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sanctity of present contracts, but not to permit any more such contracts.

Mr. FERGUSON. Mr. President, will the Senator yield?

Mr. MAYBANK. That was my intention. I understand that contracts have been made by the Government with some loyal oldtime American firms, but I do not appreciate some of them that were made with people who went to distressed areas and took contracts away from other firms.

Mr. CORDON. Mr. President, I wish to assure the Senator from South Carolina that I changed my vote because I wanted to be in a position to move for reconsideration, if necessary.

I have stated what

Mr. MAYBANK. my intention was. Mr. FERGUSON. The Senator from Michigan can see no other way to interpret the vote except that none of the money can be used for this purpose. That is clear under the amendment, namely, that it will prohibit the use of the money. It is a limitation. Of course it will go to conference. If the sponsor of the amendment will state on the floor-and the Senator from Michigan expects to be a member of the conference that it was never his intention to have it apply to contracts which are already let and in operation, it can be taken care of.

Mr. MAYBANK. I would not make such a statement, because I do not know what the WPA people working downtown under Flemming have done. They may have made contracts in Arizona for 2 or 3 years. If it is a reasonable contract, made for a reasonable time, certainly I would state so. It was never my intention, as the distinguished former judge and chairman of the subcommittee knows, to violate a Government contract. But I do not know what those wild people under Flemming have done. They are totally wild and totally irresponsible, as the Senator from Michigan knows.

Mr. FERGUSON. I wanted to know what the feeling was of the Senator from South Carolina.

Mr. MAYBANK. My feeling is that a Government contract is a Government contract. As the Senator from Michigan and the Senator from Massachusetts know, we have considered certain Government contracts in the independent offices appropriation bill, which will be before us again tomorrow morning, in connection with housing; and my feeling is that where there is a contract, it should be lived up to as a contract. However, when some second-class bureaucrat makes a contract, I am against it.

Mr. President, I ask unanimous consent to have placed in the RECORD a statement which I have prepared on the amendment.

There being no objection, the statement was ordered to be printed in the RECORD, as follows:

STATEMENT BY SENATOR MAYBANK The adoption of this amendment will once again establish the principle that legislation shall be written in the Congress of the United States, and not by order and regulation; it will restate the principle that all persons dealing with the Government will be treated in a fair, equal, and impartial

manner; that sectionalism shall not be a future consideration in our procurement program; and that small business shall not be discriminated against by virtue of being located in sparsely settled areas where labor surveys are not conducted.

Effective February 7, 1952, the Office of Defense Mobilization issued Defense Manpower Policy No. 4, which in the words of Mr. Arthur S. Flemming, authorizes a price differential of "5 percent, 10 percent, or whatever seems to be appropriate." This order amounting to agency legislation was written by the Office of Defense Mobilization with the stated purpose of alleviating unemployment, but as the learned Senator from Maine so ably stated in the hearings before the Appropriations Committee, "and in the end does not have to pay attention to bids but can go into the distress areas. It would cause a good many more distress areas, I would think."

The purpose of this amendment is to clarify the existing conflict in provisions of the Armed Services Procurement Act of 1947 and Defense Manpower Policy No. 4 issued by the Office of Defense Mobilization, and this amendment simply restates the intent of Congress as set forth in the Armed Services Procurement Act of 1947.

Under the Armed Services Procurement Act of 1947 generally all purchases and contracts for supplies and services shall be made by advertising. There are 16 exceptions under which contracts may be negotiated. Section 2 (c) (1) of the Armed Services Procurement Act has been misinterpreted and utilized to carry out Defense Manpower Policy No. 4 contrary to congressional intent. Section 2 (c) (1) provides for the negotiation of contracts "if determined to be necessary in the public interest during the period of a national emergency declared by the President or by the Congress."

It shall be my purpose at this time to analyze the provisions of the Armed Services Procurement Act of 1947 and Defense Manpower Policy No. 4, in order to set forth the conflicting provisions.

1. Under Defense Manpower Policy No. 4 a price differential of 5 percent, 10 percent, or such amount as may seem appropriate may be paid by the Government in areas of unemployment.

The Armed Services Procurement Act of 1947 makes no provision for a price differential in areas of unemployment. The House and Senate reports which accompanied the Armed Services Procurement Act of 1947 set forth that the act was expected to provide (a) that the Government as a purchaser will receive the best bargain available, and (b) suppliers in a position to furnish the Government's requirements will have a fair and equal opportunity to compete for a share in the Government's business.

Under Defense Manpower Policy No. 4, the Government does not receive the best bargain available and suppliers do not have an equal opportunity to compete, and is in direct conflict with the Armed Services Procurement Act.

2. The negotiation of contracts when necessary in the public interest under the Armed Services Procurement Act means the interest of the Government, which is borne out in reports accompanying the act in language as follows:

"However, your committee recognizes a careful administration is necessary for this bill to be workable in the best interests of the Government. It therefore expects strict supervision of its application by the responsible authorities in the various departments.'

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The Office of Defense Mobilization interprets public interest to mean savings in unemployment compensation, tax losses, idle machines, impact on communities, lost sales, and relief payments.

It was never intended that procurement legislation was to be used to solve every conceivable problem, even though the cause be

a worthy one. We have just set up a Department of Health, Education, and Welfare to cope with these problems, and I believe with our cooperation Mrs. Hobby will provide progressive leadership in this field.

3. Under the Armed Services Procurement Act of 1947, the report accompanying the act sets forth language as follows:

"Advertising continues to be the rule, negotiation the permissible exception. Advertising will be used by the departments even. when a negotiated contract is authorized if in their best judgment it can be expected to give satisfactory results."

4. Three essential conditions will prevail in the vast number of procurement cases, according to the reports accompanying the act, as follows: Definite specifications, several suitable sources of supply, and genuine price competition.

It was the intention of Congress that if these three conditions existed advertising would be used, and when one of the conditions is missing negotiation offers the satisfactory method of purchasing.

The Office of Defense Mobilization, through the issuance of Defense Manpower Policy No. 4, has permitted contracts to be negotiated when all three conditions were present contrary to the intent of Congress.

5. In the Armed Services Procurement Act of 1947, and the reports which accompanied same, the expressed purpose in making use of negotiation was to effect savings for the Government, to promote and intensify competition. Negotiation at the time of the passage of the act was understood to proceed in the following manner:

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"Procurement by negotiation as practiced by the services consists of first securing informal quotations from as many sources as practicable, usually accompanied by breakdowns of elements of costs. Separate negotiations then usually begin with the lower bidders, in order to reduce the price by eliminating unnecessary or unjustified charges. When the best possible agreement has been reached, an appropriate contract is awarded the successful firm. Experience has shown that by careful negotiation and by drafting a suitable contract it is frequently possible to secure substantial savings for the Government. Negotiation, properly employed, can promote and intensify competition."

Contracts have, as a matter of practice, been awarded in a manner which is contray to the procedure outlined, in that there has been no effort to effect savings for the Government, to negotiate first with the lowest bidder, or to intensify competition.

6. Several specific examples were mentioned in Senate Report 571, accompanying, the act, as to the manner in which the public interest would be served in negotiated contracts, as follows: After a high bid was received for certain refrigeration equipment, negotiations were then begun to purchase the entire requirements piecemeal, which resulted in a saving of $151,000, or 46 percent. In the second case a bid was let for penicillin equipment, and when a high bid was received negotiation was started which resulted in a saving of $44,670, or 43 percent. In a third case there was only one bidder for certain cable desired, and a negotiation was carried out with the same bidder resulting in a saving of 35 percent.

In every known reference to negotiation in the reports, when negotiation was being included in the act, the purpose for which negotiation was being recommended and included was the direct savings to be effected for the Government.

The Office of Defense Mobilization has never to my knowledge indicated or recommended that negotiation be used to effect savings for the Government, but instead ODM has written language into Defense Manpower Policy No. 4 which, according to the admission of the Director, authorizes a higher price than would be obtainable under

competitive bidding of as much as 5 percent, 10 percent, or whatever seems appropriate.

In using negotiation for the purpose of solving unemployment problems; preventing tax losses, and idle machines, preventing lost sales and relief payments, the Office of Defense Mobilization has not only misinterpreted the Armed Services Procurement Act of 1947 and issued an order and notification contrary thereto, but has concerned itself with the functions of other departments, agencies, and committees and exceeded its scope of authority.

7. Certainly no group has given more careful consideration to the problems of small business, or is more qualified to write legislation on that matter, than this body. And in writing the Armed Services Procurement Act of 1947, it was the declared policy of Congress that a fair proportion of the total purchases and contracts for supplies and services for the Government shall be placed with small-business concerns.

The Congress made no distinction between small businesses in one section of the country rather than another, but the action of the Office of Defense Mobilization in relation to small business has amounted to legislation with discrimination. In making labor surveys of labor-surplus areas, "the smallest area that is considered is defined as one which is not primarily a trade or service center and which has an estimated area labor force of at least 15,000 and estimated nonagricultural employment of at least 8,000." This procedure leaves out those small businesses in sparsely settled areas, whereas it was the intent of Congress to assist them.

BACKGROUND ON MAYBANK AMENDMENT TO DEFENSE DEPARTMENT APPROPRIATION BILL Procurement policies established under an Executive order issued by President Truman are placing a premium on absentee ownership, inefficiency, and factory decay in certain geographic areas at the expense of more efficient and productive modern plants in other sections of the country.

On January 17, 1951, President Truman issued Executive Order No. 10193, which is cited as the authority for procurement agencies to channel Government orders into labor-surplus areas at prices other than those determined by advertised bids. The Executive order began:

"By virtue of the authority vested in me by the Constitution and statutes, including the Defense Production Act of 1950, and as President of the United States and as Commander in Chief of the Armed Forces, it is hereby ordered as follows."

Following that Executive order, Defense Mobilizer Charles Wilson issued Defense Manpower Policy No. 4 to become effective on February 7, 1952.

In a letter dated January 14, 1952, from Lindsay Warren, Comptroller General of the United States, to the Director of the Office of Defense Mobilization, it is clearly indicated that there is nothing in the Defense Production Act of 1950, as amended, which authorizes such a negotiation of Government contracts contemplated in Defense Manpower Policy No. 4. The exact language referred to is as follows:

"As your letter apparently recognizes, there is nothing in the Defense Production Act of 1950, as amended, which of itself authorizes generally the negotiation of Government contracts or a disregard of normal procurement procedures."

The language of the Defense Production Act of 1950 which was claimed to be the authority for DMP No. 4 has now been repealed.

Mr. Warren's letter continues:

"In its simplest form, therefore, the question you present is merely whether the Armed Services Procurement Act of 1947 authorizes the procedure involved."

In making further reference to the Armed Services Procurement Act, the Comptroller General pointed out that section 3 of the act requires that award be made to a responsible bidder. The Comptroller General then made reference to section 2 (c) (1) of the Armed Services Procurement Act of 1947, which contains the following language:

"On the other hand, section 2 (c) (1) of the Armed Services Procurement Act of 1947 authorizes the negotiation of contracts, without advertising, when determined by the agency head to be necessary in the public interest during the period of a national emergency declared by the President. Such a national emergency was proclaimed by the President on December 16, 1950. Despite such authority, it would not normally appear to be in the public interest for the military departments to make awards of contracts to a firm or group of firms when it is known at the time that the services or supplies are obtainable elsewhere at a lower price."

Section 8 of the Defense Manpower Policy No. 4 did recognize that the operation of this order could have an adverse effect on an entire industry, and a method of procedure was provided for relief in such instances. Section 8 reads as follows:

"When the application of this policy would have a major effect on the operation of an entire industry, appropriate recommendations shall be made to the Director relative to that industry in lieu of recommendations relative to specific geographical areas. In such cases, after notice to and hearing of interested parties, consideration will be given to a separate certification applying to the entire industry."

Pursuant to this language of section 8 of DMP 4, Mr. Arthur S. Flemming, then Chairman of the Surplus Manpower Committee, and who is now Director of the Office of Defense Mobilization, convened a panel and directed the members to hold a hearing and submit "your findings, conclusions, and recommendations."

The recommendations submitted by Mr. Flemming, and approved by Dr. Steelman, said, in part (with reference to the textile industry):

"That no preference be given in the placement of such contracts to any areas or particular cities within areas with respect to this industry.

"That no provision be made for payment of any price differential.”

The panel further concluded that the recommendations of the panel are intended to further the public interest without undue cost to the public or unfair discrimination to any part of an industry.

With respect to costs of this plan and re-
sulting delays in procurement, the following

excerpt is taken from Progress Report No. 26,
hearing before the Joint Committee on De-
fense Production, May 4, 1953.

Senator MAYBANK. It does cost consider-
able money, doesn't it?

General HOLLIS.1 I am about to come to that.

As a generality, since the weighted average price of formally advertised awards is used as the target for negotiated contracts, and I might relate that particularly to the 80-hour rule of which we are speaking, there is not, as a rule, any additional cost to the Government involved because cases are exceptional, where we would be able to obtain our entire requirements at the lowest price awarded pursuant to formal advertising.

There are, however, certain administrative costs involved. Cost figures for ASTAPA indicate that the average cost for awarding and for administering to its conclusion, a typical contract amounts to $557.

1 Brig. Gen. Robert P. Hollis, Chief of agency staff, Armed Services Textile and Apparel Procurement Agency.

Senator MAYBANK. How much would a contract average?

General HOLLIS. I beg your pardon? Senator MAYBANK. What would the average contract amount to in dollars that costs $557 to carry it through?

General HOLLIS. I do not have figures with

me.

Senator MAYBANK. Would you supply them for the record at your convenience? General HOLLIS. I would, sir.

(The following was later supplied for the record by General Hollis :)

"The value of all contracts awarded by ASTAPA has averaged $189,000."

Senator MAYBANK. What about the time delay?

General HOLLIS. It depends on circumstances, Senator. Our experience has been to date, we go out with a formal advertisement and make a procurement usually for the major part of the procurement which is required to establish prices. Following that, we attempted to negotiate a certain quantity under these ground rules and we are sometimes successful, sometimes not.

The additional delay involved in that negotiated procurement is perhaps in the order of 30 to 45 days. Not infrequently we have found that the quantities which we have thus set aside are not subscribed by industry and it now becomes necessary for us to go into the market again with a second formal procurement or third formal procurement.

Senator MAYBANK. Whereas if you had this to start with, you would have gotten it? General HOLLIS. We would have gotten it more rapidly.

Senator MAYBANK. It costs a lot of money to handle this business; doesn't it? General HOLLIS. Yes, sir.

Mr. SALTONSTALL. Mr. President, a parliamentary inquiry.

The VICE PRESIDENT. The Senator from Massachusetts will state it. Mr. SALTONSTALL. floor?

Who has the

The VICE PRESIDENT. The Senator from Massachusetts has the floor.

Mr. SALTONSTALL. I merely wish to say that I understand, as the Senator from Michigan understands, that it is a limitation on the use of the funds. Otherwise it would be the law. I simply state it for the RECORD at this time. My principal purpose in rising is to ask unanimous consent to place in the RECORD, at the conclusion of my remarks, a letter from the Office of Defense MobiliHampshire [Mr. BRIDGES] by Mr. Flemzation, written to the Senator from New ming, which I intended to read into the RECORD.

The VICE PRESIDENT. Is there objection?

There being no objection, the letter was ordered to be printed in the RECORD, as follows:

EXECUTIVE OFFICE OF THE PRESIDENT,
OFFICE OF DEFENSE MOBILIZATION,
Washington, July 21, 1953.

Hon. STYLES BRIDGES,

United States Senate,

Washington, D. C. DEAR SENATOR BRIDGES: I am informed that the Senate Committee on Appropriations has amended section 643 of the Department of Defense Appropriations Act (H. R. 5969) as follows:

"Provided further, That none of the funds appropriated by this act shall be available for expenditure under any contract without regard to the provisions of law relating to the making, performance, amendment, and modification of contracts, for the purpose

of correcting or preventing economic dislocations."

The Department of Defense, through its procurement, construction, and other expenditures, has a very significant impact on the American economy. During and since World War II, the Government has issued various policies designed to assure that the Federal procurement agencies would take cognizance of manpower supply factors in the distribution of contracts. These policies have sought to discourage placing additional contracts or facilities in tight labor market areas and to encourage making the best use of areas where labor skills and manufacturing facilities are in surplus supply. Enclosed is a statement summarizing various past and present policies in this connection.

One of the policies which would be prohibited by the committee amendment is Defense Manpower Policy No. 4, which was issued by my predecessor in this office, the Honorable Charles E. Wilson, on February 7, 1952. This policy makes possible the placement of negotiated contracts in areas of substantial labor surplus by permitting firms located there to match the best price obtainable elsewhere. Since March 1952, more than $52 million of Defense Department procurement has been awarded to these areas as a direct result of the policy. This is a very small portion of the Defense Department's total procurement over this period of time. It has, however, been of real assistance to these communities. This assistance to areas of substantial labor surplus costs the Government nothing in prices of materials procured. Although this policy does entail some additional administrative costs, we believe they are justified by the accomplishments of the policy in making better use of manpower and production resources and in assisting distressed communities.

Critics of defense manpower policy No. 4 have pointed out that this policy authorizes the payment of price differentials. I feel very strongly that the Government should procure goods and services at the lowest prices obtainable. Throughout the existence of defense manpower policy No. 4 price differentials have never been authorized or used. Because of my strong opposition to their use, and to assure that defense manpower policy No. 4 will not be utilized in such a manner that the Government will have to pay more for the goods it procures than would otherwise be the case, I have asked for the preparation of an amendment to defense manpower policy No. 4 prohibiting the use of price differentials, and I plan to issue this amendment shortly.

We in the Office of Defense Mobilization have continually endeavored to assure that the available manpower and production resources of the Nation are utilized with maximum efficiency. I consider it essential that the needed administrative flexibility be retained to enable continuance of policies, such as defense manpower policy No. 4, designed to achieve this objective.

We hope, therefore, that the proposed amendment to section 643 of H. R. 5969 will be deleted.

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The Plant Site Board and its successor, Facility Clearance Board, took into account, among other things, the existence of readily available labor supply before selecting the specific location of any major project. Other factors taken into consideration were the need for additional facilities, availability of power, transportation, etc.

Following War Production Board Directive No. 2 of March 1942, which established policies and procedures governing the placement of war contracts by negotiation, specific recognition was given to manpower as a factor in awarding Government procurement contracts. Amendments to the directive enjoined procurement agencies to avoid contracting for the production of items or materials in communities or areas in which labor shortages are known to exist, whenever it is practical to procure the needed items or materials elsewhere. Basic factors to be considered in contract awards were (a) speed of delivery, (b) use of existing facility, and (c) manpower. At the same time, the War Production Board encouraged prime contractors to follow the intent of the directive in the letting of subcontracts.

Pursuant to the amended Directive No. 2, the War Manpower Commission certified to procurement agencies three groups of labor market areas. Group I consisted of labor market areas in which labor shortages existed and in which further supply contracts should not be awarded, when the facilities for meeting the requirements of such contracts were available in other areas. Group II areas consisted of labor market areas in which labor shortages were anticipated. Supply contracts which had a maximum delivery date of more than 6 months were not to be awarded in these areas when facilities were available in other communities for meeting the requirements of such contracts. Group III areas consisted of areas in which labor surpluses existed and no shortages were anticipated. Special effort was to be made to award contracts in these latter areas in order to utilize manpower resources more effectively.

1949 "INVENTORY RECESSION" EXPERIENCE

With the rise of sizable unemployment at the end of 1948 and early 1949, the Executive Office of the President-specifically at the instructions of Mr. John R. Steelmanprovided that Federal programs of direct action or assistance to localities be timed and channeled so as to concentrate upon areas where unemployment was heavy without sacrifice of general national objectives. A wide variety of Federal activities were influenced by this directive-procurement of equipment and supplies, construction of public buildings, roads, and other facilities, the public housing program, business loans, locating sites, and scheduling employment levels for Government financed installations and facilities.

agencies to applications for loans which originate where unemployment is serious; (2) Defense Department consideration of labor market conditions in scheduling civilian employment expansions and cutbacks at military establishments (see attachment II); and (3) the extension of preferential consideration by the HHFA, the Public Roads Administration, the Civil Aeronautics Administration, and other public-works agencies to project proposals from areas of unemployment.

EARLY STAGES OF DEFENSE MOBILIZATION, 1950-51

Shortly after the Korean invasion, the Government acted quickly to avoid delays in the delivery of defense materials which might result from unrestricted placement of defense contracts in areas of labor shortage, while other areas with idle facilities and surplus manpower were still available.

Secretary of Defense Marshall, on December 18, 1950, issued a memorandum to the Secretaries of the military departments, entitled "Broadening the Industrial Base of Procurement Programs." (See attachment III.) This memorandum directed the military departments to pay particular attention to a number of factors which should be considered in procurement, including: "i. The availability of manpower in distressed employment areas or in areas of manpower shortages."

On the recommendation of the National Security Council, the Secretaries of Treasury and Labor, and the Director of Defense Mobilization, the President, on January 17, 1951, issued the National Manpower Mobilization Policy. Each Department was directed individually to implement the policy and be responsible for its supervision. Paragraph

7 (i) reads as follows:

"Production will be scheduled, materials allocated, and procurement distributed with careful consideration of available manpower. Whenever feasible, from an economic and security standpoint, production facilities, contracts, and significant subcontracts will be located at the sources of labor supply in preference to moving the labor supply."

This policy of "bringing work to the worker" was implemented by the Department of Defense in March 1951.

DEFENSE MANPOWER POLICY NO. 1

On August 2, 1951, Director of Defense Mobilization Wilson issued Defense Manpower Policy No. 1, entitled "Implementation of National Manpower Mobilization Policy With Respect to Procurement and Production Scheduling." This policy expanded on paragraph 71 of the National Manpower Mobilization Policy with specific directives to the various departments:

Procurement. Procurement agencies were directed to issue instructions to procurement officers calling attention to the need for considering labor supply in placing orders. A An example of such instructions is the following paragraph from the Defense Department's Directive 250.03-10 of October 19, 1951:

Several changes were made in procedures and policies for Federal procurement. system was installed which gave all firms an opportunity to bid on all Government contracts. In addition to local efforts to expand employment, special assistance was given to manufacturers in areas of heavy unemployment, by providing information and suggesting new products. The Comptroller General ruled that in the event of tie low bids on Government contracts, the award could be made to a firm located in an area of serious unemployment. unemployment. In some instances, the Government undertook accelerated procurement programs in order to provide employment in slack seasons. At this same time, procurement agencies also recognized the principles of breaking up large orders and accepting bids on portions of the whole so that smaller manufacturers could bid more readily.

Other Government actions during this period were: (1) the extension of preferential consideration by RFC and other lending

"Instructions to procurement officers should emphasize the increasing need for giving serious consideration to the adequacy of the local labor supply in contract placements and in planning delivery schedules. To the extent possible, procurement should be avoided in labor market areas where manpower is in short supply or in approximate balance (areas classified in group I or group II by the U. S. Department of Labor); and should be placed in labor market areas having surplus manpower (areas classified in group III or IV)."

With respect to labor shortages, Defense required procurement officers to obtain detailed manpower information whenever a proposed purchase would result in the employment of a significant number of additional workers in an area of labor shortage.

A central monitoring system was established manpower policy No. 4, the task force worked to assure compliance.

DMP 1 also directed procurement agencies to encourage and assist prime contractors in following its principles in the selection of subcontractors. Defense Department Directive 250.03-10 required procurement officers to do this and specified that smallbusiness specialists should be utilized in this program. In 1951 and 1952, the National Production Authority cooperated with the Defense Department in a program to spread defense contracts and subcontracts to more than 3,000 manufacturers who were most seriously affected by raw materials allotments and who probably would have been forced to lay off workers. One technique used in various cities was the "industry assistance clinic," at which procurement officers were brought together with potential prime contractors, and prime contractors with potential subcontractors.

Expansion of Government facilities: DMP 1 directed agencies operating Government facilities and installations to take area labor supply into consideration when making decisions regarding the location, expansion, or contraction of such facilities. Both the Atomic Energy Commission and the Department of Defense have frequently consulted with the Department of Labor before initiating new facility construction or expansion to determine in which areas ample labor supplies could most likely be found.

Tax amortization applications: DMP 1 directed agencies responsible for approving applications for accelerated tax amortization and business expansion loans to consult with the Department of Labor regarding manpower considerations in such applications, so as to prevent the dislocations resulting from expansions in present or potential laborshortage situations. Applications for expansion in labor surplus areas were given priority attention. On February 3, 1952, a Facilities Review Board was established in the Defense Production Administration to review proposed construction or expansion projects sponsored by the Department of Defense and the Atomic Energy Commission and recommend the substitution of existing facilities when available.

Priorities and allocations: DMP 1 directed agencies issuing priorities and allocations to consider the employment effects of their orders affecting civilian production levels and to consider appeals from materials conservation orders when based on the need to maintain a work force for defense production or on community hardship resulting from unemployment.

The National Production Authority established reserves of materials to assist various hardship cases. Special consideration was given to increasing original allotments in the case of entire industries, such as the construction industry, which were faced with severe unemployment. Supplemental allotments were granted to firms in areas of substantial unemployment where further layoffs would result in community hardship. In this respect group IV classification of an area by the Department of Labor was considered prima facie evidence of community hardship.

DEFENSE DISTRESSED AREAS TASK FORCE

In December 1951 an interagency defense distressed areas task force was formed under the chairmanship of the Defense Production Administration to assist areas of heavy unemployment, particularly automobile-production centers. In January the task force visited Detroit and nearby cities for conferences with industry and labor leaders and Government officials. The Governor of Michigan created an emergency defense con

tracts commission, made up of industry,

labor, and State government representatives. The two groups cooperated to encourage the placing of larger numbers of defense contracts and subcontracts in these distressed areas. Following the issuance of defense

closely with the surplus manpower committee. The task force was abolished around May 1952.

DEFENSE MANPOWER POLICY NO. 4 DMP 4 was issued by Director of Defense Mobilization Wilson on February 7, 1952 (see attachment IV). It provided for negotiated procurement from concerns in surplus labor areas (group IV). Although the policy authorized the use of price differentials to effectuate its purposes, the agencies concerned agreed that such payments were unnecessary and undesirable. Accordingly all ODM notifications under this policy have specifically stated that no price differential was considered necessary and implementing instructions of the procurement agencies have not authorized their use.

This policy, as implemented, differs from previous policies which encouraged negotiation of contracts in surplus labor areas, by setting up specific machinery whereby firms in surplus labor areas are allowed to match the best price otherwise obtainable on negotiated contracts. A variant of this is the set-aside method, adapted from small business procedures, whereby portions of procurements are specifically set-aside for negotiation with surplus labor area firms on a price-matching basis.

DMP 4 applies only to the procurement activities of the Department of Defense and the General Services Administration. At present there are 26 areas of substantial labor surplus eligible for contract preference, constituting about 31⁄2 percent of the Nation's nonagricultural labor force. Twenty-eight areas have been dropped from contract preference due to improved employment levels. Seven Group IV areas were not approved for contract preference due to lack of facilities.

number of planes we can produce within the next few months. I wish I could believe or be convinced that the security of the United States is a matter of so short a time.

I do not believe that our security or defense measures concern us only for the next few months or during the remainder of the fiscal year. The problems we now face will be with us for a number of years, unfortunately, and there is no way, in my opinion, in which we can avoid the responsibility of providing adequately against the great danger which threat

ens.

Mr. President, planes ordered today or designed today will not be in service for at least 2 or 3 years. Atomic weapons will probably take even a longer time to construct. The officers and men required by our Air Force and by our other branches of military service will take many months and great patience to train.

I have been impressed by the fact that today we have been discussing a reduction of a billion dollars in the appropriations for the defense of our Nation. The whole question is whether we will increase our appropriations by a billion dollars or let the appropriation stand as proposed by the committee. That is not really an accurate statement. We are not dealing with a cut of $1 billion. We are dealing with a cut of many billions of dollars. I wish to point out the Department of Defense appropriations for the fiscal year 1953 were approximately The amount recom$47,185,000,000. contracts mended by the Senate Appropriations Committee for the appropriations for the Department of Defense for the year 1954 is approximately $34,511,000,000—a cut of approximately $12,673,000,000.

In the period from March 20, 1952 through April 30, 1953, preferential amounting to $52,425,749 were awarded by the Department of Defense. The 26 areas remaining under the policy have received preferential contracts amounting to $12,842,385. The General Services Administration has made preferential awards amounting to approximately $200,000 during this period.

DMP 4 also provides for special assistance to industries rather than areas. The textile, apparel, and shipbuilding industextile, apparel, and shipbuilding industries have been exempted from the area preference application of the policy and special recommendations have been made to assist them.

The VICE PRESIDENT. The bill is open to further amendment.

Mr. LEHMAN. Mr. President, I have listened to a great many reports by leaders of our Nation with regard to the international situation. They have appeared before committees of which I am a member. They have on other occasions made public statements.

Mr. President, I do not recall of one responsible official of our country testifying or expressing the opinion that the threat to the security of our country is less today than it was 3 years ago, 2 years ago, 1 year ago, or 6 months ago.

On the other hand, many officials and high military officers have testified to the contrary. They have emphasized the fact that we are under an acute threat, and that our security will be jeopardized unless we take the necessary steps to defend ourselves.

Mr. President, I listened to the debate throughout the day, and I gathered the impression that some of my colleagues believe our defense is a matter of the next few months. I wish I could believe it. I know there is a limit to the

The appropriations for the fiscal year 1953 for the Department of the Air Force amounted to $21,073,000,000. This year the Senate Appropriations Committee has recommended as the appropriations for the Department of the Air Force, $11,247,000,000, or a cut of approximately $9,825,000,000.

Furthermore, let me point out that while the figures I have cited show a comparison between the last fiscal year appropriations and the appropriations now recommended for the fiscal year 1954 even the budget estimates for the fiscal year 1954 are proposed to be greatly slashed.

In the case of the Air Force, they would be slashed by almost $5 billion.

Mr. President, no one can tell me that we shall be able to purchase as many airplanes and be able to have as much opportunity to train pilots with an appropriation of $5 billion less than the one recommended by the Bureau of the Budget, and more than $9 billion less than the appropriation made for the same purpose last year. Such a reduction in the appropriation does not make sense to me. The necessary work cannot be done under such a reduction in the appropriation. I believe that if we agree to make such a reduction in the appropriation, we shall be acting in a manner which will jeopardize the security of the Nation.

The recommended cut of $9 billion from the appropriation made for this

purpose for the fiscal year 1953 is reflected very largely in the appropriation for the procurement of airplanes and materiel, which are directly related to our defense.

Of course, Mr. President, I shall vote for this appropriation bill, for I have no choice. The Senate cannot possibly afford to end this session without passing an appropriation bill for the Department of Defense. But I wish to emphasize with all the force at my command that I shall vote for this greatly emasculated appropriation bill with great reluctance and with very great fear for the future.

I believe that the appropriations now being recommended, and which, except for some minor changes, undoubtedly will be enacted by the Congress, are completely inadequate, and may, and I fear probably will, seriously jeopardize the national security.

Mr. President, I do not delude myself into believing that the remarks I make this evening will change the decision of the branch of Congress in which I have the honor to serve, but I do not believe I would be true to my responsibilities as a Member of the Senate and my responsibilities as a United States citizen if I did not take this opportunity to protest in a very strong way against the proposed cuts, which I think are unjustified and unjustifiable, and which I believe will place the United States under great threat and in great jeopardy in the years to come.

Mr. NEELY. In my opinion, the observations just made by the able Senator from New York are entitled to unusual weight, because I think it is generally understood that he is the heaviest taxpayer in the Senate.

Mr. HILL. Mr. President, I am concerned about the inadequacies of this defense budget in the field of research and deevlopment for our Air Force and the statements made incident thereto.

In commenting on the testimony of the Secretary of Defense before the Senate subcommittee, the Washington Post recently editorialized as follows:

His seeming distain for pure research implied a curious anti-intellectualism most unbecoming to his position.

But Dr. Hugh L. Dryden, director of the National Advisory Committee for Aeronautics, has said recently that 97 percent of the work is development, and 3 percent is pure research.

Many of our most vital defense projects-including the atomic bomb, the jet engine, the swept-back wing designhave had their roots in the basic research of foreign scientists, including those of Russia. This represents a serious gap in our security structure.

I might have disregarded the Secretary's position on pure research as a slip of the tongue, were it not for other disturbing evidence. In a meeting with industrial leaders not many weeks ago, Mr. Wilson repeatedly referred to the Air Force research and development program as "boondoggling."

But there is more at stake than just the dollars Mr. Wilson would pare from the Air Force budget. If this approach to research and development is permitted

to continue, we may jeopardize our whole national philosophy regarding security under arms.

It is bad enough to reduce the production quantity of our airpower. This is a calculated risk, and, under present conditions, a most dangerous and unwarranted one. It can be even more dangerous, however, to cut back the program responsible for the quality of our air

weapons.

This defense budget reduces Air Force strength in quality as well as quantity. That is compounding an error beyond the point of a calculated risk.

It may not be practical or necessary to match a potential enemy in numbers of aircraft and guided missiles if we more than match him in the quality of our equipment. An active, progressive, and equipment. An active, progressive, and well-financed research and development program, therefore, can be a most worthy

and desirable investment.

Accordingly, it is surprising that this so-called businessman's administration, with its avowed interest in economy, cannot see the long-range economic value in an adequate Air Force research and development effort. Such a program should receive full support from the Congress.

In light of this, I am shocked and disheartened at the manner in which some have chosen to represent the Air Force research and development.

It has been claimed that the Air Force has "a lot of hacks attempting to do research and development, who have no business in those departments and activities."

Let us have the facts, Mr. President. For one thing, let us take a closer look at some of the so-called "hacks" who are handling the Air Force research and development program.

The long-range policies for this research and development were established by, and are reviewed periodically by, the Scientific Advisory Board of the Air Force. This organization comprises 75

eminent scientists, who serve as advisers to the Air Force Chief of Staff. Its chairman, who works full time for the Air Force, is Dr. Theodore van Karman, one of the world's most renowned aeronautical scientists. Its vice chairman is Dr. Mervin Kelly, president of Bell Telephone Laboratories, and perhaps the Nation's leading industrial scientist. Its members include university presidents, noted research directors, leading nuclear physicists, and one holder of the Nobel Prize, the world's highest award for scientific achievement.

They are the ones who are called hacks at the top of the Air Force research and development structure.

Several years ago the Air Force separated its research and development activities at the operating level and formed the Air Research and Development Command. This is the agency primarily responsible for the quality of our air weapons. Its commander is Maj. Gen. Donald L. Putt, a graduate of Carnegie Tech, who has been cited by this university for his scientific achievements in the Air Force, who holds a master's degree from the California Institute of Technology, and who is universally respected as a military scientist.

His deputy is Maj. Gen. James McCormack, Jr., a Rhodes scholar, who holds a master's degree from the Massachusetts Institute of Technology.

These are the so-called hacks who direct the Air Force effort in research and development.

The spokesmen in this campaign for less airpower like to portray the Air Force leader as a flyboy, rich in combat experience but lacking in other attributes of his trade. It is worth noting, therefore, that several leaders of the Air Research and Development Command, although they wear the two stars of a major general, wear no wings over their left pockets..

General McCormack is one of these men. Another nonflying leader of this command is Maj. Gen. Raymond C. Maude, the top graduate of his class at West Point, who holds a master's degree Maude, the top graduate of his class at from Yale University. General Maude heads the Air Force Research Center at Cambridge, Mass., the world's leading geophysics research laboratory.

Still another nonflying leader is Maj. Gen. William L. Richardson, a pioneer in guided-missile research who commands the Air Force Missile Test Center in Florida. All these men hold these responsible positions solely by virtue of their scientific and administrative abilities, rather than their proficiencies in the cockpit.

Civilian leadership in Air Force research and development is vested in Mr. Trevor Gardner, the Special Assistant to the Secretary of the Air Force for Research and Development. Mr. Gardner holds a master's degree from the University of Southern California. In addition to being an accomplished engineer, he is the founder of a successful research company.

Mr. Gardner applies the businessman's approach to this important segment of the Air Force effort.

As Special Assistant to the Air Force Chief of Staff for Technical Matters, and the Air Force's troubleshooter on research and development, we have a gentleman by the name of Gen. Jimmy Doolittle who earned a doctor's degree at the Massachusetts Institute of Technology long before he bombed Tokyo as one of our greatest combat leaders; and who is a successful business executive as well.

These, then, are some of the "hacks" responsible for research and development programs of the Air Force. Now for those who discredit and abuse the

recommendations of the so-called hacks.

Mr. HENDRICKSON. Mr. President, will the Senator yield for a question?

Mr. HILL. I told the distinguished chairman of the subcommittee that I would seek to move on with this speech. I do not like to be discourteous to my friend from New Jersey, but, if I may, I should like to proceed. should like to proceed. But if the Senator wants me to yield for a question, I will yield.

Mr. HENDRICKSON. I wondered where the distinguished Senator got the term “hacks." I have not heard that word used heretofore in any of the debates.

Mr. HILL. I may say to my friend that the term even appeared in the RECORD, in another legislative body. If the

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