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unless the Secretary of Defense has certified that items normally procured from commissary stores are not otherwise available at a reasonable distance and a reasonable price in satisfactory quality and quantity to the military and civilian employees of the Department of Defense.
But the thing is, we ran up against the very same thing that the milk witness indicated, and these things just aren't being policed. That's all.
Mr. OsmERS. I believe that the Secretary of Defense, under that statute that you just read, has closed some commissaries. Is that true?
Mr. Ward. He has closed, I think, six commissaries.
Mr. OSMERS. Were there not 52 commissaries operated in the United States?
Mr. Ray WARD. Two hundred and ten.
Mr. OSMERS. Two hundred and ten commissaries, or commissaries and post exchanges?
Mr. RAY WARD. Commissaries.
Mr. Osmers. Two hundred and ten. I guess the 50 was the $50 million worth of business.
Mr. Ray WARD. The fifty odd were the ones investigated by the General Accounting Office.
Mr. Osmers. I think maybe the record should show 50 of the commissary operations were investigated by the General Accounting Office to determine the effectiveness of their bookkeeping and their competitive activities.
I know you would be interested in some of the things they found. They found there were some rather sharp practices being carried on by the people operating them in connection with making comparisons with retail prices around.
They would take pepper that they would buy in, say, hundredpound lots and compare it with the 2-ounce can that the average family buys in the store. In other words, they did not follow the market-basket principle which they are supposed to do.
Mr. CONDON. Mr. Ward, I have in my district 1 at Travis Air Force Base, 1 at Mare Island, and I think there is 1 at Camp Stoneman. I have talked to a lot of people out in my district. I have talked to a lot of Navy and Army people. One of the things which they have raised, which I think you have passed over rather lightly, is the morale question.
Mr. WARD. Yes.
Mr. Condon. I know we are finding it difficult to get people to reenlist. We are finding officers leaving the service, and some of the reasons some of these men give for terminating or failing to reenlist is that one by one the so-called fringe benefits that had been available to military personnel are being taken away and cut down to that extent, so that the service becomes that much less attractive to them.
What do you think of that?
Mr. WARD. Well, Mr. Condon, I believe there is probably some truth in it. I happen to live right next to a colonel over here in Arlington, and we have discussed this problem, too.
Mr. Condon. I imagine he would have some strong opinion about it.
Mr. WARD. That is right; he does, but I don't place it from what I know about the military personnel as 1 of the top 2 or 3. It is
somewhere over on page 3 or 4, as far as their relationship with the service.
Mr. Condon. For example, at Mare Island I was talking with one of the admirals there. They used to be able to buy frigidaires and household appliances, rather costly ones, through their commissary or PX, and now they can't, and the men are all complaining about that, that they have to now pay more downtown.
Mr. WARD. Mr. Condon, it seems like all of us have a choice to make as to the type of profession we follow. You have chosen to become a Congressman. I have chosen another course, and so on. We assume we are paid adequately for our services, whether we will agree to that or not, and we all have to buy in the same places.
Mr. Condon. Would this seem like a logical thing, that if we are going to remove fringe benefits of this sort from military personnel, we ought to at least hit head on the other program and increase their wages?
Mr. WARD. I think that definitely should be considered; yes.
Mr. CHUDOFF. From your statement, it appears to me--you said there were some number of commissaries or post exchanges in the District of Columbia.
Mr. WARD. I said the metropolitan area.
Mr. CHUDOFF. Then you read from the Defense Appropriation Act of 1953, wherein the Secretary of Defense or the Secretary of Army had the right to close PX's, or commissaries, if, in his opinion, the same type of merchandise probably could be bought at a reasonable and fair price in the particular metropolitan area from private establishments.
Mr. WARD. Right.
Mr. CHUDOFF. Now, can it be that the stores in metropolitan Washington are not selling the type of merchandise at a fair and reasonable price, so that the Secretary of Defense, therefore, has not closed the six post exchanges or commissaries?
Mr. WARD. In that he has not taken action, you might assume that would be true.
Mr. CHUDOFF. Wouldn't it be true?
Mr. WARD. But there is a competitive area here. This is a competitive area and, as far as being a competitive area, I don't think that is the case. I think it is a matter of inaction on the part of the Secretary of Defense.
Mr. CHUDOFF. Don't you think as a service to the members of your organization, you should check those things and then file a complaint with the Secretary of Defense, pointing out the Defense Appropriation Act of 1953, saying, for example, you can buy a Norge refrigerator at Hecht's Department Store at so much, and buy the refrigerator at the same price you buy it in the post exchange, if they sell refrigerators in the post exchange?
Mr. WARD. The retail store, Mr. Chudoff, cannot sell at the same price as the post exchange can, for obvious reasons, that the cost of
distribution that is borne by the retailer is not assumed by the military post. Therefore, the price is going to be lower.
Mr. CHUDOFF. I understand that, but isn't it true they buy merchandise at the post exchange because of the fact that everybody knows that military personnel are not receiving adequate pay for the work that they perform and, in order to keep them happy, we might give them some other benefits, like buying utilities, that is, refrigerators and gas ranges, and things like that, at a cheaper price?
Mr. WARD. I see no reason, sir, as I explained to Mr. Condon, if there is a choice as far as the profession is concerned, why there should be any preferential treatment.
Mr. Condon. There is no choice about going into the Army if you are over 18.
Mr. Ward. That is right; but as far as your professional Army people and so forth
Mr. Condon. Would you say the Secretary of Defense is derelict in his duty at the present time in not closing these exchanges down?
Mr. WARD. We have contacted the Secretary of Defense and we have talked with officers on the staff and we have presented our case.
Mr. CONDON. Are you critical of his activities in this respect?
Mr. WARD. He has certainly given us a hearing, but nothing has happened.
Mr. CONDON. Would you care to answer my question?
Are you or is your organization critical of the Secretary of Defense's handling of this directive of Congress?
Mr. WARD. Yes.
Mr. CHUDOFF. Are you able to prove your case, Mr. Ward, with the Secretary of Defense?
Mr. WARD. On the basis of adequate
Mr. CHUDOFF. In other words, he is absolutely, in his capacity as Secretary of Defense, disobeying the law?
Mr. OSMERS. Now, I think there may be, Mr. Chudoff-I am not sure about this, but in some instances in the first place, let's say the Secretary of Defense has closed six of them already. So, we know he is aware of the act. I don't know how much money is in that appropriation act which is used to support these activities. I think in some cases they replenish their funds from sales, like a business would do, and I don't know-I am not sure—how much of the money in the 1953 Defense Appropriation Act goes into commissaries, in that sense, and there is one rather trick question in that; and if you would read that again it has to do with reasonable cost,'I think.
Would you read that again, Mr. Ward?
Mr. Osmers. If it is not too lengthy, I think it would be enlightening Mr. WARD. All right.
No appropriation contained in this act shall be available in connection with the operation of commissary stores of the agencies of the Department of Defense for the cost of purchase (including commercial transportation in the United States to the place of sale but excluding all transportation outside the United States) and maintenance of operating equipment and supplies, and for the actual or estimated cost of utilities as may be furnished by the Government and of shrinkage, spoilage, and pilferage of merchandise under the control of such commissary stores, except as authorized under regulations promulgated by the Secretaries of the military departments concerned, with the approval of the Secretary of Defense, which regulations shall provide for reimbursement therefor to the appropriations concerned and, notwithstanding any other provision of law, shall provide for the adjustment of the sale prices in such commissary stores to the extent necessary to furnish sufficient gross revenue from sales of commissary stores to make such reimbursement: Provided, That under such regulations as may be issued pursuant to this section all utilities may be furnished without cost to the commissary stores outside the continental United States and in Alaska: Provided further, That no appropriation contained in this Act shall be available in connection with the operation of commissary stores within the continental United States unless the Secretary of Defense has certified that items normally procured from commissary stores are not otherwise available at a reasonable distance and a reasonable price in satisfactory quality and quantity to the military and civilian employees of the Department of Defense.
Mr. CONDON. Has the Secretary of Defense issued that certificate in the case of the existing commissaries, all of them?
Mr. CHUDOFF. He probably would have to, under this act.
Mr. Osmers. If he is using any of the appropriations from this act, it would appear he would have to do that.
Mr. CONDON. One other question: You say six commissaries have been closed. Now, they are closing Camp Stoneman in my district, and they are going to be closing that commissary when they close the camp because they are deactivating that camp.
I think some 16 or 17 camps have been closed or deactivated in the last year or so. Of the six that were closed, were any of those from camps that went into mothballs?
Mr. WARD. I don't know, but we do know some camps have been closed; that, of those six, they are included in this number you are talking about because some camps have been closed and have been restricted as far as their operations are concerned.
Mr. CONDON. I mean, obviously, if they close Camp Stoneman next month, as it is planned to do, they are going to close the commissary.
Mr. WARD. That is right.
Mr. CHUDOFF. I don't think there is any question in my mind that there is a duty upon the Secretary of Defense to certify these commissaries before they can stay open. They all close automatically unless he issues a certificate and meets the requirements set forth in the Defense Appropriations Act of 1953, providing he is using the funds, and I guess he is. He has to use some of them.
Mr. Osmers. I should say that is probably so, Mr. Chudoff, that he has certified those that are open, that there are exceptions under section 717.
Mr. Condon. Mr. Chairman, I might say the other Mr. Ward gave me the answer to my question. Of the six commissaries that were closed, three were in camps that became deactivated and three in camps that are still in existence.
Mr. WARD. In further answer to your question, I have these figures that have been handed to me: Six were closed. Three were closed because they were deactivated bases.
Mr. CONDON. Yes.
Who is the next witness?
Mr. Osmers. You may proceed, Mr. Maudlin.
Mr. MAUDLIN. Mr. Chairman, members of the committee, my name is C. V. Maudlin. I am the Washington representative of the National Association of Waste Material Dealers, Inc., which has its headquarters at 271 Madison Avenue, New York, N. Y.
The association's membership is composed of firms located throughout the United States, engaged in the collection and processing of secondary metals, more commonly referred to as scrap or waste materials, such as scrap metals, wastepaper, scrap rubber, cotton and woolen rags and clips, and so forth.
As the economy of the country gradually returns to a peacetime basis, the members of the secondary materials industry increasingly feel the impact of Government competition on their operations.
This competition has been particularly acute in the sweating or melting of aluminum scrap and the preparation and baling of scrap metals by Department of Defense agencies.
Some of these Government operations in fields satisfactorily serviced by private enterprise were initiated by Government agencies as national defense measures and continued and expanded on the basis that they are profitable to the Government, although it has been definitely established that the continuation and expansion of such Government activities were displacing private industry which has historically handled the operations and is willing, able, and anxious to continued to do so.
The Government operations have been continued although it has been demonstrated before committees of the Congress, at which representatives of both private industry and the Government have testified, that, when all costs were determined and taxes were taken into consideration, private industry is able to do the job at a lower cost than the Government, and in spite of the fact that committees of the Congress have recommended to the Department of Defense that certain activities in competition with private industry be discontinued.
An example of competition with private industry by a Government operation, which has been recently expanded and which has definitely closed one private plant and curtailed the operation of others, is the sweating of wrecked aircraft aluminum scrap by agencies of the Department of Defense.
The history of this operation is rather long. I have covered it in some detail in a statement in which I have also included, insofar as the information is available, the data requested by the chairman of this committee as to the number of Government employees, value of Government product, and so forth.
I am submitting this statement, and ask that it be printed in the record following my testimony, and I will confine my remarks to a brief summary of it and our recommendations.
Mr. OsMERS. The statement will become a part of the record. (The statement referred to is as follows:)