2. Screening by inquiring whether any other Defense agency has a requi ment for the excess property.

3. A disposal report or factual statement is submitted to the Assistant Se tary of Defense (Installations and Logistics) for review and approval pristi the submission to Congress.

4. The Military Department forwards the disposal report to Congress required by 10 U.S.C. 2662.

5. Thirty days after submission of the disposal report to Congress, the rep ing Department forwards a report of excess real and related personal propert to GSA.

6. If there is no other Federal need for the property, GSA declares t property to be surplus and proceeds with disposal action in accordance the provisions of the Federal Property and Administrative Service Act 1949, as amended.

Mr. MORRIS. In brief, sir, Public Law 152 which established the General Services Administration requires all Federal agencies promp ly to declare excess to its needs any property not required, and to mai that property available to the GSA for future utilization and disposal Prior to declaring excess to GSA, we must advise the Armed Services Committee of the House and the Senate of the plan of action. The generally review this in subcommittee hearings with us before we pass the property to GSA.

At the time we relinquish it to the GSA, they assume and carry on all further actions from that point.

jurisdicti Mr. WHITTEN. That is where I would like for you to explain wh GSA does under the basic law. We ought to have that in the recor. at this point.

Mr. MORRIS. Yes, sir.

(The information follows:)

GENERAL PROCEDURES FOR DISPOSAL OF EXCESS PROPERTY BY GSA After submission of a factual statement to the House and Senate Are Service Committees as required by 10 U.S.C. 2662, the military department barite custody and control over the excess real property forwards a report of exces real and related personal property to the GSA regional office in the form pre scribed by GSA regulation.

GSA determines whether any other Federal requirements exists and, if ther is none, declares the property to be surplus to Federal requirements. Under the statutory provisions governing the dispostion of Federal surpits property, any State, city, or county, or other properly constituted public b can obtain surplus Federal real property at a discount or in effect "for fre by making an appropriate request through the Department of the Inter the Department of Health, Education, and Welfare, or in the case of airpor property, the Federal Aviation Administration. By established procedure, t regional office of GSA notifies State and local public bodies that certain rea If the State or local public body has the Department of the Interior, or the Federal Aviation Administration certifie use for the property and the Department of Health, Education, and Welfare to the validity of the requirement, and GSA approves, GSA will convey title the property to the State or local public body. Fair market value is determine and made a matter of record, but the State can obtain a discount or "pub

property has been declared surplus.

benefit allowance" up to 100 percent of the fair market value.

tised for sale, bids are received and award and conveyance is made to the highes bidder at fair market value. As provided by the act governing real proper!! Assuming no local public requirement, the surplus property is publicly adver disposal, negotiated sale at fair market value is permitted in proper situations In other cases, disposal is made pursuant to special legislation. Custody and accountability of the surplus property rests with the reporting agency until property is sold, transferred to another Federal agency, or otherwise disposed af

Mr. SIKES. Mr. Andrews?

Mr. ANDREWS. No questions.

Mr. SIKES. Mr. Flood?

PROCUREMENT SET-ASIDES FOR DISTRESSED ECONOMIC AND
LABOR SURPLUS AREAS

Mr. FLOOD. I suppose you are my pigeon on this one. I hope you re not because you are one of my favorite characters, you and Banneran. I hope it is somebody else.

I have been simply astounded, appalled, and shocked, and you can ll in the other words in the semantic list, at which I am advised was recent order, and if not yet issued, about to be, although I hope it is borted, having to do with set-asides in procurement for distressed conomic areas and labor surpluses and small business.

I wrote to I probably did not write to you at all, but maybe I should ave-I wrote to Cy Vance and he was pretty new on board when e got the letter in his new job. I did this as a result of information had obtained from my spies. You know about my spies? So, I new whereof I spoke. I really do not have a crystal ball although some of you fellows may think so. I really do not. People call me on the telephone, top me in hallways, and little birds drop memorandums on my desk, nd this kind of thing.

These fellows knew my bowels would be upset about this situation ecause I probably had as much to do with this in the Department as nybody else a number of years ago, maybe as far back as World Var II. I understand, for reasons that are not clear to many people n your establishment that this order is being changed. I am sure hat in your best tradition you have 11 good reasons for doing this. I have seen none of them yet, but I imagine they are all equally good n their own right.

I have difficulty in understanding why, in view of the violent protesations from the President and everybody in the White House and verybody else, in view of all of this business that is now being revived about manpower, manpower training, and distressed economic areas, Appalachia, it would occur to me that the President and whoever is n charge of the antipoverty program-my good friend Sargent Shriver-and this whole retinue including Presidential messages to the Congress in the last 24 hours, would be equally appalled, startled, and so on, as I am if they knew that the left hand, as is customary here, did not know what the right hand, or vice versa, was doing.

What in the world happened? Without any warning, out of a clear blue sky, after 20 years, what happened?

Mr. MORRIS. Sir, I think first it is very important to stress that there has been no change, or no cancellation of any past provisions for set-aside. By law in the small business field we make use of total and partial set-asides. Under regulations which have existed for some years in respect to assisting labor surplus areas we use a technique known as partial set-asides where two economic lots can be identified. Mr. FLOOD. This, I think, is a proper statement. What am I unhappy about?

Mr. MORRIS. There has been an experiment going on for something over 1 year with another technique of providing for an incentive preference to prime contractors to perform work in labor surplus areas.

Mr. FLOOD. I know. I was very happy about that.

Mr. MORRIS. After the experiments were reported to both Mr. Me Namara and Mr. Vance, they examined the matter and concluded the this was not a prudent procedure under the law which prevents from paying a price premium to alleviate economic dislocation.

Mr.

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etter

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Mr.

It was their judgment that by restricting competition we could not be assured of getting the lowest obtainable price for the Government and, therefore, that the experimental procedure was not a wise one te M continue.

However, we are continuing with all vigor the use of all other se aside techniques. I was advised this morning that we hope this year to do perhaps twice as well as we did last year in the use of prefere set-asides in labor surplus areas.

We are running well ahead this year in the percent of our price awards to small business firms, using set-aside techniques.

Mr. FLOOD. Of course, I knew when I asked the question I would have an answer just about as glib as I received. It was very good. I am not disappointed. This does not remove this cloud from me. Mr. Vance and Mr. McNamara have decided that this experiment should be discontinued? Well, in the face of an opinion from those two Oly pians, I can see where, at the lower levels, this might be some problem. I suggest to you that this is not widely held as an opinion at the lower operating levels, those people who have been concerned with what you call an experiment.

By the way, I did not know, and your attachés did not know, this was an experiment until about 2 weeks ago. The term had never been used before. We thought that this had been an established practice and the representatives in your field offices, very good career men, ap peared at seminars all through the country, including my District, and set up most effectively by you, at which time this whole thing-after having been elegantly introduced by me-was outlawed.

There was nothing to indicate this was an experiment, nothing to indicate this was being examined or under the guns. Nothing at all er cept that this is very good:

"We are glad to help you. This is another way in which we are going to do it." Blah, blah, blah.

This is not a very happy situation.

Mr. MORRIS. I can assure you, sir, in the Department, there has never been any question at policy levels but that this was an experi ment. It has never been incorporated in ASPR or authorized except by limited memorandums which I have signed indicating clearly we were to select and run certain test cases. Actually, we ran something over 100 of them in 1 year.

It was the results of these tests which were finally summarized and reported to Mr. McNamara.

Mr. FLOOD. By the way, I am no special pleader but there was ne particular contractor or particular person in my District affected one way or the other by this so-called experiment, by this unfortunate rescission at this point. The potential was there. I was encouraged as was everybody else by this step forward, but now it is clearly, in my judgment, a step backward.

I am not at all clear about why it was done.

Mr. Vance and Mr. McNamara decided that it did not do what?
Mr. MORRIS. Sir, I believe you have

Mr

Mr. FLOOD. Is this the IBM machine, a mathematical equation which ›duced a fraction?

Mr. MORRIS. No, sir. I believe you have, or will be in receipt of, a er from Mr. Vance which sets

Mr. FLOOD. I am sure that I will.

Mr. MORRIS (Continuing). Which sets out the reasoning. I might >te from it if you would like.

Mr. FLOOD. I would not like, but go ahead.

Mr. MORRIS. I might say that I am in full accord with this decision is Mr. Bannerman and the other materiel Secretaries. It states t by its very nature and terms, this procedure--meaning the test >cedure—is restricted to those firms who agreed to perform a stated centage in a substantially labor-surplus area, or who, if they do so agree, can be matched out of the procurement by contractors o fall within the 120-percent range of the lowest price offer. Mr. FLOOD. What is the matter with that theory?

Mr. MORRIS. It thus leads to the possibility of violating section 523 the Department of Defense Appropriation Act. Mr. FLOOD. It leads to the possibility?

Mr. MORRIS. Yes, sir.

Mr. FLOOD. I understand, by Presidential directive of the last four esidents, in all such cases such a doubt was to be resolved in favor the principal, not in favor of the Government. Are you aware of t?

Mr. MORRIS. Sir, the Defense Manpower Order No. 4 expressly says at no price premium shall be paid.

Mr. FLOOD. I know that; but you raise language in this letter that u are quoting to me from Mr. Vance which says there is a possiity. The minute you raise the possibility, under all Presidential rectives, from Mr. Roosevelt down to and including Mr. Johnson, all such cases, in these areas the doubts are to be resolved most fairly behalf of the applicant and not the Government.

Are you aware of that principle?

Mr. MORRIS. I am not aware of that.

Mr. FLOOD. You are not?

Mr. MORRIS. No, sir.

Mr. BANNERMAN. Mr. Flood, this is not a question of an applicant ainst the Government. It is a question of whether the Governent is going to set up this preferential procedure. Mr. McNamara required, under the law, sponsored by this committee, to assure that price premium is paid for this purpose.

What he has concluded is that he cannot assure it under this proHure.

Mr. FLOOD. This committee?

Mr. BANNERMAN. It is in the Appropriations Act.

Mr. FLOOD. We write law?

Mr. BANNERMAN. It is a section in the Appropriations Act, secon 523 of the Appropriations Act.

Mr. FLOOD. I know about that.

Mr. BANNERMAN. The conclusion Mr. McNamara has arrived at th respect to this particular procedure is that he cannot assure e committee, or assure the Congress, that there will not be, in some ses, a price premium. That is, if this procedure is followed.

One other point, Mr. Flood: Let us make it very clear that. decision in this case applies only to this procedure and not to any the longstanding procedures related to small business or labor surp

areas.

Mr. FLOOD. I understand that.

Mr. BANNERMAN. This was a test procedure from the very begin I think, actually, our people are quite aware of that. We never it in ASPR. We decided not to until it had been tested out and th knew they were conducting tests.

Mr. FLOOD. I want the record to show that it is my opinion that Department is once again acting out of an abundance of caut straining at a gnat, and defeating the whole theory and intent purpose of this kind of succor, assistance, and aid in interpreting language that you refer to in the section of the Appropriation A beyond its scope and out of its intended purpose. It defeats the p pose of Executive directive to do this job and do it well. I think y have stepped back out of an abundance of caution, shall I say aga Mr. SIKES. Anything else?

Mr. FLOOD. No.

Mr. SIKES. Mr. Minshall?

Mr. MINSHALL. No, sir.

Mr. SIKES. Mr. Ford has some questions which he will submit you to be answered for the record. His service on the Warren Ca mission has prevented his attendance here today.

(The matter referred to is as follows:)

Question 1(a). How much money, Mr. Secretary, is being spent on "outside studies and analyses? Included profit and nonprofit institutions (such : Logistics Management Institute, Institute for Defense Analysis, etc.). Answer. The attached tabulation provides a summary of Office of Secretar of Defense contracts referred to in this question.

Office of the Secretary of Defense contract summary

་

1 Funded in R.D.T. & E. Defense agencies for fiscal years 1964 and 1965. 2 Proposed.