90TH CONGRESS HOUSE OF REPRESENTATIVES 2d Session

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REPORT No. 1052

SEVENTEENTH ANNUAL REPORT OF THE ACTIVITIES OF THE JOINT COMMITTEE ON DEFENSE PRODUCTION

JANUARY 15, 1968.-Committed to the Committee of the Whole House on the State of the Union and ordered to be printed, with illustrations

Mr. PATMAN, from the Joint Committee on Defense Production, submitted the following

REPORT

[Pursuant to sec. 712(b) of the Defense Production Act of 1950]

Seventeenth Annual Report of the Activities of the Joint Committee on Defense Production

REPORT OF THE JOINT COMMITTEE

INTRODUCTION

The Joint Committee on Defense Production is authorized under section 712 of the Defense Production Act of 1950, as amended. It is composed of five Members from the Senate and five Members from the House of Representatives, selected from the respective Committees on Banking and Currency. The committee has the responsibility of making a continuous study of the programs authorized in the Defense Production Act and of reviewing the progress achieved in the execution and administration of these programs. The reports which have been furnished to this committee by the various departments and agencies for inclusion in the appendix of this report cover mobilization activities for the past year.

1

CURRENT STATUS OF MOBILIZATION PROGRAMS

Priorities and allocations

Title I of the Defense Production Act authorizes the President to establish priorities in the performance of defense contracts and to require the acceptance and performance of such contracts. The Department of Defense reports that the President approved the addition of two items to the list of highest national priority programs, and also approved 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. The Department of Defense states that a review is being made of the highest national priority programs in order to determine whether recommendations. should be made to the President concerning possible changes, which review is scheduled for completion during the calendar year 1967. The Installations and Logistics staff acts as the claimant agency for all elements of the Department of Defense and associated agencies. 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 priorities system as a mobilization readiness measure. The Department of Defense extended the use of available priorities authority until June 30, 1968, for the procurement of certain items of AID's counterinsurgency and preventive incipient insurgency operations in Southeast Asia. The special assistance procedure was continued to assure timely expediting of deliveries for military procurement for Vietnam. During the year ending August 31, 1967, the Department of Defense processed to the Business and Defense Services Administration 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 Maritime Administration reports that a tight procurement situation continued to exist because of the Vietnam action. The delegation of authority from the Department of Defense to make allotments of controlled materials and to apply DO-A3 ratings to contracts and purchase orders to meet the delivery schedules for the ships in the title V subsidy replacement program and the vehicle cargo ship for the Military Sea Transportation Service was extended to the Coast and Geodetic Survey ships under construction in three shipyards. Priorities and allocations actions covering 53 ships essential for defense purposes were processed under Defense Materials System regulations authorized in the Defense Production Act. The Maritime Administration states that the need for priorities assistance continues to be essential in the procurement of ship materials and equipment containing brass and copper in any form. The Maritime Administration reports that the most serious problem was in the procurement of shipboard electric cable. It is stated that the current strike of the principal companies producing copper and brass will undoubtedly have adverse effects on procurement related to ship construction in the near future. It is reported that as of June 30, 1967, there were 42 ships under new construction in which the Maritime Administration had an interest, including 37 new replacement ships, four ships for the Coast and Geodetic Survey and one National Science

Foundation research vessel. In addition, oceangoing private shipbuilding and conversion work consisted of two new roll-on/roll-off ships, eight tankers, and 11 tanker-cargo containership conversions. The National Aeronautics and Space Administration reports that the priorities and allocations authority authorized in the Defense Production Act continues to be of great assistance in support of NASA programs. The authority of NASA to issue priority ratings and allocations is derived from a memorandum of delegation from the Secretary of Defense dated October 21, 1958. The policies and procedures used by NASA in administering the priorities function are prescribed by the Department of Defense and are identical with those used by the military departments. Although defense orders remained at a high level during the past year, NASA reports that no serious difficulties were experienced in obtaining supplies for its programs.

The Atomic Energy Commission reports that the Defense Materials System and Priorities have been important factors in keeping deliveries from industry to the Atomic Energy Commission on schedule during the past year. Activities and workload related to the administration and operation of the Defense Materials System and Priorities in the Atomic Energy Commission continued at a high level due to competing military requirements and shortages of certain materials. AEC continued its participation in the Business and Defense Services Administration series of nationwide meetings held to brief industry on the purposes, objectives, authority, and operations of the Defense Materials System and Priorities. AEC contractors were encouraged to send representatives to these meetings. Steps were taken to improve the accuracy of requirements forecasts for controlled materials for Atomic Energy Commission programs. AEC estimated program levels in dollars and requirements for controlled materials for 3 years of a conventional war, included in the supply-requirements study of the Office of Emergency Planning for conventional war. Additional data was furnished to the Office of Emergency Planning in connection with the supply-requirements study for nuclear war. The Atomic Energy Commission supplied the General Services Administration with estimated procurement requirements for the calendar year 1967 for 56 critical materials.

The Small Business Administration reports that this agency is working with the Business and Defense Services Administration to see that small business requirements are taken into consideration when BDSA makes set-asides or recommends distribution percentages of critical materials under the Defense Materials System regulations.

The Department of Transportation reports that the only exercise of the allocations and priorities powers authorized in the Defense Production Act during the fiscal year 1967 was in support of certain civil aviation programs administered by the Federal Aviation Administration as an associated agency of the Department of Defense. The Federal Aviation Administration conducts two major civil aviation priorities and allocations programs. These programs relate to priorities and allocations of controlled materials needed to support the development, manufacture, and maintenance of (1) air carrier aircraft and (2) the National Airspace System of air traffic control, aeronautical communications, and air navigation facilities. During the fiscal year 1966, the FAA was authorized to use the rating authority under the Defense

Materials System, authorized in the Defense Production Act, for the development and production of two prototype supersonic aircraft. Another program provides essential national aviation resource data in support of the National Resource Analysis Center.

Special assistance actions

The Business and Defense Services Administration reports that in some cases extraordinary actions under the priorities powers may be required to assure the maintenance of particular national security programs on schedule. It is said that this may result from a variety of situations such as competing orders for a specialized type of product or material, conflicting priority orders on the supplier's schedule, or inadequate facilities to produce the required product or material. The Business and Defense Services Administration provides special assistance when needed to aid defense contractors in overcoming such production bottlenecks or to expedite deliveries. Such assistance includes improvement of deliveries by the issuance of special priorities or directives, including production and delivery scheduling. The report of the Business and Defense Services Administration sets forth a total of 5,178 special assistance actions with a dollar value of $400.382,797. This is reported to represent an increase of 72 percent over the 2,996 actions taken in the previous fiscal year. The National Aeronautics and Space Administration reports that on numerous occasions it was necessary to use the special assistance procedures of the Business and Defense Services Administration to improve deliveries. In each such instance, NASA cooperated with the Department of Defense to insure that no conflict existed between its orders and those placed by the military departments.

Requirements of Department of Defense

The Department of Defense continues to submit quarterly requirements data to the Office of Emergency Planning and the Business and Defense Services Administration covering the Department of Defense, the National Aeronautics and Space Administration, and other associated agency data for steel, copper, aluminum, and nickel alloys. These data are reported to the Office of Emergency Planning 3 months in advance of the beginning of the effective quarter. Increases in military production and construction for Southeast Asia caused these requirements to increase in the calendar year 1966 over earlier levels, but these requirements leveled off during the calendar year 1967. The Department of Defense reports that generally these increased requirements have not caused problems of an overall nature. Some problems arose in special-product areas, such as heavy aluminum extrusions, aluminum powder, shell steel billets, and copper base alloys. These were met by close scheduling, pending increases in capacity, and are now being met without difficulty except in the copper area. The copper problem is reported to be due to the almost complete shutdown of the domestic primary copper industry and limited shutdowns of brass mills and wire mills. The Department of Defense states in the report that the problem has not become critical as yet.

Forgings

The Department of Defense reports that in the fall of 1966 the aerospace-oriented member firms of the U.S. forging industry were overloaded with military and civilian orders and that delivery leadtimes

were extended twofold and threefold above those a year earlier. This was extending the leadtimes of military aircraft and missiles and the situation threatened to become worse. Virtually every piece of Government-owned forging equipment in the industrial equipment reserve had been released for use by the forgers. Order board scheduling was being applied to several firms to insure timely deliveries of forgings for urgent military needs with the minimum impact on commercial aircraft programs. A multi-million-dollar project was approved to modernize certain Government-owned, industry-used forging equipment to significantly increase productivity. The Department of Defense agreed to provide forecasts of peak military demand rates on a periodic basis to enable the forgers to better anticipate military requirements on individual forging plants. The aerospace industry and the forging industry developed a standard system for relating aircraft production programs to forging capacity. The major problems in the forging industry were reduced. The Department of Defense reports that delivery leadtimes for forgings have returned to about the 1965 levels, and are no longer endangering scheduled deliveries of aircraft and missiles. Forecasts of military aircraft and missile demand rates are being provided to industry through the Business and Defense Services Administration for their advance planning so as to avoid a recurrence of unanticipated demands.

Metals and minerals which may present supply problems

The Assistant Secretary for Mineral Resources, Department of the Interior, recently reported to the committee that metals and minerals which may present supply problems in the next few years are antimony, chromite, manganese, mercury, nickel, platinum, silver, sulfur, and tantalum.

Estimates of requirements for future years

In a hearing before this committee on June 19, 1967, the Assistant Secretary of the Interior for Mineral Resources was asked whether there are adequate estimates of our future requirements for materials. It was stated that the Department of the Interior has materials estimates ranging up as far as 1975, and energy estimates ranging up to the year 2000.

Leadtime for expanding minerals and metals production

years

The Department of the Interior states that recent surges in demands for minerals have demonstrated once again that the leadtime for expanding minerals and metals production capacity is too great to insure an adequate supply to meet the needs of consumers at all times. The Department of the Interior further states that in the past several the existence of stockpile surpluses, which were readily available to supplement current production in meeting the demands of consumers, made it possible in many instances to avoid or moderate shortages and the consequent economic dislocations and skyrocketing prices. Supply support to military services

The General Services Administration reports that during the fiscal year 1967, approximately 60 percent of GSA's total supply procurement program was in support of military forces, and close to 80 percent of GSA's warehouse sales went to military agencies. A substantial amount of sales to military agencies is in support of our forces in Vietnam.