I think our estimates of production are reasonably accurate, so that there ought not to be any great surprise at any time during the building as to what the ultimate cost is going to be.

Mr. CANNON. There should be some way of knowing in advance and there should be some way of agreeing in advance as to what the cost will be. In building a house for private use, as members of this committee have done, we make a contract with the builder under which we know definitely what it will cost.

General BURNS. That is right.

Mr. CANNON. Would it be practicable for the Government to use similar foresight?

General BURNS. There are two principal reasons why we cannot do that as well as you can. In the first place, we have got to do some planning as we go along. We cannot have our plans compelte at the start, because we are putting up these gigantic projects that sometimes run 20 or 25 million dollars, and our first concept of the objective is not always correct, and we have got to change the objective to meet the requirements as they develop. That is one big reason. Then, of course, as you know, there is no great fixity right now in the cost of labor and in the cost of raw materials, and so forth.

Mr. CANNON. If you enter into contract for a fixed price, that contract would be enforced.

General BURNS. That is right; but if you enter into a fixed price or so-called lump-sum contract now on a lot of these things the contractor is going to protect himself by a very high fixed price, because he is going to insure himself against rising labor costs and rising raw material costs, and all the rest of it.

Mr. CANNON. He could hardly insure himself against more than he is getting now without any insurance.

NEW OVERHEAD ORGANIZATION

(See p. 26)

Mr. CANNON. Supplementing Mr. Woodrum's inquiry, we have been informed-at least the press has informed or surmised that there will be an inner group, official or unofficial, which will expedite production and otherwise supervise activities relating to the expenditure of money provided in this bill. Can you give us any information as to that phase of this program?

Mr. SMITH. I do not think that the details have been decided.

Mr. CANNON. You understand the question is not asked in a critical mood. With this extraordinary activity, on a scale never before contemplated, it stands to reason that there should be some special agency in a position to devote time and attention to its efficient administration. You have had no information on that up to this time?

Mr. SMITH. No, sir.

Mr. CANNON. What is your impression as to the likelihood of the establishment of such an agency?

Mr. SMITH. I think that some sort of policy committee, probably consisting of Cabinet officers whose departments are especially interested in this program, such as the Secretary of War and the Secretary of the Navy, will be established. I do not see very much

in the way of an organization that is necessary beyond the use of the established agencies. I would think that in the War Department there would probably be assembled some group of officers, perhaps attached to the staff, who would give attention to this.

General BURNS. That is correct.

Mr. SMITH. And a similar situation in the Navy; the War and Navy Departments being chiefly concerned with the largest sums in this bill; and my impression would be, for whatever it is worth, that certainly no great amount of special machinery is necessary.

Mr. CANNON. In your own bureau, what special routing provision, if any, will be provided to take care of this extra work?

Mr. SMITH. We will set up the procedures for the departments in routing their requests for allocation to us. As far as I can see at the moment, although we have not actually had an opportunity to appraise it, no great amount of additional staff is necessary.

Mr. CANNON. Of course, every precaution is being taken to see that every step is carefully considered and that every operation is scrutinized? As you know, there will be a day, after the close of the war, when all transactions will be subject to review. If there is a change in party control of the Government-and I do not say that in any invidious way, because that is the natural thing committees of investigation will be appointed. The last time there was a change of administration, we appointed a committee of investigation that spent $1,000,000 investigating the war. They never did find anything, but that is the routine, and we would like to know if you are taking every precaution to meet that reckoning when it comes, and whether your records will be in form to supply any information such a committee may require?

Mr. SMITH. Yes, sir; we shall certainly make every effort to see that this program is properly administered. No one, of course, can make complete guarantees.

AGRICULTURAL PRODUCTS

(See pp. 13, 20, 32, 51)

Mr. CANNON. Recurring to the category for agricultural products, General Burns, do you consider the ration, as a munition of war? Which is the more indispensable; food for the soldier or the gun which he carries?

General BURNS. Do you want to know my personal opinion?
Mr. CANNON. Yes.

General BURNS. I think it is absolutely as essential. I think ammunition for the man is just as important as ammunition for the gun; that is to say, food for the man is as important as ammunition for the gun.

Mr. SCRUGHAM. It is more important?

General BURNS. Yes.

Mr. CANNON. How will that be handled? Will procurement under this item follow the usual Army and Navy channels?

General BURNS. I think Mr. Smith is better able to answer that question than I am, because that has to do with agricultural products. Mr. SMITH. As I pointed out before, it would certainly have to be processed by the Department of Agriculture. Now, as to the particular product that may be required at the moment, under the act, the

President would indicate what would be the appropriate agency to procure that product.

PRODUCTION COSTS AND PRICES

(See pp. 29, 48)

Mr. LUDLOW. I have noted that while you were discussing prices you stated that prices were not increasing, that they were stabilized; in some cases they were actually reduced. That does not hold true with reference to lumber?

Mr. SMITH. If I left that impression I should correct it. I was making a general comparison between the price situation now and the price situation in the last World War. Prices are increasing, of course, in some items, and we can submit probably some indices that would indicate it, but there is much less disturbance in prices than took place during the last war.

Mr. LUDLOW. I understand as regards lumber prices there has been some difficulty. Have you any particular knowledge of that; are you acquainted with that situation?

Mr. SMITH. I know in general about the problem. I would say, and it is my understanding, that lumber prices now are coming down. Mr. LUDLOW. It looked for awhile as if the price of lumber was going to impose an insurmountable burden in the various construction programs, and I was wondering whether you had gone into that question to any extent.

Mr. SMITH. We were aware of the problem and secured our information concerning it from the Defense Commission.

Mr. O'NEAL. I am amazed at that statement. I have asked every witness who has come from the Army and the Navy, and without exception each one has stated that material costs and construction costs have been higher than they were a year ago; that labor is higher than it was a year ago. That was the universal answer, and I cannot understand the statement that material costs and labor costs are not appreciably higher.

Mr. SMITH. I did not make that statement.

Mr. O'NEAL. I think some explanation of that should be made. To all of the witnesses in these hearings I have asked the specific question and have received the statement in each case, that the costs were higher depending upon the material and cost of labor was higher.

General BURNS. Mr. Smith and I answered that question in the same way. Mr. Cannon asked us about comparative costs between now and the World War.

Mr. O'NEAL. Yes.

General BURNS. And we said that costs now were considerably less than they were during the World War.

Mr. O'NEAL. Yes; but in answering the question of Mr. Ludlow it was not put that way.

Mr. SMITH. I would like to clear that up. You are asking specifically with reference to prices of lumber, Mr. Ludlow?

Mr. LUDLOw. Yes.

Mr. SMITH. I am not prepared to answer in detail. I am aware of the problem that arose.

Mr. LUDLOW. Will you put something in the record on that?

Mr. SMITH. Yes.

(The information requested follows:)

Bureau of Labor Statistics wholesale commodity price indices (1926=100)

[Annual, 1913 to 1940, both inclusive; monthly, January 1940 to February 1941, and week ending Mar. 8, 1941, both inclusive]

Mr. LUDLOW. Will this material be produced in plants that are existing now and producing war materials at this time or does it mean the erection of a vast number of new facilities?

General BURNS. Some will be produced in existing plants, some will be produced in plants under construction, and a part also will be produced in the additional wave of plants that are going to be created. Mr. LUDLOW. Will that additional wave be a large number? General BURNS. It will be an appreciable number.

DISPOSITION OF DEFENSE ARTICLES

Mr. LUDLOW. I gather from my correspondence that one of the principal fears the people have about this lend-lease program is that it might impinge upon the requirements for our own national defense. What system have you set up or will set up to check that matter to see that it does not; that is, to see that the supplying of this material to the British to the vast degree indicated does not endanger our own defense? What will be the modus operandi to accomplish that?

General BURNS. Of course, you wrote into the law that the President had to consult the Chief of Staff before the items pertaining to the Army can be released to a foreign government.

Mr. LUDLOW. I was just wondering if the mechanics of the thing have been worked out.

General BURNS. The mechanics were started to the extent that no release of stocks or materials, or production, is being given out without the President consulting the Chief of Staff.

Mr. LUDLOW. And it is the intention to religiously follow that procedure?

General BURNS. It certainly is to be religiously followed, and the departments are gearing themselves up to do that.

BUREAU OF BUDGET TO COORDINATE DATA ON PROGRAM

(See p. 27)

Mr. LUDLOW. Where will the records of this vast transfer of material be kept; will they be kept in your office?

Mr. SMITH. I do not know exactly what sort of a system we will have, but the original records, of course, will be kept in the departments, with some provision for centralizing summaries.

Mr. LUDLOW. There will be a centralized office for records; is that the idea?

Mr. SMITH. Records will all head up at a central point; but they originate at various points

Mr. LUDLOW (interposing). Have you any idea how many persons will be required to keep those records systematized at some central place?

Mr. SMITH. I do not know at this time.

Mr. LUDLOW. And you do not know yet how or to whom the records will be made available for inspection?

Mr. SMITH. They will be made available, of course, to the President. Mr. LUDLOW. Will they be made available to committees of the Congress, or Members of the Congress?

Mr. SMITH. The President is to report every 90 days.

Mr. TABER (interposing). Mr. Smith, there is no question but what there is going to be an absolute record kept in some central place of all of these transfers?

Mr. SMITH. That is right.

Mr. TABER. And it is going to be kept so that it will be made available to the President and to the committees of Congress who have charge of this situation all of the time.

Mr. SMITH. That is right. Some records are of a confidential nature.

Mr. TABER. There will be some of them that you will have to keep from the public in your statement?

Mr. SMITH. That is correct.

Mr. LUDLOW. I want to ask you in that connection, do you not think that in keeping the records they will also be available to Members of Congress who have responsibility in this matter, especially to committees?

Mr. SMITH. There will be such records available.

Mr. LUDLOW. Britain has submitted a list of the requirements so far, I understand. Do you contemplate, or do you have any knowledge of any further list of Britain's requirements coming later on? Mr. SMITH. I do not.

ADMINISTRATIVE EXPENSE

(See pp. 61, 63)

Mr. SNYDER. In setting up the personnel to take care of the added duties that will naturally come to each department, such as the Treasury, did I understand you to say you will pay the expenses of