Upon completion of those duties overseas, I returned to this country and was vice commander and chief of staff of the Air Defense Command, once again under General Stratemeyer. I forgot to mention that I had the Second Air Force for a short period of time just before the Air Defense Command was formed when I went with General Stratemeyer once again as vice commander and chief of staff. In 1944 I again returned to the Air Matériel Command where I was the Director of Supply, Maintenance, and Services of that com mand, which embraces the service activities and support activities of the command in support of the entire Air Force, both in this country and overseas. In January of this year I came to the Air Staff and was in the Deputy Chief of Staff, Matériel, Shop, as the assistant for program control. Just recently, about 3 weeks ago, I was appointed Deputy Chief of Staff, Comptroller, Vice General Rawlings, who, as the chairman knows, is now commanding general of the Air Matériel Command. I have attended very few schools. I attended the Maintenance Engineering School at Chanute Field, Ill., in 1929. I attended the 3 months short course at the Air Force Tactical School, and I attended the advance management program at the Harvard Business School in the fall of 1949. That, roughly, has been my experience. Senator O'MAHONEY. That is pretty board experience. It gives you a background in practically every field of Air Force activity. I am sure that the members of the committee will be very glad to hear that. EXPANSION OF PUBLIC AND PRIVATE PLANTS Now, as I was pointing out yesterday, this bill contains authorization for the expenditure of the requested funds for the expansion of public and private plants. On page 44 of the bill as it passed the House, we find the phrase, beginning in line 1. * expansion of public and private plants, Government-owned equipment and installation thereof in such plants, erection of structures, and acquisition of land without regard to section 1136, Revised Statutes, as amended, for the foregoing and other purposes, and such land, and interests therein, may be acquired and construction prosecuted thereon prior to the approval of title by the Attorney General as required by section 355, Revised Statutes, as amended * That is not new language, but I think it would be well to have a description here of the present plan so far as this budget is concerned with respect to the expansion of private plants and the erection of structures. General ASENSIO. General Shepard. Senator O'MAHONEY. Won't you come forward, General, and sit at the table. General SHEPARD. I am General Shepard from the Office of the Deputy Chief of Staff Matériel, Headquarters, United States Air Force. Senator O'MAHONEY. Gen. H. A. Shepard, we might as well have the full name. General SHEPARD. That is correct, sir. My present assignment is Director of Procurement and Production Engineering, Headquarters, United States Air Force. AMOUNT AUTHORIZED AND REQUESTED In the combined fiscal 1951 and fiscal 1952 Air Force budget there has been either authorized or requested a total of about $1,800,000,000 for the provisioning of industrial facilities. The facilities include not only brick and mortar as determined by expansion of landholdings, leasehold improvements, and actual construction of buildings and test facilities but also include the procurement and use of machinery and machine tools and production equipment. In relation to that total of about $1,800,000,000 in the 2-year budgets, the figure in this particular budget is a little over $1 billion. We will expend about two hundred million dollars on construction projects and about $100 million of the $200 million will be construction in privately owned plants. That kind of construction usually is the addition of a balcony in some manufacturer's facility or the removal of a wall to open a manufacturing area, or the installation of certain air-conditioning equipment to manufacture the highly complicated and unusual items that the Air Force has to have in this particular period of its life. Senator O'MAHONEY. Is this the expenditure covered by project 131 under program 130? General SHEPARD. That is correct, sir. Senator O'MAHONEY. On the justification pages 12 and 13. sir. BROADENING OF INDUSTRIAL BASE Senator O'MAHONEY. It would appear from this that the planned: Policies followed by the Air Force for expansion of facilities are those enunciated by the Secretary of Defense as follows: (a) Contracts be spread across industry as widely as possible in order to broaden the industrial base of our procurement program; (b) the equitable distribution of procurement contracts among the maximum number of competent suppliers; (c) the utilization of existing open industrial capacity to the maximum. Would you amplify that, please? Senator O'MAHONEY. When the justification refers to contracts to be spread across the industry as widely as possible, does that mean that you plan to do more and bring in more contractors than we have now? General SHEPARD. Not so much in the future. This statement of policy refers back to the procedure that we have used in handling Air Force contracting since the beginning of this expension period. As Mr. McCone illustrated on the chart yesterday, we did by the contracts create extra productive capacity beyond that required for the materials to go into the 95-wing air force. Senator O'MAHONEY. This doen't mean then that any part of this money for the expansion of private plants is to be used to build new private facilities or expand new private plants which do not now participate in any contracts? General SHEPARD. That is not quite accurate, Mr. Chairman. Senator O'MAHONEY. Too broad, is it? General SHEPARD. A little bit too broad, sir. The money which is in this budget will create previously planned programs of plant expansion both in Government facilities and in private plants. I think it is appropriate to say that we have been motivated by statements of policy and instructions from both the Secretary of Defense and higher authority to try to spread the necessary production of Air Force items throughout industry, to not only provide the equipment we need at the earliest practicable date, but in addition to provide a mobilization protection which would be invaluable in the event we suddenly had to undertake a war effort. Now, in doing that kind of production planning and in selecting multiple sources throughout industry, we have at the same time taken into account the great advantage that that policy has in providing contracts for small business and we have very carefully organized our efforts to insure that small business concerns do reap the benefits of a policy which would give them contracts in preference to establishing new Government-financed projects. Senator O'MAHONEY. Just look at this page and look at the last paragraph: In obtaining this broadened industrial base for the aircraft procurement and guided missiles program, the Air Force is pursuing the following administrative procedures. That is a present condition apparently and so described. Senator O'MAHONEY. In pursuing these procedures (1) contractors are first approached to provide their own facilities; (2) facilities financing by the Air Force is avoided by the substitution of certificates of necessity where possible; (3) facilities financing by the Air Force is avoided by encouraging RFC loans where possible. Are you now approaching contractors, and if so, for what work? Are you issuing certificates of necessity or recommending them? If so, where? And finally, are you now encouraging RFC loans, and if so, where and for what purposes? AMOUNT OF PROCUREMENT FUNDS General SHEPARD. We are still encouraging RFC loans. We are still recommending the approval of certificates of necessity to individal contractors who are receiving contracts from funds that are requested in this budget. More specifically, the funds in this budget, which for procurement purposes will total roughly $15 billion over-all, being translated into contracts, will be with perhaps some new sources which have not been formerly Air Force contractors, and some of those contractors will require loans, will require accelerated amortization on their facilities. Our policy as listed in the justification ndicates that our first choice is to locate contractors who do not require expansion. Senator O'MAHONEY. General, you realize, of course, you are alking in terms of a plan. General SHEPARD. Yes, sir. Senator O'MAHONEY. My questions are intended to elicit some nformation of the execution of the plan. General SHEPARD. I see, sir. Senator O'MAHONEY. The plan is perfectly clear from this. I would like to have a specific answer to the question, What contractors are you now approaching to provide their own facilities and what sort of facilities? General SHEPARD. May I obtain a list and show it to you? General SHEPARD. Here is a list, sir, of the contractors with whom we either are or have arranged plant expansions, these financed by the Government. CERTIFICATES OF NECESSITY General SHEPARD. In addition to those and also including some of the contractors on that list are facilities projects which have been undertaken through Air Force affirmative recommendations on certificates of necessity. As of the 8th of August, the Air Force had recommended favorably 566 instances of certificates of necessity, totaling $682,574,000. Senator MAYBANK. Let me ask you something on the certificates of necessity. There are a lot of people who have asked for certificates of necessity and have been instructed they have to go to the Army or Navy. That doesn't mean you are the sole benefactor of the 566? General SHEPARD. Not at all. Senator MAYBANK. That is what I want the record to be clear on. I am not certain the Air Force approved certificates for cotton duck and things of that kind. That goes to the Navy, Army, and everywhere else. General SHEPARD. That is right, sir. Senator MAYBANK. That is really for all of the services in some instances? General SHEPARD. That is correct, in some instances. Senator O'MAHONEY. I observe part of this list is labeled "confidential" and perhaps it should not be in the record, beginning on page 466. General SHEPARD. I would prefer that the list as a whole be classified as confidential and not carried in the record if the record will indicate that it has been displayed to the committee. Senator O'MAHONEY. That will be quite satisfactory. Do I understand these are contracts which have been approved as of the 1st of August? General SHEPARD. The list you have before you includes not only those which have been already approved but in addition those that will be financed out of the funds requested in this budget. So all of the contracts on the list have not yet been executed. Senator O'MAHONEY. It would appear from a hasty glance at these contracts that they are in fact contracts for end items. General SHEPARD. No, sir. The dollars that appear on the list are those required to procure machinery and production equipment and to do limited amount of brick and mortar work in support of the end items which also appear on the list. BRICK AND MORTAR WORK IN PLANT EXPANSION PROGRAM Senator O'MAHONEY. Very well. work is involved? How much brick and mortar General SHEPARD. About 10 percent of the total amount of $1,800,000,000 will go for what we call brick and mortar, which in some instances is not new construction but simply rearrangement within plants, and installation of utilities in plants and things of that kind. Senator O'MAHONEY. Are you planning the construction of any new plants for private industry? General SHEPARD. No, sir; we are not. Senator O'MAHONEY. These are modifications which the companies would not of themselves do? General SHEPARD. That is correct, sir. Senator O'MAHONEY. Is there any reimbursement to the Government for such expenditure? General SHEPARD. Indirectly, sir, through the price which we negotiate for the end items that are manufactured in these facilities. Senator O'MAHONEY. So when you negotiate the price, consideration is taken of the fact that Government money is being expended for the expansion of the plant facility? General SHEPARD. That is correct, sir. Senator O'MAHONEY. Can you give us an estimate of the total sums that will be expended for that sort of work? I mean now for the expansion of the facilities, not for the tools that go in. The tools that go in are the property of the Government, I take it. General SHEPARD. About $200,000,000 is the total sum of construction, brick and mortar. Senator O'MAHONEY. I am correct in that statement, am I not, as far as the equipment that is installed in these private facilities is concerned, that remains the property of the Government? General SHEPARD. That is correct, sir. Senator O'MAHONEY. Now, I am advised that you have a prepared statement. Should it go in the record at this point or should it go in later? General SHEPARD. No, sir. My prepared statement relates to the entire aircraft and related procurement appropriations, of which this is a part. NUMBER OF CERTIFICATES OF NECESSITY RECOMMENDED Senator O'MAHONEY. Very well, sir. Thank you. Now, then, let me ask you if you have recommended certain certificates of necessity for these facilities? General SHEPARD. We have recommended 566 certificates of necessity. Senator O'MAHONEY. You have a list of those? General SHEPARD. We can provide a list of those. Senator O'MAHONEY. Yes, if necessary. General SHEPARD. Yes, sir. Senator O'MAHONEY. How about RFC loans? What is the amount of the loans that you have recommended? What is the amount of loans that have been granted? General SHEPARD. I would prefer to check it for the record, but my belief is $400,000,000. Senator O'MAHONEY. That is recommended or actually made? General SHEPARD. Recommended, and I would like to correct that for the record. (The information referred to appears on pp 1319-1320.) |