Special Message to the Congress on the Need for a Modern System for the Management of Government Property.

To the Congress of the United States:

In accordance with the Government's settled policy of eliminating temporary war agencies as soon as practicable, I recommend that the Congress now provide for the liquidation of the temporary arrangements for disposing of surplus war property and for the completion of the remaining disposal activities within the permanent Federal establishment. At the same time, the Congress should provide for a number of improvements in the permanent system for the procurement, use and disposal of Government property.

For a number of years the Federal Government has needed a better system of property management. The present arrangements, which have been developed under piecemeal legislation dating as far back as 1870, are inadequate to meet the present requirements of the Government. That legislation contains many obsolete provisions and does not provide for the central leadership and direction necessary to coordinate the complex activities concerned with the procurement, use and disposal of Government property.

The Congress has considered basic revisions in the Government's system of property management in the past. The 77th and 78th Congresses devoted much attention to this subject. This work was interrupted, however, by the more urgent need for emergency legislation to provide for the disposal of surplus war property.

The Surplus Property Act of 1944 was enacted for this purpose. The War Assets Administration and its predecessor agencies have been responsible for the disposal of surplus war property at home. The Department of State has been responsible for disposing of surplus property located abroad.

The Surplus Property Act was not designed to be permanent property management legislation. Rather, its purpose was to achieve a number of special objectives which would make the disposal of the huge war surpluses a constructive force in demobilization and reconversion.

An effective job has been done in achieving these objectives. Disposal operations have been carried on without the uncontrolled dumping of surplus stocks which would have created hazards to business and employment. Many thousands of veterans have been assisted in establishing or improving their own business, professional, and agricultural enterprises. The competitive position of small business has been protected and strengthened. State and local governments and schools throughout the country have received substantial benefits. Our surplus property abroad has been disposed of in a manner which would make the greatest contribution to world recovery efforts.

The critical period in disposing of war surpluses is now drawing to a dose. By June 30, 1948, the total amount of war property declared surplus, both at home and abroad, will have reached nearly $40 billion, in terms of original cost. By that date, it is expected that all but about $6 billion in property will have been disposed of.

Of the original $40 billion total, property costing about $11 billion was located abroad, of which about $600 million will be left next June. This small remaining inventory, which is widely dispersed, can be liquidated most efficiently by transferring responsibility for its disposal from the Department of State to the owning agencies--primarily the Departments of the Army and Navy. Where appropriate, the disposal of this property would continue to be conducted so as to assist our international programs.

About $29 billion, of the $40 billion total, represented property located in the United States and its Territories and possessions.

The greatest number of buyers has been interested in consumer and producer goods which constitute the main types of surplus personal property useful in a peacetime economy. It is estimated that on June 30 only about $500 million of a total of almost $10 billion of such goods will remain. Much of this small remainder will have limited sales appeal and all of it will face increasingly stiff competition from the record output of our industries. As inventories of surplus goods decline, unit costs of disposal will necessarily rise. Furthermore, disposal costs are held at high levels by the rigid priority and preference provisions of the present law. Unless the law is changed, we will soon reach the point at which it will cost the Government more to dispose of these goods than it receives from their sale. We should therefore simplify the disposal procedure and make possible reduced costs by providing for the elimination of these cumbersome provisions when the remaining quantities of this property are no longer of sufficient size to justify their maintenance.

The same considerations apply to aircraft, aircraft components, electronic equipment, and other miscellaneous items, of which about $1.2 billion, mainly aircraft components, are expected to remain on June 30 from a total of nearly $10 billion. No useful purpose would be served by retaining the present priority and preference provisions of the law for these items, for which there is very limited demand.

A different situation exists with respect to surplus real property. Of a total of somewhat more than $9 billion of such surplus there will remain on June 30 a substantial amount--some $2.6 billion of property awaiting disposition and an additional $1.1 billion under lease. A long-range program will be required for the ultimate disposition of this property. Removal of preferences and priorities applying to this type of property would not result in substantial economies but would, on the other hand, confuse a large number of current negotiations for the orderly sale of important assets.

The War Assets Administration has served well as an emergency agency for the disposal of surplus war property. It would not be suitable, however, to maintain a large independent agency to liquidate the remaining personal property and to deal with the longer range disposal of real property. The War Assets Administration, therefore, should be terminated at the end of this fiscal year and the remainder of the war surplus property disposal program transferred to a permanent agency.

At the same time that these actions relating to surplus war property are taken, we should improve our permanent system for the procurement, use and disposal of property. The problem of providing for orderly liquidation of the surplus war property program and the problem of establishing a new and better system for administering the property management functions of the Government are intimately related. Both should be considered together.

Efforts to achieve permanent improvement should be directed toward two main objectives. First, such procurement, disposal and other property management functions as can best be performed at a central point should be consolidated in a single Government agency. Second, adequate provision should be made for the coordination throughout the Government of those property management activities which are not to be performed by this central agency.

Government supply activities with respect to personal property, such as procurement and warehousing, are now centralized to a considerable extent in the Bureau of Federal Supply of the Treasury Department. Certain exemptions from these central supply activities are made, as in the case of the National Military Establishment for reasons of national security. Moreover, some items are purchased for the Government not by the Bureau of Federal Supply but by other agencies with special competence. Appropriate exceptions for such cases as these should, of course, be continued.

At the present time, Government procurement and disposal functions are not in the same agency. They should be brought together. Common direction of purchasing and disposal activities will permit the establishment of an efficient system to insure that equipment no longer needed by one agency is made available to other agencies and to prevent the purchase of new equipment when surplus equipment is already available.

Furthermore, the centralized services concerned with personal property are closely related to centralized services concerned with real property and they should be brought together in the same agency. At the present time, central services with respect to real property are primarily the responsibility of the Public Buildings Administration of the Federal Works Agency.

Taking all these considerations into account, I am convinced that the Federal Works Agency should be made the central property management agency of the Government, by transferring to it the Bureau of Federal Supply and the remaining war surplus disposal functions of the War Assets Administration. Placing the Bureau of Federal Supply and the surplus disposal functions of the War Assets Administration in the same agency will make possible common direction of purchasing and disposal operations, thus presenting obvious opportunities for economies. Placing the Bureau of Federal Supply in the same agency with the Public Buildings Administration will facilitate the procurement of utility services, the operation of repair shops, and the provision of other common services affecting both real and personal property.

To improve the administration of those property management activities which are not centralized, each Executive agency should be required by law to maintain an adequate inventory control of its property, to shift property which has served its original purpose to other uses within the agency when appropriate, and to report to the Federal Works Administrator any property no longer needed. Furthermore, the Federal Works Administrator should be given authority to establish a uniform system of identifying and classifying property, to make surveys of Government property management activities, and to prescribe uniform policies.

To accomplish these objectives, I recommend that the Congress enact legislation for the following purposes:

1. To terminate the War Assets Administration and transfer to the Federal Works Agency the function of liquidating the remaining domestic surplus war property. The priorities and preference requirements of the Surplus Property Act applying to personal property should be eliminated in the near future. Those applying to real property should continue in effect until December 31, 1949.

2. To transfer the responsibility for liquidating the remaining surplus war property abroad from the Department of State to the owning agencies.

3. To transfer the Bureau of Federal Supply and its functions to the Federal Works Agency.

4. To provide on a permanent basis for the orderly and economical procurement, use and disposal of Government property, under the central leadership and direction of the Federal Works Administrator. It is especially important that the Federal Works Administrator be given responsibility for developing improved methods,-and that sufficient flexibility be provided in the law to permit the adoption of new methods without delay.

I have requested the Federal Works Administrator to submit to the appropriate committees of the Congress proposed legislation to carry out this program.

The enactment of such legislation will abolish our largest remaining war agency and provide for an orderly liquidation of the present war surplus disposal program. It will establish an improved system for managing the Government's property, and mark a major advance toward the development of a central service agency for the Federal Government. These steps will make an important contribution to the efficient and economical conduct of the Government.

HARRY S. TRUMAN