ing costs which are several hundred million dollars less than they would have been if plants of the K-25 type had been built. The total gaseous diffusion plant capacity, including that under construction, has now reached the point where even small improvements in process efficiency have a substantial value in terms of increased production. The field for further improvements has by no means been exhausted. A number of new developments, which were made too late to be included in plants built during the expansion program, can be incorporated in existing plants when the most efficient way to make these changes has been established. These changes will result in further large savings. Graphite Piles Similar progress has been made in the field of plutonium production. For example, the capacity of the original production facilities at Hanford has been increased substantially. New facilities, which have been built or are under construction, are capable of even more economical production. Continuing success of process improvements to increase power levels is an optimistic indication that the ultimate capacity of these units has yet to be reached. Chemical Separations In the intricate chemical process of extracting plutonium from the highly radioactive uranium discharged from the piles, important advances were made also. The new chemical plants separate both plutonium and uranium from fission products. The uranium thus reclaimed can be used as feed for the gaseous diffusion plant. This new chemical process, originally designed in the Commission's national laboratories, is far more economical than the process originally used. Heavy Water Production An active program of process development is being conducted to develop and test new processes and equipment incorporated in the design of the Savannah River plant. In the postwar years a significant advance has been made in the large scale production of heavy water. This has resulted in a volume production at a cost much below that of the wartime program. Another important phase of the Savannah River process development program is to ensure a constant improvement in the productive capacity of the Savannah River units above their basic design ratings. It is significant that this improvement program began even before initial operation of the plant. Uranium Feed Materials The feed materials phase of the production program deals with the conversion of uranium ore and concentrates to uranium metal suitable for reactor fuel, or to uranium hexafluoride to be fed to the gaseous diffusion plants. While these operations present some special problems, they are much more similar to conventional processes of the chemical and metals industries than are reactor and diffusion plant operations. Feed materials process development has undergone substantial expansion to serve the increased reactor and diffusion plant capacity. Many improvements and new processes of great potential importance are now being studied. Some of these developments have already been incorporated into production practice. In the field of metals production, for example, reuse of certain materials in metallurgical operations has reduced waste losses. In addition, several totally new processes for metal production are being explored. One or more of these processes may eventually afford opportunities for substantial reductions in the unit costs of metal. New metal fabrication techniques are also being investigated. These techniques are important, not only because of the cost of the operation itself, but because of the profound effect which the process may exert on the behavior of uranium metal under prolonged irradiation. A new process has been devised in the refining of uranium ore conIt possesses the great flexibility required for handling concentrates of the many different types now being received or contemplated. Construction and Supply As of May 31, 1954, largely as a result of continued progress in the construction of the Savannah River plant, and major new facilities at Paducah, Oak Ridge, Portsmouth, and Hanford, capital investment in atomic energy production plant facilities was estimated to have grown to about $5.7 billion before depreciation reserves. Expansion of process facilities at Oak Ridge was the only major construction started during the past 6 months. Costs incurred for new plant and equipment averaged about $106 million per month during the first half of 1954, compared with an average of $96.5 million per month during the period July-December 1953. Peak monthly costs for the current AEC construction program are expected to occur during the month of June 1954 and are estimated at approximately $120 million. Monthly construction costs should decline slowly during the next 6 months and average approximately $107 million for calendar year 1954. Construction Management The AEC Contract Manual for Construction and Associated Engineering Services issued in January 1949 to establish standards, policies, and procedures for obtaining construction and related engineering services for all offices of the Commission, has been expanded and revised during the past 6 months in the light of operating experience. Principal modifications include: (1) Incorporation of principles for applying judgment factors in the determination of fees for cost-plus-afixed-fee construction and engineering services; (2) revision of standard forms for cost-plus-a-fixed-fee and fixed-price construction and engineering contracts, required as a result of new legislation and dictated by past experience in using the forms; and (3) elimination of unnecessary duplications with other AEC issuances, which have developed since the contract manual was issued. Small Business Small business programs were established in conjunction with the procurement activities of both AEC operations offices and major costtype contractors. These programs are consistent with both the congressional small business policy that a fair proportion of total supplies and services shall be purchased from small-business concerns, and with the scope and character of the procurement activities of AEC purchasing offices. A revised AEC procurement information booklet, "Selling to AEC", was issued. It supplies business concerns with background information on AEC and provides some idea of what is bought by AEC, where it is bought, and who buys it. The Atomic Energy Commission-Small Defense Plants Administration agreement of March 1953 was reaffirmed with the Small Business Administration. This agreement provides for exchanges of information between appropriate AEC operations offices and cost-type contractors and SBA regional offices regarding AEC procurement opportunities, small See "Small Business Participation", p. 10, 15th Semiannual Report. For sale by the Superintendent of Documents, U. S. Government Printing Office, Washington 25, D. C. Price 25 cents. businesses qualified to participate in AEC procurement and other matters. Purchases by AEC cost-type contractors continue to represent substantial opportunities for small-business participation in AEC procurement. From July 1, 1951 to March 31, 1954, AEC cost-type contractors awarded subcontracts totaling $1.86 billion. Of this total $752 million, or 40 percent went to small business. Direct contract awards to small business amounted to $132.2 million, or 3 percent of the $4.4 billion in contracts awarded from July 1, 1951 to March 31, 1954. Priorities AEC priorities and allocations operations under the Defense Materials System were adjusted to conform with amended regulations of the Business and Defense Services Administration. Continued use of allotments of controlled materials, and identification of all purchase orders with rating symbols by AEC and its contractors provided preferential treatment for AEC procurement. This procedure also helped maintain mobilization machinery for orderly and rapid expansion of defense production and construction in the event of a new emergency. Continuing to act as claimant for the power supply projects essential to its expansion programs at Oak Ridge, Portsmouth, and Paducah, the AEC applied for, and was granted E-5 ratings by the Business and Defense Services Administration for 14 additional electric generating units. Procurement Manual A comprehensive procurement manual was issued establishing uniform policies and procedures common to contracting for supplies and services of all types. The objective of the manual is to promote more uniform and effective procedures in procurement by, and on behalf of, AEC. Military Application The Nation's atomic weapons stockpile, growing rapidly in total numbers, reflects a trend of increased variety and versatility of weapons. Development of a "family of weapons" has extended the military usefulness of available fissionable material. Paralleling fission weapon development since 1950, there has been in progress a concerted development effort on thermonuclear weapons. In view of important progress made in fission and thermonuclear weapon development programs, a national policy decision was made to take every advantage of such progress to assure that the United States maintains its superiority. The President directed the Commission to continue to produce atomic weapons during 1954 consistent with this decision. The weapons research and development program was highlighted by the tests conducted at the Pacific Proving Ground during the period of this report. This test series, known as Operation CASTLE, was conducted by Joint Task Force 7 composed of personnel of the Commission, Army, Navy and Air Force. Following the pattern established for earlier tests at the Pacific Proving Ground, the Commission, through the Los Alamos Scientific Laboratory and the weapons research laboratory of the University of California Radiation Laboratory at Livermore, Calif., was responsible for the test devices. Both the AEC and the Department of Defense participated in the scientific measurements. The Department of Defense was responsible for certain supporting operations and services. These tests were successful in development of thermonuclear weapons. Special mention for their part in this enterprise should go to the management and staff members of the Los Alamos Scientific Laboratory as the agency primarily responsible for these thermonuclear developments. A number of significant contract actions took place during this period. A 5-year renewal contract was signed with Western Electric Co., Inc., for operation of Sandia Laboratory at Albuquerque, N. Mex., by a wholly-owned subsidiary, Sandia Corp. Also, a 3-year renewal of contract with Bendix Aviation Corp. for operation of the Commission's facility at Kansas City, Mo., was executed. Contracts were signed also with ACF Industries, Inc., providing for continuing engineering and fabricating services. One of the oldest buildings occupied by the Los Alamos Scientific Laboratory was demolished during the spring of 1954. The temporary-type, wood-frame structure, known as "D" building, was erected in 1943 when the first scientists on the Laboratory's staff were moving into Los Alamos. The early extensive chemical and metallurgical work on the characteristics of plutonium and the development of safe methods of processing this dangerous material were conducted in the structure. The first pieces of plutonium readily visible to the naked eye were fabricated in the building, and later, the nuclear parts of the bombs set off at Trinity Site, near Alamogordo, N. Mex., and at Hiroshima and Nagasaki, Japan, were produced there. No harmful radiation was received by any person working in the building during its long occupancy. However, some room surfaces were |