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three nor more than ten times the costs incurred by the Contractor in providing any such gratuities to any such officer or employee.

(c) The rights and remedies of the Government provided in this clause shall not be exclusive and are in addition to any other rights and remedies provided by law or under this contract.

21. Examination of records.- (a) The Contractor agrees that the Comptroller General of the United States or any of his duly authorized representatives shall, until the expiration of 3 years after final payment under this contract, have access to and the right to examine any directly pertinent books, documents, papers, and records of the Contractor involving transactions related to this contract.

(b) The Contractor further agrees to include in all his subcontracts hereunder a provision to the effect that the subcontractor agrees that the Comptroller General of the United States or any of his duly authorized representatives shall, until the expiration of 3 years after final payment under this contract with the Government, have access to and the right to examine any directly pertinent books, documents, papers, and records of such subcontractor involving transactions related to the subcontract. The term "subcontract” as used in this clause excludes (i) purchase orders not exceeding $1,000 and (ii) subcontracts or purchase orders for public utility services at rates established for uniform applicability to the general public.

22. Eight-Hour Lave of 1912.-This contract, to the extent that it is of a character specified in the Eight-Hour Law of 1912 as amended (40 U. S. Code 324– 326) and is not covered by the Walsh-Healey Public Contracts Act (41 U. S. Code 35-45), is subject to the following provisions and exceptions of said Eight-Hour Law of 1912 as amended, and to all other provisions and exceptions of said Law:

"No laborer or mechanic doing any part of the work contemplated by this contract, in the employ of the Contractor or any subcontractor contracting for any part of the said work, shall be required or permitted to work more than eight hours in any one calendar day upon such work, except upon the condition that compensation is paid to such laborer or mechanic in accordance with the provisions of this clause. The wages of every such laborer and mechanic employed by the Contractor or any subcontractor engaged in the performance of this contract shall be computed on a basic day rate of eight hours per day; and work in excess of eight hours per day is permitted only upon the condition that every such laborer and mechanic shall be compensated for all hours worked in excess of eight hours per day at not less than one and one-half times the basic rate of pay. For each violation of the requirements of this clause a penalty of five dollars shall be imposed upon the Contractor for each such laborer or mechanic for every calendar day in which such employee is required or permitted to labor more than eight hours upon said work without receiving compensation computed in accordance with this clause; and all penalties thus imposed shall be withheld for the use and benefit of the Government."

23. Invoices and payment.-The Contractor shall submit one properly certified invoice, in quadruplicate, itemizing the sales made, the commission due, actual cost of printing and mailing the brochures, actual cost of advertising (printing and advertising costs shall be substantiated by receipted copies of vendors' bills). Invoice shall be submitted to the Sales Contracting Officer, Naval Supply Depot, Bayonne, N. J., for certification and forwarding to the U. S. Navy Regional Accounts Office, U. S. Naval Supply Activities, Bldg. #2, 29th Street and 3d Avenue, Brooklyn 32, N. Y., for preparation of public voucher and payment.

IN WITNESS WHEREOF, the parties hereto have executed this contract as of the day and year first above set forth.


(Contracting Officer)





certify that I am the Secretary of the Corporation named as Contractor herein; that who signed this contract on behalf of the Contractor, was the

of said Corporation; that said contract was duly signed for and in behalf of said Corporation by Authority of its governing body and is within the scope of its corporate powers.

(Corporate Seal)

(Secretary) Lieutenant Commander McIVER. I would like to add one other point.

Parke-Bernet asked whether if this auction was successful they would have the inside track on other auctions. As far as NPO is concerned, the answer is "No." The Navy is not going to make a monopoly of the services of any one auctioneer.

Almost every other company called me up and asked the same question.

Mr. BALWAN. It is obviously a feather in the firm's cap if they performed the services well. Would it be possible to contract the services of Parke-Bernet to handle your next five auctions?

Lieutenant Commander McIVER. We could develop an open-end type of arrangement.

Mr. SPOKOWSKI. We are looking into that and there is much for and against an open-end contract. Our legal people have shown us pitfalls in this.

We have not made a final determination on having an open-end contract but we had thought of an open-end 6 months contract. Whether we had 6 or 12 sales at Brooklyn, Bayonne, or the supply facility in New York, they would handle it.

There are a lot of legal interpretations. The Purchase Division of BuSandA which has jurisdiction over NPO does not feel too receptive to having an open-end contract.

Mr. Balwan. I would like to know what the Navy's feelings are in negotiated sales of aviation spare parts or ships' parts using industrial agents for such technical property. Probably they would do a pretty good job on that field.

Mr TOLINO. We went all through that 112 years ago. We had open hearings in that problem. I personally made an extensive trip across the United States and to the west coast and talked to manufacturers of aircraft on setting up agents to dispose of parts and supplies coming to the aircraft. I also talked to the agents themselves. Spoke to and have on record agents that did this job in the past-people that were engaged in that activity in the past. That was tried once.

They brought in the people who are interested in the sale of automotive parts, electronics, aircraft. That involves movement of parts, and cataloging of parts.

The aircraft industries association voted it down.
We had conferences all the way across the country on the problem.
Mr. Balwan. Do you have the reports?
Mr. TOLINO. We have made a complete report on it.

Mr. BALWAN. A report was made. You are talking about conferences you had across the country. That would be a big saving in time to us because that is what we are discussing. The question that comes to my mind is that since we have all of this experience back of us, can we take advantage of it? Do we have to go through that again? Mr. TOLINO. We didn't have the volume as we did after the first

The impression I got is that we had learned once. It is not advisable to go into it again. I think it was the Cook Commission that went into this.


Mr. RIEHLMAN. I have had no actual experience in that field of disposing of airplane parts. This was before my time. After the last war

the War Assets Department got into the agent-disposal program. It was not very good.

Mr. BALWAN. Might we not learn some of the good and bad points of it!

Mr. TOLINO. The report that we are going to give you on ways and means will touch on the agent proposition for certain types, categories, and conditions. We feel that agents might possibly be used for selling certain type items, particularly those items which would be a detriment to the Nation if they were thrown on the public.

We are still in the working stage of the thing. When you do get your report it will definitely make some comment on agents and determine if we think it should be used.

Mr. Balwan. We have the disposal officer for NSD who offered to get acquisition costs on the first 8 or 9 items that might be of interest to us.

Also, what is the volume of surplus on the base and how has the trend as to receipt of this surplus been running, and roughly how much of a backlog will you have after you get rid of this thing?

Lieutenant PETTINGELL. I don't have the sales prices.

However, the first lot had an acquisition cost of $6,600. This material consists of bunk springs and is practically useless commercially. Springs of this sort are generally sold as light iron from about $18 to $20 a ton.

The second lot was oxygen masks, 142 each, with a total value of about $8,800. These, incidently, were not all complete, but according to the sales price we got almost a 33-percent return on the acquisition cost.

The next lot was gas masks, 24 each, or a total value of $600 acquisition cost for the lot, and I believe we got about 50-percent returns on those masks.

The next lot was ladders, 30 each, totaling about $390 and on these we received about a 20-percent return.

The next lot was conveyors for a total acquisition cost of $40.

The next lot consisted of wooden ladders, 71 each, a total acquisition cost of $330, and we received a return of a little better than 20 percent.

The last lot I have is out-of-date film, lot No. 7, the acquisition cost of which was $2,800 and we received $780 or about 25 percent of the acquisition cost.

Mr. Balwan. Is it correct that some of this film is of no use after you open it?

Lieutenant PETTINGELL. All the film is out of date, this is true. There is no guaranty made.

The woolen blankets we sold for $3 apiece cost about $5 and $5.50 apiece. Actually we anticipated a return of about $1 a blanket.

Mr. BALWAN. Do you have any information to give us on the total amount of surplus you have on hand ?

Lieutenant PETTINGELL. In 6 months, it has increased. It has doubled itself.

Lieutenant Commander HEMPSON. We have received an estimated $2,500,000 a month.

Mr. SPOKOWSKI. In June of this year we made an agreement with GSA and the Department of Defense and were able to limit the categories of material that must be screened and reported to SMD.

Mr. BalwAN. What are the classes ?

Mr. SPOKOWSKI. Departments themselves were given the prerogative to use their own judgment as to what they can screen-ships spare parts, automotive spare parts peculiar to vehicles 6 years old or older.

Any line item which is not over $100 is not reportable.

Regardless of line item similarity, under the old procedure if you had a box of nuts and bolts that were not similar you could not include them in that category. Now, even if they are not similar they are not reportable.

We do anticipate quite a number of tremendous sales from now on because we feel that the services themselves have finally gotten on to the paperwork and the auctioneering method. Material that has had to be screened before can now be gotten rid of.

This went into effect July 22. Reports are not quite out yet because it takes a little while to get them rolling,

Mr. RIEHLMAN. We appreciate the courtesies extended to us this morning, your cooperation in showing us around, and the information your staff has gotten together for us in a rather extremely short time, because we kind of dropped in on you unexpectedly. It has been an enlightening and very interesting forenoon here and we are happy to have this as part of the record we are trying to establish in the field of surplus property.

Mr. BalwAN. I would like to extend the same sentiments as the Congressman for myself and my staff.


Washington 25, D. C., December 15, 1953.
House of Representatives,

Washington, D. C. MY DEAR MR. RIEHLMAN: Five copies of the auction-sale report held at the Naval Supply Depot, Bayonne, N. J., are enclosed for your information.

This report is factual and gives in detail the approach used in contracting for auctioneering services through final consummation of the sale. The net sales return of 13.84 percent exceeds the return usually obtained by the sealed-bid method. The sale indicates that the auction-sale method allows for a fast and orderly disposal of surplus property and should be used in disposing of large quantities of surplus property. This is especially true as evidenced by the acceptance and response received by the general public.

The Bureau of Supplies and Accounts believes sufficient trial auctions have been held by the Navy. Instructions have been issued to field installations to utilize the auction-sales method as a standard means of disposing of surplus property. It is anticipated that auction sales will become the general method of disposal with sealed-bid sales used only when insufficient material is available to conduct an auction sale.

I trust the foregoing information will be sufficient for your purposes. If I can be of further assistance, please do not hesitate to call upon me. Sincerely yours,

M. L. ROYAR, Rear Admiral, (SC), USN, Chief of Bureau,



Capt. Hugh C. Haynsworth, Jr., SC, USN, commanding; Lt. Comdr. J. F. McIver,

SC, USN, contracting officer ; Lt. (jg.) Garrett L. Pettingell, SC, USNR, disposal division officer; F. J. Gregory, property disposal officer; Leona Rapport, property disposal assistant


Bayonne, N. J. The Naval Supply Depot, Bayonne, is proud to have participated in this experimental method of disposing of material which is surplus to the needs of the armed services.

This report reflects, I think, the success of disposal by auction. All aspects of the sale are covered in some detail; however, additional information is available on file and can be supplied on request.

Reactions, both here at the depot and on the part of the public, have been universally favorable and the Navy has unquestionably enjoyed intangible returns in the form of good public relations.



The idea for an auction sale of disposal material at NSD Bayonne was born largely through the necessity of discovering a way by which a large backlog of material could speedily be sold with the most advantageous return to the Government. In addition to eliminating the backlog, it was felt that there was a definite necessity for enlarging the field of Bayonne's sales potential to include buyers from outside the immediate locality. Under the sealed bid system, buyers from a localized area were successsfully solicited and although satisfactory prices (in accordance with the Navy-wide average) were attained for most surplus and excess material, it was felt that a sale of greater magnitude, coupled with extensive advertising, could produce a higher return.

The sealed bid method of sale, although satisfactory in some cases, limits both the Navy and the buyer. There is little or no competitive interest in sealed bid buying, for the buyer must examine the material, and on his examination alone, place a bid which he thinks will be high enough to out-bid his competitors, yet low enough so that he may in turn sell the material at a profit. He, supposedly, has no idea what his colleagues are bidding, and in many cases an unsuccessful bidder will, immediately after the sale, seek out the successful bidder and purchase the material from him at a profit. It would seem that this method of sale, therefore, is impractical in many cases, for the Navy should receive the highest dollar for its material. At an auction sale, all bidders have an opportunity to increase their bids up to the final fall of the auctioneer's hammer. Therefore, the Navy can be reasonably sure of obtaining the top dealer dollar for its merchandise.

It was also felt that in addition to eliminating a large backlog and obtaining better prices, that an auction sale with the proper publicity would serve as a means of inviting favorable public comment, in that a larger portion of the buying public would be solicited.


Therefore, in view of an apparent need for an auction sale at NSD Bayonne, permission was requested and received from the Bureau of Supplies and Accounts to conduct such a sale. With this in mind Disposal Division proceeded to examine the pros and cons involved in selling a large amount of material effectively at public auction. Prior to the Bayonne sale, there had been two Navy auction sales conducted at the Philadelphia Naval Shipyard in April and June of 1953. Philadelphia was the first naval activity to explore this medium of sale since 1929. A survey of the two Philadelphia sales was made, and, by

1 Sale conducted by Parke-Bernet, Inc. (machinery, surplus, and real estate division Louis J. Marion and Harry E. Loree, auctioneers ; Mary Vandegrift, advertising and publicity director.

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