POWER TO ESTABLISH PRIORITIES AND ALLOCATE MATERIAL WEDNESDAY, MAY 14, 1941 UNITED STATES SENATE, Washington, D. C. The committee met, pursuant to call, at 10 o'clock a. m., in the Military Affairs Committee Room, Capitol, Senator Robert R. Reynolds (acting chairman) presiding. Present: Senators Reynolds (acting chairman), Thomas (Utah), Johnson, Lee, Schwartz, Hill, Downey, Chandler, Wallgren, Austin, Bridges, Gurney, Holman, Thomas (Idaho), and Lodge. The CHAIRMAN. We will come to order, please. The Committee on Military Affairs has before it today H. R. 4534, to amend the act of June 28, 1940, entitled "An act to expedite the national defense, and for other purposes," in order to extend the power to establish priorities and allocate material. (H. R. 4534 is as follows:) [H. R. 4534, 77th Cong., 1st sess.] AN ACT To amend the Act approved June 28, 1940, entitled "An Act to expedite the national defense, and for other purposes," in order to extend the power to establish priorities and allocate material Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 2 of the Act approved June 28, 1940 (Public, Numbered 671, Seventy-sixth Congress), as amended, is amended by inserting "(1)" after "SEC. 2. (a)" and by adding at the end of subsection (a) thereof the following: "(2) Deliveries of material to which priority may be assigned pursuant to paragraph (1) shall include, in addition to deliveries of material under contracts or orders of the Army or Navy, deliveries of material under "(A) contracts or orders for the Government of any country whose defense the President deems vital to the defense of the United States under the terms of the Act of March 11, 1941, entitled 'An Act to promote the defense of the United States'; "(B) contracts or orders which the President shall deem necessary or appropriate to promote the defense of the United States; and “(C) subcontracts or suborders which the President shall deem necessary or appropriate to the fulfillment of any contract or order as specified in this section. Deliveries under any contract or order specified in this section may be assigned priority over deliveries under any other contract or order. Whenever the President is satisfied that the fulfillment of requirements for the defense of the United States will result in a shortage in the supply of any material for defense or for private account or for export, the President may allocate such material in such manner and to such extent as he shall deem necessary or appropriate in the public interest and to promote the national defense. The President shall be entitled to 1 obtain such information from, require such reports by, and make such inspection of the premises of, any person, firm, or corporation as may be necessary or appropriate, in his discretion, to the enforcement or administration of the provisions of this section. No person, firm, or corporation shall be held liable for damages or penalties for any default under any contract or order which shall result directly or indirectly from his compliance with any rule, regulation, or order issued under this section. "(3) The President may exercise any power, authority, or discretion conferred on him by this section through a Director of Priorities (in this paragraph called the 'Director') whom he is authorized to appoint by and with the advice and consent of the Senate. The Director shall receive compensation at the rate of $12,000 per annum, and is authorized to appoint and fix the compensation of such officers and employees as may be necessary to carry out his powers under this section. The Director shall exercise his powers under paragraphs (1) and (2) of this section with the assistance of industry committees, which he is hereby directed to establish and utilize, and upon the basis of information furnished to him by such industry committees and upon the basis of such other information as he deems pertinent. Such powers shall be exercised by the Director only after prior ap proval of such exercise by the Joint Army and Navy Munitions Board." Passed the House of Representatives May 8, 1941. Attest: SOUTH TRIMBLE, Clerk. The CHAIRMAN. From the House report on this measure it is obvious that clarifying legislation in extending the priorities power, is vital to defense. It is indeed a pleasure to announce to the committee the names of the distinguished visitors who have graciously consented to speak to us on this very important matter-extension of priorities powerthe Honorable William S. Knudsen, Director General, Office of Production Management, and others who are associated with him and with the Navy and War Departments. With the permission of the committee, we will call the first witness. Judge Patterson. Will you be good enough to come around here, Judge? We have had the pleasure of having you with us before, and we are glad to welcome you again, Judge. Will you kindly give your name, title, and so forth, to the official reporter? STATEMENT OF ROBERT PATTERSON, UNDER SECRETARY OF WAR Mr. PATTERSON. Robert Patterson, Under Secretary of War. The War Department, gentlemen, does not favor the inclusion of subsection 3 in H. R. 4534. At the present time, the priorities organization is this: The priorities power, by Executive order, is vested in the Office of Production Management, and in the Division of Priorities of that organization. The Army and Navy Munitions Board lays down, for the guidance of the Director of Priorities, the military and naval preferences among themselves, that is, the Army and Navy Munitions Board will declare, in a priorities directive, that it is more important to have certain naval construction than certain antiaircraft weapons, and has all of the items classified and given ratings. I think that that is the proper function of the War Department and Navy Department, and they agree among themselves and have come to an agreement in every case as to preferences and priorities of certain types of military weapons and certain types of naval weapons. With that as a guide, the Director of Priorities, in the Office of Production Management, operates the machinery. He declares when materials are critical, and therefore priorities should be applied to them; and he carries out the necessary priorities machinery for according to those naval and military items the needed priorities essential to their prompt production. I think the system is working well. The main bill here, of course, H. R. 4534, is beneficial. The amendment added by section 3 seems to me to distort the priorities arrangement. It singles out priorities for statutory treatment, when the priorities power is properly only one arm of the production, and one function of the Office of Production Management. That seems to me to be unfortunate. The last sentence, which would give a controlling power to the Army and Navy Munitions Board, I think misses the function of the Army and Navy Munitions Board. The Army and Navy Munitions Board doesn't attempt to do anything except to declare, as I have just said, the relative priorities between the Army and Navy items. It has certain naval items and certain aircraft items up at the top of the list; it declares that the national-defense program, from the point of view of military and naval experts, requires better treatment for those items than for certain items further down the list, field artillery or tanks-those are of a lower rating. We see no reason why the exercise of priority powers, however, by the Director of Priorities in the Office of Production Management should be subject to the Army and Navy Munitions Board; and the Army and Navy Munitions Board does not desire any such power. Senator BRIDGES. May I ask a question on this section 3 that is offered as an amendment in the House to this particular bill? How would this change the procedure from the present set-up? Mr. PATTERSON. At the present time the Director of Priorities in the Office of Production Management is the active administrative officer of the Office of Production Management for priorities. His decisions are subject to control by a four-man set-up. They can, if they see fit, reverse him. That would not be possible, of course, under the proposed legislation. Senator JOHNSON. Judge Patterson, in your opinion and in the opinion of the War Department, the bill would have merit if section 3 were stricken from the bill? Mr. PATTERSON. Yes, sir; we would favor it. Senator JOHNSON. You favor all of it except section 3? Mr. PATTERSON. Yes, sir; heartily. Senator JOHNSON. And you have no substitute in mind for section. 3, there being none needed? Mr. PATTERSON. I think none is needed. Irrespective of the exact provisions of the present section 3, this can be said as to the inclusion of any such treatment of director of priorities, that it singles out for statutory enactment one phase of a larger picture that is, production-and that is the function of the Office of Production Management, which has, of course, three divisions: Priorities, Purchases, and Production. |