agency of the Federal Government, shall be disposed of to State governments or subdivisions or instrumentalities thereof by grant or loan whenever it can be used for various public purposes specified in the bill. This subject is certainly one upon which the will of Congress should at some appropriate time be expressed by legislation. Congress may well feel that State governments and other tax-supported institutions should have preferential rights as to the acquisition of surplus war property. Such preferential rights, if granted, could involve a prior right to purchase before commercial buyers were given an opportunity or, in addition, could involve a reduction in price or even an outright gift. Unless guided by an expression of congressional intent, this Administration would, if course, be in no position to go any further than to give tax-supported institutions a right to purchase, ahead of commercial purchasers, at the same price at which transfers could be made between agencies of the Federal Government. If any price reduction or gift is to be involved, such a policy can only be enunciated by Congress. Since any such legislation involves a potential loss of revenue to the Federal Treasury, the desires of Congress should be expressed in the clearest terms. For instance, if it is desired that surplus Government property should be given to tax-supported institutions, this should be clearly stated. The term "grant or loan" in the bill would appear to present a difficult problem for any administrator in this connection. In addition, it should be noted that numerous suggestions have been made, both in and out of Congress, as to various classes of prospective purchasers or donees of surplus property to whom Congress might deem it desirable to grant preferential rights of one sort or another. Among these may be mentioned returning veterans, prior owners of land acquired by the Government for war puposes, educational institutions, charitable institutions, and the like. It would seem impossible to administer any system of preferential rights which Congress may desire unless their relative priorities and the nature of their preferential rights are clearly set forth by legislation. For that reason, among others, this Administration would prefer to see legislation on the subject of the disposition of surplus war property deferred until time and experience have enabled it to make intelligent legislative recommendations on the subject. The proposed bill exemplifies a second reason why it would seem preferable to handle the subject of surplus property disposal in a single comprehensive piece of legislation. If orderly disposal is to take place, it should be supervised by a single agency which can deal with all of the complex problems involved rather than by separate agencies handling different but related parts of the problem. In other words, whatever agency Congress chooses for the administration of surplus property disposition on a policy level should be given full jurisdiction and responsibility. S. 1815, in setting up an agency to deal only with the distribution of surplus property to State governments, their subdivisions and instrumentalities, would appear to depart from this principle. The Bureau of the Budget advises me that it has no objection to the submission of this report. United States, Senate, Washington, D. C. DEAR SENATOR REYNOLDS: The War Department is opposed to the enactment of S. 1815, Seventy-eighth Congress, a bill to provide for distribution of surplus war materials through domestic lend-lease to States and their political subdivisions and instrumentalities thereof, on which you have requested an expression of its views. The purpose of the bill is the establishment of a temporary agency to be known as the Surplus Property Administration under the direction of a Surplus Property Administrator appointed by the President and confirmed by the Senate, having jurisdiction over the disposition of surplus tangible personal property owned by the United States, which was acquired, held, or utilized for military or other purposes related to the war effort, such property being described in the bill as "war materials." This measure relates to surplus personal property only. It is believed that any central agency established for the disposition of surplus war materials should have jurisdiction over all surplus property, both real and personal, in order that policies and procedures governing the sale or other disposition of such property may be properly coordinated. This is particularly important with respect to Government-owned war-production plants which contain large quantities of machinery and other equipment. Proper disposition of such plants in the best interests of the Government would seem to require that the central disposing agency possess power and authority to dispose of the personal property in a particular plant, together with the buildings and other parts thereof, where disposal of the entire property as a unit could be accomplished to better advantage than by separating the machinery and other equipment from the real property. There no doubt are many other situations in which control of both surplus real and personal property should be centralized in the same agency in order to accomplish satisfactory results. By section 4 of the bill, each Government agency having custody or control of war materials would be required to transmit to the Surplus Property Administrator detailed schedules of property determined to be surplus to the needs of the agency, whereupon the Administrator would determine the classes and amounts of such property which can be disposed of and would direct transfer thereof to him. The bill does not indicate the procedure or the authority for making determinations that property is surplus. This Department believes that legislation on this subject should provide clearly that such determinations shall rest solely in the agency having the right of possession and control of the particular property involved. Although section 4 provides that the Surplus Property Administrator shall determine the classes and amounts of surplus property which can be disposed of in the manner provided in section 5 of the bill, and that he shall direct the transfer of such property to him, the bill is silent as to what disposition shall be made of property reported to the Administrator as surplus but which cannot be disposed of in the manner provided for in the bill. Apparently the bill contemplates that the procuring agencies will dispose of surpluses, but only after waiting for an unstated period until the Administrator makes a determination as required by the bill. This would leave in the hands of the various agencies of the Government for indefinite periods large quantities of surplus materials which could not be of use by the agencies or for the purposes specified in section 5 of the bill, and which would eventually have to be disposed of. Section 5 provides for disposition of surplus war materials by the Administrator; first, to other Government agencies having need therefore, and, secondly, upon an equitable basis "through domestice lend-lease by grant or loan to public agencies, whenever in his opinion such war materials can be utilized for purposes of soil conservation or other form of land improvement; flood control, construction, improvement, or maintenance of roads, highways, or streets; public health, or other public purpose useful and beneficial to the people of the United States." It is believed that a system of preferential distribution of surpluses would create seriously burdensome delays and administrative difficulties. Moreover, the limited authority contained in section 5 is regarded as too narrow to be of use in the solution of the problem of disposing of surplus war materials. If a central agency of the kind contemplated by the bill is to be established, it is believed that such agency properly should be given plenary authority over and charged with the responsibility for the disposal of all surplus property in accordance with policies established by the Congress. Any lesser authority or responsibility would accomplish only a partial solution of the problem of disposing of surplus property. Under section 7 of the bill, the transfer to the Administrator of control without custody of surplus property is contemplated, the agency which retains custody being required to protect, maintain, and manage such property until the Administrator assumes custody or otherwise disposes of the property. This Department believes that the entire responsibility for the possession, storage, maintenance, security, and handling of surplus property should be fixed in the disposal agency and that the other agencies should be relieved of a burdensome and continuing responsibility which is unrelated to their regular functions and duties. Accordingly, this Department does not feel that enactment of S. 1815 is desirable. The War Department is unable to estimate the fiscal effect of enactment of this measure. 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. S. 1893 (TITLE III) (NEW VERSION OF S. 1823). TO PROVIDE FOR THE ESTABLISHMENT OF AN OFFICE OF WAR MOBILIZATION AND ADJUSTMENT, AND FOR OTHER PURPOSES Hon. Henry L. Stimson, Secretary of War. Hon. JAMES E. MURRAY, Chairman, War Contracts Subcommittee, MAY 4, 1944. Committee on Military Affairs of the United States Senate, DEAR SENATOR MURRAY: The War Department has given consideration to the provisions of S. 1823, a bill "To establish an Office of War Mobilization and Adjustment." The provisions of title IV of the bill deal with surplus war property disposition. Provision is made for the establishment of a Surplus War Property Administration, headed by an Administrator and a board upon which are included representatives of 14 specified agencies and the 9 members of the National Production-Employment Board. The addition of the members of that Board to a body already large could not fail to impair its usefulness. In general the provisions of title IV fail to accomplish the primary requisite of any legislation dealing with the subject of surplus war property disposition in that they do not contain any clear grant of authority to dispose of surplus property. The proposed legislation contents itself with the enactment of certain restrictions and the promulgation of certain policies. It is believed that a basic grant of authority is needed, especially in view of the fact that some of the legislation under which disposition or surplus property is now being made is of limited duration. This title is likewise objectionable in that it fails to reserve to the contracting agencies power to dispose of termination inventory and to make any disposition of surplus property which in the judgment of the agency is required to facilitate the prosecution of the war. Unless the power to make such disposition is reserved the prosecution of the war would be impeded, and termination settlement greatly delayed. It is likewise believed desirable that any pending legislation should clarify the relation of the contracting agencies and the disposal agencies and should indicate that the disposal agencies have responsibility to take physical possession of surplus property at the request of the contracting agencies. The legislation is likewise defective in failing to define surplus property as property declared surplus by a contracting agency. The absence of such definition may create confusion and be harmful to the efficient conduct of the war. Section 403 of the proposed enactment contains what appears to be an iron-clad proviso requiring surplus war property located outside of the United States or to be disposed of outside the United States, to be assigned for disposition to the Foreign Economic Administration. It is believe that this provision may interfere with military operations overseas and may prove otherwise impracticable. Section 405 imposes upon the Director of the Bureau of the Budget the duty to receive and review the property requirements of Government agencies for the purpose of acquiring such property in their behalf from surplus stocks. This would see to require screening by the contracting agencies of their entire program with the Bureau of the Budget and would seriously impede the procurement of the necessary munitions of war. Section 406 imposes on each disposal agency the responsibility of organizing advisory committees and in this respect seems to duplicate facilities already available within the War Production Board. Section 407 requires circularization prior to disposition of any surplus property of detailed inventories thereof to the Bureau of the Budget, the Smaller War Plants Corporation, and the Foreign Economic Administration. This is believed to be impracticable. Furthermore, this section appears to authorize the Bureau of the Budget to acquire property on behalf of the War Department and to commit its appropriations. The War Department does not believe that the Bureau of the Budget should be given operating powers of this description. Section 408 contains provisions restricting the disposition of surplus property. Paragraph (a) requires all disposition to be made after advertisement and competitive bidding unless the head of the disposal agency certifies that disposal by some other means would better effectuate the policy of the act. Paragraph (b) prohibits sale or other transfer of surplus property unless the disposal officer certifies in writing to certain findings as to the economic effect of the sale or transfer. Paragraph (c) prevents the disposition of a plant or group of plants representing a cost to the Government of $5,000,000 or more until an opportunity is afforded the Attorney General to render an opinion on the subject. Paragraph (d) requires that every contract for the disposition of a plant shall reserve to the Government the right to rescind the contract in the event that the transfer fails to maintain the plant in operation for 3 years. Paragraph (f) requires the disposal officer to notify the Smaller War Plants Corporation prior to disposition of any property. Taken altogether, it is believed that these restrictions would effectively prevent any substantial disposition of surplus property. Section 411 raises a number of difficult questions. It is not clear whether it intends to cover Government-owned extensions or additions to contractor-owned plants as well as wholly Government-owned plants; whether it intends to cover production of parts and components; whether it intends to forbid the disposition of plants in connection with war production; whether it intends to prohibit any temporary lease or use of such plants until Congress acts. The wisdom of such a prohibition seems doubtful. Section 412 will likewise create serious difficulties. This provision may be sound with respect to entire plants but is obviously unsound if applied to property which is consumed or destroyed by being used and is unduly cumbersome for many other types of property. In addition, many special types of tools, dies, and equipment designed for war production and many other special products for war uses will have no use or value for civilian purposes. The reduction of this property to scrap should be encouraged rather than restricted. Finally, in its application to military property such a provision might have extremely undesirable consequences. In this connection the War Department believes that surplus military property should not be disposed of without consultation with the War and Navy Departments. All of the foregoing restrictions would, of course, be especially objectionable if made applicable to termination inventories or to the disposition of surplus property for purposes of facilitating war production. * Sincerely yours, O HENRY L. STIMSON, |