1951 which will be starting on the first of July, we will be getting a scant 10 percent of the Nation's steel, which will be allocated to us and we in turn will allocate it to our contractors, about 10 percent, but that will peak up

Senator CAPEHART. TO 15?

Mr. SMALL. Unless something happens, yes, it will peak up to about 15 percent.

Senator CAPEHART. What percentage of the aluminum are you going to take?

Mr. SMALL. Naturally we will take more aluminum than we will of steel.

Senator CAPEHART. A larger percentage?

Mr. SMALL. A larger percentage.

On aluminum-our present estimate on aluminum for the third quarter of calendar 1951 will be about 30 percent of the Nation's supply.

Senator CAPEHART. Of aluminum?

Mr. SMALL. Of aluminum.

Senator CAPEHART. And what will it be on copper?

Mr. SMALL. In the third quarter, about 18 percent.

Senator CAPEHART. Now, what percentage will you take during the entire fiscal year of 1952 of steel, copper, and aluminum?

Mr. SMALL. On steel, we will average, since we peak at 15 percent, we will average out at around 131⁄2 percent.

Senator CAPEHART. For the fiscal year 1952?

Mr. SMALL. I am talking about the calendar year. For the fiscal year we will average out about the same.

Senator CAPEHART. And what percentage of the aluminum will you take for the fiscal year 1952?

Mr. SMALL. For the fiscal year 1952 we will probably average out at about 34 percent.

Senator CAPEHART. And how much of the copper?

Mr. SMALL. On copper, I would say we would average out at not more than 22 percent.

Senator CAPEHART. That gives the committee some idea of the impact upon the civilian economy.

Mr. SMALL. That is right.

Senator CAPEHART. There is 13, 16, and what?

Mr. SMALL. Thirteen percent on steel, twenty-two on copper, and about thirty-four, I would say, on aluminum. I am interpolating. The CHAIRMAN. Does that include the Army, Navy

Mr. SMALL. Army, Navy, Air Force, Marine Corps.

The CHAIRMAN. Does it include the Coast Guard? Maritime? Mr. SMALL. Not Maritime. Coast Guard will be included. The CHAIRMAN. That is where the big steel is going. Does it include Atomic Energy?

Mr. SMALL. It does not include the requirements of the Atomic Energy Commission.

The CHAIRMAN. I know what is happening now in the Atomic Energy plant down home, they are demanding steel and are getting it and should. Do not misunderstand me, but I was hopeful. appreciate, Mr. Small, and Mr. Secretary, that you can only speak for the Defense Department, but we have to add these other defense agencies, the Coast Guard and maritime-they certainly are defense

agencies, we are appropriating for them purely for defense. The Navy says the maritime service is essential, they are doing a wonderful job, and they need steel.

Is there any way we can get the total national defense amount of steel, copper, and aluminum?

Mr. SMALL. Well, you can get the requirement and the probable allocations for each of the agencies from Mr. Gibson, DPA.

The CHAIRMAN. He said 40 percent of steel, a peak of 40 percent. Senator ROBERTSON. For the third quarter of 1952?

Mr. SMALL. He is talking about the military, plus these other agencies, plus so-called defense supporting programs like the steel expansion, pipelines, farm machinery, and so forth.

The CHAIRMAN. Ánd he added railroad cars, and electrical require

ment.

Senator CAPEHART. Then you have to deduct, of course, what those industries normally buy in order to get the additional impact that you are going to have, because railroads normally buy cars, utilities normally buy steel, so you have got to get what they have been buying, and deduct it in order to get the total impact upon the national

economy, you see.

Mr. SMALL. That is correct, sir.

Senator ROBERTSON. Mr. Chairman, I understand that we had this letter from Mr. Gibson where he had 40 percent in the third quarter of 1952 at the bottom of the letter, and a correction was made yesterday that it is the third quarter of 1951. Now, was that correction put in our record, or where was the correction made? Who is the gentleman that made the correction?

A MEMBER OF THE PRESS. Mr. Gibson's office made that correction, Senator.

Senator ROBERTSON. Who did they make it to?

A MEMBER OF THE PRESS. They made it to the press.
Senator ROBERTSON. Well, they ought to let us in on it.

The CHAIRMAN. Mr. Secretary, I want to call this to your attention: I have known you a long time. The difficulty this committee has is to get the facts. Yesterday we had the hearing here and it said 1952. Then Mr. Gibson has a press conference yesterday afternoon and says it is the third quarter of 1951. We are just at a loss half the time. That is why we wanted you down here to find out.

Senator ROBERTSON. I conferred yesterday with representatives of the General Contractors Association, and they were interested primarily in highway construction. They told me over a hundred million dollars' worth of highway contracts had been let, not one of which could start because they all took steel, and they could not get any allocation for steel at all. It was supposed to be divided up, but a certain percentage was allocated for roads, and a certain amount for something else, but there is no action. The construction is supposed to end this year, this is the best building time we will ever have, yet they are standing idle, the men and equipment are idle, because nobody seems to know how much steel the defense agency is going to take, or else somebody is not organized to allocate to these nondefense activities what is left of the steel.

Mr. SMALL. Senator, I do not believe there is any doubt in the minds of Mr. Gibson, or his people, as to what the Department of Defense wants. We tell them explicitly what we want, and the

numbers of tons. I think what he is saying is, if I understand you correctly, that he does not yet know the measure of some of these defense supporting things, like the new steel mills, the new roads, if you like, all the rest of those things.

He is the focal point where all of those figures flow. We do not have them. There is no possible way we could except know from him. Secretary MARSHALL. We have become involved in the discussion before the official of the Defense Mobilization in which I sit in, and Mr. Small sits with me. When Mr. Wilson has a meeting, we decide on these basic allocations, the number of freight cars, this, that and the other, and of course Mr. Gibson is the central source of information there on the over-all coverage. So it would seem to me that is where you would get your general statement of the whole problem. We get down here to the things we are directly concerned with.

Senator ROBERTSON. 110,000,000 tons of steel next year, is that about the way you estimate production?

Mr. SMALL. No, I think we are getting two things confused there. You are getting product tons confused with ingot tons. Our production is running around, as I recall, 75 or 76 million product tons, which, in ingot tons, is about 100,000,000. By next year it will be up about 10 percent, 110,000,000, and in product tons would bring it to about 82. Senator CAPEHART. Mr. Chairman.

The CHAIRMAN. Go ahead.

Senator CAPEHART. I made a fuss the other day on the floor of the Senate in respect to the report of the Appropriations Committee on page 7 with respect to the increases in the cost of certain types of radio sets.

Now, I did it for two or three reasons. One was that I felt that it possibly was unfair to the national defense to have those figures outstanding, or it was unfair to industry, or unfair, maybe, to both, and suggested that someone who knew the facts be called before this committee for an explanation.

For example, on page 7 of this report it talks about a special type radio set that has gone from $4,597 to $20,185. Now, do you have the information on that?

Secretary MARSHALL. I think that can be given, sir. In the first place, looking into it myself, as a general proposition it appeared the estimates on these costs were on the engineering basis because the article had never been completed and manufactured and a cost set up. Then when they finally get around to the actual individual item basis, this price comes out.

Senator CAPEHART. In other words, the report said it was due to increase in cost of materials and labor. Now, that just could not possibly be.

Secretary MARSHALL. I think it goes beyond that.

Senator CAPEHART. Would you say, for all practical purposes, the set that was originally talked about at $4,597 was completely discarded, and a new set engineered and designed?

Secretary MARSHALL. I think that General Lawton of the Deputy Chief Signal Office can give you the answer.

General LAWTON. I am General Lawton of the Signal Corps. Senator CAPEHART. I want to say to General Lawton that such figures as this are very confusing, and I think very unfair no doubt both to the national defense, and the Signal Corps, as well as the

manufacturers, because when you say that something has gone up from $4,500 to $20,000 due to labor and materials, it just cannot be. General LAWTON. You are correct, the statement is not only very confusing, it is incorrect. First, I will read what the Appropriations Committee of the Senate wrote on May 22, 1951, in their report on this subject to accompany H. R. 3842:

It should be noted that the increase for Signal Service covers a period in most cases back to the original budget prepared in September of 1949. A number of these items, however, were newly developed and had never been produced in quantity, so the original price estimates were necessarily based on preliminary engineering estimates, and subsequent price quotations reflect, in some instances, revised cost estimates based on definitive contracts. It is also noted that in a number of cases the increase cost partially results from tooling and engineering costs for new sources of production.

Now, remember we used an estimated price of September 1949 in the budget for 1951. A number of these items, however, were newly developed, had never been produced in quantity, so that the original price estimates were necessarily based on preliminary engineering estimates, and subsequent price quotations reflected in some instances revised costs based on definitive contracts.

Now, up at the top of this column, that is a misnomer when it says, in that first column, "Amount requested to cover price increases.” That is wrong. Nobody has ever made any of the sets that are here listed, except one, and that is a pole digger, an earth auger which digs holes for telephone poles, which is mounted on a standard ordnance truck-it is item 18, and there you will see an increase of 28 percent. Now, that is factual, because in 1950, before Korea, we bought this item. Then after Korea, we have a definitive contract on that item, and it is a 28 percent increase.

Now, the price of other items in there, that have never been produced before, is only an engineer's estimate at the laboratory who is not thoroughly conversant with production of this new miniaturized equipment.

Senator CAPEHART. That is the point, you see. It said, “Amount requested to cover price increases.

General LAWTON. That should be struck out, sir.

Senator CAPEHART. The impression was left in this report that these sets had gone up in price due to material and labor, and as I said in my opening statement, it is very unfair both to the National Defense Establishment as well as the manufacturers if those are not the facts. Now, your explanation is that these were sets that were engineered and never produced before.

General LAWTON. That is correct, and had they been produced around September of 1949 with those prices at a slow rate by a small company with a low overhead, they would not be too far out of line.

Senator CAPEHART. If they had not been changed, if specifications had not been changed.

General LAWTON. Sometimes we have to do that when we get into production, even with the best engineering companies, because you cannot go into production with a laboratory model without one or more changes by the production engineer.

Senator CAPEHART. Who produces these particular sets?

General LAWTON. Well, I have one here produced by RCA, the well-known walkie-talkie. You will find that we had in our 1951 budget about 295 items of which only about 10 items have ever been.

made before, and the reason for that is this: During the intervening period of 5 years since World War II, the Congress has given the Signal Corps $25,000,000 a year to improve our equipment. We have used the best electronic engineers in our own Signal Corps Engineering Laboratory plus those in institutions and commercial laboratories. We have used MIT, GE, Bell Laboratories, and many other laboratories. We have taken the walkie-talkie you are familiar with, and reduced it from 46 pounds to 23 pounds.

Instead of having 40 channels, we have got 167 radio channels, and one dry battery in this set will last, instead of about about 20 hours, about 30 hours of continuous operation. It is a miniaturization type, so as you look at it you will notice that it requires almost the watchmaker's method of assembly.

That set has never been made before, but after a year or so of production it will roll off the production line and many people will wonder why we did not do this before. True, it looks a little intricate, a little close work, but if the Swiss can make watches as they have done over a period of hundreds of years and make a living at it, we can learn to make these things small.

Senator CAPEHART. Who is manufacturing this item that went from $4,597 up to $20,000?

General LAWTON. Will you give me the item on the left, so I can identify it better?

Senator CAPEHART. From $4,597 to $20,185.

Mr. SMALL. That is the radio set I was talking about this morning. General LAWTON. That is what we call a radio relay set, and that is being designed by Western Electric which is a large research and development organization. When they get this packaged right for military use, a large quantity of production will be made by Philco, so that the price has not yet been determined by a definitive contract.

One other reason for this price differential was a misunderstanding within the Signal Corps. At a relay station the signal going in one direction, east to west, is picked up, amplified, and sent on. The laboratories estimated the cost as $4,597, and this price, per relay station, was entered in the budget. However, voice conversations have to travel in both directions, so another similar equipment is required at the same point to relay the signal west to east. It, therefore, requires two of these equipments at each relay station, which should have been entered in the budget at $9,194.

Senator CAPEHART. Have you already let the contract for those? General LAWTON. A letter order has been let for them, yes, sir. Senator CAPEHART. Were they put out on open bids?

General LAWTON. No, negotiated bids.

Senator CAPEHART. Why negotiated bids?

General LAWTON. In general, in January when we wanted to get all of our items started in production, we gave the first production to the company who had done the research and development on it, where they had the engineers who could start production, and then in cases like this relay set mentioned above, manufacturers who did not have the production facilities, we said to the prime contractor, "You must subcontract," and we named the subcontractor with their concurrenceSenator CAPEHART. Have you put any of these radio sets involved here out on open bidding?

General LAWTON. No, sir.