Page images




Washington, D.C. The committee met, pursuant to adjournment, at 10 a. m., in room 104-B, Senate Office Building, Senator Robert R. Reynolds (chairman) presiding.

Present: Senators Reynolds, Johnson of Colorado, Hill, Downey, Kilgore, Holman, and Thomas of Idaho.

The CHAIRMAN. The committee will please come to order. I will ask the Official Reporter to take the name, designation, and official capacity of the gentleman who will now testify from the Office of Production Management, and if you will be good enough to provide him with your name, title, and any other information that is preliminarily necessary in identifying you, please. STATEMENT OF J. P. COTTON, OFFICE OF THE GENERAL COUNSEL,


Mr. COTTON. Mr. Chairman, my name is J. P. Cotton. I am from the general counsel's office of O. P. M. May I just say that Colonel Watt called us yesterday afternoon and said that as a result of Judge Patteson's testimony of yesterday on the requisition bill that you gentlemen were interested in hearing from an O. P. M. witness on the 0. P. M. policy in regard to its policy of subcontracting.

Mr. Mehornay tells me that he is familiar with the requisition bill only in the most general way, but he is head of the Defense Contract Service Unit in O. P. M. whose particular concern is subcontracting.

The CHAIRMAN. Thank you very much.

Mr. Mehornay, we will be glad to hear you, if you will give your name to the reporter.



Mr. MEHORNAY. My name is Robert R. Mehornay. My work here is that of Chief of the Defense Contracts Service Section of the 0. P. M., which has as a part of its work the subcontracting operations of O. P. M.

The CHAIRMAN. I might add to what Mr. Cotton said, we are not only interested in being provided information relative to subcontracts and what subcontractors might be affected by this bill, if passed; but

[ocr errors]

it is my understanding that the members of the committee would also like to be informed as to what materials, if any, where they are located, and the character thereof, that might be subject to seizure under this bill if passed, in order that we may have a general understanding of the foundation of the whole matter here that we are interesting ourselves in at the present time, and if you will be good enough to give us such information as you can.

Mr. COTTON. I might add, Senator Reynolds, if you are interested in other aspects, such as you have mentioned, we will be glad to have other people come up that might be more familiar with the bill, if

you want.

As I say, we understood you wanted to hear the 0. P. M.'s contracting policy, and Mr. Mehornay will furnish you that.

The CHAIRMAN. We are very much obliged to you, and the probabilities are that the committee will desire to bear more in regard to such materials, their location and availability, and the use to which those materials are put that are not available at the present time on the general market, and so forth.

Senator DowNEY. Yes.
The CHAIRMAN. Is that not true?
Senator Downey. Yes, Mr. Chairman.

The CHAIRMAN. Now, I think it will be well if the junior Senator from California [Senator Downey) will direct the general inquiry to Mr. Mehornay, in order that he may direct his statement to answers required by you as a result of your questions on yesterday pertaining to th matter.

In other words, a brief statement by the Senator from California, in order that he may be thoroughly advised as to just what it is we wish to get, I think would be well.

Senator DowNEY. Perhaps I can make my position clearer on this matter by stating to you that the terms of this present bill disturb me in certain respects.

It gives the Government the power to take from any businessman or corporation in a summary proceeding any of its machinery or leases, any of its patents, any of its equipment, any of its material, and turn it over to any other business organization for the purpose of using it for national defense.

Now, I am very much alarmed lest, in California, at least, that that power might be used in such a way as to destroy many of our small businesses.

I do know, at least, we do have out there hundreds of small industries and manufacturing concerns that are anxious to do work for the national defense that have not yet found the opportunity or means of doing that.

On the other hand, it is my belief that many of the larger corporations out there, particularly the shipbuilding companies, are loaded down with orders for shipbuilding that they do not have the personnel or the machinery or the equipment to fill and that instead of subletting the contracts for the work, the larger organizations that cannot do them, they will go out and just summarily, through the Government, take over the equipment and machines and personnel and organization of these smaller groups, and it was in relation to such a possibility that I desire to elicit further information.

Mr. MEHORNAY. I will be very happy to give you all I have, Senator.

Senator DownEY. Then, in the first place, let me ask you this, and I would like for the present to restrict my questions to California, that I know something about, and we can apply it upon the national scale, if that is satisfactory to the Chairman.

The CHAIRMAN. Certainly.

Senator DOWNEY. Take in southern California, for instance: Do you conceive yourself that the Government does have, does require, the power in the interest of national defense to summarily take over the machinery and equipment of any business organization there existing now in order to turn those over to other organizations engaged in producing, for national defense?

Mr. MEHORNAY. At the present time, from the information we have, I would say that the work that would need to be done on the property requisitioned, if I may use that word, could be done in the hands of the present owners by subcontracting or a division of the orders; in the light of the possible load for the long-range planning, I would have to guess with you, and I am afraid that that would have to be a developing program.

I cannot forecast that part of it, but for any load that we have now, I think we can adequately handle it if the known machinery and tools that are available in that area-restricting it to the southern California area, Senator, if that is the way you want it done.

Senator DOWNEY. Well, I was thinking of California as a whole. I presume the same situation exists in the San Francisco Bay region. Ι

Mr. MEHORNAY. It definitely does; yes. Senator DOWNEY. Then, let us extend the area of the application of your remarks; does the same situation prevail generally in the United States as indicated by you concerning California?

Mr. MEHORNAY. It would not extend in some items. The airplane and shipbuilding probably presents a little different problem, but whether or not it would be necessary to requisition tools, in the light of the tool production program that we all know of to be put down on an individual order, an individual project, I would say in the main as of now the work can be done; but a blanket statement that all could be would leave me on son e lines I could not substantiate, because individual problems touching individual items might not stand up.

Senator DOWNEY. Well now, Mr. Patterson indicated to us yesterday that one of the evils that the Government desired to overcome by this bill was the withholding from the United States of machine tools and other machinery by the second-hand machine dealers for speculative purposes and speculative sales.

Can you tell us, do you know anything about the extent to which there is unused machinery necessary for defense purposes in the hands of second-hand machine dealers ?

Mr. MEHORNAY. I cannot testify as to that from direct contact, but I have the general information from the tool section that they do know where thousands of tools are now located. There has been a price ceiling set on those tools, and I think it is rather a question of the condition and type of adaptability of the tools, rather than the question of hoarding of the tools. I do not believe we could charge that there was a hoarding.

[ocr errors]

With the sources known and the prices set, it rather stops off the hoarding, but yet each tool has to be analyzed as to its adaptability to the particular use that it would be needed for.

Senator DOWNEY. Well, Mr. Mehornay, then I understand from your remarks that so far as you know there is not any necessity of the Government being implemented with the plenary power of this bill, because of any difficulties existing in the second-hand machinery condition, the owners of the second-hand machinery.

Mr. MEHORNAY. Senator, you are leading me a little far out, because when we get into the need of this bill—and, you will grant me, I am not entirely familar with it. It just comes within my scope, along with all the other problems involved.

I do not know the intent or the background of the bill. I would be

Senator DOWNEY. Well, I will withdraw that question.
Mr. MEHORNAY. I am sorry, Senator.
Senator Downey. I think that the witness is entirely right in that.

Well, now, can you tell us what is being done by your organization in the United States to promote and assist the process of having the organizations with defense contracts who have not the ability to fulfill those contracts, to have a portion of the work done by subcontractors?

Mr. MEHORNAY. Yes, sir. We have to work in an advisory and persuasive way with the officers of the services and with the prime contractors.

If I may start with the work that we have done and the development with the services, and then go into the prime contractors, phase of it, I will appreciate it.

Senator DOWNEY. When you speak of prime contractors, you refer to the individual or corporation that has the contract from the Government?

Mr. MEHORNAY. That is correct; to which I will add those that will be getting them under the current program.

We started actively on this about 4 months ago. We found that the services completely subscribed to the policy, but had not at that time made directives to their officers as to effectuating the policy which in an over-all way was admitted to be right, and in the War Department we started as far back as December, when a very mild directive was issued that all possible facilities should be used, particularly smaller facilities, and if the contracting officers could be satisfied with these subcontractors, provided that they should be encouraged. However, the services, and I refer to the Army, held firmly to their policy of years and years that the Government would deal only with the primary contractor.

I am sure you are not interested in the developments between, but getting the record down now to the last Army directive, it statespardon, me may I refer to this, because I will be quoting, and I want to be very careful with that.

The effective orders directs the attention to the necessity of using every available facility in order to expedite deliveries and uses of facilities of subcontractors; the use to the greatest extent practicable, and direct that a liaison officer be appointed in each procurement district for each of the procuring offices to contact the nearest defense contract service, 0. P. M. office, of which we have 36-I am sure you

are familiar with that, sir-for the purpose of using our expert personnel, our data and records in order to expedite delivery through subcontractors. The contracting officer-and we consider this probably our greatest development- shall contact primarily contractors to file lists of components which he does not have facilities to produce on time

nd to indicate where he needs subcontractors. That has resulted in a reviewing of the existing contracts in work by the procurement officers in order to determine whether or not they are in need of subcontractors. That is, in the program, some are being found, and as they are being found, we are suggesting lists of subcontractors whose facilities are known to us and have been analyzed by us, that are able to take on that work.

Now, that recommendation is made directly to the prime contractor. The contracting officer for the Army does not himself undertake to nominate nor direct to a prime contractor, by name, a subcontractor. We are taking that load and are suggesting a list of names for the purpose of further spreading the load of the existing contracts.

Senator Thomas of Idaho. May I ask a question there?
Senator DOWNEY. Certainly, Senator.
Senator THOMAS of Idaho. To what degree of success

are you meeting in trying to get prime contractors to employ subcontractors?

Mr. MEHORNAY. Directly to the prime contractor or through this process, sir.

Senator Thomas of Idaho. I mean through your policy that you have adopted. What success are you having in getting these contracts scattered out among subcontractors?

Mr. MEHORNAY. I do nor know that I can give you a figure that would be indicative. I can only say that in one of our offices we are now attempting to place or suggesting subcontractors to do approximately $38,000,000 worth of this type of work, which I have described. That is the current problem of one of the offices. I have not that account. This process has been in effect only since May 20, and it has taken some little time to organize it and get it into operation and

under way.

I am afraid I do not have a figure that indicates that.

Senator THOMAS of Idaho. I thought that the general policy, as I understand it, that you have adopted is a policy of encouraging the subcontracting of a lot of this defense work.

Mr. MEHORNAY. Definitely; yes, sir.

Senator Thomas of Idaho. And I am wondering what degree of success you are meeting with on that program; whether the prime contractors like or welcome that kind of a program or not.

Mr. MEHORNAY. Well, we have to be cognizant of the fact that we are approaching a prime contractor with a problem that he is not entirely familiar with, meaning in most instances he has always been a complete manufacturer within himself. We are now coming to him and asking him, when we have no authority to force him, we are asking him if he will not do this purely from the standpoint of speed of delivery.

Senator THOMAS of Idaho. We get, of course, off of the subject, because I assume this question had nothing to do with the effect.

Senator JOHNSON of Colorado. It has everything to do with it, Senator.

Senator THOMAS of Idaho. You think it has?


« PreviousContinue »