MOBILIZATION PROGRAMS During the past fiscal year validated license controls were imposed on shipments of nickel-bearing scrap, nickel-bearing compounds and nickel or nickel alloy electroplating annodes. After consultation with interested agencies these controls were instituted because there were indications that nickel was becoming a short supply commodity in the United States and there was a need to keep a very close check on the quantity exported. Short supply export controls were continued on copper after consultation with interested agencies because of the continuing problems of defense industries in obtaining required quantities of copper at reasonable prices to meet their defense commitments. All exports of copper are being licensed within an export quota established to assure against an excessive foreign drain of the material. Both programs appear to be meeting the objectives for which they were instituted. Conditions in the market for both commodities are under constant review to assure that any changes in these programs which may be required to improve their effectiveness will be made promptly. Experience has demonstrated that import-export controls are a very important part of resource mobilization effort. Controls on exports and imports must be imposed to assure against excessive drain of scarce materials, that enemies and potential enemies of the United States do not obtain materials required by them to further their war effort, to channel quantities of goods allocated for export to countries and uses which will aid the overall U.S. effort, to further the foreign policy of the United States, and to aid in the importation of commodities needed in the United States to further its objectives. EMERGENCY OPERATING PLANS The Bureau of International Commerce has established plans to assure continuity of its essential functions. These plans are reviewed on a continuing basis and updated as needed. They include, but are not limited to, establishment of relocation cadres, and the prepositioning of documents essential to carrying on these essential functions from preselected relocation sites. They also include plans for reassignment of personnel in other areas of the Bureau of International Commerce, whose programs would be discontinued, to export-import control agencies to implement programs which would become necessary in a national defense emergency. The staff would also be augmented by members of the Bureau of International Commerce unit of the national defense executive reserve. In order to provide for additional executive talent which would be needed by the Bureau of International Commerce in the event of a national defense emergency, a unit of the national defense executive reserve was established in the last quarter of fiscal year 1966. Recruiting efforts have resulted in the designation of 28 reservists in specialized fields in which executive talents would be required. An additional 15 individuals are ready for designation. The objective of the Bureau is to have a unit of 100 executive reservists trained and available to serve in key positions should the need arise. A training program is being developed to assure that the unit is ready when called upon to report for duty. DEFENSE DEPARTMENT Hon. WRIGHT PATMAN, ASSISTANT SECRETARY OF DEFENSE, Chairman, Joint Committee on Defense Production, Congress of the United States, Washington, D.C. DEAR MR. CHAIRMAN: As requested in your letter to the Secretary of Defense dated July 19, 1967, attached is the Department of Defense report covering activities conducted under the provisions of the Defense Production Act of 1950, as amended, during the period September 1, 1966-August 31, 1967. Industrial dispersal program. 244 National mobilization program planning, mobilization material requirements, and national stockpile programs.. 244 Executive Reserve program. 245 Civil defense... 245 Activities of the Department of Defense which are related to the provisions of the Defense Production Act of 1950, as amended, included the following, during the year ending August 31, 1967: Priorities and allocations. Expansion of production capacity and supply. (a) Guaranteed loans. (b) Utilization and improvement of existing production capacity. Assistance to small business firms. Assistance in areas of substantial unemployment. Industry integration committee operations. Industrial dispersal program. National mobilization program planning, mobilization material requirements, and national stockpile programs. Authority. The authority for the Department of Defense participation under title I of the Defense Production Act of 1950, as amended, stems from Executive Order 10480 and the issuance of delegation 1 by the Business and Defense Services Administration (BDSA), which authorizes the Department of Defense to participate in the national priorities and allocations program in conformance with orders and regulations issued by BDSA. The Secretary of Defense, under DOD directive 4405.6, August 20, 1954, has delegated the priorities and allocations authority to the Assistant Secretary of Defense (Installations and Logistics) and the appropriate operational authority has been redelegated to the military departments, the Defense Supply Agency, Defense Atomic Support Agency, Defense Communications Agency, and the associated agencies. Summary of activities.—Uniform policies relating to priorities and allocations matters within the Department of Defense are developed by the Office of the Assistant Secretary of Defense (Installations and Logistics), and these policies, together with guidance and detailed instructions to all operating elements and associated agencies are disseminated through the DOD Priorities and Allocations Manual. Continuing liaison was maintained with the civilian control agencies, Office of Emergency Planning, and BDSA, for the purpose of recommending actions, participating in development and clearance of orders and regulations, and cooperating in the preparation and implementation of policies relating to requirements, production, and distribution for approved military programs. The joint Department of Commerce-Department of Defense, defense materials system and priorities training program was continued through fiscal year 1967 with additional briefings in 25 intermediate-sized cities throughout the Nation. The purpose of these briefings was to reacquaint contractors and suppliers, particularly new subcontractors working on national defense contracts, of the mandatory nature of the use of industrial priority ratings and allotments, thus assuring delivery of production resources to enable them to make timely deliveries of materiel needed for Southeast Asia, as well as our other needs. Response was excellent and the audiences, primarily representatives of industry, administrators of city and State governments and trade associations, were larger than expected. The President approved the addition of two items to the list of highest national priority programs, and also seven additions and five deletions to the Southeast Asia ammunition item. Approved programs in this category are afforded the use of the blanket DX industrial priority rating. A review of highest national priority programs, scheduled for completion this calendar year, was instituted to determine whether recommendations should be made to the President concerning possible changes in the composition of this category. Among the policies and procedures issued this year were (1) extension of the use of available priorities authority until June 30, 1968, for procurement of certain items of AID's (Agency for International Development) counterinsurgency and preventive incipient insurgency operations in Southeast Asia; (2) continuation of the shortcut special assistance procedure for use by the military departments, DSA and other interested Defense agencies to assure timely expediting of deliveries for military procurement for Vietnam; (3) concurrence in and promulgation to the military departments, DSA and other interested Defense agencies, set-asides for copper and copper base alloys; (4) continuation by BDSA of a set-aside of domestic refined copper, as recommended by the ASD (I. & L.), to assure an adequate supply of copper for defense orders; (5) continuation of the quarterly set-aside of primary nickel on U.S. suppliers; (6) BDSA leadtime rules for the acceptance of rated orders for nickel and ferronickel by producers and distributors, to insure prompt placement of orders and to enable them to schedule deliveries for defense orders and nondefense users in more orderly fashion; (7) an OEP decision approving the use of the DO industrial priority rating for the construction of 13 ships by the Maritime Administration in addition to the 72 ships approved last year; (8) reaffirmation of the priorities and allocations support to Department of Transportation programs formerly granted to the Federal Aviation Agency; (9) procedures to be followed by the Department of Defense and its associated agencies in maintaining timely deliveries of copper during the current copper strike; (10) promulgation to DOD elements and interested agencies of a BDSA pamphlet containing questions and answers on the Defense materials system and priorities, and for which the OASD (I. & L.) provided comments to BDSA concerning its content; (11) under BDSA delegated authority, about 100 Defense Contract Administration personnel canvassed a selected group of consumers, producers, and warehouses to collect information on the production, distribution, and use of copper in defense programs. The installations and logistics staff acts as the claimant agency for all elements of the Department of Defense and associated agencies under approved procurement programs. Activities include (1) issuing periodic requirements calls; (2) reviewing and consolidating requirements for submission to the Office of Emergency Planning; (3) supporting the requirements before committees of OEP when required; (4) receiving and distributing materials allocations; (5) preparing appeals for additional materials; and (6) arranging for transfers, adjustments, and returns of materials. Priorities and allocations functions performed by the installations and logistics staff are designed to keep current military production, construction, and research and development programs on schedule and to maintain the national priorities system as a mobilization readiness measure. These functions include (1) redelegating authority to the military departments, the Defense Supply Agency, the National Aeronautics and Space Administration, the General Services Administration, associated agencies, and other offices within the Office of the Secretary of Defense; (2) preparing and issuing uniform policies and procedures to govern the use of this authority within the Department of Defense: (3) recommending special actions to expedite deliveries to fulfill defense orders; (4) resolving production and distribution conflicts within the Department of Defense; (5) maintaining consolidated controlled materials accounting controls; (6) recommending simplified procedures; and (7) participating with OEP and BDSA in developing standby priorities and allocations systems for mobilization readi ness. The military departments and the Defense Supply Agency continued to perform various activities in support of the priorities and allocations program to assure the fulfillment of military procurement programs and to provide for ready identification of military orders. These activities include (1) assigning DO or DX preference ratings to military contracts and orders; (2) preparing departmental statements of requirements; (3) making controlled materials allotments; (4) administering special distribution controls; (5) obtaining special priorities assistance for individual DOD contractors experiencing production difficulties; (6) auditing operations of DOD military establishments and selected contractors for compliance with instructions and regulations; (7) collaborating in the simplification of current and standby operating procedures; and (8) DMS and priorities training activities. During the year ending August 31, 1967, the DOD processed to BDSA 4,105 cases with an approximate value of $427 million requesting special assistance to obtain materials, components, end items, and production equipment to fulfill military contracts. The assistance was in direct support of approved military, AEC, and NASA programs. In addition to these special assistance cases, order board scheduling actions were recommended by OASD (I. & L.) and sequences of deliveries were directed by BDSA for (1) certain communication equipments, semiconductors, and electron tubes needed for South Vietnam and other important programs, at five plants; (2) aluminum extrusions for aircraft and landing-field matting for South Vietnam which involves four individual plants and the production from six heavy presses; (3) bomb lugs, electronic and mechanical counters, aircraft landing gear assemblies and components, armor plate and certain high temperature alloys involving five individual plants. Order boards for five struck brass mills and wire mills were obtained by BDSA and distributed by OASD (I. & L.) to DOD elements to assist procuring agencies in identifying and assisting procuring agencies and contractors in placing important orders in nonstruck mills. During the period of this report, 29 aircraft plants and 13 military installations were audited by the Department of Defense in connection with its responsibilities for assuring compliance with DMS regulations and instructions. DOD requirements for controlled materials to support priority orders for current procurement were computed each quarter, and allocations from OEP to cover these requirements were made to the military departments, DSA, and the associated agencies each quarter. EXPANSION OF PRODUCTION CAPACITY AND SUPPLY (a) Guaranteed loans Authority.-The DOD participates in the guaranteed loan program under the Defense Production Act of 1950, as amended, and authority delegated to the DOD under Executive Order 10480. (b) Utilization and improvement of existing production capacity Authority.-DOD activities related to title III of the Defense Production Act of 1950, as amended, also include development and use of methods and procedures to utilize existing production capacity. Summary of activities: Industrial facilities and plant equipment.-During fiscal year 1967, accelerated Southeast Asia production levels coupled with the introduction of newly developed military hardware resulted in continuation of a relatively high level of investment in industrial facilities. The OASD (I. & L.) approved major expansions totaling $296.3 million. It is estimated that departmental approvals of projects under $1 million total $33.7 million, making total approvals for fiscal year 1967 $330.0 million, which compares with $279.6 million in fiscal year 1966 and $56 million in fiscal year 1965. The Defense Industrial Plan Equipment Center (DIPEC) of the DSA, which was established in March 1963, managed the DOD inventory of industrial plant equipment to assure full utilization of available assets and preclude the procurement of new equipment when suitable items are available in inventory. Industrial plant equipment owned by the Department of Defense, except that in the hands of military units and aboard ships, is reported to DIPEC and becomes a part of their inventory. That portion which is idle is known as the Department of Defense industrial equipment reserve (DODIER). The DODIER includes a number of standby lines and package plants which are held to augment the facilities of planned mobilization producers. It also includes a general reserve of equipment to support both current contracts and mobilization production which is not earmarked for any specific producer or program while it remains idle. Utilization of DODIER items during the reporting period was unusually high in support of production requirements for Southeast Asia. During fiscal year 1967 idle equipment from the general reserve having an acquisition value of $192.6 million was made available for use on defense programs. A number of package plants and standby lines were reactivated involving the use of some 9,314 machines with an estimated acquisition cost of $101 million. In addition some 4,535 items were loaned from package plants for use on other programs. The use of this layaway equipment contributed materially toward the ability to accomplish early production. Specifically, standby lines were able to achieve production in 4 months or less and package plant reactivations were productive in from 3 to 8 months. These time frames compare advantageously |