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Senator Johnson of Colorado. That is the very heart of this bill. It has everything to do with it. It is the most important matter before America today, this matter of subcontracting. You have put your finger on the most important thing we have, and I am disheartened to hear the witness say that it is merely a recommendation, and a mild one at that; that it is not compulsory.
Mr. MEHORNAY. There is no compulsion that can be used.
Senator JOHNSON of Colorado. I am very disheartened to hear you say that, sir.
Senator DowNEY. Senator Johnson, let me suggest that we develop a few further preliminary details from the witness, and then continue the examination along the line you were suggesting.
Senator JOHNSON of Colorado. Certainly.
Senator DOWNEY. You were reading to us from some declaration by your unit of the O. P. M. addressed to the Army in relation to policy?
Mr. MEHORNAY. I am sorry, Senator, if I did not make myself clear.
Senator Downey. You probably did, but it is very difficult to take these things all in.
Mr. MEHORNAY. This is a résumé of an Army directive issued by Under Secretary Patterson to all arms and services and procurement officers.
Senator DOWNEY. That is a declaration from the Secretary of War's office?
Mr. MEHORNAY. Yes, sir.
Senator DOWNEY. As I understand, recommending to the prime contractor the use of subcontractors wherever he could.
Mr. MEHORNAY. Directing procurement officers to require this file of equipment and recommendations on the part of the contracting officer to the prime contractor, that he use subcontractors to speed up.
Senator DownEY. Let me orient myself, or let us orient ourselves a little more along that line, Mr. Mehornay.
You are a member of our governmental organization commonly known as the Office of Production Management.
Mr. MEHORNAY. Yes, sir. Senator DowNEY. What is the title of your office? Mr. MEHORNAY. Chief defense contract service, in which there is a unit on subcontracting. A section has a unit.
Senator DowNEY. And who is the superior officer of your department?
Mr. MEHORNAY. John D. Biggers.
Senator DOWNEY. And this unit that you are here representing, of course, is only one of many units under Mr. Biggers?
Mr. MEHORNAY. Yes; and one of five under me.
Senator DOWNEY. Well now, when was the organization initiated in the 0. P. M. to promote the use of subcontractors? Mr. MEHORNAY. The 31st of January this year.
Senator Downey. Would you say that you have achieved any substantial or practical results up to date?
Mr. MEHORNAY. I think the ability of the O. P. M. to encourage Secretary Patterson to issue such a directive as I am reading from, or explanation, is quite an advance in subcontracting, because it gives the official directive of the Under Secretary of War to the policy and directive from him to his contracting officers that they shall lend every support to it in the field.
Senator THOMAS of Idaho. Now, getting back to my question, To what degree of success are you meeting with? That is the point that I want to know about. Are the prime contractors paying any attention to the suggestions of the War Department or the 0. P. M.?
Mr. MEHORNAY. Well, I would not be able to report on that, in the short time. Surveys and investigations are going on, sir. As soon as we have gotten the information I will be very happy to submit it.
Senator THOMAS of Idaho. Now then, in answering Senator Johnson as to the problems of this bill, is it the intention of the War Department or the 0. P. M. to use this bill for the purpose of forcing this particular thing we are talking about?
Mr. MEHORNAY. Well, I am familiar with the bill in a very, very rudimentary way, and I do not believe that the requisition of a tool, taking it away from a man who has it, and delivering it to another man would encourage subcontracting.
Senator Downey. It would have the contrary effect, probably, would it not?
Mr. MEHORNAY. Possibly it would.
Senator DOWNEY. Well, in order that you may understand more the issue that is distressing my mind, let me state it more frankly in realistic terms. I do not know that the information I have is correct, but I understand that in Los Angeles, we have four shipbuilding companies there now, I believe, the Bethlehem, the Consolidated, the California, and the Los Angeles, who are loaded up with hundreds of millions of dollars of orders for shipbuilding and that they have hardly made a substantial beginning upon the fulfillment of their orders, and that they lack the personnel and the equipment, and the machines to do that, and that it is the desire and wish of these companies to maintain in their own hands on their own site, all of the building work they can and to do as little by subcontracting or through other contractors as possible.
Now, are you familiar with that particular situation there in Los Angeles relating to the shipbuilding program? Mr. MEHORNAY. I am not.
Senator DOWNEY. And, you do not know to what extent they could use some contractors, or to what extent they cannot do it?
Mr. MEHORNAY. I do not know to what extent they are counting on doing it.
Senator Hill. Would that shipbuilding come under the 0. P. M., or would that come more directly under the Maritime Commission?
Mr. MEHORNAY. It would come under the Maritime Commission.
Senator Hill. Do you have much to do with them or not? I am wondering whether we might get that information. Mr. MEHORNAY. Yes.
The CHAIRMAN. Do you know how many subcontracts have been let to date?
Mr. MEHORNAY. I do in specific instances.
The CHAIRMAN. I mean generally, as a total, how many subcontracts have been let by prime contractors?
Mr. MEHORNAY. The Ordnance Department since last June has let some 1,400 prime contracts, and they are using, by actual count, 21,000 subcontractors; that same 1,400 prime contractors, or an average of 15.
The records of the National Association of Manufacturers shows that they have an average-pardon me, may I refer just a minute to that?
The companies they have verified show an average of 31 subcontractors to each prime contractor, and the Army and Navy Munitions Board records as checked up through priority checking shows an average of six.
Now, O. P. M., as such, keeps no record of that kind.
The CHAIRMAN. Is it the policy of the 0. P. M. to keep records or do they have records of all subcontracts that have been let? Mr. MEHORNAY. No; we do not. The CHAIRMAN. You do not? Mr. MEHORNAY. No, sir.
The CHAIRMAN. For the information of the members of the committee, I might state we have here today a gentleman from the War Department who is in a position to give specific information on the orders, as to the number of subcontracts made and other information relative thereto.
Senator Downey. You say, Mr. Chairman, we have a witness here now?
The CHAIRMAN. We have a witness here who can give full information about all these things.
I think if you would like that information now, we might dispense with this witness just temporarily and have Colonel Hare come around and testify.
So, Colonel Hare, we will be glad to hear you. Will you please give the official reporter your name and official position?
STATEMENT OF LT. COL. RAY M. HARE, QUARTERMASTER CORPS,
OFFICE OF UNDERSECRETARY OF WAR, FACILITIES DIVISION
Colonel HARE. Ray M. Hare, Lieutenant Colonel, Quartermaster Corps, Office of Under Secretary of War, Facilities Division. · I am also Chief of the Facilities Division of the Army and Navy Munitions Board.
The CHAIRMAN. Colonel, do you know how many contracts, subcontracts, have been let to date?
Colonel HARE. We have a record of 177,000 and some odd subcontracts that have been let to date that we know of, and our records do not include the very small ones. These are the important ones that would justify priority or preference ratings
Senator JohnSON of Colorado. As to those contracts, that does not mean that you have 177,000 firms that are doing subcontracting.
Colonel HARE. No.
The CHAIRMAN. How many of those contracts have been given to any one firm?
Colonel HARE. Well, it differs. We say that it will average about five to a firm. Some of them have as many as 20 or 25. Some of them have only one.
Senator Johnson of Colorado. Can you give us an example of the kind of firm that is receiving these contracts, these subcontracts?
Colonel HARE. I can give you an example, a firm that is issuing the contracts.
The Baldwin Locomotive Works up in Philadelphia has over a thousand subcontracts let and they are making tanks for the Ordnance Department.
Senator DOWNEY. Might I intervene right there? Are you familiar with the manufacturing program of the Baldwin Locomotive Works?
Colonel HARE. No; only my record reflects what is in that plant now and also in a general way what is projected for that plant in the general forward planning of the work.
Senator DOWNEY. Well now, the specific question I would like to know about is this: One of the objectionable features of this bill, at least from my information, is the summary power given to the Government of the United States to seize machinery and equipment from one manufacturer and turn it immediately over to another.
Now, what I want to ask about istake in the case of the Baldwin Locomotive Works. Would your knowledge of the Baldwin affairs indicate that that power is required by the Government in order to further the defense manufacturing of the Baldwin Co.? Do they need additional machinery that they can go out, and, by a summary process, take from other manufacturers?
Colonel HARE. I have a recollection of a condition that existed in that plant at one time where one subcontractor could not get the type of machine that was needed and it held up the complete assembly line on some phase of the work. I do not remember the details.
Senator DOWNEY. You do not know why they could not get it; whether they could not buy it or whether it was not in existence.
Colonel HARE. I assume that they could not locate that particular type of machine.
Senator DOWNEY. If I might ask this question. I am asking for myself, Mr. Chairman, and of course not the committee.
What I am interested in is in finding somebody from the Government here who can come to us, give us one concrete case in which the Government would find it advisable to apply this summary power they are asking for as very urgent and vital powers here. Now, what I would like to ascertain is one concrete case, to draw this discussion out of the realm of generalities down into concrete cases.
Do you understand what is the issue in my mind?
Colonel HARE. Yes, sir. I cannot give you a concrete case, but in my experience in the War Department in answering letters from industry written in regard to the program, many instances have come up where a firm was in bankruptcy, where they were going to have their equipment sold on the block, and that equipment was important to the War Department and we had no authority to intercede.
I know from personal visits as a survey officer in the Chicago area, where many manufacturers told me that they welcomed the ability of the Government to commandeer or to force them to hold machinery in readiness for any order or to give preference to the Government orders, because they needed something like that to protect them
against litigation in connection with other work that they might have; other customers that they might have.
Senator DOWNEY. You understand that the Government already has that power to force them, any manufacturer, to take defense contracts?
Colonel Hare. Yes, sir.
Senator Downey. If the Government desires, and failing in that, the Government has the power to take over the plant. You understand that.
Colonel HARE. I understand that.
Colonel HARE. Yes, sir; but my understanding—and of course, I am not an expert on this—is that we do not have the power to seize individual tools or to threaten to seize the individual tool that we might need.
Senator DOWNEY. You have not, unless you first give the manufacturer the chance to take defense contracts himself, and he refuses to, then you have the right to take over that machinery, as I understand it.
Senator Hill. Do they have authority just to take that machinery, or do they not have to take the whole plant, under that section 9? As I recall the wording of that section 9, the Government would have to take the whole plant. I am not sure about that.
Senator DOWNEY. I would assume that might be true.
Senator Hill. I think that they would have to take the whole plant under section 9 of the Selective Service Act.
Colonel HARE. That is my impression.
Senator JOHNSON of Colorado. They ought to take the whole plant, if they are going to take the heart out of it. If they are going to go in there and pick up one part of the plant, and walk off with it, they ought to take the whole plant.
Senator Hill. Colonel, you spoke about 177,000 subcontracts. How many prime contracts cover that 177,000?
Colonel HARE. I do not have those figures with me. I am interested primarily in the subcontract phase of this, the farming out.
Senator Hill. Who could give us those figures as to the prime contracts?
Colonel HARE. Our statistical division; but it would, of course, change daily.
Senator HILL. I appreciate that, but they could give us the same kind of figures on prime contracts that you have given on subcontracts. We realize that they change every day; that you are making new contracts every day.
Colonel HARE. Yes, sir.
Senator Johnson of Colorado. You say that it is your work to look after subcontracts?
Colonel HARE. Yes, sir.
Senator JOHNSON of Colorado. How do you go about that job of yours?
Colonel HARE. We assist in the preparation of directives to our purchasing officers and our procurement, planning officers, that would cause them to use their influence to make manufacturers who have prime contracts make greater use of such contracts.