5. That there would be an increased efficiency in the aircraft disposal program.

As testimony developed at the hearing, it became obvious that there were actually two major points of conflict. First was the matter of the cost of operation and the resultant saving or loss to the Government; second was the problem of demilitarization raised by the Department of Defense.

Prior to the hearing the Air Force had furnished certain cost data to the committee. Witnesses for private industry demonstrated that such figures did not reflect current conditions. The most glaring single error was the fact that the Air Force estimated current market price of aluminum scrap at 3710 cents per pound when the actual price was between 7 and 10 cents per pound. That one inaccuracy altered the entire cost study of the Air Force.

The Air Force also stated in the information submitted to the committee prior to the hearing that the estimated recovery of aluminum would be 75 percent. Representatives of private industry testified that a more realistic figure would be between 60 percent and 65 percent. Industry witnesses were supported in this contention by testimony from the National Production Authority. This discrepancy coupled with the inaccurate price figures mentioned above rendered the Air Force cost study valueless. Industry witnesses also challenged the accuracy of figures contained in a cost study submitted by the Navy.

During the hearing the Air Force produced a new cost study covering 18 days of operation of a sweating furnace at McClellan Air Force Base, Sacramento, Calif. The Air Force did not present these figures to the committee prior to the moment when the first Air Force witness was sworn in. The Air Force estimated that on the basis of the 18 days' study, it would realize a saving of $144,000 or more per y ear at the one installation. Most of the savings were based upon the theory that an enormous cost was entailed in demilitarizing aircraft, if the aircraft were to be sweated in private furnaces. It was the conclusion of the committee that the service could well arrange for the sweating of aluminum on Air Force bases by private industry, thereby eliminating the alleged high cost of demilitarizing aircraft parts prior to their removal from a base.

Inasmuch as the argument of necessary demilitarization for purposes of security was only presented when all other arguments had been exploded, appeared entirely likely that there was little merit to the position taken by the service in this respect. Industry pointed out that scrap-warranty clauses in existing governmental contracts for the disposal of scrap adequately protected the Government. Defense witnesses did not produce a single case in which a violation of the scrap-warranty clause had occurred, although the service did rely upon the example of a service aircraft having been resold in an instance where the Government interposed no objection and where no scrap-warranty clause had been involved.

Your committee feels that the alleged profit to the Government is extremely doubtful. Even if some Government profit could be established, the question might yet be asked: “Should not the Government go into all business enterprises where there is a chance of showing a so-called profit?”' It seems rather obvious that the philosophy of government itself, as practiced in this country requires a negative answer to that question. This conclusion would seem to be supported by recent committee reports of both the United States Senate and the House of Representatives.

The background of this matter showed that the Air Force had attempted to justify its actions on several grounds. It had attempted to give the impression that private industry could not handle the generation of scrap; that there was an unnecessary delay in getting the byproduct of scrap back into industry's hands; it attempted to give the impression that the National Production Authority had approved the action; it had attempted to give the impression that industry itself had given its approval to the plans. These attempts at justification were found to be invalid.The committee strongly disapproves of the misleading statements, inferences, and tacties by which the Defense Department attempted to justify its competition with private industry.

On the basis of the testimony taken at the hearing and on the basis of all information contained in the files, your committee concludes that the operation of aluminum sweating furnaces by the Navy and the Air Force constitutes unnecessary and unjustifiable competition with private enterprise. Your committee recommends that the Defense Department take steps immediately to remove the Government from competition with private industry in the operation of aluminum sweating furnaces.

Seventh Intermediate Report of the Committee on Government Operations, 834 Cong., 21 sess., H. Rept No. 1197. United States Senate Appropriations Committee Rept. No. 601, p. 7, sec. 622, 83d Cong., Ist sess.


Mr. Maudlin. “Aluminum sweating" is a term used in the trade to describe a process under which contaminated aluminum scrap is heated in a specially designed furnace until the molten aluminum forms in beads like sweat, drops off, is caught and poured into molds and is marketed as aluminum pig.

The contaminants which do not melt, such as iron and copper, are removed from the furnace and sold or otherwise disposed of.

The principal source of aluminum scrap for sweating furnaces is commercially known as wrecked aircraft scrap and is generated principally by the Navy and the Air Force.

On May 1, 1953, it was learned that the Air Force had authorized the construction of large commercial-size sweating furnaces at McClellan Air Force Base near Sacramento, Calif., and at Tinker Air Force Base near Oklahoma City, Okla., notwithstanding the fact that the National Production Authority had denied concurrence in the construction for economical, technical, and conservation reasons.

Following unsuccessful efforts to have the Department of Defense abandon their plans for constructing the furnaces, the operators of privately owned aluminum sweating furnaces requested the Select Committee on Small Business of the United States Senate to study the matter.

The committee staff made a thorough study of the situation and a public hearing was held at which representatives of the Department of Defense and private industry testified.

The report of the committee, which is included in the statement that I have filed, concludes with the following recommendations, and I quote:

On the basis of the testimony taken at the hearing and on the basis of all information contained in the files, your committee concludes that the operation of aluminum sweating furnaces by the Navy and the Air Force constitutes unnecessary and unjustifiable competition with private enterprise. Your committee recommends that the Defense Department take steps immediately to remove the Government from competition with private industry in the operation of aluminum sweating furnaces.

Representatives of the privately owned and operated aluminum sweating furnaces also appealed to the House and Senate Appropriations Committees to prohibit the use of funds obtained from the sale of scrap materials for the construction, acquisition or operation of Government aluminum sweating furnaces at the time the committees were considering the Department of Defense appropriations for the fiscal year ending June 30, 1954.

The Senate Appropriations Committee included the following statement in its report on the bill, and I quote:

Sec. 622. * * * It is the belief of the committee that the agencies of the Department of Defense should exert every possible effort to dispose of scrap and salvage materials through scrap and salvage dealers and to avoid going into scrap operations in competition with such private businesses.

The chairman of the Senate Subcommittee on Department of Defense Appropriations wrote to the Secretary of Defense, calling his attention to the committee report, the letter being quoted in the statement I have filed with you.

In spite of the direct and specific recommendations of both the Senate Select Committee on Small Business and the Senate Appropriations Committee, the Department of Defense completed the construction of the two large sweating furnaces and put them in operation.

During the consideration of the Department of Defense Appropriations for 1955, representatives of the Department of Defense and of the privately owned aluminum sweating furnaces appeared before both the House and Senate Appropriations Committees. A proviso was placed in the act, which is now the law, making the appropriations for the Department of Defense for the fiscal year ending June 30, 1955, reading as follows-and I quote:

Provided further, That no funds available to agencies of the Department of Defense shall be used for the operation, acquisition or construction of new facilities or equipment for new facilities in the continental limits of the United States for metal scrap baling or shearing or for melting or sweating aluminum scrap unless the Secretary of Defense or an Assistant Secretary of Defense designated by him determines, with respect to each facility involved, that the operation of such facility is in the national interest.

This proviso should be helpful in limiting the construction of additional sweating furnaces by the Department of Defense, but does not affect the operation of the existing furnaces which have curtailed the operations of privately owned aluminum sweating furnaces and so far closed one of them.

The Department of Defense has attempted to defend its aluminum sweating operation on the contention that such operations result in a profit to the Government.

Cost analyses presented in the memorandum that I have filed with your committee, based on cost data furnished by the Department of Defense to the Senate Select Committee on Small Business, show that the net monetary return to the Government would be larger if the Department of Defense sold all of its wrecked aircraft scrap as scrap instead of sweating a large tonnage of the scrap and selling it as aluminum pig.

Even if the Department of Defense could show a profit from its aluminum sweating operations, the few additional dollars profit to the Government would not be justified in view of the injury inflicted on the privately owned and operated aluminum sweating industry, which is at present operating only 40 percent of capacity due, in part, to the competition of the nine Government-operated aluminum sweating furnaces.

I have presented these facts, Mr. Chairman, in an effort to show the fallacy and futility of depending on the Department of Defense to act on recommendations made by congressional committees.

As long as the decision as to whether or not to enter into, or to continue, a Government activity which competes with private business is left with the department or agency concerned, there is little hope of any relief for private industry.

We urge that this committee recommend legislation which will provide a procedure under which a private business threatened or affected by Government competition can appeal, and under which the findings would be binding on the Government department or agency involved.

I appreciate the opportunity, Mr. Chairman, given me to appear before you on this matter which is so important to the secondary materials industry, and thank you for your patience in hearing me.

Mr. OSMERS. Mr. Maudlin, you have made a very good statement, and there has been considerable comment on the subject of aluminum sweating, as you know, by the general public. I was very interested to hear the note that you ended

your statement on, possibly because it agrees with the contention that I make-that

we must establish, by an act of Congress, within the executive department some place where business may legitimately take its complaint, place it before competent authority, and that the Government department can make its reply, and I think only in that way will we ever eliminate many of these unnecessary activities.

I wonder whether you also feel that any new activity that a Government department intends to establish should be reviewed by a different department of the executive branch in order to determine whether it should be engaged in or not.

Mr. Maudlin. We definitely believe that it should, Mr. Chairman, as I have endeavored to point out in my remarks and as is more fully covered in the statement I filed.

Mr. OSMERS. I noticed it was covered in your statement.

Mr. MAUDLIN. As long as the decision, the final decision, is made by the department or agency involved, we cannot expect too much relief.

We have definitely found that to be the case.

I want to make it very clear, Mr. Chairman, that we bave no complaint whatsoever with the reception we received when we appeared before the Senate Select Committee on Small Business or the Appropriations Committees of the House and the Senate. They heard our case. They also heard the Defense Department's case. They decided in our favor each time, but, as a final result, the Defense Department has refused to follow the definite, specific recommendations of these congressional committees, and it will require some independent agency to direct them to get out of the aluminum sweating business.

Mr. ÖSMERS. I believe that point is well taken, Mr. Maudlin. I simply can't see how the legislative committees of Congress, meeting as they do, generally, half a year, and then intermittently, and having many other problems, can sit in judgment on these matters and weigh all the factors in connection with the establishment or the disestablishment of these many activities. For example, we have had Armed Services here today that come under a discussion. We have had the Post Office Department. We have had the Veterans' Administration. We have had nearly every branch of the Government, or nearly every important branch of the Government, come before this committee, and nearly every important branch of government is competitive. So, you would be in a dozen different committees of Congress.

Take, for example, this young man who testified with respect to his belief of unfair competition that he was suffering from the Post Office Department. The only man in the Government that he can go to see is his competitor, the Postmaster General. He has to discuss his problem with his competitor. He can't get a hearing. He can't even get figures.

So, it is obvious to me Congress should act in this field.

Do you feel that the Executive should be required to report annually to Congress and to the people on progress made in terminating these unnecessary activities?

Mr. Maudlin. Very definitely so, Mr. Chairman.
Mr. OSMERS. Are there any further questions?
If not, Mr. Maudlin, thank you.

Mr. FOUNTAIN. Mr. Chairman, I would like to make an observa

Mr. OSMERS. Mr. Fountain.

Mr. FOUNTAIN. I have been listening with a great deal of interest particularly to your question with respect, I assume, to the subject matter of section 4 of your bill. I imagine that is what you have in mind.

Mr. OSMERS. 9890, Mr. Fountain?
Mr. FOUNTAIN. 9890.

I am inclined to agree with you. The only thing that disturbs me is the fact that, as you say, in order for it to be effective and in order for these complaints to be properly and effectively and honestly heard, it appears you bave almost got to have another agency or another bureaucracy of some kind: but, assuming for purposes of argument, that we set up such an agency which can deal with these complaints in an impartial manner, what is it going to amount to, if it doesn't have some teeth or some means of enforcing the rulings which it may make?

Mr. OSMERS. I feel, Mr. Fountain, that the Executive, under the Constitution and under many, many of the laws that we pass here, has authority to act in this field.

Mr. FOUNTAIN. All right.

Mr. OSMERS. No one has raised the question at all before the committee, or before the subcommittee, about the President's authority. I believe that it is in fairness to the Executive, whoever he might be, that he, himself, cannot sit in judgment on each case. It would seem to me that we, by congressional direction, could establish some person or board, or group.

My original bill, H. R. 8832, I like much better than I do H.R. 9890, even though it set up a board, because it seemed to me a little broader and probably it would work out just as well.

H. R. 9890 designates the Secretary of Commerce, and he has certain very specific duties given to him in the bill; additional ones can be given to him by the President, and I feel, Mr. Fountain, and the rest of the members of the committee, that if the Secretary of Commerce, following the procedure set up in H. R. 9890, or the Anti-Government Competition Board established by H. R. 8832, places on the President's desk a recommendation that the United States Government not engage in aluminum sweating in the continental United States, it would be my opinion that any Executive that we might have would not permit aluminum sweating to be conducted in the continental United States.

Now, that is just my feeling about the type of man that is President of the United States, that if he had an intelligent report placed before him, by someone who was not directly concerned in it, but that everybody had been heard, I feel the Executive, the average Executive that we will have, will act properly and in accordance with the recommendations.

I think some of the witnesses here-take, for example, the warehouse people--may be oversanguine about what may happen to them. I don't know but what the Government is going to continue to do a lot of warehousing, and some of it, I assume, they will have to do at all times.

Are there any other questions?
If not, thank you very much, Mr. Maudlin, for your statement.
Mr. Hibben.

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