the maximum practicable amount of subcontracting and the resultant use of small plants to the extent consistent with the contractor's responsibility for satisfactory performance.

"By order of the Secretary of the Air Force:

"HOYT S. VANDENBERG, "Chief of Staff, United States Air Force."

There is a pride of accomplishment within the Air Force, that in our practices we have kept pace with stated policy. Our small-business program is positive, and aggressive. Some of it has been in effect for many months, and other parts will be recognized as an indication of our determination to provide not just 90 percent effectiveness, but as close to 100 percent as rests within our power. (Chart I, p. 159.)

Our small-business program is organized, and functioning today. At the top we have an Office of Small Business reporting directly to the Deputy Chief of Staff, Matériel, at headquarters. The Chief of this office has general supervision over the effectiveness of the entire program and also serves as adviser on small-business activities to the Under Secretary, the Assistant Secretary for Management, and the Deputy Chief of Staff, Matériel. At the Wright-Patterson Air Force Base in Dayton, Ohio, where all important Air Force contracts are placed, there is also an Office of Small Business, on a staff level. Full-time smallbusiness specialists at Wright. Field screen all purchase requests to determine those suitable for small-business participation. Those determined suitable are so labeled, and on these the small-business specialists work with the contracting officers to insure the maximum participation of small plants as prime contractors. The responsiblity for the making of a satisfactory procurement nevertheless rests upon the contracting officer, and in those cases where there is a difference of opinion between the small-business specialist and the contracting officer as to the manner in which a procurement is being handled, the difference is resolved by the highest procurement authority of Air Matériel Command. This procedure will enable us to report henceforth the number and dollar value of prime contracts placed with small concerns as against their potential, together with the reasons why all prime contracts on such procurements might not have been placed exclusively with small concerns.

In this connection the exceptionally technical nature of many Air Force items must be pointed out. Everyone knows of the tremendous changes in military aircraft that have taken place since World War II, but people are apt to lose sight of the extremely difficult production techniques resulting from these changes. Every part and piece of a bomber, including equipment and clothing for its crew, must be able to stand up and perform without question under stresses and strains and temperature changes unheard of in World War II; speeds in excess of 600 miles per hour; altitude changes from sea level to 40,000 feet in a matter of minutes. Under these conditions a thoroughly competent small-plant producer of gun mounts, for example, in World War II, might not be a competent source at all today. The importance of this factor can hardly be overemphasized. The failure of a thread in pilot's garment at 30,000 feet could mean the loss of an entire crew, the plane, and possibly the mission. The contracting officer's responsibility in selecting competent sources should not be lightly regarded.

Since the greatest opportunities for small concerns in Air Force procurement lie in the subcontracting field, the bulk of our organization to assist small business to capitalize on these opportunities is located in our field organization. We have 6 procurement districts, and within them a total of 24 regional offices. These district and regional offices do no purchasing; their responsibility being the administration of the contracts placed at Wright Field. The procurement districts are also used for screening each facility expansion request to see if subcontracting cannot be substituted. In each of these 30 offices is a full-time small-business specialist to assist the small-business man in getting on the bidders' list at Wright Field if he so desires, but chiefly to acquaint him with the subcontracting opportunities that are nearest him. The field-office small-business specialists also are directed to maintain a close working relationship with the local National Production Authority offices, chambers of commerce, and other appropriate agencies to avoid duplication of effort.

Over and above, each district has an officer or a qualified civilian, whose duty is to call on the major primes in the interest of securing the maximum amount of subcontracting to small plants; a roving missionary if you will, a circuit rider; but he wears the hat of the agency that places the contracts.

Let us take a look at the results achieved to date from this intensive program, while recognizing that some parts of the program are only just starting. (Chart II, p. 161.)

On prime contracts, you realize that all important Air Force contracts are made by Air Matériel Command at Wright-Patterson Air Force Base in Dayton, except for purely local purchases made by the 102 Air Force installations scattered throughout the country, such as the one at Bolling Field here in Washington. These local purchases for the first 2 months of this year totaled $43,750,000, 70 percent of which, $30,453,000, went to small concerns in 61,205 separate transactions. This 70 percent is an increase from 64 percent for the last quarter of 1950 and we are constantly calling on the purchasing and contracting officers in the bases to make maximum use of small concerns for local purchases.

Now as to the situation at Wright Field. In the first quarter of this year 2,481 prime contracts were awarded to small plants for an amount of $213,801,000. This was 50 percent in number of contracts, and approximately 10 percent in dollar value. It compares favorably to the 6.6 percent in dollar value awarded in the last quarter of 1950, and to the 4.5 percent for the three war years of 1943, 1944, and 1945. These must be considered in the knowledge that it includes purchases of airplanes, engines, propellers, fire-control systems, automatic pilots, superchargers, etc., for which no one would contend small plants could qualify as prime contractors. The very important part small plants play as subcontractors in these procurements will be brought out later. Yet these, of course, are the big dollar values in Air Force procurement.

In getting prime contracts, many small plants have difficult financing problems. We have been able to be of material assistance to small concerns in the V-loan program within the Air Force. In number, 70 percent of the loans guaranteed so far by the Air Force have been to small plants, and in dollars, 10 percent, a little over $17,000,000. Air Force procurement authority, with regard to the issuance of the requisite certificate of eligibility for a V-loan, has been authorized to interpret quite broadly the "no other alternate source" provision in the requirements for the certificate, so as to avoid any discrimination against a smaller business man needing financial assistance. This is true also in operating instructions of Air Matériel Command, to the effect that "the need for a V-loan should not deter the making of the contract."

Now what is the subcontracting picture to date? (Chart III, p. 163.)

Contrary to general belief, the airframe prime contractors of the Air Force are located, not in one State, but in 11. And the production of one heavy bomber uses the production facilities of 1,610 plants in 36 States and the District of Columbia. Each of these plants has additional subcontractors. Aircraft engine assembly plants are located today in 12 States, and the production of one aircraft engine requires the supply parts, materials and services of 4,604 plants in 34 States and the District of Columbia.

We look upon these large assembly plants, for that's what they are, as trustees of the Air Force dollar; as a projection of our procurement program. And we require them to follow our policy, the Government's policy, in the handling of that money. We have a very definite program of assistance to small business in all of this.

(Chart IV, p. 164.)

The subcontracting plans of the large prime are thoroughly discussed before he gets his contract, a contract which contains the following:

"It is mutually understood and agreed that the policy of the Government, as declared by Congress in Public Law 413, Eightieth Congress, is to bring about the greatest utilization of small plants' facilities which is consistent with efficient production.

"The contractor agrees to accomplish the maximum amount of subcontracting to smaller plants that the Contractor finds to be consistent with the efficient performance of all its other obligations undertaken by this contract."

When a contract has been placed, it is passed on to the field organizations for administrative purposes. There the follow-up on subcontracting opportunities is carried on intensively. It may fairly be said that all plant representatives and commanding officers of Air Matériel Command in district and regional offices

are small business specialists in fact, although not in name. We have recently completed a survey of 59 large prime contractors holding approximately $5,000,000,000 in contracts. These 59 have placed 32,382 subcontracts, 24,306 or 75 percent of them with small concerns.

(Charts V, VI, and VII, pp. 165, 166, 168.)

Today we have charts showing how three of our largest prime contractors have reacted to the small business program. These figures show the breakdown as between large and small subcontractors at all levels, both in numbers of plants concerned, and in dollars. As additional studies are completed they will be reported to your committees.

(Chart VIII, p. 169.)

A new development is the prime contractors' exhibit, started by the Eastern Procurement District in February of this year, as a down-to-earth method of bringing buyer and seller together under the best auspices. At the New York show which ran 2 weeks, 32 large Air Force primes came in contact with 4,560 small, potential subcontractors. Plans are being made to repeat it this summer. The Chicago Air Force exhibit is just over. Seventy-six large primes participated, and over 11,000 small-business men, representing 4,128 concerns had the opportunity to meet their prospective customers. While we meet here today, the exhibit in Boston is being held, 75 exhibitors taking part. This is the first of the exhibits jointly sponsored by the Army, Navy, and Air Force. Los Angeles will have its exhibit in July or August, Seattle, in late June, Detroit and Fort Worth dates are not yet set. There are some "spot" results from these exhibits naturally, but the real results will not show up until production gets into higher gear. A survey made April 1 of all the small plants attending the New York exhibit brought 2,344 replies. Thirty-six small plants had at that date received 39 contracts, 109 other plants reported contracts in the negotiation stage. thousand one hundred and four said they had developed valuable contacts, 1,095 reported they had received no value from the exhibit, but 875 of them said they would be present at the next one.

One

This is a current illustration of the determination of the Air Force to increase its 90-percent effectiveness for small business to 100 percent. We are bringing the buyer and the seller together.

Representative EVINS. It is a very fine presentation.

Mr. MCCONE. Here are some photographs of what went on in Boston yesterday. Some of the Members might be interested in them. General Shepard and I would be happy to answer any questions. Representative EVINS. Mr. McCone, we thank you for your splendid statement and the presentation of these charts, which certainly shows a widespread interest and activity in the small-business field. I am very much interested in the statement of policy by General Vandenberg and your statement following that, that your small-business program is positive and aggressive.

I believe these charts tend to show that. You have a small-business specialist or a representative in the office of the Under Secretary and all the way down into the various regional air procurement districts.

The statement of policy is fine, and these charts are splendid. We wanted to find out the extent of the volume of small business since the emergency, not only the numbers of contracts, but in dollar value, and I believe in some of the charts you have depicted that in certain cases, but not in the over-all. Can you give the committee the numbers of contracts let since the emergency was declared, going to small business and to large business by the Air Force?

Mr. MCCONE. I have the figures for the fourth quarter of 1950 and the first quarter of 1951. I do not have the figures for the third quarter of 1950. I am speaking of the calendar year. I can get those. Can I give the 6-month period I have for the record?

85230-51-12

Representative EVINS. You have them for the 6-month period? Mr. MCCONE. Yes.

Representative EVINS. But you do not have them carried from the date of the emergency?

Mr. MCCONE. No; but I can get that for you.

Representative EVINS. The committees would be pleased to receive that information.

Mr. MCCONE. For the fourth quarter of 1950, which is October, November, and December of last year

Representative EVINS. That would substantially cover the period in question.

Mr. MCCONE. There were 2,978 purchase actions at Wright Field for $887,241,000. Of those, 1,765, for $57,667,000, or 6.6 percent, went to small business.

During that same period, the field purchases, there were 100,445 purchase actions, totaling $31,837,000. Of that 71,164, or 71 percent, numberwise, totaling $20,276,000, or 63.8 percent, dollarwise, went to small business.

Turning to the first quarter of 1951, the Procurement Division at Wright Field had 4,828 procurement actions, totaling $2,439,310,000. Of those, 2,481 or 50 percent, numberwise, went to small concerns, totaling $237,089,000, or 9.7 percent dollarwise.

In the field offices there was during this period 84,707 purchase actions, totaling $43,750,000. Of those 61,205, or 75 percent, numberwise, went to small business, representing $30,453,000, or approximately 70 percent.

These figures may have been hard to follow, and I will be glad to file this with the clerk.

EXHIBIT 9

Prime contracts and purchase orders placed, not including interdepartmental and interservice procurement

LOCAL PURCHASES OF AIR FORCE INSTALLATIONS (102) IN CONTINENTAL U. S.

Representative EVINS. Do these figures show all purchase actions or all contracts let by the Air Force during these periods? Mr. MCCONE. Yes.

Representative EVINS. And not selected common-use items?

Mr. MCCONE. No; this represents all purchase actions during the periods involved that were covered by obligations within the definition of the Bureau of the Budget.

Representative EVINS. The first chart you exhibited there on purchases would indicate a tremendous majority of the volume of purchases went to small business, but I rather got the impression that certain selected common-use items used by the Air Force bases were involved.

General SHEPARD. These are total purchases, sir.

Representative EVINS. Would you revert to that initial chart? The one I am referring to is the one on the left, 72 percent.

Mr. MCCONE. Those are the local purchases and common use items. Representative EVINS. Those are local purchases?

Mr. MCCONE. Those are common-use items that you buy at a base for the maintenance of the base and the maintenance of the automotive equipment on the base, commercial hardware and the millwork that you might need in your maintenance or repair, and all such things.

Representative EVINS. According to the general picture of this chart, the greater volume of purchases to small business is for items used on the base?

Mr. MCCONE. That is correct.

Representative EVINS. But for aircraft manufacturing, the big items, only 9.7 percent of the dollar value is going to small business.

Mr. MCCONE. Yes. But then you have to look beyond this to really get the impact of the program on small business. You have to look beyond this and see how much of this is subcontracted to small business. If you would just get two of those charts, the one on air frames and the one on electronics-this is talking now a little on averages. I think you can see that in air frames you had 11 percent which went to small subcontractors and in electronics 10 percent. If that