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With respect to the contention that military personnel are compensated on a "disadvantageous” basis, this would appear to be premised on the assumption that the Department of Defense feels justified in making up alleged compensation deficiencies by means of other benefits—such as the sale of gasoline at cut-rate prices. I would not be so presumptuous as to argue the issue whether military personnel are underpaid or overpaid. That is a matter for the best judgment of the Congress. However, adequate compensation for military personnel is a problem for the entire country and is a burden that should be assumed by all taxpayers. It most certainly is not in keeping with the principles of the free enterprise system and our system of government to ask that merchants and business men located near military installations subsidize military compensation deficiencies by way of direct competition with their business.

SPECIFIC EXAMPLES OF COMPETITION

For the information and enlightenment of this committee I should like to now present a bill of particulars-specific examples selected at random as to just how the Government is competing in this particular segment of marketing and the effects that such competition has on local business in the United States.

Before turning to specific illustrations I should like to briefly present some general statistics to the committee. I have obtained figures indicating the dollar volume of gasoline sold through post exchange filling stations at Army and Air Force installations during the years 1952 and 1953. In the calendar year 1952, Army and Air Force post-exchange-operated service stations had sales in excess of $23,480,000. In 1953 these same facilities marketed in excess of $23,900,000 worth of gasoline and other items normally carried by such outlets.

For these 2 years of operation, and this is based on Army and Air Force figures alone and does not include facilities operated by the Navy, Marine Corps, or other service components, approximately $47.5 million in sales were made by post-exchange-operated service stations. For the information of the committee I submit as exhibit A the complete details behind these sales figures.

This means that local jobbers and retailers were deprived of this volume of business and that the Government was deprived of the taxes that would have been paid by these businessmen on the income generated on this additional volume in their business operations.

Not only have the Army and Air Force sold almost $48 million worth of gasoline and related items through post-exchange service stations in direct competition with local businessmen, but they have also obtained such favorable prices on this gasoline that they are able to merchandise it at some 2 to 4 cents per gallon less than the local businessmen can sell a comparable product of equal grade and quality.

I have obtained from jobbers throughout the country dozens of specific illustrations demonstrating the scope of this competition by the Government and the impact it has on the marketing conditions in the local areas affected.

I would like to briefly review just a few of these specific illustrations for the information of the committee.

FloridaTyndall Air Force Base, Panama City, Fla., has one post-exchange filling station which was built in 1945, This post-exchange station sells gasoline 2 to 3 cents per gallon below local commercial stations. The station markets approximately 80,000 to 100,000 gallons of gasoline a month, and also sells what are known in the trade as TBA items (tires, batteries, and accessories) in proportion to this gasoline volume. In this instance a commercial, locally owned and operated gasoline station is located within 200 yards of the base and is closer to many officers and airmen stationed at Tyndall Field than is the post-exchange gasoline station. In addition, over 50 commercial stations are located within a radius of 1 to 10 miles of the base.

North Carolina.-The situation existing at the Marine Corps installation at Camp Lejeune, N. C., is a classic. I am informed that four post-exchange service stations are currently being operated at this base and there is an excellent possibility that a fifth will be installed in the very near future. These post-exchange stations are marketing regular and premium gasoline at 4 cents per gallon under the local commercial-station price. It is estimated that the gallonage sold by these PX stations is approximately 375,000 gallons per month, and this represents about one-third of all the gasoline sold in the area immediately surrounding Camp Lejeune.

In addition to competition with local stations, some of which are located within one-quarter of a mile of the base, these stations are maintaining a vigorous competition in the merchandising of tires, batteries, and accessories. For example,

AC sparkplugs cost local commercial stations 51 cents each, and carry a fair trade price of 85 cents. They are sold at exchange service stations for 4542 cents each. A similar example is the Ford oil filter cartridge—this item costs commercial stations $1.07 and carries a retail list price of $1.92. The post exchange Ietails this item for 85 cents. An Exide battery which lists for $21 at commercial stations sells for $16.85 at the PX. A Firestone 6.70–15 first line tire lists at commercial stations at $22.60, plus taxes, whereas the same tire in the post exchange station sells for a total of $16.85, including Federal excise tax, but not subject to the 3 percent State sales tax. It is stated that when the above-referred to post exchange stations are closed for holidays or inventory, commercial stations within that immediate area enjoy almost twice their usual sales. I might also note in connection with the situation at Camp Lejeune that while sales are theoretically limited to military personnel and their dependents, as a practical matter this merchandise is available to civilian employees on the base and to other civilians having access to the installation.

South Carolina.— I have been provided with a very interesting proposal that was submitted to a jobber by Lt. Col. Harold L. Hamilton, exchange officer at Fort Jackson, S. C. Colonel Hamilton advises that the Fort Jackson exchange is interested in the construction of a new service station on the base, and that said service station should be equipped and laid out for the resale of 70,000 to 80,000 gallons of gasoline monthly; that such station "should have at least 12 pumps, 2 lubrication lifts, 2 wash racks, a tire repair room large enough to accommodate 3 vehicles at one time, an office and displav room, a stock room, toilet facilities for both men and women, and a central cashier's booth, either in the gasoline pump line or designed so that it will be easily accessible in the front of the service station." I leave to the good judgment of this committee as to whether an elaborate facility such as this outlined by Colonel Hamilton would be competitive with local commercial stations.

I might note that in addition to this proposed station, Fort Jackson is currently operating a PX gasoline station marketing gasoline at 2 cents per gallon under the local market price, and during 1952 and 1953 this station did approximately $500,000 in sales. There are at least 11 commercial stations within a radius of 2 miles from this Army post, all of which have felt the loss of volume and will suffer even more when the new station is built.

South Dakota.—A particularly well-documented illustration of how the Government is competing with local private enterprise is represented by the situation existing in connection with the operation of the PX station at Ellsworth Air Force Base, Rapid City, S. Dak. Socony-Vacuum Oil Co. built the exchange at Ellsworth Field at a cost of $27,500. There is a contract to supply this station at tank-car price for a period of 5 years. The post exchange pays 1 cent per gallon to the supplier, which is applied to the cost of constructing the station, the theory being that this 1 cent per gallon will pay the construction costs within 5 years.

I am informed that during 1 month in 1953 the gross sales in this station were $33,886.97; direct expense charged was $30,383.88; leaving an operating profit of $3,503.09.

Within a radius of a mile and a half of Ellsworth Field there are at least three commercial stations, all of which are fully equipped, located on the main highway leading from Ellsworth Field. The field is 10 miles from Rapid City, S. Dak., and in addition to the commercial stations mentioned above, there are at least four more located on the highway leading into Rapid City.

Texas.—We have been informed of post exchange service stations being maintained at 13 Army and Air Force installations within the State of Texas. I might briefly review the marketing situation attendant to a few of these situations. At Čarswell Air Force Base, Fort Worth, the PX service station markets premium and regular gasoline at 242 cents under the posted commercial price and it is estimated that this station is marketing in excess of 65,000 gallons of gasoline per month. At Randolph Field, San Antonio, the post exchange superservice station maintains 12 pumps and gasoline is sold at 242 to 3 cents per gallon below the local price. In 1952 this station had sales of approximately $330,000, and in 1953 of approximately $472,000.

Based on the foregoing factors and the factual elements which I have undertaken to review, the National Oil Jobbers Council heartily endorses the principle of the legislative proposals before the House Committee on Government Operations, and it is upon these factors that we feel that legislative action is mandatory-rather than relying on the Department of Defense to issue periodic high-sounding regulations that merely nibble at a problem, rather serve to pro

vide a permanent solution to the problem of getting the Government out of business operations that are competitive with private enterprise.

CONCLUSION

Owing to time limitations and a desire to refrain from unduly burdening the committee with statistical data, I have only quickly reviewed the highlights of what is becoming an increasingly aggravated situation. Before concluding there is one other aspect of this problem to which I would like to refer. The preferential position and near monopoly enjoyed by the exchange operated service stations not only affects local businessmen competitionwise, but also enables the PX stations to buy gasoline and other products at prices equal to or less than the prevailing wholesale price. This enables the PX station to obtain gasoline at a price from 2 to 4 cents per gallon less than the price paid by the average retail service station operator, and being freed from many of the cost problems and the impact of taxation suffered by private enterprise, the PX station has become a substantial demoralizing factor in the marketing areas concerned.

Independent gasoline dealers and independent jobbers have enough difficulties in the conduct of their business affairs with the competition of large integrated oil companies, coupled with ever increasing costs, Federal and State regulations, and the ever present tax structure.

We feel, and apparently many other industrial and commercial spokesmen are of the same mind, that the military should get out and stay out of business operations that are competitive with private enterprise. To date appeals directed to the military along this line have produced nothing but high-sounding principles followed by fine print directives that serve to accomplish an operating pattern that appears to be diametrically opposed to the press release principles and the flag waving. We in industry are getting fed up with the delay and subterfuge and the Esau-Jacob approach to this problem that the military authorities have apparently adopted.

În conclusion we respectfully request that this committee take affirmative, direct action to cope with this problem and that all possible effort be extended toward obtaining the necessary legislation that will provide the lines of demarcation as to what are appropriate business-type activities for operation by government organizations.

I thank the committee for the privilege of making this statement and request that my prepared remarks be made a part of the hearing record.

EXHIBIT A

ATLANTA REGION

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$370, 515. 16 | Terminal posted.

ica
56, 571. 41 Do.
136, 046.85

Do.
414, 636. 79 Posted tank car.
159, 430. 86 Do.

39, 223. 41 Do.
249, 994. 65 Tank wagon less $0.0225 per gallon.

65, 187. 54
209, 562. 17 Posted dealer less $0.023 per gallon.
88, 772. 46 Tank car less $0.05 per gallon.
35, 974. 50

Posted tank car.
117, 399.88 Dealers tank wagon less $0.0175 per gal-

lon. 59, 947.93 Tank wagon less $0.02 per gallon. 153, 870. 19 Posted tank car. 109, 362. 83

Tank car. 134, 835. 26 Tank wagon less $0.0228 per gallon. 272, 514. 41 Terminal price less $0.0025 per gallon.

4, 122. 74 Do. 263, 568. 10 Posted transport truck delivered.

Posted tank wagon, Biloxi, less $0.025, 329, 767.83

regular. Posted tank wagon, Biloxi, less $0.0275,

premium. 213, 243. 70 Termin 1 plant, Tampa, Fla., for spot

t nk car and transport truck de

livered.
303, 346.32 Tank car less $0.0055 per gallon.

65, 188.80 Do.
106, 530. 22

Do.

Maxwell Air Force Base

Do...
Do.

299, 950. 53

57, 765. 58 102, 700. 67

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Camp Drum
Fort Meade

Do.
Military District of Washington

Do.
Do..
Do.
Do
Do.

Do
Fort Monroe
Camp Pickett
Hanscom Air Force Base
Dow Air Force Base
Grenier Air Force Base.
Griffiss Air Force Base
Limestone Air Force Base

Do.
Suffolk Air Force Base 1
Mitchell Air Force Base.

Do.
Otis Air Force Base

Do.1
Sampson Air Force Base

Do.1.
Stewart Air Force Base

Do...
Presque Isle
Langley Air Force Base.
Olmsted Air Force Base
Wright Patterson Air Force Base.

I Not in operation.

$26,20

Tank wagon. 193, 444 Tank wagon less $0.0225 per gallon. 8, 526

Do. 2, 303 1816 Tank wagon less $0.0175 per gallon.

79, 608 157, 734 Tank wagon less $0.015 per gallon. 264, 587 Tank wagon less $0.02 per gallon.

4,72 Tank wagon less $0.0206 per g llon. 235, 160

Tank wagon less $0.015 per gallon. 45, 867 Do. 15, 422

Tank wagon. 18, 048

Do. 28

Do. 347, 455 Tank wagon less $0.015 per gallon,

regular. 59, 229

Tank wagon less $0.0165 per gallon,

premium. 22, 084 74, 910 11,989 1244

Tank wagon less $0.015 per gallon,

regular; tank wagoņ less $0.0175 per

gallon, premium. 62, 134 149, 453 Tank wagon less $0.0175 per gallon. 29, 302

Do. 118, 398 Tank wagon less $0.0225 per gallon.

84, 826 Do. 102, 705 Do. 232, 919

Do. 130, 472

Do. 3,673

Do. 141, 117

Do. 67,814 Tank wagon. 228, 866 Tank wagon less $0.02 per gallon.

7, 204 Tank wagon less $0.0225 per gallon. 58, 563

Tank wagon. 11, 527

Tank wagon less $0.0175 per gallon. 95, 377 Tank wagon less $0.0125 per gallon. 55, 777 Do.

1, 285 142, 612 Tank wagon less $0.015 per gallon.

26, 867 Do. 124, 935 Tank wagon less $0.01 per gallon.

38, 692 Do. 108, 302

Do.

Do. 15, 493 Tank wagon less $0.0175 per gallon. 93, 691

Do. 48, 111 Tank wagon less $0.01125 per gallon. 276, 751 Tank wagon less $0.015 per gallon.

11, 013 224,73Takwages $0.02per gallon,

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Fort Sam Houston.
Sandia Base
Fort Sill.
Alexandria Air Force Base..
Barksdale Air Force Base..
Amarillo Air Force Base.
Bergstrom Air Force Base.
Altus Air Force Base.
Webb Air Force Base..
Biggs Air Force Base.

? Not in operation.

$290, 852. 49 Bulk plant. 140, 331. 22 Do. 126, 927.01 Contractors delivery cost plus $0.01125.

per gallon. 153, 204.94 Transport. 61, 319.79

Tank wagon. 242, 094.84 Tank wagon less $0.0175 per gallon on

regular; $0.0275 per gallon on high

test. 323, 633. 55

Tank car. 251, 971.31 Contractors bid, time of delivery. 237, 958. 78

Tank car transport. 47, 352. 62 Dealers tank wagon less $0.015 per

gallon. 154, 395. 33

Tank car. 123, 811.19 Bulk plant. 119, 118.04 Tank car less $0.018 per gallon.

960.80 Dealers transport. 25, 262. 53

Bulk plant. 212, 389.86

Do.

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