For Sale Uncle Sam's Scrap - Sales of the Defense Department’s recyclable materials

Sales of the Defense Department’s recyclable materials--which include everything from buttons to battleship scrap--boost not only U.S. Treasury revenues but those in the recycling industry, too. Here’s an in-depth look at the Defense Reutilization and Marketing Service plus how to join in this business with Uncle Sam.

By Robert J. Garino

Robert J. Garino is director of commodities for the Institute of Scrap Recycling Industries, Washington, D.C.

The U.S. Government and the nation’s scrap processing and recycling industry have developed close ties over the decades. Everything from surplus iron used in past world wars to silver, gold, and platinum-based metals found in today’s photographic and electronic scrap have been candidates for reclamation. In fact, the U.S. Government is a leading source for all scrap materials recycled by this industry and provides more scrap in total than any other generator.

Recent history illustrates government interest in ferrous and nonferrous scrap metal. During World War II, for example, there existed the Industrial Salvage Branch of the War Production Board. Although not directly involved in collecting and selling scrap during that period, it was this branch that directed scrap drives in the early 1950s.

Industry and government have worked together through some difficult periods. In the 1940s and 1950s, scrap processors worked under temporary government regulations that classified and imposed price ceilings on many grades of nonferrous and ferrous scrap, but they did not stop the flow of surplus government scrap to processors.

DRMS Made It Official

As a result of the growing importance and industry acceptance of defense-generated scrap, the Defense Reutilization and Marketing Service (DRMS) was established. Begun in September 1972, its express task was "providing disposal support to the military services by the reutilization of Department-of-Defense-owned excess material, as well as the sale of surplus personal property assets worldwide."

DRMS headquarters in Battle Creek, Michigan, monitors the operations of five regional headquarters in Memphis, Tennessee; Columbus, Ohio; Ogden, Utah; Camp Smith, Hawaii; and Lindsey Air Force Station, Wiesbaden, West Germany. Within the five regions are 133 Defense Reutilization and Marketing Offices (DRMOS) and 84 off-site branch offices located in the U.S. and 19 countries. DRMS employs more than 4,000, including about 100 military and 500 foreign nationals.

To encourage cooperation and facilitate the sale of scrap metals, ReMA's predecessor organizations started hosting workshops and seminars with various branches of the Armed Forces in the 1950s. These meetings continue today through ReMA's Government Sales Committee.

In many ways, much of the advice given by scrap processors to government officials managing scrap has changed little over the decades. Speaking about scrap preparation at a seminar at the Naval Supply Center in Oakland, California, in 1952, Jack Campbell, Berg Metals Company, Los Angeles, informed military officials that "the first step in the procedure is identification and proper marking, the second step is to provide suitable areas for accumulations to maintain the segregation, and the third step is to generate a conscious desire on the part of your people to achieve and maintain proper scrap segregation. Where it is possible to maintain proper segregation, you will help to create a larger dollar return to the Navy for its scrap and you will have the real personal satisfaction of aiding the defense effort by a job well and properly done." That same message applies today.

A $5-Billion Inventory

DRMS says the inventory of property available for disposal covers the total range of items used within DoD--from bolts to boxcars, buttons to battleships, helmets to hydrofoils, air conditioners to airplanes. Material available on a current list includes electronic equipment, lathes, ladders, tractor tires, amphibious vehicles, and missile containers. During fiscal year 1986, the inventory value of excess and surplus material handled by DRMS was $5 billion, expressed in original acquisition prices.

Of special concern to the scrap industry is the DoD Recyclable Materials Sales Program, a unique program within DoD that is of tremendous importance to military installations. Each year, millions in scrap sales proceeds are returned to the government from DoD scrap sales conducted worldwide by DRMS and its field offices.

"Recyclable materials," as defined by DRMS, are those materials that ... normally would be discarded (such as scrap or waste) but that may be reused after undergoing some type of physical or chemical processing." This includes all metallic scrap generated as a result of demilitarization or mutilation prior to turn-in to the servicing DRMO for sale. This also includes fired brass shells sold for smelting or reloading. All ships, planes, weapons, and other such material must undergo demilitarization or mutilation prior to sale.

Through DRMS's reutilization program, material with an original purchase price of $919.9 million in fiscal year 1986 was redistributed within DoD for authorized use. Another $142.2 million worth was transferred to other federal agencies (e.g., Department of Agriculture, Agency for International Development), and $239 million worth was donated to state, local, and other authorized recipients.

Thus, property valued at over $1.1 billion was sold through over 2,500 sales--including national and local auctions, nationally advertised sealed-bid sales, local spot-bid sales, and retail sales. Gross proceeds from these sales were $76.1 million, of which $35.8 million was gained from material sold as scrap. Each year, sales proceeds are returned to the U.S. Treasury and redistributed to the five regional headquarters.

More recent-data confirms the growing importance of DRMS sales. Fiscal year 19&1 saw total DRMS proceeds swell to $84.3 million, up nearly 11 percent over fiscal year '86. Scrap sales posted a modest decline to $35.6 million. Scrap markets were softer during that period, hence the lower revenue generated by DRMS.

DRMS Scrap Proceeds Climbing

For fiscal year 1988, which ended in September, total proceeds (based on eight-month available data) would grow to $100 million dollars. Scrap's contribution was growing even faster--over $50 million dollars annually. Should these preliminary figures prove close to the mark, scrap will contribute more than half of the total proceeds. (In fiscal year '86, scrap's share was 47 percent.)

The vast majority of scrap available for sale is categorized by DRMS as ferrous scrap, followed by nonmetallic and nonferrous scrap (see table). Although smallest in terms of tonnage sold, nonferrous metal's financial contribution is the largest component of total sales. Using the month of May, 1988, as a typical month, of the $4.3 million dollars in scrap materials sold, more than half the revenue can be traced to nonferrous metals.

DRMS also operates a separate Precious Metals Recovery Program. During fiscal year '86, $35 million in gold, silver, and platinum-family metals were recovered, refined through civilian contracts, and placed in storage for reissue to contractors on new military purchases. In addition to metals recovered from scrap, the DRMS Precious Metals Recovery Office in Earle, New Jersey, also recovers silver from photographic and X-ray film and developing solutions with equipment placed in military laboratories. DRMS reclaimed 24,000 troy ounces of gold, 5,000 troy ounces of platinum-family metals, and 4 million troy ounces o silver that year.

Sales Ideas in the Works

The Department of Defense, through DRMS, remains a vital, growing source of scrap material. Its Resource Recycling Program is firmly established and its revenue contribution to the U.S. Treasury--at $50 million--is significant.

To improve its sales system, DoD is considering several new ideas that may lead to even greater involvement by the private sector in scrap sales. These include using credit cards to facilitate bidding for scrap and various proposals that would liberalize the entire bidding process. DRMS has also invested in a new computer system designed to streamline scrap sales catalogs and bidder evaluation. The system is expected to be implemented early in 1989.

Get on the List

Here's how to get on the bidders list: Write to DRMS, c/o DoD Bidders Control Office, P.O. Box 1370, Battle Creek, Michigan 49016-1370.

The Battle Creek office will respond with a pamphlet on how to purchase surplus government material, along with a bidder's application form. Return the form to Battle Creek to receive sales catalogs as they are developed.

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Sales Stories

Mack Cottler, of Mack Cottler & Associates, Beverly Hills, nostalgically recalls melting down the first surplus B19 bomber in Pyote, Texas, in 1951. It was one of 101 B19s sold as scrap metal by DRMS that year. According to Cottler, the aircraft were dismantled on site with individual scrap components carefully sorted and segregated. Once the major components were removed, the aluminum fuselage was cut up and fed into a portable furnace constructed on site. The furnace poured aluminum ingots, which were sold to secondary aluminum smelters in the Midwest.

As varied as is the surplus material regularly offered for sale by DRMS, so are scrap arisings. A recent catalog listed items ranging from small-arms cartridge cases to wrecked aircraft scrap to stainless steel tool bits and cast iron engine blocks.

At times, even dirt is offered. Gerald Cohen, president, Atlantic Stainless Co., Inc., North Attleboro, Massachusetts, remembers replacing mounds of rich, lead-metal-containing soil, used as a backstop for the Marine base firing range at Annapolis, Maryland. The backstop became so saturated with spent projectiles that, rather than absorb the firing, it caused bullets to ricochet. Legend has it that a ranking officer was hit by a ricochet.

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DRMS Scrap Sales (short tons)

Ferrous Scrap

FY 1986: 262,200

FY 1987: 285,330

FY 1988 (8 months): 187,930

Nonmetallic Scrap

FY 1986: 205,770

FY 1987: 197,360

FY 1988 (8 months): 141,300

Nonferrous Scrap

FY 1986: 54,770

FY 1987: 52,540