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and give us what further information he can and what further encouragement he can as to whether small industry is going to have a bigger place in this picture. He stated a while ago that a new program had been inaugurated on May 1. Is that not right, Mr. Mehornay?

Mr. MEHORNAY. May 20.
Senator JOHNSON of Colorado. May 20?
Mr. MEHORNAY. Yes.

Senator JOHNSON of Colorado. All right. So that it has not had a very long time to indicate what it will do. But what I want to find out--and you were answering my question when you were interrupted—and I want Colonel Hare also to answer that question-is what the prospects are for small industries throughout the country.

Mr. MEHORNAY. When you say to a man that he cannot get a certain machine tool-and everything gets back to machinerywithin the time limit that he must produce, we naturally bring in his neighbor; and the instructions definitely are out that no facilities be authorized without due studies of existing facilities available through subcontracting. A man cannot be given an extension of time, cannot be given priority or acquisition of the equipment, until he demonstrates to the satisfaction of the contracting officer that there are no subcontracting facilities to take the place of that. I think that is definitely encouraging on that.

Then, to me the most encouraging thing is that beginning now we are going to ask bidders to give us a list of the machinery that they do not have in their own plant at the time of making their bids, to tell us where they propose to get them, how they propose to get them, and why they cannot use subcontracting in lieu of them. And when we put that "must" on a person, he is going to arrange his subcontracting and the spreading of his work before he comes in.

We feel definitely that if we cannot do this before the contract is let-and may I interpose here that we have very few, if any, orders for less than $500,000—-there is no disposition on the part of the services to deny us the privilege of seeing them in amount less than $500,000 if we ask them. We live in that kind of relationship. We can see them if we ask them to let us see them. There is no recalcitrance on their part to let us see them.

Now, when we pull that contract down into that, we get a predetermination on how the man is going to execute the order. Then we can guide it where we please.

We will have some difficulty under the legislative restrictions that the lowest responsible bidder must have the order. There are in the Army certain conditions under which he can deviate from that. The Navy restrictions are a little tighter. But if it is the will of Congress and the will of the people, we will handle it that way. This job has to be done, and that we can get done.

Now, with that background of the things that have been done and are being done, as to this survey that Senator Reynolds is asking about, I reiterate that it is only a question of timing when I can answer how much and where.

When we get that, I see no reason why the effect of this bill would be or where it would be necessary to use it in many instances. If you have a recalcitrant owner of a tool who will neither use it in defense nor allow it used in defense, you probably should have the power to take it right straight away from him. But I cannot conceive of the fact that a sufficient number of tools will be in the hands of such people that you cannot find them where they sit and use them where they sit with the men that sit with them.

Now, we believe also that before any man should be allowed to have delivered to him a tool taken from another man, he must prove within any possibility of a doubt that his entire production is dependent upon taking that particular tool. He should have to demonstrate that there is no other way to do it.

Also, we are tremendously interested in whether or not you are going to just wholesale take these tools away from these small men and store them away, or whether you are going to predetermine where they will go and for what purposes. And it is up to the man who is going to get them and use them to demonstrate why he has to have them.

That is our approach to it now; and whether we need the authority of this bill to handle that, I don't know. But we feel that we can bandle it as it stands.

You cannot make tools by resolution. You are going to have so many tools wherever they are. Your problem is to move the tools or move the work. We are universally of the opinion to move the work and not move the tools. And under that policy and that operation I cannot conceive that many tools will have to be moved if you can put those restrictions around it and make it disastrous not to move them. I cannot see that that would happen often.

Senator KILGORE. Mr. Chairman, may I ask

Senator Johnson of Colorado. I would like to have Colonel Hare answer my question, please.

Senator KILGORE. Oh, yes.

Senator JOHNSON of Colorado. The same question-whether there is anything encouraging in the picture for small business getting a bigger part in this program of defense.

Colonel HARE. In the War Department we believe that on the horizon there are greater opportunities for the small manufacturer than have existed in the early phases of our program.

As stated before, the earmarked sources are pretty well filled. We are going to have to have new capacities. We are out trying to develop this capacity.

We are lowering our standards, you might say, a little bit. For instance, first we said a man should have about a $50,000 capitalization to be on our list as a prime source, a mass-production source. We are now taking anyone, listing anyone, who has a plant in the community and equipment and who gives any promise of being able to perform once he gets a contract..

The little man in our records today—I recently had occasion to look up the firms that are in our forward-planning picture. More than a third of them have less than 50 employees. I think that is very encouraging.

Senator DOWNEY. I didn't understand to what that applied. To future contracts?

Colonel HaRE. Yes. We try to project our procurement program ahead 6 or 7 months or a year; and of those firms that we consider as standing by, fully a third of them had less than 50 employees.

Senator DOWNEY. That is the prime contractors?

Colonel HARE. Yes. Well, we don't know whether they are going to be prime contractors or subcontractors. We know they are not now in the program. We want to bring them in.

Senator JohnSON of Colorado. Is it going to be your policy in the future to insist more and more upon extending contracts to the small manufacturers?

Colonel HARE. We are trying to. I might say we are formulating a plan for more regional competition in the future. For instance, people in California would not be bidding against people in Illinois or in Maine. This competition would be just a little bit fairer by terms of freight rates and so forth.

I am not really qualified to speak on that, except that this is a favorable sign which you have asked for.

Senator Hill. Who would be qualified to speak on that, Colonel?

Colonel HARE. I don't know just how far that situation has gone, but General Schultz, of the Under Secretary's office, who is the current procurement man, I understand, is considering something along that line. I am not positive that that is just exactly it. But it is to have that effect, of having a more regional competition than a Nation-wide competition. That will be a good influence for the smaller men.

Senator Johnson of Colorado. And for the central part of the United States, in not compelling the region in the central part of the United States to compete with the Atlantic seaboard.

Colonel HARE. Yes. That is right.

Senator Hill. Is it your thought that practically every manufacturing plant in this country that is capable of manufacturing supplies or matériel for the armed forces can be used?

Colonel HARE. The War Department in its plans considers the entire industrial capacity of the country. They feel that those people who are not actually manufacturing munitions will be manufacturing other essentials for the welfare and morale and so forth, taking care of the customers of those firms that have given over their capacity to munitions; and that the whole manufacturing industry of the United States, over 200,000 manufacturers, will feel the effect of the program.

Senator Hill. Have you any figures as to how many idle plants there are today?

Colonel HARE. No. We feel that there are approximately 50,000 plants in the United States that are engaged in that kind of normal work that would fit them to produce the kind of items that we want to equip the Army

We have no way of gaging the number of plants that are idle, except that we get a lot of mail from these people who write to you gentlemen and ask that their plant be used. We are getting much fewer of those letters.

We feel that a lot of manufacturers who are now in the program, instead of building new plants, are taking over a warehouse or an old shop in that particular area, renting it for storage capacity, and so forth. That is the feeling that we have in handling this correspondence with industry, which is a pretty big thing, as you know.

Senator JOHNSON of Colorado. Have you issued any sort of a guide to small industries as to how they can get into the program?

Colonel Hare. Yes, sir.
Senator JOHNSON of Colorado. Have you kept that up to date?

Colonel HaRE. Yes.

We have what we call an Army purchase information bulletin, which is distributed through Mr. Mehornay's organization, through our 52 Army districts, through chambers of commerce, and national associations of manufacturers. It is well distributed. That tells them in detail, “If you are in this kind of business, this is what we would like to get from you, and this is the fellow to see about it.”

Senator DOWNEY. I would like to renew that request to get Captain Jones of the Navy Department called down here.

The CHAIRMAN. I will state here that we will try to have the Captain here and other representatives. And, in order to be sure that they are present, we are going to give them ample time in order that they may prepare themselves to provide us with the information which you desire. As a result thereof we are going to take a recess until Monday, so that we will be sure to have those witnesses here.

Senator DOWNEY. Thank you.

The CHAIRMAN. There is one gentleman here who desires to return to New York this afternoon. He said he wanted to be heard here briefly.

Will you come around and sit over here, Mr. Byerly. We are going to have to take a recess after this. Most of us have business on the floor at 12 o'clock.

STATEMENT OF ROBERT W. BYERLY, PRACTICING ATTORNEY IN

NEW YORK CITY, REPRESENTING THE NEW YORK PATENT LAW ASSOCIATION

Mr. BYERLY. I think what I have to say will be said very shortly.

The CHAIRMAN. Give your name and address to the reporter, and what organization, if any, you represent here today officially.

Mr. BYERLY. I am a practicing attorney in New York City. I represent the New York Patent Law Association.

The Patent Law Association of New York looked at this bill because it specifically mentions patents.

We found on studying it that it dealt with patents in the same way as it dealt with all other property, which we think is entirely correct; but, looking at it from a broader point of view than that of patent law, it seems to us that the bill goes too far; that it goes to the point of penalizing a great many patriotic citizens who are willing to do all that they can to help the Government.

If I may give you a brief illustration of that in connection with patents.

There are many patent owners who would be glad and willing to license not only the Government but all subcontractors that the Government wishes licensed under their patent in order to help the defense program. But on the other hand, this bill goes much further than that. It enables the Government actually to take a patent away from a man and give it to somebody else. And that, except in the case of some delinquency, seems to us to be going rather far, as it would result in destroying a patentee's own business instantly, and he never could get it back.

It seems that it would be a scheme of concentrating industry, although it might be done in perfectly good faith, for an immediate

objective, and it seems to me that the net effect of it would be wrong. The results desired could be obtained just as well by getting the necessary licenses for those whom the Government wished to have do the manufacturing

I think the same thing that I have said about patents applies certainly to real estate and very probably also to machine tools and other things that have been discussed here. And it may possibly therefore be of some help to the committee to have our suggestion as to an amendment of the first section of the act designed solely for the purpose of preventing the act from working a hardship on those citizens who are willing to cooperate with the Government in having their property used for defense purposes.

The CHAIRMAN. Do you have your suggested amendment there? Mr. BYERLY. Yes, sir.

The CHAIRMAN. Will you read it for the benefit of the record, please?

Mr. BYERLY. It is a paragraph to be inserted at the end of the first section, just above section 2:

Provided, however, That if, within ten days after the requisitioning under this Act of any property other than tangible personal property, the owner of the property shall file with the President a written declaration and consent that the property may be used by or for the Government for national defense or other governmental purposes on the basis of compensation to be determined in accordance with section 2 of this Act, the title to the property shall not be taken over or disposed of under the provisions of this Act unless the owner refuses to execute such leases, licenses, or other grants to the United States as may be necessary to give effect to the declaration and consent which he has filed.

I think, Mr. Chairman, that by amending that paragraph as it is here, a man who is perfectly willing to have the Government or subcontractor or anyone use his property for defense purposes, can say so; and then he will escape the danger of having that property actually taken away from him and given to somebody else.

The CHAIRMAN. It is your idea that they may be given a license under the patent? Mr. BYERLY. Quite so. The CHAIRMAN. And not requisition the patent in its entirety? Mr. BYERLY. Quite so.

The CHAIRMAN. In other words, the owner of the patent retains the title to it, and he is merely called upon to issue a license under the patent to the Federal Government for the national defense program under this bill?

Mr. BYERLY. Yes. And, as the proviso stands, if he is for some reason recalcitrant and says, “I won't do that,” then it seems fair enough to take it away from him. It seems to me that there is a penalty clause here, taking property away from a man and giving it to someone else.

The CHAIRMAN. There is one question in that case which arises. You made mention a moment ago of machinery. I suppose that you have in mind that instead of requisitioning the machinery outright and thereby bringing about a transfer of the title, you have in mind the leasing of this particular piece of machinery to the Government? Mr. BYERLY. Yes, sir.

The CHAIRMAN. And it would be optional with the owner of the machinery as to whether or not he would sell it outright or lease it;

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