364. Report by the Executive Stockpile Committee to President Kennedy0

REPORT ON DISPOSING OF EXCESS STOCKPILE MATERIALS

This report is in response to your request for the development of recommendations regarding long-range disposal programs for excess stockpile materials.1

Scope of Disposal Problem

As of September 30, 1962, the market value of Government inventories of strategic and critical materials in excess of present maximum objectives was $3,336,303,000.

Of this total, $3,100,702,000 represented inventories of specification-grade materials. The balance, $235,601,000, represented materials which do not meet specifications or for which there are no stockpile objectives.

[Page 812]

About seventy-nine per cent of the excess of specification-grade materials, i.e., $2,438,000,000, is invested in inventories of only twelve materials. The remaining twenty-one per cent of such excess, i.e., $662,702,000, is contained in inventories of forty-nine materials.

Net recurring storage costs applicable to surplus inventories amount to approximately $4 million annually.

Some Issues Involved

The Committee concluded that long-range stockpile disposal programs can best be developed after decisions are reached about several important matters.

The issues involved are:

(1)
The need for a stockpile public information program.
(2)
The propriety of developing disposal plans for surplus materials before new and up-to-date stockpile objectives are calculated.
(3)
The need for retaining materials to meet some non-war requirements for strategic materials, e.g., cold war potential needs.
(4)
The preference to be given various methods of disposal.
(5)
The adoption and proclamation of criteria and procedures for developing disposal plans.
(6)
The need for additional legislation to promote efficient stockpile management and facilitate disposals of surplus materials.

Recommendations

As a result of its studies and discussions of these issues, the Committee makes the following recommendations:

No. 1.

A program should be developed to provide appropriate information to the general public, producers, processors, and consumers, both domestic and foreign, about the facts relative to stockpile surpluses, and the plans and programs which the Government may have or develop regarding them.

No. 2.

The Committee reaffirms the recommendation in its report of March 19, 1962,2 that present maximum objectives should be used to determine the surplus of each material for which disposal plans should be developed. A careful review of present objectives should be undertaken and different interim objectives adopted where appropriate.

[Page 813]

No. 3.

In formulating disposal plans, disposals of stockpile surpluses should be deferred in those instances where this may be considered necessary to meet contingencies short of war or national emergency arising because of the unanticipated consequences of economic or political activities in foreign countries which might result in a cut-off of critical supplies essential to day-to-day operations of the economy. Deferral of disposals on this basis should be confined to those cases where the United States is dependent for the bulk of its requirements on a limited number of foreign countries, where adequate substitute materials are unavailable, and where a cut-off of supplies would cause a serious disruption in a broad sector of commercial or industrial activity.

No. 4.

Preference should be given to disposal of surpluses by direct cash sales through regular commercial channels.

No. 5.

No legislation should be requested to provide price differentials to small businesses purchasing surpluses. Attention should be given, however, to the use of set-asides and the provision of terms and conditions which can be met by small businesses with regard to packaging, quantities, payments, and delivery. Full use should be made of the certification of competence procedure provided by section 8(b)(7) of the Small Business Act of 1958.3

No. 6.

Surplus disposals should be on a non-exclusive, non-discriminatory basis to all potential buyers, except where special circumstances might justify limiting disposals to a particular group, e.g., producers or sales agents.

No. 7.

Federal agencies should continue to purchase their direct needs for surplus stockpile materials from the General Services Administration.

No. 8.

Opportunities for disposals of surpluses through their use in the manufacture of articles being procured by the Government, i.e., indirect Government use, should be thoroughly investigated. This method of [Page 814]disposal should be used only when it is expected that disposals cannot otherwise be made. It should, however, be looked upon as an important tool for the implementation of surplus disposals.

No. 9.

Disposals which involve the use of surpluses to pay for all or part of the cost of Government procurement, i.e., barter, should be made only when it is expected that the disposal could not be satisfactorily made by other methods, and only when there are assurances that the materials will not be directly resold on the market. Such disposals, however, should be looked upon as an important tool for the implementation of surplus disposals.4

No. 10.

Permanent authority for the use of Defense Production Act5 inventories to pay for the cost of upgrading materials needed for the National Stockpile should be provided by law.

No. 11.

Regardless of which of the methods discussed in recommendations Nos. 4 through 10 is used, the amount disposed of should be within the overall amount authorized by an approved long-term disposal program for the material involved.

No. 12.

(a)
An interdepartmental committee chaired by the Office of Emergency Planning should be designated to conduct preliminary investigations of all aspects of the proposed disposal of any material, including selective consultation with industry. This committee should recommend relevant factors, policy decisions, and criteria for determining the ultimate maximum and minimum amounts of disposal and the average rate of disposal to be incorporated in each long-range disposal program to be approved by OEP.
(b)
Criteria for the development of disposal programs (Attachment A)6 should be approved and published.
[Page 815]

No. 13.

Necessary stockpile legislation should be provided to expedite and facilitate the disposal of stockpile surpluses.

No. 14.

Disposal programs should be developed for all surpluses under the Defense Production Act and the Strategic and Critical Materials Stock Piling Act. Disposal programs for surpluses in the Supplemental Stockpile should also be developed if and when legislation is provided to facilitate disposals from that stockpile.

[Here follow 20 pages of “Discussion of Recommendations.” Also omitted are the signatures of Edward A. McDermott (Chairman), G. Griffith Johnson (Department of State), Roswell Gilpatric (Department of Defense), John M. Kelly (Department of the Interior), Edward Gudeman (Department of Commerce), John F. Henning (Department of Labor), Huntington D. Sheldon (Central Intelligence Agency), and Bernard L. Boutin (General Services Administration).]

  1. Source: Kennedy Library, National Security Files, Kaysen Series, Economic Policy, Stockpiling of Strategic Materials, SM 63. No classification marking. A January 16 transmittal letter from McDermott as Chairman of the Executive Stockpile Committee to President Kennedy, not printed, submitted the report for his review and consideration. An attached covering memorandum from McDermott to Kaysen, February 15, states that the President approved the public release of the report.
  2. Document 347.
  3. Document 349.
  4. Reference is to section 8(b)(7) of P.L. 85-536, approved July 18, 1958, under which small business government contractors could participate in procurement and disposal contracts without any other requirements with respect to capacity and credit. (72 Stat. 391; 15 USC 637(b)(7))
  5. In a letter of January 3 to McDermott, Acting Secretary of Commerce Edward Gudeman expressed reservations about recommendations 9 and 10 because “the Department of Commerce continues to be seriously concerned about the disruption of markets through noncommercial channels.” (Washington National Records Center, RG 40, Department of Commerce, Executive Secretariat Files:FRC 69 A 6828, Office of the Secretary, President’s Committee on Stockpiling)
  6. P.L. 81-774, approved September 8, 1950; 64 Stat. 798, 50 USC App. 2061, et seq.
  7. Not printed.