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FOR THE FISCAL YEAR ENDED JUNE 30, 1936 DEAR MR. SECRETARY: In my first report to you covering the activities of my office, I discussed, in considerable detail, the developments in current procurement matters, the supervision of which is charged to me as one of the most important duties of my oflice. It so happened that, because of the inauguration of the Civilian Conservation Corps in 1933, and the consequent sudden necessity for the purchasing of large amounts of supplies, matters relating to current purchasing by the War Department were brought under close scrutiny and tested by the rapid mobilization of some 300,000 men. In my report of last year I detailed at great length the other major function of my office—the preparation of plans for war-time procurement and the mobilization of industry in such an emergency. This phase of national defense was receiving marked attention from the national legislature in its investigation of the munitions industry and in its attempt to determine the best methods for removing profiteering from war. While these particular activities of Congress continued into the past fiscal year, the attention of the people of the Nation was focused for the first time on the importance of formulating, in peacetime, definite policies for the mobilization of industry to support the vast military machine necessary to carry to a successful conclusion a war of major importance. While the efforts of our national lawmaking body are still being directed toward a solution of these important problems, I wish to reiterate again that I am very glad the opportunity presented itself to have this important duty of my office brought under the microscopic view of those qualified to judge the progress made along these lines and the efficacy of the measures initiated in this office to prepare the Nation in an industrial way for war.

This year, therefore, I will confine myself to a brief report touching upon the results of the past year's accomplishments of my office in order to bring up to date the record of progress made in carrying out the duties assigned to me by law and regulation. This report will include a short discussion of the most important features of procurement planning and industrial mobilization for war and the recent developments therein, together with a résumé of matters relating to the supervision of the day-by-day purchasing of the War Department, and to the most outstanding of my nonstatutory duties.

Because of conditions which arose during the year in the international as well as the national situation, a definite realization of the vital importance of the part that industry plays in national defense has been continuing to grow in the minds of the people of this country. Modern war requires immense quantities of intricate weapons and ammunition, machines for fast transportation, both in the air and on the ground, and immense quantities of noncommercial articles of military equipment. The maintenance of an adequate war reserve to satisfy full initial requirements of every article is costly, especially since technological progress increases the rate of obsolescence of mechanical equipment. Because of the impracticability of maintaining a complete war reserve of all matériel required for a major war, the timely procurement of adequate supplies in the event of such an emergency is of the greatest importance.

In order to make this possible, the statutory mandate to the Assistant Secretary of War was included in the National Defense Act as amended in 1920 and placed the responsibility of providing for the mobilization of matériel and industrial organizations for wartime needs squarely on his shoulders. These duties involve two distinct but interrelated phases of planning—one for procurement and the other for industrial mobilization.

An analysis of the requirements of the former shows that it is necessary first to determine what supplies to procure, where to procure them, and how to procure them. These determinations have far-reaching consequences. The determination of what supplies to procure involves consideration of standardization of equipment, specifications, and computations of requirements. Determination of where to procure the supplies involves consideration of the geographical and strategical apportionment to industry of the war requirements, and of the productive capacity of individual plants. The necessary and proper contractual relations which should exist between the Government and industry are materially involved in the determination of how to procure supplies in war. Planning for wartime industrial mobilization involves the task of evolving plans designed to assist a wartime President in mobilizing the Nation's economic resources and in unifying the national industrial effort in any war emergency. This planning not only covers the timely procurement of adequate munitions, but also gives consideration to the necessity of civilian requirements.

Military equipment must be designed, developed, and tested. The needs of the fighting forces are, of course, of paramount importance. The standardization of equipment is a function of the General Staff and of the supply arms and services. Types recommended for standardization are cleared through my office in order to assure that the article can be produced in sufficient quantity in war to be of practical value. After a type is standardized, specifications must be drafted under my supervision by the supply arms and services in sufficient detail for manufacturers to produce the article desired. After its standardization, the determination of the basis of issue and the computation of requirements may proceed. These operations are then followed by procurement planning for war production. There has been a tendency in the past to delay the adoption of types of equipment as standard with a view to further development and improvement. I have constantly endeavored to have this standardization of articles of equipment expedited. To step up the process, I caused a new regulation to be put into effect which permits procurement planning to proceed upon a type not yet standard when application therefor is made by the chief of a supply arm or service for an item considered to be, at the time, the most suitable and available for the purpose. Such authorization having been granted, the necessary basis of issue is provided. Thus, the reluctance to standardize which heretofore existed is partially eliminated by this change.

The actual work of computing requirements is a function of the supply arms and services. Computations are based, among other things, on military mobilization plans and equipment tables. Computations of the requirements for a large modern army necessary in a major conflict are obviously most complicated and extensive. It is of the utmost importance to note that each revision of the military mobilization plans necessitates the Herculean task of recomputing requirements. I am gratified to report that all these computations under the 1933 War Department Mobilization Plan have been completed.

Supply requirements for war must of necessity take into consideration the productive capacity of the country. Procurement planning has disclosed the fact that there would be serious wartime shortages in certain types of noncommercial equipment and that the adoption of new types of equipment may in some instances impede the production of other equipment of equal or greater importance. For instance, in the case of automatic weapons, it is questionable whether industry could supply the increase in ammunition expenditure rates that adoption of a new type would entail. This possibility of delay is now considered prior to the adoption of a new type of equipment.

The allocation system provides for the assignment in peacetime to selected plants of a definite production task to be undertaken in a war emergency. The selected plants are allocated to the procuring agencies primarily interested. Excellent progress has been made in the work of compiling data on the maximum load that the supply arms and services intend to place upon each allocated facility. The first portion of the Load Directory was published last year, and for the first time my office has a comprehensive knowledge of the load to be placed on all allocated facilities.

I am glad to be able to report that considerable progress is being made in the coordination between the War Department and the Navy Department in regard to the allocation of industrial plants to the respective services for use in a major emergency. As an example, this year an agreement was consummated between the two, settling the question of the allocation of machine-tool plants for wartime procurement. This will permit contact and direct planning in detail for specific types of machine tools. A similar agreement between the two services has been made on a substantial number of other important manufacturing establishments, including those engaged in the production of aircraft-one of the industries most vital to national defense. Until recently neither service had sufficient information concerning the requirements of the other to permit satisfactory progress, and it was only during the past year that the real cooperation necessary for efficiently utilizing the Nation's industrial facilities reached the point where gratifying results could be reported.

This coordination between the Army and Navy, so essential in producing a comprehensive plan for wartime procurement and one which will fit the needs of the two services, is being secured under the auspices of the Army and Navy Munitions Board. During the year the Joint Steel Plan was completed in tentative form. This plan has for its objective the wartime supply of steel to the Army and Navy and an emergency fleet in the time, quantity, and quality desired. Copies of the completed tentative plan have been furnished

to the supply arms and services of the War Department and to the Navy for comment and criticism as to the sufficiency and suitability of capacity credits on the industrial plants specified in the plan.

The study of basic raw materials is a continuous function of my office. Industry is continually developing new uses and improved technology for raw materials which must be considered in industrial planning for war. Those essential war materials, which have changed materially in importance in recent years, have been the subject of special studies during the year. A substantial number of procurement plans for strategic

materials and critical materials have been completely revised. On account of scientific advancements, this revision is, of necessity, a continuing process. Satisfactory progress is being made toward keeping these plans up to date.

The increasing recognition of the importance of raw materials in national defense was reflected during the year in the enactment by the Congress of a law which prohibits the export of any tin-plate scrap, except upon license issued by the President. The primary purpose of the act is to assure, in the interests of national defense, the continued operation of the detinning companies of the country. Practically the entire normal supply of virgin tin is imported. There is, however, a detinning industry, which in 1931 recovered tin equal to 27 percent of the virgin tin imported in that year. The secondary tin is recovered from the scrap that results from the manufacture of tin-bearing articles and from junk containing tin. In time of war, when imports are difficult to obtain, the detinning industry would constitute an important source of supply of this strategic war material. In addition, there was introduced in Congress a bill which would provide for acquiring stocks of ferromanganese ore, chrome ore, tungsten ore, and pig tin for war reserves. When Congress adjourned this bill had not been reported out by the committee to which it had been referred. The interests of national defense will be decidedly enhanced by the passage of this bill and by the congressional enactment controlling the exportation of tin scrap.

In my report of last year I discussed the beneficial effect on the plans for wartime procurement and industrial mobilization resulting from the survey by different committees of Congress in connection with the munitions industry and abolishing war profiteering. The Special Committee on Investigation of the Munitions Industry was authorized, among other things, to review the findings of the War Policies Commission and to recommend such specific legislation as might be determined desirable to insure the removal of profiteering from war. The hearings and investigations were continued, but at the end of the year the committee reports had not yet been published. The War Department, through its representative, cooperated with the committee during the entire period.

One of the lasting contributions being made by the committee is the publication in printed form of the minutes of the meetings of the following industrial control agencies established during the World War: The War Industries Board, the Council of National Defense, the Standards Board, the General Munitions Board, and the Price Fixing Committee. The proceedings of these meetings contain invaluable information regarding the procurement problems encountered during


the World War and the methods of their solution. These records will now be available for the first time in convenient form to students and to others who may be interested in wartime industrial problems. The committee kindly agreed to furnish a sufficient number of copies to my office, where these documents will prove of considerable" value in research.

The Congress itself during the past year continued to give careful and intelligent consideration to proposed legislation designed to prevent profiteering in war and to give to the Government the industrial controls required in time of war. The legislation under consideration was embodied in the bill H. R. 5529, Seventy-fourth Congress, entitled “An act to prevent profiteering in war and to equalize the burdens of war and thus provide for the national defense, and promote peace.” This bill passed the House of Representatives, and in the Senate was extensively revised by certain committees of the Senate. When Congress adjourned the bill was on the Senate Calendar, The Navy Department, through the Army and Navy Munitions Board, cooperated in the consideration of the bill.

I believe the records will show that the War Department has taken sympathetic interest in every bona fide effort since the war to prevent the making of undue profits during such a period by those who place their own selfish interests above those of the Nation. Such measures must be sound and must not, under any circumstances, include provisions which would hinder or vitiate the national effort to produce the necessary war materials when they are needed—a mission most vital in order to carry any war to a successful conclusion.

Among the controls which the Government must exercise are measures which provide for Federal regulation of industry, price fixing, priorities, licensing, and commandeering. These elements of control will go a long way toward preventing excessive profits in war.

If a bill embracing the matters covered in H. R. 5529 is enacted into law, there will be, for the first time in our history, legislation on the statute books empowering the War and Navy Departments to formulate plans for the wartime mobilization of industry founded on basic law. If the industrial control measures authorized by this bill are promptly initiated and wisely administered, they will help the country to pass promptly and smoothly to a war footing and will tend to shorten the duration of the conflict. The cost to the Nation will be materially lessened and much of the disastrous aftermath of war will be avoided.

Industrial planning tends to achieve two primary objectives which insure (1) that the procurement program of munitions can be launched and carried forward under orderly procedure and that production will be secured in the time required; (2) that undue profits and excessive costs of war may be reduced. The industrial mobilization plan of 1933 outlines the organizational and control provisions deemed necessary to achieve the above-mentioned results. The thorough analysis of this plan by the Special Senate Committee on Investigation of the Munitions Industry confirmed its inherent soundness. Some desirable changes were indicated, and the plan is now being revised. The revision is being coordinated through the agency of the Army and Navy Munitions Board which will formulate a plan acceptable to both services.

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