recommendations to prevent General Electric from bidding for the Chemical Corps' surplus methyl chloride? Mr. HONEYWELL. Would you identify the document you are reading from? Mr. WALDEN. That is the memorandum I was reading from before. Mr. HONEYWELL. That is an internal memorandum for the Department of Defense? Mr. KEATING. Is this from the lieutenant colonel that made the other memorandum? Mr. WALDEN. This is the same memorandum. Mr. KEATING. I don't question the accuracy of it but having served as a lieutenant colonel in the Pentagon, I can say with considerable assurance that there are many memorandums there that for accuracy could be improved upon. Mr. ScoTT. Of course we don't have that trouble with the Navy. The CHAIRMAN. I wonder if we have that same trouble with your Department. I don't know. We would like to see. Mr. WALDEN. May I add that the signature on this memorandum is Edward H. Schneider. Mr. KEATING. I don't impugn Lieutenant Colonel Schneider's accuracy or veracity. I don't know the gentleman. I know the way the Army and I think the Navy and Air Force operate and accuracy is not the prime consideration. It wasn't when I was there. The CHAIRMAN. That is a strong indictment. I hope it is not true. I am sure the gentleman is not trying to find an excuse for this kind of action here by saying that the statement made is not accurate. Mr. KEATING. But as a lawyer I question the method of proof here engaged in by counsel to prove as a fact something taken out of a memorandum made by a lieutenant colonel in the Air Force. The CHAIRMAN. I don't think the gentleman himself hesitated to do that when he conducted an inquiry not so long ago. However, we won't go into that. We want the records in the Department of the witnesses before us. If we had them we probably could know if they are corroborated. Until we get corroboration we will have to accept this as true and I think the allegations are true as read from this memorandum. Mr. WALDEN. Since these methods are questioned, I would like to say the only reason these documents are used instead of the original. documents of the Department is that we have not been furnished the documents of the Department of Commerce. In view of the fact that we have an investigation, this is the only way to proceed. Mr. KEATING. You could call this Lieutenant Colonel Schneider over here and ask him about it. Mr. SCOTT. I think Mr. Keating is wrong in this respect. If the other body could conduct an investigation built around a major, we could conduct one built around a lieutenant colonel. Mr. WALDEN. I would like to indicate in any event that Colonel Schneider was present in March, at this meeting to which this document refers to. Mr. HONEYWELL. We call industry advisory committees or task forces at the request of the Department of Defense. Mr. WALDEN. I would like to read the comments of the Department of Commerce at the special conference cn disposal of surplus supplies of methyl chloride which is contained in the same minutes we are discussing here: Because the problem of surplus methyl chloride disposal is one of some magnitude the Disposal Division is seeking the advice and counsel of the industry in arriving at a recommendation for submission to the Department of Defense. This meeting was called primarily to acquaint industry members of all facts and problems, Dr. Kilgore stated, and to provide them an opportunity to present their views. Department of Defense representatives were present, he added, to explain the problem in such detail as possible. I ask you whether this meeting was not called primarily to acquaint industry members with all the facts. Mr. HONEYWELL. Isn't that quite an appropriate thing for the Department of Commerce to do? Mr. WALDEN. Do you want my answer on it? Mr. HONEYWELL. Yes, if you would care to give it. Mr. WALDEN. I am not expressing an opinion one way or the other. Mr. HONEYWELL. I would be happy to express my opinion in that it is quite appropriate, I see nothing inappropriate in that action. Mr. SCOTT. That is what you are there for? Mr. HONEYWELL. Correct. Mr. WALDEN. I didn't say it was improper. Mr. HONEYWELL. I gathered the inference that there was something improper in handling this matter in this manner. I am attempting to clear the matter. Mr. WALDEN. The question is: In view of your statement that these meetings were sometimes called at the request of the Department of Defense, whether it was not called on behalf of the industry in this instance? Mr. HONEYWELL. I notice there were 7 representatives of the Department of Defense present against a total of 16. So that it would indicate definitely that was a matter of primary interest to the Department of Defense and that they attended en masse to get the Advisory Committee to explain to industry what the nature of the problem was. (The documents referred to are as follows :) Memorandum for record. Subject: Disposal of surplus methyl chloride. 1. History: APRIL 25, 1955. (a) Methyl chloride was in short supply during the Korean emergency. It was under direct allocation by NPA during this period. ODM, through tax amortization and other means, stimulated the basic capacity for this material. (b) The Chemical Corps classified plant at Muscle Shoals, Ala., produces this material as a byproduct in their operations. During early 1953 this byproduct material was utilized in another part of the classified process at Rocky Mountain Arsenal. However, for basic economical reasons, the Rocky Mountain process was revised and the Muscle Shoal surplus byproduct material could no longer be used. A small market was found in the RFC synthetic butyl rubber plants. However, these rubber plants are being sold to private operators and this market no longer exists. (c) In November 1954, the Chemical Corps requested bids on 1,530 tons of methyl chloride. General Electric's bid of 61⁄2 cents per pound for 250 tons of this material was accepted. Diamond Alkali's bid of 12 cents per pound was rejected. (d) Representatives of Ansil Chemical, Diamond Alkali, and Dow have complained to BDSA that the action of the Chemical Corps in selling to outside firms is unfair competition and the 1,500 tons has a depressing effect on the market. 2. On March 10, 1955, BDSA called an industry advisory of the principal producers in this field. Those present were: Mr. H. Bertine, Chief, Chemical and Rubber, BDSA Dr. Kilgore, Deputy Chief, Chemical and Rubber, BDSA Mr. Lem. Weirick, Organic Division, BDSA Mr. Leo Walsh, Adviser, Chemical Corps Mr. Schaffner, Materiel Command, Chemical Corps Mr. Hutton, Material Command, Chemical Corps Mr. Vogel, Legal, Chemical Corps Mr. Smith P. Kerr, OASD Surplus Properties Major Sullinger, Office of Deputy Chief of Staff for Supply and Logistics Lieutenant Colonel Schneider, Office of Deputy Chief of Staff for Supply and Logistics Mr. L. A. Coleman, Allied Chemical & Dye Mr. D. H. Rose, Salvay process division, Allied Chemical & Dye Mr. R. J. Yeager, Ansil Chemical Co. Mr. H. LaBoeus, silicon products division, General Electric Co. Mr. C. B. Shepherd, E. I. du Pont de Nemours Mr. L. P. Butinschoen, Dow Chemical Co. 3. The following information was furnished the committee: (a) Chemical Corps scheduled production of the classified material cannot be discontinued. Consequently, the byproduct methyl chloride will also continue to be produced. (b) The capacity of the Chemical Corps for storage of this material is limited. It must be moved as expeditiously as possible. (c) In November 1954, the Chemical Corps requested bids on 3,600,000 pounds of this surplus material. General Electric Co. was awarded 500,000 pounds at the rate of 100,000 pounds per month for a price of 62 cents per pound. Diamond Alkali bid of 12 cents per pound was rejected. An additional sale of 280,000 pounds was made to RFC (Humbolt)-butane rubber plant. (d) The Chemical Corps will have a quantity of 3,060,000 pounds to dispose of between January 1, 1955, and July 1, 1955. (e) The methyl chloride specs are as the material comes off the line. No additional purification is done at the Muscle Shoals plant. (f) The quantity of 3,060,000 pounds represents the residue after all other possible Government actions have been taken. (g) The Universal Oil Products Co. has made a comprehensive technical study of this process. They endeavored to find ways and means to reduce the amount of byproduct methyl chloride produced, or to feed it back into the system. No successful methods were developed. 4. General Electric is both a small producer and the largest consumer of methyl chloride. Three of the producers present, Ansil Chemical, Diamond Alkali, and Dow Chemical Co., have the major portion of their sales with this company. Naturally the aim of the producers present was to develop a system aimed at preventing General Electric from bidding for Chemical Corps methyl chloride and yet not antagonize their largest potential customer. As a result of this situation, no agreeable solution to the problem was suggested by this industry advisory group. It was decided that each was to consult his home office and meet again on March 17, 1955, and attempt to reach a solution. 5. The 1953 census production figures for methyl chloride was 20,260 tons. Several of the industry adviser members considered it more nearly 16,000 tons. Census has not completed its 1954 figures; however, BDSA estimate they will be somewhat higher than 1953 production. Recommendations: In view of the comments in paragraph 4 above, the committee listed no recommendations but scheduled a meeting for March 17, 1955. EDWARD H. SCHNEIDER, Lieutenant Colonel, GS, Programs Branch, Procurement Division. DEPARTMENT OF COMMERCE, BUSINESS AND DEFENSE SERVICES ADMINISTRATION, Washington, D. O.. SUMMARY MINUTES: SPECIAL CONFERENCES ON DISPOSAL OF GOVERNMENT SURPLUS SUPPLIES OF METHYL CHLORIDE, MARCH 10 AND 17, 1955 Herbert W. Bertine, Director, Chemical and Rubber Division, INDUSTRY REPRESENTATIVES PRESENT W. B. Beeson, sales manager, chlorinated products division, Diamond Alkali Co., Cleveland, Ohio. L. P. Butenschoen, manager, solvent sales division, Dow Chemical Co., Midland, Mich. Lawrence A. Coleman, solvay process division, Allied Chemical & Dye Corp., New York, N. Y. Harold W. LeBoeuf, manager of production, silicone products department, General Electric Co., Waterford, N. Y. Douglas H. Ross, solvay process division, Allied Chemical & Dye Corp., New Clark B. Shepherd, E. I. du Pont de Nemours & Co., Inc., Wilmington, Del. GOVERNMENT REPRESENTATIVES PRESENT Business and Defense Services Administration: Charles F. Honeywell, Administrator Russell C. Flom, Assistant Administrator Herbert W. Bertine, Director, Chemical & Rubber Division Lowell B. Kilgore, Deputy Director, Chemical & Rubber Division Leonard Weirich, Chemical & Rubber Division Anthony A. Bertsch, Office of Advisor on Allocation and Production Controls Richard Burbank, Office of Small Business Charles R. Hersum, Industry Advisory Committee Staff Maria Rotondo, summary writer, Industry Advisory Committee Staff Other agencies: John W. Byrnes, House of Representatives Department of Defense: Smith P. Kerr, Office of Assistant Secretary of Defense (Supply & Clarence C. Pusey, Office of Assistant Secretary of Defense (Supply & Department of the Army: Lt. Col. Edward H. Schneider, Office of Deputy Chief of Staff for Supply Maj. Carl O. Sullinger, Office of Deputy Chief of Staff for Supply and L. F. Walsh, industrial adviser, Office of the Chief Chemical Officer John Vogel, legal adviser, Office of the Chief Chemical Officer Louis E. Garono, Army Chemical Center, Muscle Shoals, Ala. Joseph G. Schaffner, Material Command, Baltimore, Md. H. Hutton, Material Command, Baltimore, Md., Office of the Chief Chemical Officer OPENING REMARKS Mr. Herbert W. Bertine, Director of the Chemical and Rubber Division, Business and Defense Services Administration, who was the Government presiding officer, welcomed the conferees and stated that the meeting had been called to discuss problems arising from the byproduct production of methyl chloride by the Government and its disposal. Referring to his recent appointment as Director of the BDSA Chemical and Rubber Division, serving on a short-term basis without compensation from the Government, Mr. Bertine stated that, since his company is an affiliate of one of the corporations involved in this industry, he would not participate in formulating the recommendations to be made by the Division to the Department of the 67271-55-pt. 1-13 Army. He then requested Dr. Lowell B. Kilgore, Deputy Director, Chemical and Rubber Division, BDSA, to state the purpose and scope of the meeting in greater detail. PURPOSE AND SCOPE OF MEETING Serving as a focal point in Government for the presentation of industry problems, BDSA has a working arrangement with the Department of Defense to consult with industry and act as a channel of communication for the transmission of industry advice on many matters, among them the disposition of Governmentowned surplus personal property, Dr. Kilgore stated. BDSA frequently receives notices of proposed disposals to be made by the armed services, and whenever a serious impact on any industry or segment of an industry is foreseen, the appropriate industry division of BDSA is requested to advise the Department of Defense regarding the best manner in which disposal of a particular product or commodity can be accomplished with the least harmful impact on industry, he explained. Because the problem of surplus methyl chloride disposal is one of some magnitude, the Division is seeking the advice and counsel of the industry in arriving at a recommendation for submission to the Department of Defense. This meeting was called primarily to acquaint industry members with all facts of the problem, Dr. Kilgore stated, and to provide them an opportunity to present their views. Department of Defense representatives were present, he added, to explain the problem in as much detail as possible, within security limitations, and to clarify the various aspects of the problem. Urging a full and free discussion of the subject, Dr. Kilgore concluded by saying that the final recommendation made by BDSA may not necessarily reflect the views of the conferees whose function was that of an industry advisory group. STATEMENT OF THE PROBLEM Mr. L. F. Walsh, industrial adviser, Office of the Chief Chemical Officer, Department of the Army, stated that the Chemical Corps manufactures an intermediate chemical at the Phosphate Development Works, Wilson Dam, Ala., for use in the production of a product used in munitions. In the manufacturing process, methyl chloride is produced as a byproduct. It is necessary to dispose of a portion of this byproduct which is excess to Government needs, and in accordance with Army regulations the Chemical Corps has requested authority to dispose of a quantity of 3,060,000 pounds during a period of approximately six months, by offering the material for sale to private industry. This quantity includes excess methyl chloride now on hand. Previous to this time (except for a small quantity sold to private industry) it was possible to use excess methyl chloride produced at the Phosphate Development Works as Government-furnished material on Government contracts. It had been expected to dispose of a substantial percentage of the excess methyl chloride to be produced in 1955 and 1956 to the Rubber Reserve Corporation as Government-furnished material in the manufacture of rubber under Government contracts. The recent sale of plants of this corporation has shut off proposed transfer of excess methyl chloride as Government-furnished material. Previous Government contract on which methyl chloride, excess to Phosphate Development Works, was used, have been completed. Under present plans, it is expected that for a period of 1 year or longer, byproduct methyl chloride will have to be disposed of, as it will not be possible to use this material on Government contracts. In November 1954, 3,600,000 pounds were offered for public sale, and one responsive bid was accepted for 250 tons, to be delivered at the rate of 50 tons per month. Acceptances of bids have since been held in abeyance, however. DISCUSSION BY CONFERENCE MEMBERS Conferees discussed presently available and anticipated quantities of Government excess methyl chloride supplies, including plans for its disposal by possible alternatives which did not compete directly with private industry. Available surplus.-Army representatives clarified that the disposal period for the quantity under consideration had been extended to July 31, 1955. Rate of disposal.-Insofar as subsequent production is concerned, Mr. Walsh indicated that the disposal rate is not expected to increase, and that continued |