Order Code RS20549
Updated October 27, 2006
CRS Report for Congress
Received through the CRS Web
Defense Surplus Equipment Disposal:
Background Information
Valerie Bailey Grasso
Analyst in National Defense
Foreign Affairs, Defense, and Trade Division
Summary
The Department of Defense (DOD) has a policy for disposing of government
equipment and supplies considered “surplus” for a different mission, or deemed
unnecessary to the agency’s designated mission. The effort to dispose of surplus military
equipment dates back to the end of World War II, when the federal government decided
to reduce a massive inventory of surplus military equipment by making such equipment
available to civilians.1 At a July 25, 2006, hearing before the House Government
Reform Subcommittee on National Security, Emerging Threats, and International
Relations, Bennie Williams, the Defense Logistics Agency (DLA) Director of Logistics
Operations, identified four target areas for managing surplus military equipment: (1)
processing controls for batch lot items and materials requiring demilitarization; (2)
processing of items coded with Local Stock Numbers received at the Defense
Reutilization and Marketing Service (DRMS); (3) improved controls regarding access
to DRMS inventory assets; and (4) reducing the concurrent procurement of items
available at DRMS.2
DOD identifies and disposes of approximately $20 billion dollars of military
surplus/excess materiel annually — items ranging from desks and chairs to full weapons
systems.3 “Disposition” is the process of redistributing, transferring, donating, selling,
demilitarizing, destroying or other “end of life cycle” activities, and is the final stage
1 Disposal of surplus real property, including land, buildings, commercial facilities, and
equipment situated thereon, is assigned to the General Services Administration’s Office of
Property Disposal. For further information, see CRS Report RS20630, Surplus Federal Property,
by Stephanie Smith.
2 Statement of Bennie Williams before the House Government Reform Committee, Subcommittee
on National Security, Emerging Threats and International Relations, July 25, 2006.
3 The federal government classifies items by Federal Supply Class (FSC) Code, National Item
Identification Number (NIIM); combining the two codes results in the National Stock Number
(NSN). See [http://www.governmentliquidation.com].
Congressional Research Service ˜ The Library of Congress

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before exiting DOD’s control.4 In some cases, the act of demilitarization – of destroying
the item’s military offensive and defensive capability – accomplishes the disposal.
Surplus property can be reused, transferred, donated, or sold; potential recipients include
law enforcement agencies, school systems, medical institutions, civic and community
organizations, libraries, homeless assistance providers, state and local government
agencies, and the public. About half of these items are designated for the foreign military
sales program, and about half are made available to other government agencies, eligible
donees, or sold to the public.5
Under DLA, DRMS is charged with the disposal of surplus and excess defense
equipment and supplies. Headquartered in Battle Creek, Michigan, DRMS has a total
work force of 1,328 civilians and 11 active duty military personnel. DRMS has offices
in 37 states and 14 countries (including Iraq and Afghanistan), providing support at major
U.S. military installations around the world.6 In Fiscal Year 2005, DRMS processed 3.4
million line items, with an original acquisition value of over $20 billion.7
In June 2001, DRMS awarded a seven-year contract to Surplus Acquisition Venture,
LLC, for the exclusive right to sell military surplus items. The company established
Government Liquidation, LLC as the purchaser and reseller for aircraft parts, vehicles,
clothing and textiles, medical items, furniture, commercial kitchen equipment, and other
items. Government Liquidation is a subsidiary of Liquidity Services, Inc. (LSI), and holds
the exclusive contract with DRMS for the sale of surplus DOD property. Effective
December 1, 2006, LSI will establish new “centralized controlled property centers” in the
U.S. to achieve greater over inventory to prevent restricted property from being offered
for sale to the public.8
In 2005, DLA conducted a public-private completion for warehousing functions at
68 DRMS sites in the United States, including Hawaii. As a result of cost-comparison,
DRMS determined that it was more cost effective to retain the government employees
rather than convert to contractor performance. The final decision, to retain the
4 See the Acquisition Community Connection at the Defense Acquisition University, at
[https://acc.dau.mil].
5 For further discussion of excess defense property, and the demilitarization and disposal of
surplus military equipment, see CRS Report RL31675, Arms Sales: Congressional Review
Process and CRS Report RS20428, Excess Defense Articles: Grants and Sales to Allies and
Friendly Countries, both by Richard F. Grimmett, and CRS Report RL31686, Demilitarization
of Significant Military Equipment, by Valerie Bailey Grasso. Another source for information is
the Demilitarization and Disposal section of the Acquisition Community Connection at the
Defense Acquisition University.
6 For answers to questions about the disposal of government surplus property, contact DRMS
at 1-888-352-9333, or on the internet at [http://wex.drms.dla.mil].
7 Statement of Bennie Williams, Director, Defense Logistics Agency, before the House
Government Reform Subcommittee on National Security, Emerging threats, and International
Relations, July 26, 2006.
8 Press Release. Liquidity Services, Inc., to Develop and Implement New Inventory Assurance
Procedures under Its Surplus Contract with DOD. Yahoo! Finance. September 13, 2006,
accessed online at [http://biz.yahoo.com/bw/060913/20060913005623.htm;?.v=1]

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government’s Most Efficient Organization (the reconfigured “in-house” government
employee work group), was announced on October 7, 2005.9
Controlling Legal Authority
Authority for the disposal of surplus defense property can be found in Public Law
(P.L.) 94-519, 10 U.S.C. 381, which amends the Federal Property and Administrative
Services Act of 1949 (40 U.S.C. 484), P.L. 107-117, and in DOD Manual 4160.21, at
[http://www.dla.mil/dlaps/dod/416021m/guide.asp].
Major Recipients
State and Local Governments. If property cannot be reused or transferred to
other federal agencies, it may be donated to state and local government programs. Each
state has designated a “State Agency for Surplus Property Program,” which is a local
governing authority to receive and distribute all federal surplus property. The program
authorizes “screeners” to handle the logistics, and the state agency may charge a fee for
handling the transaction. Eligible recipients include, but are not limited to organizations
that promote public health, safety, education, recreation, conservation, and other public
needs, including veterans groups and Native American organizations. Some groups that
qualify as a “service education activity” may have a slight priority in the screening
process.
Law Enforcement Support Office (LESO). LESO administers 10 U.S.C.
Section 2576a, which transfers excess DOD equipment to federal and state law
enforcement agencies through the 1033 Program (FY1997 National Defense
Authorization Act). In addition, the 1122 Program (FY1994 National Defense
Authorization Act) authorizes state and local governments to purchase law enforcement
equipment for counter-drug activities. Each state appoints a “Point of Contact (POC)”
for this program; the POC may purchase items from any of the four inventory control
points managed by DLA. To order items, contact your State Agency for Surplus Property
Program.
Fire-Fighting Support Program. Title 10 U.S.C. 2576b authorizes the U.S.
Department of Agriculture Forest Service to manage the DOD firefighting property
transfers. An interagency agreement between DOD and the Forest Service is under the
authority of the Economy Act, 31 U.S.C. 1535. The Federal Excess Personal Property
(FEPP) Program, administered though the Forest Service, provides equipment to state and
territorial forestry programs for wildland and rural firefighting.10
Humanitarian Assistance Program. 10 U.S.C. 25 authorizes DOD to provide
excess property as coordinated through the Defense Security Cooperation Agency, Office
of Humanitarian and Refugee Affairs.
9 Defense Logistics Agency Announces DRMS A-76 Results. October 7, 2005. Retrieved on
September 21, 2006, at [http://www.dla.mil/public_info/read_news.asp?track=255]
10 [http://www.fs.fed.us/fire/partners/fepp/].

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Public Sales. Property not reused by DOD, transferred, or donated can be sold to
the general public through public auctions and sealed bidding. Munitions, explosives and
strategic items are not sold.
Other Programs
There are a number of special programs which may assist organizations which fail
to qualify for DRMS property as a DOD, federal, or donation customer. Such programs
include (but are not limited to) museums, educational institutions, National Guard and
Senior Reserve Officer Training Corps units, and the Civil Air Patrol.11
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11 For further information, see [http://www.drms.dla.mil/rtd03/specialprograms.htm].

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