Senator HILL. You do not know what rule refers to the Maritime Commission?

Mr. MEHORNAY. I am sorry, but I am not familiar with that. Senator HILL. I do not think they have to clear through the O. P. M.; certainly not to the extent that the War and Navy Departments do.

Senator DOWNEY. Senator, I did not understand your prior question. What was that?

Senator HILL. I was just making it clear that as I understood neither the War nor the Navy Department today can make a contract if it involves over a half a million dollars without that contract first having been approved by the O. P. M.

Mr. MEHORNAY. With that policy of shortening time and bringing these, forcing these men in that way, and the policy of the O. P. M. which distinctly is that subcontracting must be used to its fullest extent, I believe that we have the background in the letting of contracts which will allow us, if we are given the opportunity before a contract, regardless of its size, is let, to analyze that from the standpoint of the parts that that contractor proposes to subcontract.

Senator JOHNSON of Colorado. Is there a provision in the contract now, Mr. Mehornay, if you will pardon an interruption, where the contractor states how much of this contract is going to be sublet?

Mr. MEHORNAY. There is no requirement of that kind at this time. Senator JOHNSON of Colorado. They make no statement of that kind at any place in the contract?

Mr. MEHORNAY. No, sir.

Senator JOHNSON of Colorado. Do you not think it would be helpful if you had that information before you?

Mr. MEHORNAY. I think it is impossible to operate under the objective which we will have without that.

Senator JOHNSON of Colorado. I should think that is correct.

The CHAIRMAN. The O. P. M. is in charge of all the purchases by the Army and the Navy?

Mr. MEHORNAY. Yes.

The CHAIRMAN. Why is there not, therefore, someone down at the O. P. M. who can answer Senator Johnson's inquiries about the shipbuilding business on the program? Most of the contracts made by the Navy are submitted to your organization in view of the fact that they are over $500,000. Isn't there someone down there at the O. P. M. who can answer the direct inquiries made by Senator Johnson?

Mr. MEHORNAY. I am afraid that there is not, and for this reason: The contracts do not have in them whether or not there will be any subcontracting, nor who the contractors will be.

The CHAIRMAN. Yes. But the contracts already have been made, and judging by the experiences of the past, isn't the O. P. M. itself interested in the progress of the contracts in excess of $500,000 that have already been made and are in the course of fulfillment? Mr. MEHORNAY. As to subcontracting?

The CHAIRMAN. Yes.

Mr. MEHORNAY. As to subcontracting the O. P. M. by official action and under order is as of today making a survey of all subcontracting in the contracts which have been let.

The CHAIRMAN. Then there is a man who can provide us with the information as to any difficulties in reference to subcontracts, if any, is there? That is what he is interested in, I believe.

Senator DoWNEY. Yes.

The CHAIRMAN. Who is there down there that can give us this information? The O. P. M. has charge of all the Government contracts relating to national defense, hasn't it?

Mr. MEHORNAY. That is right.

The CHAIRMAN. And, as has been stated, with reference to the Army and the Navy-we will confine it to the Army for the momentwe want to know who there is down there in the O. P. M. who is in a position to provide us with the status of all contracts in excess of $500,000 or less than $500,000, and what the difficulties are, if any. This committee is viewing them in relation to this proposed legislation. I am sure there must be somebody down there who can give us that information. Who is it?

Mr. MEHORNAY. They can give it to you, sir. I can give it to you as soon as we can have gotten the reports from the companies which we are now asking.

But without the return of the answers to our questions, I cannot make a factual statement on what is being done. I am sorry, sir. We are only apart on the standpoint of timing. The investigation is being made. There are not reports in from which to report to you the findings.

The CHAIRMAN. Who is there down there who can provide us with the information pertaining to the experience that you have had with regard to these contracts?

Mr. MEHORNAY. We have no record of the experience, Senator. We are gathering the record now. We have not kept that record.

The CHAIRMAN. Heretofore do you mean to tell us that no information has been procured with regard to these contracts?

Mr. MEHORNAY. That is correct, as to the amount of subcontracting being done under them as they go along.

Senator DowNEY. Mr. Chairman, I believe that Captain Jones, who is head of the shipbuilding department of the Procurement Division of the Navy, would probably be the right man to furnish us with all the facts about the contracts that have been let in the Los Angeles area and the equipment of the different companies and all of that. If it meets with the approval of the chairman and the committee, I would like to have Captain Jones called.

The CHAIRMAN. Where is he?

Senator DowNEY. He is here in Washington. He is head of the shipbuilding bureau of the Navy.

The CHAIRMAN. In view of the fact that we seem to be unable to get the information that we are asking here in some respects, I suggest that we take an adjournment until Monday.

Senator JOHNSON of Colorado. Are we going to let the witnesses answer the question that I asked?

The CHAIRMAN. Yes. Go ahead.

Senator JOHNSON of Colorado. We were getting some very fine. answers. This question is extremely important, I think, to the small industries of the country. I would like to have the witness go on

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 machinery— within 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 handle 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?