Other materials in national stockpile inventory

In addition to inventories of specification grade materials, the national stockpile contains nonspecification grade materials for which there are stockpile objectives, materials that have been removed from the stockpile list, and others for which there are no objectives. Quantities of nonspecification grades of material on hand in the national stockpile as of June 30, 1964, are shown in table 12 (p. 121). Quantities of materials in the national stockpile which have been removed from the list and for which there are no stockpile objectives are shown in table 13 (p. 121).

Most of the nonspecification grade materials were acquired by transfer of Government-owned surpluses to the national stockpile after World War II. Others were accepted as contract termination inventories. Several were of specification grade when acquired but no longer qualify due to changes in industry practices and other technological advances. Disposal action for many of these items has been authorized by OEP. Inventory changes during fiscal year 1964 were due primarily to disposals, or to reclassification and other adjustments of the inventories.

Stockpile storage

OEP is responsible for establishing the general policies for the stockpiling program, including storage, security, and maintenance of inventories and determination of vulnerability of storage sites against loss or denial of access in the event of massive nuclear attack. GSA is charged with the general operating responsibility under the policies established by OEP. On June 30, 1964, Government-owned strategic materials were stored at 158 locations to effect geographical distribution in relation to the needs of consuming areas as follows:

As of June 30, 1964, approximately 52 million tons of strategic materials were stored at these locations in comparison with 51.5 million tons in storage on June 30, 1963.

Acquisitions of stockpile materials

During fiscal year 1964, jewel bearings was the only material authorized for cash purchase for stockpile purposes. In addition to jewel bearings, the strategic stockpile procurement directive for fiscal year 1964 provided for the stockpile acquisition by methods other than cash purchases of four commodities-antimony, chrysotile asbestos, refractory grade chromite, and small diamond dies. The directive also provided for the upgrading of certain stockpile materials to columbium metal, columbium carbide powder, tantalum metal, tantalum carbide powder, and oxygen-free high-conductivity copper through the use of excess materials as payment-in-kind to cover the transportation and processing costs.

The one remaining supply contract entered into under the Defense Production Act program was terminated by GSA on March 5, 1964. This contract was with the Hanna Nickel Smelting Co. and called for the delivery of 16,993,000 pounds of nickel valued at $9.8 million through June 30, 1965. The company paid the Government $2,175,000 representing the negotiated difference in the contract price and the current market price of the nickel remaining to be delivered.

During fiscal year 1964, the Commodity Credit Corporation negotiated 37 new barter contracts totaling $81.1 million for strategic materials to be placed in the supplemental stockpile. All of these contracts were for materials in excess of stockpile objectives. These transactions were authorized to advance foreign policy objectives or other Government interests. OEP requests procurement through barter only when the material is needed for stockpiling purposes. The value of strategic materials delivered to CCC under barter agreement during fiscal year 1964 totaled approximately $39.9 million as compared with $89.2 million during fiscal year 1963. Table 14 (p. 122) indicates the value of materials acquired by barter by CCC through June 30, 1964.

Disposal programs

As indicated in the previous report, the Director of OEP, acting in accordance with the recommendations contained in the Executive Stockpile Committee's report which the President approved on January 30, 1963, established an Interdepartmental Disposal Committee to review all aspects of any proposed disposal program and make recommendations to the Director. This committee is chaired by OEP and consists of representatives from the Departments of State, Defense, the Interior, Agriculture, Commerce, and Labor, the General Services Administration, Agency for International Development, and Small Business Administration. The Bureau of the Budget, the Atomic Energy Commission, and the Department of the Treasury participate as observers. A subcommittee, chaired by GSA, and composed of the Departments of State, Defense, the Interior, and Commerce, was established to review and determine the scope of the program, including guidelines as to quantity and rate of sales, and other factors that must be resolved in order to insure that the interests of producers, processors, and consumers, and the international interests of the United States are carefully considered both in the development and carrying out of each disposal plan. Before decisions are made regarding the adoption of a long-range disposal program, appropriate consultations are held with industry and other interested parties to afford them the opportunity to express their views and obtain the benefit of their advice.

During the period October 1963 through June 30, 1964, definite progress has been made with respect to disposing of excess materials. Considerable time and effort have been devoted by members of both the Interdepartmental Disposal Committee and the subcommittee in carrying out their functions and responsibilities. During this period, the subcommittee held a total of 38 meetings and the full Committee convened 14 times to resolve problems and reach a determination with respect to each material under consideration. A total of 25 special ad hoc working groups have completed studies and compiled data relating to 25 excess stockpile materials. As a result, the subcommittee completed its investigations and made long-range determinations for 15 excess materials, 14 of which were favorably acted upon by the full Committee and forwarded to the Director of OEP with recommendation for action. As of July 10, 1964, 11 of these had been approved by the Director with instructions to GSA to develop a proposed plan as the basis for industry consultations and subsequent approval by the Director of OEP for submission for Congressional authorization. The Director has two plans under consideration while one plan has been deferred for 6 months at the suggestion of the Disposal Committee.

Of the 11 disposal plans approved by the Director, 3 have been authorized by the Congress-cadmium on June 12, 1964, tin on July 2, 1964, and molybdenum on July 14, 1964; 4 are undergoing agencies' consultation with industry and foreign countries, and 4 are now in the developmental stage.

During fiscal year 1964, OEP approved a total of 34 disposal actions (including the 3 long-range disposals mentioned above), of which 15 involved materials released from the national stockpile, 15 from the Defense Production Act inventory, and 4 from the supplemental stockpile, as indicated in table 15 (p. 122). Two of these disposal actions-palladium and iodine-were canceled due to a revision in the stockpile objective and settlement of a claim against the carrier. Eleven of the materials to be released from the national stockpile are presently awaiting congressional approval and three materials to be released from the supplemental stockpile will be submitted to Congress by GSA shortly.

In addition to the foregoing long-range disposal programs, OEP has approved, and GSA has under development, short-term disposal plans for four materialshyoscine, raw silk, silk noils, and silk waste.

The surplus inventories of 12 materials with a market value of about $3.3 billion represents 80 percent of the total surplus of approximately $4.2 billion in Government inventories. Disposal programing for these 12 materials has reached a stage where 6 materials have disposal programs currently in effect. 2 are being reviewed with industry, 3 are under review by the subcommittee, and 1 has been deferred pending completion of the supply-requirements study for nuclear war.

As of June 30, 1964, cumulative sales commitments of surplus materials negotiated by GSA totaled $727.5 million at sales value, of which $403.4 million were from the national stockpile, $313.5 million from the DPA inventory, and $10.6 million from the Federal Facilities Corporation (tin). Of this total, sales commitments during fiscal year 1964 amounted to $167.1 million, of which $127.1 million were from the national stockpile and $40 million from the DPA inventory.

The major disposals during fiscal year 1964 were: tin, $63.8 million; rubber, $44.6 million; aluminum, $25.1 million; cadmium, $4.6 million; coconut oil, $4.5 million; feathers and down, $2.2 million and magnesium ingots, $2.7 million. Some of the special disposal programs currently in effect include: Aluminum.-After a year of negotiation between Government officials and the three major producers, agreement was reached in May 1963 which permitted the sale of 135,000 short tons of aluminum with a market value at the time of $62.5 million. Through June 30, 1964, total sales amounted to 78,699 short tons valued at approximately $36.2 million. The next offering totaling 33,750 short tons, of which 6,250 will be a set-aside restricted to firms qualifying as small business concerns, is scheduled for December 1964.

Cadmium.-On April 13, 1964, OEP approved the release of an additional 5-million pounds of cadmium from the national and supplemental stockpiles, subject to congressional authorization, to alleviate the shortage reported by industry. On June 12, 1964, Public Law 88-319 was enacted authorizing the disposal of this material. Effective July 1, 1964, GSA is making quarterly offerings at a rate not to exceed 2,400,000 pounds per year or 600,000 pounds per calendar quarter. Sales during the first 2 months of each quarter will be restricted to holders of unsatisfied defense-rated orders. During the third month, any unsold portion of the 600,000 pounds will be offered on an unrestricted basis for domestic consumption only. All sales will be made on a shelf-item basis. Prices for the materials during any quarter will be the fair market price as determined by GSA.

Coconut oil.-In April 1959, OEP approved and GSA undertook to dispose of 265 million pounds of coconut oil from the national stockpile. During fiscal year 1964, the remaining 38 million pounds were sold for $4.5 million. The Government received a return of $31.6 million for the total 265 million pounds.

Lead. On July 14, 1964, the Congress enacted Public Law 88-373 authorizing the disposal of 50,000 tons of excess lead from the national stockpile, without regard to the normal 6-month waiting period. This congressional action was urged by industry to help increase the available supply of primary lead needed for production requirements and to replenish industry's stocks which have been declining for sometime because of the supply deficiency. Government sales are planned to be effected promptly.

Molybdenum.-This material has been in short supply for several months. On April 10, 1964, OEP authorized the disposal of the excess molybdenum over stockpile needs (11 million pounds) from the national stockpile, subject to congressional approval. The Congress authorized this release under Public Law 88-377 on July 14, 1964, without regard to the normal 6-month waiting period. Government sales are to be on a competitive bid basis for domestic consumption only. The initial offering will approximate 2 million pounds with subsequent offerings to be determined on the basis of initial sales and current market conditions. Rubber. During the year ending June 30, 1964, Government sales of surplus rubber amounted to 85,834 long tons valued at about $45 million. As of that date, 313,489 long tons valued at $207 million had been sold since October 1959 when the disposal plan started. This leaves a balance of 156,511 long tons to be sold of the original 470,000 long tons authorized for disposal by the Congress.

Disposal procedures have been amended from time to time and, prior to September 1, 1964, the GSA was authorized to sell 5,000 long tons of natural rubber each month for commercial purposes and an additional indeterminant amount for use in programs of the Agency for International Development (AID) and Department of Defense contracts. As of September 1, 1964, the commercial sales rate was increased for the period of the next 12 months to 18,000 long tons per quarter.

During the past year, OEP has made special efforts toward the increased use of surplus rubber by AID and the Department of Defense in their foreign aid programs. AID has stepped up the use of surplus rubber, in lieu of dollars, to recipient countries previously acquiring rubber in foreign markets, as well as using surplus rubber in connection with the procurement of tires and tubes for such countries. During the period, the Defense Department substantially increased the quantities of Government-owned rubber in the purchase of military truck tires and retreading materials and started to use sizable quantities in connection with the procurement of aircraft tires for the three services. Table 16 (p. 123) gives an indication of the extent these programs have increased in the past fiscal year.

During fiscal year 1965 it is planned that surplus stockpile rubber will be used in all procurement activities of Federal agencies to the maximum extent possible.

Under the new rubber disposal procedures, companies furnishing tires and tubes to Federal agencies (except Department of Defense) from the "General Supply Schedule" of the General Services Administration will be required to purchase surplus rubber with a value equal to 25 percent of the value of the tires and tubes. There will be no quantitative limitations on the amount of rubber sold for direct Government use. Efforts will be made to increase the use of surplus rubber in the AID and DOD programs.

Tin.-On June 21, 1962, the Congress approved the disposal of 50,000 long tons of tin from the stockpile. From September 12, 1962, through June 30, 1964, sales commitments amounted to 26,932 long tons valued at $76.7 million, leaving a total of 23,068 long tons remaining to be sold. Of the total, 14,937 tons or 55 percent were sold during the past 6 months. As indicated by the price rise— $1.085 per pound on September 12, 1962, when GSA made the first offering, to $1.55 on June 30, 1964-Government sales have caused no serious impact on the market. Effective March 20. 1964, a revised long-range plan involving approximately 98,000 long tons of additional excess tin in the stockpile was announced for disposal over a period of 6 to 8 years, subject to the approval of the Congress. Congressional authority was granted on July 2, 1964. Because of the prevailing strong market, it is anticipated that, during the current fiscal year, the disposal rate will be approximately 20,000 long tons. This program will be reviewed before the end of the year, in consultation with other interested agencies, to determine the subsequent rate of sale.

Zinc.-On May 13, 1964, OEP directed GSA to prepare an interim short-term disposal plan for the release of 75,000 short tons of excess zinc from the national stockpile subject to congressional approval. This action was requested by the Assistant Secretary of the Interior and the Administrator of the Business and Defense Services Administration, Department of Commerce, who urged that the Government help alleviate the tight market situation confronting industry with respect to certain grades of zinc. Industry indicated that estimated requirements would exceed anticipated production for 1964 by 50,000 to 75,000 tons and this deficit could not be met by a further drawdown of existing stocks. The Congress authorized the release of 75,000 tons of zinc on July 14, 1964, without regard to the 6-month waiting period. Except for set-asides to be sold to independent alloyers of zinc, GSA plans to restrict Government sales to producers of primary zinc who agree to distribute the material, at no profit, for domestic consumption only.

PRODUCTION EQUIPMENT

Objective

To assure adequate supplies of production equipment to satisfy essential defense production, cold-war mobilization, survival and recovery requirements.

Status

Government-owned production equipment currently available to apply against this objective consists of items either in use or being maintained in storage. Included are: (1) items controlled by the Department of Defense which are either being used on current contracts and in Defense installations or are being maintained in the Departmental Industrial Equipment Reserve; (2) items selected by the Department of Defense, with the assistance of the Department of Commerce, for inclusion in the National Industrial Equipment Reserve which is administered by the General Services Administration under section 303 of the Defense Production Act; and (3) items owned by other agencies such as the Atomic Energy Commission, the National Aeronautics and Space Administration, and the Department of Commerce. Under the responsibilities assigned by Executive Order 11051, the Director of OEP provides policy guidance to all Federal agencies on Government-owned production equipment. During fiscal year 1964, revised policy guidance on such equipment was issued to all Federal agencies (Defense Mobilization Order 8555.1, Nov. 13, 1963). It covers the use, storage, maintenance, modernization, leasing, redistribution, utilization for disaster purposes, and the maintenance of inventory records of production equipment. In fiscal year 1964, a survey was made to determine the adequacy of the procedures being used to channel production equipment items excess to the needs of one agency to other Federal agencies for use on authorized programs prior to being sold as surplus. All interested Federal agencies considered the existing procedures to be satisfactory and are now actively screening lists of excess pro

duction equipment for possible use in their programs. As a result, OEP has discontinued its review of detailed lists of excess items issued by individual agencies. Excess production equipment was used during the year to increase the National Industrial Equipment Reserve, and to carry out the machine-tools-forschools program. Further information on activities under these programs is contained in the reports of the Department of Defense and the Department of Health, Education, and Welfare.

Under existing procedures, the Department of Commerce maintains an inventory of idle production equipment owned by all Federal agencies, except such equipment owned by the Department of Defense and that in the NIER. Due to the small number of tools involved, the possibility of merging this inventory with the centralized inventory now maintained by the Defense Industrial Plan Equipment Center is being investigated by OEP.

Pool-orders status

Pool-tool orders are designed to insure that the machine-tool industry will continue to produce general-purpose production equipment during the initial stages of a future emergency until defense and defense-supporting contractors can determine their specific needs for new production equipment. Approximately 90 percent of the machine-tool producers have entered into contractual agreements with the General Services Administration, providing for the production of about 14,000 items valued at approximately $230 million when the producers are notified in an emergency.

During the year, GSA, with OEP's concurrence, amended existing contracts to insure that the contractor will deliver the latest model currently being produced, if and when the program is "triggered."

COMPONENTS PRODUCTION

Objective

To assure continued domestic production of jewel bearings and to expand and modernize the Government-owned jewel-bearing facility in order to provide for essential needs in case of an emergency.

Status

The Government-owned contractor-operated Turtle Mountain plant in Rolla, N. Dak., is the only facility in the United States capable of manufacturing jewel bearings in sizable quantities. Currently, the output of this facility is used primarily to provide jewel bearings required by defense contractors, with any output not required for this purpose being delivered to the Government to complete the stockpile objective. The number of jewel bearings sold to defense contractors has been increasing and, in calendar year 1963, represented about 68 percent of the total output. During this period, the average unit cost of standard military bearings was substantially reduced.

In fiscal year 1963, the Congress appropriated $1,100,000 to expand and modernize this facility as recommended by the OEP Advisory Committee on Jewel Bearings. This project, when completed, will provide a minimum capability for producing jewel bearings needed for essential requirements during an emergency. The General Services Administration is responsible for carrying out the expansion and modernization program. Based on damage assessment studies, which indicated that the facility would be subjected to little or no radiation effects in the event of a nuclear attack on the United States, OEP requested GSA to eliminate the radiation protection construction features which were planned for the new building.

In May 1964, GSA dispatched a group of experts to Europe to examine the latest type of jewel-bearing-production equipment and, at the end of the fiscal year, it was preparing to place contracts for the types of equipment recommended by this group.

As provided in the Appropriation Act, the land and the existing building owned by the Rolla Civic Improvement Association, which the Government leased in the past with a purchase option, have now been acquired by the Government. Drawings and plans for the new building are being developed.

As recommended by OEP, GSA is developing plans for storing the existing equipment, which will be replaced by the new equipment, in a safe location. This will insure that some capability to produce jewel bearings will be available in an emergency even if the Rolla facility should be damaged or destroyed.