PROCEDURE ON ALLOCATION OF MATERIALS

Senator WHERRY. But we would like to know. You sit on the board where the allocations are made, or a representative for you sits on the board?

Mr. SMALL. Let me explain it. The Joint Chiefs tell the military what they want done. They want 18 divisions plus some combat teams. They want 1,161 naval vessels. They want 95 air groups not later than June 1952. Those are translated through the tables of equipment into bazookas, jeeps, and Garand rifles.

Those things are translated into procurement schedules, planned

schedules.

When are you going to get this 18-division force and the weapons for it? You have to have your schedule of production to meet that need.

Then you take the tank or the gun, or whatever it is, and translate it back in terms of steel to "When must that be rolled on the steel mill?"

We figure out those things, take those figures over to the Defense Production Administration to the shop Mr. Gibson is now running. We say that we need so many tons of steel for the third quarter, which is the total for the Army, Navy, Marine Corps, and Air Force, for all of our contractors and for our navy yards, for our ordnance arsenals.

Senator FERGUSON. Do you take into consideration when that field can be used?

Mr. SMALL. Yes. We say to our contractors and the National Production Authority says to them through their regulations: "You must not have more steel than a practicable working minimum, which is ordinarily considered 60 days."

DETERMINING TIME STEEL MAY BE USED

Senator FERGUSON. That was not my question.
Do you consider when the steel can actually be used?
Mr. SMALL. By the contractor?

Senator FERGUSON. Yes.

Mr. SMALL. He is not allowed to have steel or aluminum or anything else in his hands in his inventory above a supply that will carry him forward through the next 60 days.

Senator FERGUSON. That does not quite answer my question.

This 135 percent is an estimate as to when they will use the steel. You have not any way of knowing whether the military will use that 10 percent during that quarter?

Mr. SMALL. Yes. In the third quarter, as an example, the individual contractor submits to us a controlled-materials-plan form. He says: "I want so many tons of carbon steel for such-and-such purpose."

Let us translate it into tanks. He is making tank armor. needs it for that.

He

I have an inventory of this much steel. I use this much a month. I am asking for the third-quarter allocation, which will carry me. through the quarter and leave me at the end of the quarter enough inventory to keep me running in the event of a railroad wreck.

But I have enough to carry me over a slight hump-60 days or less. Therefore, when we issued the allotment, which is done by departments-I will go back again for a minute and explain.

Senator WHERRY. Will you start in again as long as you are answering the question, but answer as to how you do it.

Mr. SMALL. The services give us their requirements, which we check and squeeze the water out of. They never ask for too little. We try to get them to the minimum. We fight at the Requirements Committee DPA for our share of the steel. We get whatever they give us. The Munitions Board gets that. We take that steel, and the Munitions Board says that the Navy, the Air Force, and the Army asked for so much and will now get so much for their programs. We distribute that steel among the three services. They, in turn, distribute it among their programs, and the contractors who are working on the programs.

They claim to us on the basis of programs so much per tank, per gun, et cetera. You allocate it back to them. If they are short, they have to figure out where to put it.

Senator FERGUSON. They are getting all they demand?

CUT BY DEFENSE PRODUCTION ADMINISTRATION

Mr. SMALL. We got cut 25 percent.

Senator WHERRY. Who does that?

Mr. SMALL. The Defense Production Administration.
Senator WHERRY. Who is on that committee?

. Mr. SMALL. About 15 of the major agencies are on that committee. Senator WHERRY. You get into a huddle and put your requests on the table and thrash it out?

Mr. SMALL. Yes, if you want to be precise about it.

Take the case of steel. The steel requests are considered at the steel level first by the NPA technicians to be sure they think the thing is right. Then it goes up to another committee which is working all the time. They call that the Program Adjustment Committee, where they compare the programs, the pipelines, the railroad cars, this, that, and the other, and the military included in that comparison.

They come up with a judgment as to what they think.
Senator WHERRY. That is a review committee?

Mr. SMALL. Yes. Then it goes up to what they call a Requirements Committee, which is in Mr. Gibson's shop, on which are quite a number of the major claiming agencies. There the decision is reached as to what the agency gets in each case.

I am going to see to it that the Army, the Navy, and the Air Force get the steel that they need.

Senator FERGUSON. For what quarter were they cut?

Mr. SMALL. The third quarter. We were cut from about 10 percent of the steel of the country to about 8 percent of the steel of the country, on condition that if we actually found that was not enough they would give us enough.

Senator WHERRY. Is there any board above that board to whom you can appeal?

Mr. SMALL. Yes, sir.

Senator WHERRY. What is that board?

Mr. SMALL That is to Mr. Wilson's staff, and to him personally. Senator WHERRY. Is that final?

Mr. SMALL. No, sir.

FINAL APPEAL

Senator WHERRY. Where do you go from him?

Mr. SMALL. If necessary, we would go to the President.

Senator WHERRY. This top board does most of this allocating. Have you ever revised your figures to this one, that one, or the other one for any purpose? Have you had to make adjustments among yourselves percentagewise for steel?

Mr. SMALL. The first allocations made to the claiming agencies are being currently made for the third quarter of this year. We have never previously had the controlled-materials plan in this emergency. Senator O'MAHONEY. I think, to supplement some of the various questions, may I ask: Is the Munitions Board represented on the Defense Production Administration?

Mr. SMALL. Yes, sir; on that committee.

Senator O'MAHONEY. So, you are sitting in all the time on the allocation of these materals?

Mr. SMALL. That is right, sir.

Senator WHERRY. Will your other claiming agencies and that top board really finally determine this allocation?

Mr. SMALL. That is right.

Senator WHERRY. The only appeal is to Charles Wilson?

Mr. SMALL. Yes, and beyond him if need be.

Senator WHERRY. I wish you would answer Senator Ferguson's question.

Senator FERGUSON. You are cut back from 10 percent to 8 percent of the steel in the third quarter with that understanding?

Mr. SMALL. On the understanding that, if we needed more, it would be given to us.

Senator FERGUSON. This would indicate in the third quarter there is going to be a deficiency of 25 percent, which is 125, but it leaves a deficiency of 25 percent in ordinary manufacturing outside of munitions for the third quarter.

Senator O'MA HONEY. It includes every use of steel.

Mr. SMALL. It is a net deficiency, really. All of these people have padded what they say they need.

Senator FERGUSON. Has the military?

Mr. SMALL. No, sir. Did you expect me to say we have? With sincerity, I would say the requirements are not padded. Senator FERGUSON. You would not be to blame on the question later if it turns out they are padded.

As General Knutson used to say, you cannot produce chickens any faster by putting two hens on the nest. Therefore, when your manufacturers of your munitions say they will have the capacity to get suchand-such orders out during the certain period, you may find later they just are not able to get them out because of engineering and various other things. You would not be at all to blame.

I want to know your opinion on that.

Mr. SMALL. We have had a great deal of experience on this in the last war. We are familiar with this. The same pattern will be followed this time that was followed last time.

However, we may find that our estimates of what our contractors need, or even the statements by our contractors as to what they need, are in error on the high side, and we will throw the tickets back at the Defense Production Administration and say, "Give this to somebody else."

Senator FERGUSON. Your judgment today is there will not be a deficiency of 25 percent, that they will get all the steel they really need?

Mr. SMALL. No; I did not say that. I said the people have asked, or have estimated that much. I am talking about outside the military now. They have estimated their needs at 125 percent of the steel of the country. Do they need all of that? I am sure they do not. Senator FERGUSON. Would it be 25 percent they do not need? Mr. SMALL. I think they are going to be short.

Senator FERGUSON. How much?

Mr. SMALL. I do not know. That is not my province. I do not know these figures.

Senator FERGUSON. We would like to know that. That is within our province.

Mr. SMALL. Yes, sir. The man for you to get the figures from is Mr. Gibson.

Senator WHERRY. How are you going to get out of anyone that they have padded their steel requirements any more than the military? Mr. SMALL. You can get a lot out of it.

Senator WHERRY. I will venture every claiming agency that goes before your committee will say "Absolutely, we have got to have this steel." Is that right?

I would want them to say that if they were representing me as a

eontractor.

Mr. SMALL. I went through this once before and I happened to be the matériel officer.

Senator WHERRY. I want to compliment you. I did not mean to infer you would not do your duty. I cannot see how you can bring these other claiming agencies up based upon what their allocations are and have them say, "We are asking for 25 percent more, or 15 percent more, or 5 percent more", on the theory that their requirements are padded.

Mr. SMALL. They are not going to admit they padded it, and they will not admit they do not need what they are asking for. Everybody cannot have as much as he is asking for.

Senator WHERRY. You can say that about the military.

Mr. SMALL. They are not getting as much as they ask for.
Senator WHERRY. They must have padded it, then.
Mr. SMALL. No, sir.

Senator O'MAHONEY. In the last analysis, the Defense Production Administration has to make the judgment as to whether or not the particular facility for which the steel is requested, or the other material, is essential to the war effort, or whether it overbalances civilian activity at the expenses of the military.

I would think that the rule must be quite definite in the Defense Production Administration that what is needed for defense is delivered to the proper defense agency.

Mr. SMALL. That is the reason for the agency.

Senator O'MAHONEY. I want to revert a bit to the original question. Senator WHERRY. Before you do that, Mr. Chairman, what Senator Ferguson is interested in is if it is true this figure of 135 percent is final, that business outside of defense contracts is going to have a pretty hard time in the third quarter. Is that not your point?

Senator FERGUSON. Yes.

Senator WHERRY. That would affect a lot of these small businesses that do not have defense contracts.

Mr. SMALL. It is not a cut down. It is because they want to go ahead faster than they were going ahead.

Let me present another thought and maybe this will clarify it.

STEEL PRODUCTION

We have been increasing steel capacity of the country. I think by this time this year that steel capacity has been increased to the point that new capacity which did not exist a year ago is now enough to take care of munitions.

In other words, speaking roughly, that the rest of the country is getting the same amount of steel they got a year ago.

EFFORTS TO KEEP STEEL FROM BLACK MARKET

Senator YOUNG. What is being done to keep steel from going into the black market, if anything? The problem that we have out in North Dakota is that the small fabricators are practically shut down. They can get all the steel they want in the black market, but not from regular Government sources.

Senator FERGUSON. I hope you will cover that. That is important. Did you see the statement that K. T. Keller made in regard to scarce material and the black market?

Mr. SMALL. I don't know.

Senator FERGUSON. I sent a memorandum to you on that. That is the question that is facing so many steel users, the black market.

Mr. SMALL. If we found one of our contractors selling into the black market, you know what would happen to the contractor. Senator FERGUSON. I hope I do know.

Mr. SMALL. The major problem of the black market is the problem of the Defense Production Administration and the National Production Authority, not the military.

Ninety percent of the steel of our country is going into things that we have no control over whatever.

Senator FERGUSON. For the third quarter you cut automobiles back how much?

Mr. SMALL. We have not cut anything back.

Senator FERGUSON. They have been cut back.
Mr. SMALL. Yes, sir.

Senator FERGUSON. How much?

Senator O'MAHONEY. I think we have gotten off the track here. Senator FERGUSON. But this is important.

Senator O'MAHONEY. Yes; but I merely am pointing out we were assembling for the purpose of discussing the appropriations which are being made for military purposes and this morning Mr. Small

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