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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.
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, O. 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 and 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 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
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?
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
NEY. 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 0. 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.
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 0. 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 O. 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 O. 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 aver
age of 15.
average of six.
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
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. 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?