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Mr. Ludlow. That is, profit from operation? Mr. MOORE. It is increment in the sense of net appreciation, excess of realization, or income.

Mr. Ludlow. Where you take over property that is alien-owned property, and presumably the personnel is largely composed of nationals of that foreign country, what steps do you take, if any, to check on the loyalty of those people?

Mr. McNAMARA. We have an Investigation Division, which checks the records of the F. B. I. and various other agencies. Mr. Ludlow. That is gone into pretty thoroughly? Mr. McNAMARA. Very thoroughly.

FRIDAY, APRIL 27, 1945.

SMALLER WAR PLANTS CORPORATION

STATEMENTS OF HON. MAURY MAVERICK, CHAIRMAN; W. DARLINGTON DENT, DIRECTOR OF ADMINISTRATIVE FINANCE AND MANAGEMENT; W. B. ROECA, BUDGET OFFICER; M. G. BARDWELL, ASSISTANT GENERAL MANAGER; BERNARD LAMB, DIRECTOR, OFFICE OF PLANT ASSISTANCE; M. REA PAUL, CHIEF, OPERATIONS BUREAU; FRANK PRINCE, CHIEF, LOAN BUREAU; LAWRENCE ARNOLD, BOARD MEMBER; AND J. T. HOWINGTON, BOARD MEMBER

SALARIES AND EXPENSES, ESTIMATE

Mr. CANNON. We are very glad to have with us our former colleague, Mr. Maverick, a distinguished member of this administration, who appears before us in behalf of a Budget estimate of $8,000,000 for the 1946 Budget.

As I recall it, Mr. Maverick, you were authorized to spend $10,000,000 for administrative expenses in 1945?

Mr. MAVERICK. Yes, sir.

Mr. CANNON. As a matter of fact, you still have left of that, in round numbers, approximately $1,250,000?

Mr. MAVERICK. Yes, sir. Mr. CANNON. So that would mean a total expenditure in Mr. MAVERICK, It is $1,762,382, not $1,250,000. Mr. Canxon. That would leave you for 1945 a total expenditure of about $7,250,000; to be exact, $7,237,000?

Mr. MAVERICK. No, sir; a little over $8,000,000.

Mr. CANNON. Now, you have to take into consideration the fact that you included in 1945, $841,000 for overtime pay, which is not arluded in your 1946 Budget.

Mr. MAVERICK. Yes, sir.

Mr. CANNON. Comparing your 1945 budget with your 1946 budget so that plane, your 1945 budget would be about $7,400,000, in round numbers, which would make $8,000,000 for which you are asking us, or an increase of about $600,000-$603,000—over your budget for the current year. You are asking us for $600,000 more.

I do not know what you are going to do with that, although I am sure if it were left to your discretion it would be wisely expended.

We would be glad to have from you a general statement of your placements up to this time, as to the number served, as to the volume of production secured, and your plans for the coming year, especially with respect to reconversion and disposition of surplus property:

Mr. MAVERICK. Yes, sir. I do not in any sense want to begin by being contentious. It is not exactly correct to say it is an “increased” program or staff. Rather, I would say that we saved a lot of money last

year, and are going to save some this year. That is my way of putting it. Our request for this year is $8,000,000; budget last year was $10,000,000; and year before that $12,000,000.

GENERAL STATEMENT

As chairman of the Smaller War Plants Corporation, I come before this committee with the request that $8,000,000 be appropriated from the Corporation capital to cover the administrative expenses for the fiscal year 1946. The amount requested is $2,000,000 less than the appropriation approved by your committee for the fiscal year 1945, except for the points that were brought up by the chairman, Mr. Cannon, which are already in the record.

At the very start let me say I like my job. I am enthusiastic. Our purposes are the most important in America-little business, and the survival of the free enterprise system, and the American way. · In some quarters it is considered doubtful strategy to show previous savings in an operation in justification of current requests. That's because you think you may get cut down on the next one. That's not my belief. Rather, I believe that this committee is always ready to assign credit to an agency which can show constructive economy along with objective accomplishment.

We will not spend more than $8,250,000 in the fiscal year 1945. In other words, we have saved nearly $2,000,000 of the appropriation of $10,000,000 for the fiscal year 1945.

We all know that there is such a thing as "penny wise, pound foolish” economy. I am happy to report, therefore, that with an expenditure of little over $8,000,000, we have accomplished more in provable results than in any previous year of the Corporation's life. I should like to give you a few summary statistics.

STATISTICS ON ACTIVITIES AND ACCOMPLISHMENTS

In the fiscal year 1944 we procured for small plants, 19,933 prime contracts aggregating $1,589,261,056. In the same line of activity for 9 months of the fiscal year 1945, the dollar participation is $2,026,285,272. In the fiscal year 1944 we handled loan and lease applications totaling $189,838,064. In the current fiscal year to date we have handled loan and lease applications totaling $307,596,203. Eventually they may run over $400,000,000; which means we are doubling our loans. Of equal significance is the relationship of the numbers of loan applications, which are as follows: 1944.

2. 083 1945 (9 months).

2. 227

Lease applications during the same periods are as follows: 1944.

857 1945 (9 months).

484 In the fiscal year 1944 we solved 2,040 technical problems through our Technical Advisory Service (T. A. S.). In 1945 to date we have solved 2,480. This T. A. S. is a great thing, and I will say more of it.

These statistics are important because the amount appropriated by Congress for the operations of the Corporation in 1944 was in excess of $12,000,000.

While these statistics are clear testimony of the efficient discharge of responsibilities, they fall far short of telling the entire story. While operating at $2,000,000 less than the appropriation, the Smaller War Plants Corporation has undertaken sustained program planning in connection with the Contract Termination and Surplus Property Disposal Acts. We have studied the problems of small business fully and substantially. Our Corporation has participated in literally thousands of incidents of aid to small business which will never be tabulated in the money columns of the agency. Mr. Chairman, the truth is, we are learning by experience. All agencies learn by experience. They get better, if they are any good in the first place, as they go along. In some cases we are doing from two to three and four times as much work with the same personnel, or less personnel.

We have tried to cut expenditures in every direction. It must be admitted that it has been exceedingly difficult for us to make any great cut in travel and communications costs. The nature of our program, and the fact that our work is spread all over the entire Nation, simply makes it essential- and imperative-to use rapid forms of communication and frequent contact by travel. Otherwise the job required of us by Congress and what should be done, just wouldn't. be done.

Although we have kept all essential staff services, we have cut, as far as possible, expenditures not directly contributing to program operations. In this connection, I would call attention to a letter which I addressed to Chairman Cannon under date of January 18, 1945, outlining an administrative development through which a saving of more than $100,000 and more than 40 employees was made.

CONTINUANCE OF SMALLER WAR PLANTS CORPORATION

The legislative history of the Corporation for the past year has been of extreme interest and importance. In the first place, with virtually no opposition, the Congress passed Public Law 474 increasing the capital stock of the Smaller War Plants Corporation from $150,000,000 to $350,000,000. Upon word of the President, your committee has already appropriated an additional $50,000,000 of the increased rapital amount for loaning and leasing purposes. Complete and extended hearings were held in connection with this legislation. That record is very effective on the fact that the lending program of this Corporation is properly administered and essential to the welfare of small business.

ADDITIONAL RESPONSIBILITIES UNDER PUBLIC LAW NO. 395

Later in the fiscal year 1945, the Congress passed Public Law 395, the Contract Settlement Act. Very important responsibilities were added to, and conferred upon, the Smaller War Plants Corporation by this act of Congress. I quote briefly from the statute as follows:

(g) The Smaller War Plants Corporation is hereby directed

(1) to disseminate information among small business concerns with respect to interim financing, termination settlements, removal and storage of termination inventories pursuant to the provisions of this Act and the regulations of the Director; and

(2) to assist small business concerns in connection with the securing of interim financing and the preparation of applications for such interim financing, the effecting of termination settlements, and the removal and storage of termination inventories, and to make interim loans and guaranties, in order to assure that small business concerns receive fair and equitable treatment from prime contractors and intermediate subcontractors in connection with the termination of war contracts.

In addition to the functions quoted, the Corporation is represented on the Contract Settlement Advisory Board. The Director of Contract Settlement, moreover, is directed tocollaborate with the Smaller War Plants Corporation in protecting the interests of smaller war contractors in obtaining fair and expeditious termination of settlements and interim financing

The contract settlement legislation is clear evidence that Congress intends to persist in its efforts to obtain equitable treatment for small business. That the Congress further intends the smaller War Plants Corporation to be the instrument through which this objective is eached is also evident and is a part of the statute self.

SURPLUS PROPERTY RESPONSIBILITY

In November 1944, and soon after the passage of the Contract Settlement Act, Congress enacted the Surplus Property Disposal Act, Public Law 457. In this statute Congress again reaffirmed its position insofar as small business is concerned, as well as its confidence in the Smaller War Plants Corporation, by delegating more important responsibilities to it.

I think it is essential that the essential details be in the record. The law says this, among other things:

(c) The Smaller War Plants Corporation is hereby specifically charged

That is the language of the statute-I emphasize—“is hereby specifically charged”with the responsibility of cooperating with the Board and with the owning and disposal agencies, of making surveys from time to time, and bringing to the attention of the agencies and the Board the needs and requirements of small business and any cases or situations which have resulted in or would effect discrimination against small business in the purchase or acquisition of surplus property by them and in the disposal thereof by the agencies.

We are doing that, and doing it with less men than we had before; I continue to read:

(d) The Smaller War Plants Corporation is hereby authorized and directed to consult with small business to obtain full information concerning the needs of small business for surplus property. We are doing that.

(e) The Smaller War Plants Corporation shall have the power to purchase any surplus property for resale, subject to regulations of the Board, to small business

and is empowered to receive other property in exchange as partial or full pay, ment therefor), when in its judgment, such disposition is required to preserve and strengthen the competitive position of small business, or will assist the Corporation in the discharge of the duties and responsibilities imposed upon it. The provisions of subsections (a) and (c) of section 12 shall be applicable to purchases made by the Smaller War Plants Corporation under this subsection,

I would like to say in reference to thatand I will explain it later and give any more details you want—that we are working with the Surplus Property Disposal Board. Regulations are being gotten up and we are preparing as much as we can, with our limited finances, to effectuate the provisions of the act.

(1) The Smaller War Plants Corporation is hereby authorized, for the purpose of carrying out the objectives of this section, to make or guarantee loans to small business enterprises in connection with the acquisition, conversion, and operation of plants and facilities which have been determined to be surplus' property, and, in cooperation with the disposal agencies, to arrange for sales of surplus property to small business concerns on credit or time bases.

We have adopted various resolutions and are getting ready on that also.

It is only appropriate that I should commend the wisdom of Congress in its consistent attention to small business interests in these important governmental programs. The economic foundation of the Nation is directly involved. Indeed, failure to legislate the position of small business might find billions of dollars in surplus falling in the hands of large vested interests: (1) monopolies; (2) speculators. This would destroy economic stability.

Failure to recognize the problem of small business in contract settlements might find the small interests subjected to the biased whims of large contractors who, by sheer business necessity if nothing else, would look first to their own advantages.

CORPORATE LIFE OF S. W. P. C. EXTENDED

Finally, on April 20, 1945, just 1 week ago, the House of Representatives passed Senate bill 105 extending the life of the Smaller War Plants Corporation to December 1946.

There are pending before the Congress many pieces of proposed legislation which are of vital interest to American small business and to the Corporation. They need not be discussed here. The point I want to make is that Congress has made it abundantly clear that the work for which the Corporation was created shall be carried forward. I am here to prove to the satisfaction of this committee that in carrying out this will of Congress, the Corporation is being conducted efficieftly and effectively.

UNCERTAINTY IN PLANNING

I find it as difficult as any other administrator in Washington today to discuss adequately or fully a program for the coming fiscal year. It would be relatively easy for me to outline to you the objectives of the Smaller War Plants Corporation and the justification for such objectives. There is hanging over our planning groups the shadow of uncertainty which accompanies war. Looking to just last fall, large-scale military successes caused us to make reconversion the principal topic of the day. In the discouraging days of December came the "Battle of the Belgian Bulge.” Our troops had a set-back.

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