Defense Surplus Equipment Disposal:
Background Information

Valerie Bailey Grasso
Specialist in Defense Acquisition
June 30, 2009
Congressional Research Service
7-5700
www.crs.gov
RS20549
CRS Report for Congress
P
repared for Members and Committees of Congress

Defense Surplus Equipment Disposal: Background Information

Summary
The Department of Defense (DOD) through a Defense Logistics Agency (DLA) component
called the Defense Utilization and Marketing Service (DRMS) has a policy for disposing of
government equipment and supplies considered surplus or deemed unnecessary to the agency’s
currently designated mission. DRMS is responsible for property reuse (including resale), precious
metal recovery, recycling, hazardous property disposal, and the demilitarization of military
equipment. The effort to dispose of surplus military equipment dates back to the end of World
War II when the Federal government sought to reduce a massive inventory of surplus military
equipment by making such equipment available to civilians. [Note: 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, Disposition of Surplus Federal Property, by Garrett
Hatch.] In August 2008, Liquidity Services, Inc. was awarded the DRMS contract to manage the
receipt, storage, marketing, and disposition of all useable surplus property generated by DOD
installations throughout the United States. The contract has a base term of three years, with two
one-year renewal options.
During March 2009, several press reports indicated that DRMS had tightened its demilitarization
policy on the sale of small arms cartridge cases. On March 20, 2009, DLA issued a statement that
revised this policy. DLA has determined that the cartridge cases could be made available for
public sale to qualified buyers.

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Defense Surplus Equipment Disposal: Background Information

Contents
Introduction ................................................................................................................................ 1
Controlling Legal Authority ........................................................................................................ 2
Legislative Activity..................................................................................................................... 2
Major Recipients......................................................................................................................... 3
State and Local Governments ................................................................................................ 3
Law Enforcement Support Office (LESO) ............................................................................. 3
Fire-Fighting Support Program.............................................................................................. 3
Humanitarian Assistance Program ......................................................................................... 4
Public Sales .......................................................................................................................... 4
Other Programs........................................................................................................................... 4
For Additional Information.......................................................................................................... 5

Contacts
Author Contact Information ........................................................................................................ 5

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Defense Surplus Equipment Disposal: Background Information

Introduction
On September 12, 1972, the Defense Property Disposal Service (the forerunner to DRMS) was
established under the Defense Supply Agency (now DLA). Defense Property Disposal Offices
were established worldwide on or near major military installations. DRMS is responsible for
property reuse (including the disposal and sale of surplus and excess defense equipment and
supplies), precious metal recovery, recycling, hazardous property disposal, and the
demilitarization of military equipment. DRMS provides support at major U.S. military
installations worldwide. Headquartered in Battle Creek, Michigan, DRMS personnel serve in 16
foreign countries (including Iraq and Afghanistan), two U.S. territories (Guam and Puerto Rico)
and 41 states. DRMS employs approximately 1,455 people. Of those, approximately 332 work at
its Battle Creek, Mich., headquarters.
Property disposal means redistributing, transferring, donating, selling, demilitarizing, destroying,
or other “end of life cycle” activities. Disposal is the final stage before the property leaves DOD’s
control.1 In some cases, the act of demilitarization—destroying the item’s military offensive and
defensive capability—accomplishes the intent of disposal. During FY2006 DLA identified,
disposed of, or re-utilized approximately $20 billion dollars of military surplus/excess materiel—
items ranging from desks and chairs to full weapons systems.2
Property is considered excess when one particular agency determines it is not needed for its
particular use, while property is considered surplus when it is no longer needed by the Federal
government. Property transferred to DRMS is declared surplus after about 21 days. Surplus
property can be reused, transferred, donated, or sold; potential recipients may 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 all surplus 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.3
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. LSI has established new “centralized controlled property centers”
in the United States to achieve greater control over inventory and to prevent restricted property
from being offered for sale to the public.4 As of June 1, 2007, LSI’s contract with DOD was

1 See the Acquisition Community Connection at the Defense Acquisition University, at https://acc.dau.mil.
2 From the DRMS website, at http://www.drms.dla.mil.
3 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, by Richard F. Grimmett, CRS Report
RS20428, Excess Defense Articles: Grants and Sales to Allies and Friendly Countries, 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.
4 Press Release. Liquidity Services, Inc., to Develop and Implement New Inventory Assurance Procedures under Its
Surplus Contract with DOD. September 13, 2006. http://investor.liquidityservicesinc.com/
phoenix.zhtml?c=195189&p=irol-newsArticle&ID=904827&highlight=
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broadened to include the oversight, audit, and verification procedures for the destruction of DOD
scrap property sold to the public. Under the terms of the contract, LSI will manage the receipt,
marketing, and sale of virtually all DOD surplus scrap property in Hawaii and Guam. LSI was
awarded a new contract in August 2008. Under the terms of the new contract, LSI will pay DOD
about 3.26% of DOD’s original acquisition value for all useable surplus items referred; LSI will
retain 100% of the profit while assuming the costs for merchandising and resale. DOD’s surplus
property will continue to be offered for sale through LSI’s online auction marketplace.5
In 2005, DLA conducted a public-private competition for warehousing functions at 68 DRMS
sites in the United States, including Hawaii. As a result of the competition, 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 government’s Most Efficient
Organization (MEO), was announced on October 7, 2005.6
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.
Legislative Activity
In the 111th Congress, the Affordable Reloaded Munitions Supply (ARMS) Act of 2009 (H.R.
2193) was introduced in the House on April 30, 2009. The bill would prohibit the Secretary of
Defense from implementing any policy that prevents or places undue restriction on the sale of
“intact spent military small arms ammunition casings” to certain domestic suppliers. The bill has
41 co-sponsors, and was referred to the House Armed Services Committee.
In the 110th Congress, at least two bills were introduced that sought to strengthen the control of
sensitive surplus military equipment. S. 387, the Stop Arming Iran Act, was introduced in the
Senate on January 25, 2007, had two co-sponsors, and was referred to the Senate Armed Services
Committee. The bill would prohibit the direct or indirect sale of spare parts for F-14 fighter
aircraft (whether for sale through DRMS or through another DOD agency). A similar bill, H.R.
1441, also known as the Stop Arming Iran Act, was introduced in the House on June 12, 2007,
had 38 co-sponsors, and was referred to the House Armed Services Committee.
P.L. 110-116 ( FY2008 DOD Appropriations Act) contains a provision (Section 8079) that
authorizes the creation of a joint program between DOD and the Department of Health and

5 Liquidity Services, Inc. Awarded New Surplus Contract with the U.S. Department of Defense. Science Letter, August
19, 2008. Expanded Reporting, pg. 2698.
6 Defense Logistics Agency Announces DRMS A-76 Results. October 7, 2005. http://www.dla.mil/DLAPublic/
DLA_Media_Center/PressRelease/PressRelease.aspx?ID=17
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Human Services to distribute surplus dental and medical equipment, at no cost to DOD, to certain
Indian Health Service facilities and to federally-qualified health centers.7
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). DLA estimates the LESO budget for FY2008 and FY2009 to be $1.3 million
for each year.8 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,
applicants are to contact their 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 wild land and rural firefighting.9

7 P.L. 110-116, Section 8079 states: (a) The Secretary of Defense, in coordination with the Secretary of Health and
Human Services, may carry out a program to distribute surplus dental and medical equipment of the Department of
Defense, at no cost to the Department of Defense, to Indian Health Service facilities (within the meaning of section
1905(l)(2)(B) of the Social Security Act (42 U.S.C. 1396d(l)(2)(B))). (b) In carrying out this provision, the Secretary of
Defense shall give the Indian Health Service a property disposal priority equal to the priority given to the Department
of Defense and its twelve special screening programs in distribution of surplus dental and medical supplies and
equipment.
8 Defense Logistics Agency, Operation and Maintenance, Defense-Wide, FY2008/FY2009 Budget Estimates.
9 http://www.fs.fed.us/fire/partners/fepp/.
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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.
Public Sales
Property not reused, transferred, or donated can be sold to the general public through public
auctions and sealed bidding. Munitions, explosives and strategic items are not sold.
Press reports indicate that in March 2009, Government Liquidation notified certain small arms
dealers that the new DRMS policy regarding the demilitarization of small arms cartridge casings
would require DRMS personnel to witness the mutilation of the property and sign the Certificate
of Destruction prior to its sale. DLA later issued a formal press release which reversed the policy,
as described in the following excerpt from the DLA Press Release.10
The primary focus of the DRMS mission is to protect national security by ensuring property
is properly identified for reutilization and disposition and not released for public sale when to
do so would jeopardize national security.
During the past two years, DRMS, located in Battle Creek, Mich., revised its processes to
further ensure only appropriate items were made available for public sale. To strengthen
current controls and to mitigate future security risk, the DOD issued policy that prohibits the
sale of military unique items controlled by the Department of State through its Munitions
List.
Small arms cartridge cases are identified as a sensitive Munitions List item and were held
pending review of the policy relating to the category of items in which cartridge cases were
included. Upon review, the Defense Logistics Agency has determined the cartridge cases
could be appropriately placed in a category of government property allowing for their release
for sale.11
Other Programs
There are other 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.12

10 For further information, contact Tonya Johnson, DLA, at (703)767-6310, or LaTonya.Johnson@dla.mil.
11 http://www.dla.mil/DLAPublic/DLA_Media_Center/PressRelease/PressRelease.aspx?ID=438.
12 For further information, see http://www.drms.dla.mil/rtd03/specialprograms.htm.
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For Additional Information
For more information about DRMS, see http://www.dla.mil/drms. Also, the DLA Customer
Contact Center is open 24 hours a day, 7 days a week, at (877) 352-2255, or contact the Center at
DLAContactCenter@dla.mil.

Author Contact Information

Valerie Bailey Grasso

Specialist in Defense Acquisition
vgrasso@crs.loc.gov, 7-7617




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