Mr. KASTER. No. In other words, the sales are prepared and it is a question of what sale is lotted up and published first.

Mr. COTTER. Do I understand, then, that you are computing your salvage by acquisition cost?

Mr. KASTER. Wherever known; yes, sir.

Mr. COTTER. It is a mongrel proposition when it gets to salvage. What percentage of the salvage can you determine the acquisition cost on?

Mr. KASTER. If it is sold by item, we have the Quartermaster catalog by item.

Mr. COTTER. Apparently a good percentage of your salvage is sold by item.

Mr. KASTER. That is right.

Mr. COTTER. What is your figure for the month of August there? Lieutenant Colonel LEEPER. 298,000.

Mr. COTTER. And you obtained how much for it?

Lieutenant Colonel LEEPER. We disposed of, through sale, 250,000, and obtained $22,000 for it, about 9 percent.

Mr. COTTER. You had salvage and scrap, and that did not get into your acquisition?

Lieutenant Colonel LEEPER. I think so, sir.

That about finishes it. I want to say that I realize that I have covered some of these points in generalities. I did it intentionally, not to confuse you, but I felt time would not permit going into detail that this particular subject justifies. We will stand ready to do our best to answer any questions you might have.

Mr. RIEHLMAN. I think you have given us a pretty clear-cut picture of the procedure followed here, and my colleague on the committee and I have a little bit more difficulty sometimes than our staff members because they are devoting all their time to this effort to follow it through, so we have to depend on them to clarify some of these matters.

I think that is a good, clear picture, and it has been very helpful to me. Have you anything, Mr. Ikard?

Mr. IKARD. No; not at this time. I think it is very good.

Mr. COTTER. Do I understand that you have some arrangement with the State of Kentucky, that you pay them 2 percent for some service charge for handling donable surplus, screening and so forth? Mr. KASTER. No. We pay no one anything.

Mr. COTTER. Do you know whether they charge the other States? Have they got some arrangement with the other States they serve? Mr. KASTER. I don't know that, sir.

General MARSHALL. We do know we get trucks from States all over the eastern half of the United States. We had trucks in from Mississippi, Florida, Missouri, Oklahoma, and Arkansas. Isn't it all handled through the central agency in Washington?

Mr. KASTER. Chicago, the Department of Health, Education, and Welfare, and the General Services Administration.

General MARSHALL. We had 14 trucks in here one morning.

Mr. COTTER. Did you people plan to have your warehouse people or your surplus people make a separate presentation?

General MARSHALL. We feel that this would be the procedure and policy presentation here, and we would cover the rest of it by an actual visit.

Mr. RIEHLMAN. I think in fairness to the local representative, we should get him on the telephone. I doubt very much if he could join us, but out of pure courtesy to him we should tell him we are here, and if he would like to join us he could.

General MARSHALL. Do you care to take a break at this time, Mr. Chairman?

Mr. RIEHLMAN. Yes.

(Whereupon, at 10:16 a. m., the hearing was recessed for 5 minutes.) General MARSHALL. I understand that someone had a question just as we were coming into the room. I will repeat it. The question is our impression of the operation of the sales, as to whether we consider it economical, whether we are getting the best returns, or any procedure which should be recommended for any change.

Mr. KASTER. I feel that we are getting a fairly good return.

Mr. COTTER. Do you feel that the sealed bid form of sale is the best method of disposal?

Mr. KASTER. I do. I feel that there is less possibility of collusion under a sealed bid than under any other type.

Mr. COTTER. Do you feel you get almost as much return as you get from a modified type of negotiated sale?

Mr. KASTER. Yes, sir; because we arrange our sales in such a manner that we give the small man the same opportunity as a large man. You would be surprised at how many small farmers are gradually coming in, and we are getting twice as much money for it because they have a definite purpose for it when they buy. They use it for their own use and do not try to resell it, and therefore, you have a better return.

Mr. COTTER. Do you have any form of small lot sale, that you do not have to go through all the ritual as on your formal bid sale, where there is no deposit required?

Mr. KASTER. No.

Mr. RIEHLMAN. We had an illustration of the Air Force spot bid sale.

Mr. KASTER. No; we do not have that.

Mr. COTTER. They use the invitation, but they do not seem to describe it as well. They do not require a deposit, and they only have one a week. It is sent to a smaller group. The lot doesn't run over a couple of thousand dollars.

Mr. KASTER. Occasionally we have retail sales. On the retail sale I feel we can realize more money than otherwise. On some folding chairs, for instance, we offered them for sale and I think our price was anywhere from 39 cents up to about 69 cents, but on a retail sale we received $1 each, and they moved fast.

Mr. COTTER. Do you advertise in the newspaper on the retail sales? Mr. KASTER. No.

Mr. COTTER. You put out your invitations for bids and you put out a catalog?

Mr. KASTER. No; it is hard to explain. But I can sell one chair and it goes around, the word goes around faster than if you put it in all the local newspapers in the country. It gets around by word of mouth. It goes much faster than an invitation, because when you publish it on an invitation the average Government employee, both military and civilian, knows that he is not authorized to submit a bid. But on a retail sale anyone is authorized to purchase. So if you put it on a bid they think, well, we cannot bid on it anyhow.

Mr. IKARD. Do you determine whether to have a retail sale by the items to be sold or because of the amount involved?

Mr. KASTER. By your demand or, for instance, in the case of these chairs, I realized, or at least I thought, that they were worth more than the price bid. Like everyone else, I figured that I could use 6 of them, and how many other hundreds got out 6 or 12 I don't know. But they can be used for either a lawn or basement or whatever it was, and they were worth $1. So we did realize that much money for them. Sometime we pick out those items that we feel are not selling too well on the sealed-bid basis, or the prices are not reasonable.

Mr. IKARD. Do you hold this retail sale for a 6-month period, for instance?

Mr. KASTER. Yes.

Mr. IKARD. Those items are for sale at retail for 6 months?
Mr. KASTER. That is right.

Mr. RIEHLMAN. If you advertised those under a sealed bid, the probability is that if there were large quantities nobody would bid on them, and if they did they would plan on a large profit and they would probably bid 25 or 30 cents.

Mr. COTTER. Do you have to get authority from the General Services Administration?

Mr. KASTER. From Headquarters, Fifth Army.

Mr. CoTTER. How many retail sales have you had ?

Mr. KASTER. We have just finished the authority on the chairs. We practically sold all we had. They are beginning to come in again. As a very good indication of the price, a lot of our bidders who normally bid on a sealed-bid sale were purchasing those chairs for $1. If we had offered them on a sealed-bid sale we probably would have received offers of 35 or 40 cents from the same people.

Mr. CoTTER. That is why we asked the question originally. With the terrific range on the bid price on the sealed bids, it might appear that unless the interest on a particular lot happens to be there, and a legitimate buyer happens to be there to submit his bid, that somebody is going to steal them. There are a lot of bids put in just for that

purpose.

Mr. KASTER. But we do not release them on that basis. If we feel that it is not a reasonable price, and we inspect those items, and, if in our own mind we feel that the item is worth more than that, we recommend to the office that other disposition be made, either an authority for a retail sale or otherwise.

Mr. COTTER. How many sealed bid sales have you had since July 1? Mr. KASTER. We have published 19 and have opened bids on 17. Mr. COTTER. Of the 17, how many items have you rejected because of inadequate bids?

Mr. KASTER. Possibly 100 items.

Mr. COTTER. Individual items?

Mr. KASTER. Yes, or lots.

Mr. COTTER. And how many items have you held your retail sale on, just the one?

Mr. KASTER. No, we had three items. We now have five other items that are going to higher headquarters for permission to sell. Mr. RIEHLMAN. What would that be?

Mr. KASTER. Chairs, and I opened a bid Thursday on some folding cots. All of them are not in good condition. Some of them are fairly good.

We received a bid of 76 cents. I feel they should be worth $2. I can sell them at $2.

Mr. COTTER. You say your depot personnel can buy them on a retail sale?

Mr. KASTER. Yes.

Mr. IKARD. On a retail sale anybody can buy?

Mr. KASTER. Yes, sir, that is the only time they can.

Mr. IKARD. Did you fix a price?

Mr. KASTER. Yes. We set the price when we submit a request, and they are sold at that price. We establish a fair-value price. Mr. RIEHLMAN. What would be the other items?

Mr. KASTER. Food containers.

General MARSHALL. They are excellent for picnics.

Mr. KASTER. We have some cooking and working kitchen tables that we will request authority on.

Mr. COTTER. Have you ever computed your cost, administratively and so forth, for getting us these sales, and determining to what extent that eats into your return from the time the property kicks over into surplus?

Mr. KASTER. Yes, sir. We prepare an economy study on the item, and roughly it will figure maybe $5 per lot for us to advertise and write up.

In most cases we are selling poorer grade items-here is one thing we have to consider. The department of health and educational welfare has the first choice. Naturally, if it is worth while at all, they are going to take it so they are giving us most of the junk back. That is one reason for some of our small receipts.

Then again, of course, for example, furniture items, on your big, heavy items the transportation involved is so great, and in most cases the trucking lines will not handle it unless it is packed and crated, and in those cases you cannot reach out and draw in the out-of-town people unless you have a good sale going on at the same time. We are trying to arrange 3 or 4 sales that they can inspect at one visit. Mr. COTTER. Could you get a much greater return on a lot of this stuff if, after your sealed bid was opened and you determined what your scale of bids were, you could sit down and negotiate with them and say, "Look, this is completely unreasonable," and go to the next lowest bidder and say, "Would you want to up that 10 percent over the last bid?"

Do you feel you would be in a position to have the facilities to do that? It would take a negotiator, and do you feel that it would be worthwhile.

Mr. KASTER. In some cases. But don't you think that everyone who submitted a bid would start flooding our place with letters of complaint saying that we were showing partiality or in collusion with certain people?

Mr. COTTER. But you would have to give everybody a chance, and anybody could raise it, but they would have to raise it by some formula.

Mr. IKARD. Wouldn't you find that many of your bidders would plan to raise after the bids were in, and they would bid 10 or 20 percent lower?

Mr. KASTER. They would. The lower bids would come in as an opening bid.

General MARSHALL. I do not think we are set up administratively to handle that sort of an operation. To do it right you would have to handle it right. We just do not have the organization for that purpose. There are a lot of pitfalls to take into consideration.

Mr. RIEHLMAN. I think that we had better move out into the field for our inspection at this time, after which we will have our conference. (Whereupon, at 10:35 a. m., the subcommittee adjourned until 1: 10, p. m. the same day.)

AFTERNOON SESSION

Mr. RIEHLMAN. The subcommittee will be in order, and I understand that at this time Mr. Kaster will make the presentation.

STATEMENT OF JOSEPH G. KASTER, CHIEF, SALVAGE BRANCH, AND PROPERTY DISPOSAL OFFICER

Mr. KASTER. This is a salvage sale that was screened by the educational agencies. They rejected them so we offered them for sale.

In this, most or all of the items are listed as an item, although they are not complete as an item. Here is a grinder, combination, incomplete, used, and we show the procurement cost wherever it is available. Mr. COTTER. Would you identify the date of that invitation and the date of the opening?

Mr. KASTER. The date of opening is the 23d of October. The date of invitation when it was published was October 8. It is No. 1912036-S-54-19.

(Abstract of bids received in response to invitation for bids No. 12-036-S-54-19, see appendix 3, p. 790.)