78TH CONGRESS HOUSE OF REPRESENTATIVES 2d Session { REPORT No. 1245 FIFTH INTERIM REPORT OF THE HOUSE SMALL BUSINESS COMMITTEE THE SURPLUS PROPERTY PROBLEM FROM THE VIEWPOINT OF SMALL BUSINESS MARCH 9, 1944.-Committed to the Committee of the Whole House on the state of the Union and ordered to be printed Mr. PATMAN, from the Committee on Small Business, submitted the following INTERIM REPORT [Pursuant to H. Res. 18] The following report is submitted as a supplement to the Third Interim Report of the House Committee on Small Business and represents the unanimous expression of all members of the committee, who are as follows: Wright Patman (Texas), chairman; J. W. Robinson (Utah); Eugene J. Keogh (New York); Henry M. Jackson (Washington); Estes Kefauver (Tennessee); Charles A. Halleck (Indiana); Leonard W. Hall (New York); Walter C. Ploeser (Missouri); William H. Stevenson (Wisconsin). INTRODUCTION For several months various committees of the Congress, including the House Committee on Small Business, have engaged in serious study of the problems arising from the foreseeable accumulation of huge stocks of Government-owned surpluses and the need for devising an orderly program, through legislation, for their control, disposition, and sale. The third interim report of this committee, issued November 1, 1943, quoted the view of numerous authorities that this probable holding in surplus materials, plants, tools, mobile equipment, real estate, and other items would total many billions of dollars by the time the end of the present hostilities is reached. Some of these congressional committees have concerned themselves principally with the problems of plant and real-estate disposal. Others have devoted more thought to consumer goods. Others have boldly encompassed both of these fields and have also included such diverse items as ships, food, and machine tools in their consideration of the subject. When we consider the multiplicity of items involved in any detailed study of this problem, when we add to this the identification of scores of different industry groups whose problems of both manufacture and distribution are often unrelated and often competitive one with the other, it is small wonder that the net evidence of this congressional study by the several committees has been a series of legislative proposals offering administrative prescriptions not all of which are compatible one with the other. It is, therefore, quite possible that the members of these various committees viewed with mingled feelings of fear and relief the recent publication on February 15 of the vigorous report of Messrs. B. M. Baruch and John M. Hancock to the Director of War Mobilization, which covered in considerable detail this very vital subject. That report, with its many evidences of careful study, tempered by seasonal judgment, when taken in conjunction with the subsequent Executive order creating the post of Surplus Property Administrator in the Office of War Mobilization, has undoubtedly done much to help crystallize both congressional and business thought on this major question. The House Committee on Small Business feels that the time has come for a careful review of all pending legislative proposa's relating to surplus property disposal. It feels that such review should be taken not only in the light of the Baruch report and its accompanying Executive action but especially from the viewpoint of the small businessman. The committee feels that it would be delinquent in its appointed duty at this time if it did not point out that it feels that much of the proposed legislation on this subject fails to provide adequate guaranties designed to protect the small businessman and assure him proper consideration in the disposal of these surpluses. Further, with no intended reflection on either the integrity or the ability of the one just appointed to the post of Surplus Property Administrator, the committee feels that it has not yet seen visible evidence that the Administrator has been provided with or has prepared any book of procedures designed to give adequate protection to small business. He is working under an implied mandate in the Baruch report which says, "the Surplus Administrator should sell all he can as early as he can." Much of the physical detail of selling is apparently still to be vested in some of those Federal agencies which have shown definite evidence of ineptness and disregard of small business interests in the past. The very magnitude of the problem precludes the personal supervision of all sales and their supporting statements of justification by the Administrator. Therefore, this committee feels that it is the positive duty of the Congress to agree on and pass immediately such legislation as will include full and adequate protection of small business interests in the sale of any or all Government-owned surplus property. POINTS OF AGREEMENT It is gratifying to note that not only the Baruch report but the majority of the proposed legislative measures have certain excellent points in common upon which there seem to be mutual agreement. Some of these include 1. The establishment of a Surplus Property Policy Board, consisting of several cabinet-level officials and qualified appointees to come from private industry. 2. The delegation of responsibility for actual surplus disposal to one central agency. 3. The advisability of appointing business advisory committees for each type of property to consult with and advise the disposal agency as to time and method of sale of the items in question. 4. The utilization of established trade channels in the disposition of these surpluses. 5. The prohibition of the sale of surpluses to speculative interests. 6. Selling in small lots in order to permit participation in purchases of small businesses as well as large ones. 7. Wide publicity on all sales, both before and after, and the granting of sufficient notice to permit all interested parties ample time in which to prepare proposals for purchase. RECOMMENDATIONS 1. Each of the above seven points of agreement should be included in greater detail in any measure passed by the Congress covering the disposal of any type of Government-owned property declared surplus. 2. The Surplus Property Policy Board should be the final voice in all surplus property matters and the Administrator or General Manager should have full and adequate, but not final, authority. 3. Smaller War Plants Corporation should be given a membership on the Surplus Property Policy Board and should not be represented by or through War Production Board. 4. Title to all surpluses should be vested in the central disposal agency which should supervise and approve all sales of all surplus items. The central agency should consult with but not be bound by the advice of the agency from which the surpluses were received. (In this connection, it is assumed that the closest working arrangements of a more than temporary nature would be established between the central agency and the respective agencies which have declared as surplus the items in which they have a common interest.) 5. The counsel and data supplied to the central agency by the business advisory committees covering each type of property, in the absence of provable information to the contrary, shall be held the sole basis for the time, place, method, manner, and amount of sales to be held by the central agency, provided that the adoption of such recommendations shall produce the maximum returns to the Government consistent with a policy of using normal trade channels in such a manner that the sales will not unduly disrupt normal trade and commerce. 6. Provision shall be made in the appointment of these business. advisory committees for the seating thereon of manufacturers, wholesalers, retailers, or other established distribution firms. No such committee shall be appointed which does not include as members at least two small businessmen who are representative of each of the above classes. 7. Provision shall be made for the lease or sale on credit of these surpluses to thus expand the opportunities of small business. 8. Provision shall be made for the lease or sale on credit of these surpluses to returning servicemen who can present evidence of capability to utilize such surpluses in the establishment or maintenance of their own businesses in such a manner that will not unduly disrupt normal trade and commerce. 9. Provision shall be made for the temporary enjoining of surplus sales through appeal to the Surplus Property Policy Board in those cases where it may be held that the holding of such sales would prove detrimental to the best interests of any firm in the industry in question or where large interests were apparently about to be given undue preference over small firms through the holding of such sales. 10. The patents and other properties now held by the Alien Property Custodian for which there is no obvious military use shall be declared surplus and transferred as to title to the central disposal agency and treated in the same manner as other surpluses. 11. Studies should be made before sale of the Government-owned plants as to possibilities of subdividing the very largest units in order to make them available for acquisition by small business. An easement to the patent rights covering the products manufactured in any Government-owned plant during wartime shall accompany the sale of the plant or any parcel thereof when the plant and its manufacturing facilities have been established for some specialized manufacturing use. 12. Due consideration should be given by the Congress to provisions already contained in H. R. 3873, a copy of which is attached as exhibit A in this report. (It should be noted that this committee, which acted as sponsor for this measure, no longer urges the inclusion of section 205 (c) (3) in any final measure to be approved by the Congress in this connection. CONCLUSION This committee recommends the careful reading of the BaruchHancock report, War and Post-War Adjustment Policies, by every person concerned with the vital question of Government-owned surpluses. That report defines small business as "the broad backbone of enterprises, scattered throughout the country, which rely largely on the initiative and resourcefulness of their individual proprietors.' With such a definition, this committee is in full agreement. The report also makes several other recommendations designed to further the cause of small business which are worthy of serious consideration by all who have an interest in the future of this important segment of our economic structure. Notwithstanding this committee's admiration for the BaruchHancock report and its obvious clarity, it feels that it cannot and should not be taken as the final word on this subject. Experience in the past shows us that it has never been sufficient to confine our interest in the problems of the small and weaker elements in our society to general statements of acquaintance and affection. To protect and nourish these elements, we must at times take positive action and implement our principles by a statement of specific policies and procedures. To this end, we commend this vital problem to the immediate and diligent attention of the Congress for handling in a matter consistent with the foregoing recommendations. EXHIBIT A [H. R. 3873, 78th Cong., 1st sess.] A BILL To amend the Reconstruction Finance Corporation Act by adding a new title thereto relating to the sale or other disposition of surplus property of the United States Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Reconstruction Finance Corporation Act, as amended, is amended by inserting "TITLE I", immediately before the first section thereof, by striking out the word "Act" wherever it appears therein as a reference to such Act (except in the short title of such Act), and inserting in lieu thereof the word "title", and by adding at the end of such Act, as amended, the following new title: "TITLE II "SHORT TITLE "SEC. 201. This title may be cited as the 'Surplus Property Act of 1943'. "DEFINITIONS "SEC. 202. As used in this title "(1) The term 'property' means any supplies, materials, or equipment, including real estate and improvements thereon, or tangible property owned by the United States, or by any corporation owned or controlled by the United States, which is under the jurisdiction or control of any governmental agency. "(2) The term 'surplus property' means any property which has been declared to the central agency handling surplus property to be surplus to the function, activity, or project in connection with which it was acquired or accrued. "(3) The term 'Government agency' means any executive department of the Government or any administrative units or subdivision thereof, any independent agency in the executive branch of the Government, and any corporation owned or controlled by the United States. "SURPLUS PROPERTY POLICY BOARD "SEC. 203. (a) There is hereby established a Surplus Property Board (referred to in this title as "the Board"), which shall consist of the Chairman of the Board of Directors of the Defense Supplies Corporation who shall be the Chairman thereof, th Secretary of War, the Secretary of the Navy, the Secretary of the Treasury, and three individuals to be appointed by the President, by and with the advice and consent of the Senate. The three individuals so appointed shall be businessmen who have had at least five years' experience in the business of the retail sale and distribution of merchandise. "(b) The Board (1) shall determine and prescribe the methods to be used by governmental agencies in making and maintaining inventories of property, and (2) shall determine the surplus property under the jurisdiction of the various governmental agencies that should be sold or leased, and shall inform the Reconstruction Finance Corporation as to every such determination. "DUTIES OF GOVERNMENTAL AGENCIES "SEC. 204. Every governmental agency (1) shall make and maintain accurate uniform inventories, in accordance with methods determined and prescribed by the Board, of property under its jurisdiction; (2) shall cooperate with the Board for purposes of determining which of the property under its jurisdiction is surplus property; and (3) shall cooperate with the Reconstruction Finance Corporation in connection with the sale or lease of surplus property pursuant to the provisions of this title. "DUTIES OF THE RECONSTRUCTION FINANCE CORPORATION "SEC. 205. (a) Surplus property which the Board has determined should be sold or leased shall be sold or leased by the Reconstruction Finance Corporation in a manner consistent with the provisions of this section. "(b) The Corporation shall appoint an advisory committee for each class of property which is to be sold or leased. The members of such advisory committee shall be appointed from among persons who, by reason of their business experience, are familiar with the handling and marketing of such class of property, or similar property. It shall be the duty of the Corporation, in selling or leasing surplus property, to consult with the appropriate advisory committee or committees so appointed as to the price, time, method, and manner of disposing of such property. "(c) In the sale or lease of surplus property pursuant to this title, the Reconstruction Finance Corporation shall, so far as practicable, be governed by the following considerations: "(1) Distribution of such property should be through established trade channels. |