reason brought into the picture. Once they are brought into the picture, they could negotiate with Lend-Lease, War Department, Navy Department, or the Maritime Commission, or with prime contractors for some part in this program.

I hope you will give some thought to that, and I know you will, to the setting up of an agency that will have some authority to bring these small plants into the picture.

Mr. NELSON. I shall be glad to contribute whatever I can in thinking. However, I consider that is outside the field of production and procurement, and is not for me to set up.

Senator MEAD. I am of the opinion it is very close to production, if you bring in these 25 to 30 thousand plants.

Mr. NELSON. There are two things you have to separate out of that. If you are talking of conversion and bringing them into either the war effort or essential civilian supply, yes; I consider that as part of my job. The question of the financing of them and what is done in that way to rehabilitate them, or other things, I do not consider that part of my direct responsibility, and would rather see it set up independently.

Senator MEAD. I think so. I think if it was set up independently they would all be brought in line to participate in this program, and when they were able to participate in the program and prepare for it then they would become part of your productive effort.

Mr. NELSON. Then it would come over into our responsibility. Senator MEAD. But I know offhand of two airplane factories, both capable of manufacturing trainer planes, and one with a contract for the Dutch East Indies that, at the time we visited the plant, was about completed; and I understand that Mr. Odlum has helped one of these industries get into the defense picture, but the other small airplane plant has been unable to get into the defense picture; and so, if there are hundreds and thousands of such plants in the various categories that are striving to get into the picture, we ought to bring them in, and I know there are a great many located over the country; but we need, I believe, an independent agency with power to furnish them with the funds and the advice they need to come into the picture, and I hope it will have your cooperation at a very early date.

Mr. NELSON. I will be glad to cooperate with anybody setting it up, to show what the problems are so far as we see them.

Senator MEAD. I believe an endorsement from you in behalf of small business would be most helpful right at this time.

Mr. NELSON. As I told you, sir, I am discussing that with Mr. Eccles on Thursday.

Senator MEAD. Fine.

The CHAIRMAN. Mr. Nelson, there is a parting thought this committee wants to leave with you. If any of the agencies with whom you have to deal, and who have to come to the United States Senate for the approval of appropriations, do not feel that they want to wholeheartedly cooperate in this effort, bring that matter to the attention of this committee and we will bring it to the proper legislative committee so they will cooperate.

Mr. NELSON. Thank you.

The CHAIRMAN. If there are no other questions, that is all.
Mr. NELSON. Thank you again.

The CHAIRMAN. I want to have this editorial, which was published in the St. Louis Post-Dispatch and copied in the Richmond Times, copied in the record as my views on dollar-a-year men.

(The editorial referred to was marked "Exhibit No. 350" and is included in the appendix on p. 4248.)

The CHAIRMAN. The next meeting of the committee will be at the call of the chairman.

(Whereupon, at 12:50 p. m., the committee adjourned, to reconvene upon the call of the chairman.)

INVESTIGATION OF NATIONAL DEFENSE PROGRAM

THURSDAY, FEBRUARY 12, 1942

UNITED STATES SENATE,

SPECIAL COMMITTEE TO INVESTIGATE
THE NATIONAL DEFENSE PROGRAM,

Washington, D. C.

The committee met at 10: 47 a. m., pursuant to call of the chairman, in room 318, Senate Office Building, Senator Harry S. Truman presiding.

Present: Senators Harry S. Truman (chairman), Clyde L. Herring, James M. Mead, Ralph O. Brewster, and Tom Connally.

Present also: Mr. Hugh A. Fulton, chief counsel, Mr. Charles P. Clark, associate chief counsel.

The CHAIRMAN. The committee will come to order.

Mr. MacKeachie, you haven't appeared before this committee before, have you?

Mr. MACKEACHIE. No; I haven't.

The CHAIRMAN. It is customary first to swear the witness. Do you solemnly swear to tell the truth, the whole truth and nothing but the truth, so help you God, in the testimony you are about to give before this committee?

Mr. MACKEACHIE. I do.

The CHAIRMAN. Will you be seated, Mr. MacKeachie? Will you tell us your full name and title, please, for the record?

TESTIMONY OF DOUGLAS C. MacKEACHIE, DIRECTOR OF
PURCHASES, WAR PRODUCTION BOARD

Mr. MACKEACHIE. Douglas MacKeachie, Director of Purchases, War Production Board.

The CHAIRMAN. I am somewhat interested, Mr. MacKeachie, in your background before you came here. Tell us something about your connections before coming to Washington.

Mr. MACKEACHIE. Before coming here I had been purchasing director for the New England Division of the Atlantic & Pacific Tea Co.

The CHAIRMAN. And what were your connections before that?

Mr. MACKEACHIE. I had been with the Atlantic & Pacific Tea Co. for about twenty-odd years.

The CHAIRMAN. Twenty years. Were you the purchasing director for that organization? That is the biggest chain store outfit in the world, isn't it?

Mr. MACKEACHIE. Yes.

The CHAIRMAN. Well, you ought to know something about purchases.

Do you have a prepared statement you wanted to make?

Mr. MACKEACHIE. Yes; I do, Mr. Senator. It is very brief.
The CHAIRMAN. Proceed.

FORMATION AND FUNCTIONS OF CONTRACT REVIEW BRANCH OF WAR PRODUCTION BOARD

Mr. MACKEACHIE. I asked to appear before this committee because we have studied carefully the recommendations on reviewing contracts contained in the committee report of January 15 and given to me directly by members of the committee, together with those of the Vinson committee, and I should like to tell you briefly what we plan to do and to answer, so far as I can, any questions which may be in your minds.

First, let me say that we have in mind recommending the following policies, and these policies will be recommended immediately. They should be in effect in a few days.

1. That war procurement contracts be placed by negotiation rather than upon the basis of competitive bids. This method will enable the Government to make the most effective utilization of available productive capacity. It will eliminate the great volume of work and considerable delay which are involved in the procedure of placing contracts on a bid basis. Of course, it will not preclude asking for quotations from various sources where that procedure is desirable. By that I mean informal quotations.

2. That contracts for standard commercial items be placed generally with the smaller manufacturers, leaving the facilities of larger concerns available for the more difficult production tasks.

3. That contracts contain a standard clause for renegotiation under stated conditions.

This last recommendation embodies one of the recommendations of your committee. As I read your report, your committee recommends: (1) That contracts should be reviewed carefully after execution, in regard to protection of the Government's interest, prices, delivery dates, and terms; (2) that contracts ordinarily should include provisions permitting adequate review and renegotiation; and (3) that such provisions should be actively used.

As you know, title XIV of the second war-powers bill, now pending, specifically provides for the inspection and audit of the plant and books of any contractor with whom a defense contract has been placed since September 8, 1939. These powers, together with the powers of renegotiation granted by the first War Powers Act, will put us in a much better position to carry out these recommendations. We are, therefore, setting up in the Purchases Division of the War Production Board a Contract Review Branch. The functions of this branch will be as follows:

(a) To clear, prior to execution, such contracts or proposals for contracts by Government agencies as the Chairman, W. P. B., shall direct. Arrangements necessary to avoid delay in the execution of contracts will be effected with each contracting agency.