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DEFENSE PRODUCTION ACT AMENDMENTS OF 1951

MONDAY, JUNE 4, 1951

UNITED STATES SENATE,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C.

The committee met, pursuant to recess, in room 301, Senate Office Building, Senator Burnet R. Maybank, chairman, presiding.

Present: Senators Maybank, Robertson, Benton, Moody, Capehart, Bricker, and Schoeppel.

Also present: Senator Lehman.

The CHAIRMAN. The meeting will come to order. I have four amendments to the bill, referred to this committee, which will be inserted in the record.

(The amendments referred to follow:)

[S. 1397, 82d Cong., 1st sess.]

AMENDMENT Intended to be proposed by Mr. LONG to the bill (S. 1397) to amend the Defense Production Act of 1950, and for other purposes, viz: At the proper place in the bill insert the following:

SECTION 1. That the sum of $100,000,000 is hereby authorized to be appropriated as an emergency fund to be expended under the direction of the Secretary of the Army and the supervision of the Chief of Engineers in the immediate construction of river and harbor and flood control improvements required in the interest of national defense: Provided, That any such improvement, or a useful part thereof, can be substantially completed in one fiscal year: And provided further, That pending the appropriation of said sum, the Secretary of the Army may allot, from existing river and harbor and flood control appropriations, such sums as may be necessary for the immediate prosecution of such improvements, those appropriations to be reimbursed from the appropriation herein authorized when made.

SEC. 2. Funds provided pursuant to this Act shall be expended on any river and harbor or flood control improvement only after certification by the Office of Defense Mobilization of the importance of said project to national defense.

[S. 1397, 82d Cong., 1st sess.]

AMENDMENT Intended to be proposed by Mr. MAYBANK to the bill (S. 1397) to amend the Defense Production Act of 1950, and for other purposes, viz: On page 41, after line 9, insert the following:

SEC. 109. The Defense Production Act of 1950 is amended by inserting immediately after title VII thereof a new title VIII.

"TITLE VIII-INDEPENDENT SMALL BUSINESS

"SEC. 801. It is the sense of the Congress that the objectives of this Aet will be furthered by

"(a) the fullest possible use of independent small-business enterprises in defense procurement; and

"(b) careful consideration of the effect upon independent small business enterprises of materials conservation and limitation orders.

"SEC. 802. In carrying out this policy the President shall

"(a) coordinate and determine the means by which the productive capacity of independent small-business concerns can be most effectively used for national defense and essential civilian production;

"(b) require all governmental agencies to provide upon his request detailed information with respect to the placing of defense procurement contracts; and

"(c) require all governmental agencies to consult with him in the issuance of orders limiting production by business enterprises in order that independent small-business concerns will be most effectively used in the production of articles, equipment, supplies, and materials for national defense and essential civilian purposes.

"SEC. 803. The President shall, whenever he determines such action necessary— "(a) consult with appropriate governmental agencies concerning the development of procurement policies and procedures;

"(b) review proposed procurement actions to ascertain their suitability for replacement with independent small-business enterprises;

"(c) obtain detailed information as to the methods and terms which holders of prime procurement contracts use in letting subcontracts, and obtain detailed information as to the extent to which such prime contractors entered into subcontracts, and take action to promote the letting of subcontracts by prime contractors to small business concerns;

"(d) certify to governmental financial agencies and guaranteeing agencies the amount of funds required to convert to defense production any plant of an independent small business concern interested in obtaining the funds necessary to provide for such conversion;

"(e) certify to Government procurement officers with respect to the adequacy of production facilities and credit, of any independent small business concern to perform an individual Government procurement contract or to participate in specific classes of Government procurement;

"(f) make and maintain a complete inventory of all productive facilities of independent small business concerns which can be used for defense and essential civilian production, and in connection therewith to arrange for the use of the facilities of any appropriate group or agency, governmental or nongovernmental;

"(g) obtain from any Federal department, establishment, or agency engaged in defense procurement or in the financing of defense procurement or production such reports concerning the letting and methods of letting contracts and subcontracts and making of loans to business concerns as he may deem pertinent in carrying out his functions under this Act;

"(h) obtain from suppliers of materials detailed information pertaining to the method of filling orders and the bases for allocating their supply for the purpose of assisting independent small businesses to obtain materials for defense or essential civilian production from its normal sources;

"(i) make recommendations to the appropriate Federal agencies to insure a fair and equitable share of materials, supplies, and equipment to independent small business concerns for the benefit of the defense program or for essential civilian purposes; and

"(j) determine within any industry the independent concerns, firms, persons, corporations, partnerships, cooperatives, or other business enterprises, which are to be designated 'small business concerns' for the purpose' of effectuating the provisions of this Act.

"SEC. 804. In any case in which an independent small business concern has been certified by or under the authority of the President with respect to the adequacy of productive facilities and credit to perform a specific Government procurement contract, the officers of the Government having procurement powers are directed to accept such certification as conclusive, and are authorized to let such Government procurement contract to such concern without requiring it to meet any condition with respect to productive facilities and credit other than such conditions as may be included in such certificate.

"SEC. 805. Special consideration in proceedings under the Renegotiation Act of 1951 shall be given to the holders of Government prime contracts, and holders of subcontracts thereunder, who subcontract to independent small business

concerns.

"SEC. 806. The President shall make a report every six months with respect to operations under this Act to the President of the Senate and the Speaker of the House of Representatives. Such report shall include such information and

such comments and recommendations, with respect to the relation of independent small business concerns to the defense effort, as the President may deem appropriate.

"SEC. 807. The President may delegate the power and authority conferred upon him by this amendment to a single officer or agency. Such single officer or agency may be authorized by the President to redelegate the power and authority to a single officer and agency."

SEC. 2. On page 38, line 16, strike out "and", change the period in line 18 to a "semicolon", and add the following: "and by inserting at the end thereof the following: title VIII-Independent Small Business".

[S. 1397, 82d Cong., 1st sess.]

AMENDMENTS Intended to be proposed by Mr. MAYBANK to the bill (S. 1397) to amend the Defense Production Act of 1950, and for other purposes, viz:

On page 41, line 9, insert the following:

SEC. 110. The Defense Production Act of 1950 is amended by adding thereto a new title IX reading as follows:

"TITLE IX-AMENDMENTS TO PROVISIONS OF INTERNAL REVENUE CODE FOR AMORTIZATION OF EMERGENCY FACILITIES

"SEC. 901. Section 124A of the Internal Revenue Code is amended by adding thereto a new subsection (j) reading as follows:

"(j) After the effective date of this subsection, no application for a certificate under subsection (e) of this section involving an emergency facility for a particular product shall be processed if filed by an applicant for whom an application under subsection (e) involving such a product has theretofore been approved, until such time as all applications under subsection (e) involving that particular product which are pending on the effective date of this amendment have been either approved or denied. After such pending applications have been so approved or denied, no application filed in any month for a certificate under said subsection (e) involving an emergency facility for a particular product shall be processed in that month if filed by an applicant for whom an application under said subsection (e) involving such a product has theretofore been approved, until other applications filed during such month involving that particular product have been approved or denied. Any application approved after the effective date of this amendment without compliance with the provisions of this subsection shall be void and of no effect.'

"SEC. 902. Section 124A (d) (1) of the Internal Revenue Code is amended by striking out 'December 31, 1949' and substituting therefor 'July 1, 1950'. Any certificate issued under subsection (e) of this section prior to the effective date of this amendment with respect to an emergency facility completed or acquired by a taxpayer after December 31, 1949, and before July 1, 1950, shall be valid and effective only for a twelve-month amortization on a sixty-month amortization base and may be utilized only during the first taxable year of the taxpayer ending after December 31, 1949, or for a consecutive period of twelve months beginning with the month following the month in which the facility was completed or acquired, at the election of the taxpayer.

"SEC. 903. This title shall take effect upon the passage of this Act."

On page 38, line 16, strike out "and," change the period in line 18 to a comma and add the following: “and by inserting 'Title IX-Amendments to Provisions of Internal Revenue Code for Amortization of Emergency Facilities' at the end thereof."

[S. 1397, 82d Cong., 1st sess.]

AMENDMENT Intended to be proposed by Mr. SPARKMAN (for himself, Mr. O'CONOR, Mr. LONG, Mr. GILLETTE, Mr. HUMPHREY, Mr. HUNT, Mr. BENTON, Mr. TOBEY, Mr. SALTONSTALL, Mr. THYE, Mr. HENDRICKSON, Mr. SCHOEPPEL, Mr. DUFF, Mr. AIKEN, Mr. ANDERSON, Mr. BRIDGES, Mr. BUTLER of Nebraska, Mr. CAIN, Mr. CAPEHART, Mr. CARLSON, Mr. CASE, Mr. CHAVEZ, Mr. CLEMENTS, Mr. DOUGLAS, Mr. FLANDERS, Mr. GREEN, Mr. HENNINGS, Mr. HILL, Mr. HOEY, Mr. IVES, Mr. JENNER, Mr. KEFAUVER, Mr. KERR, Mr. KILGORE, Mr. LANGER, Mr. LEHMAN, Mr. MAGNUSON, Mr. MCCARTHY, Mr. MCMAHON

Mr. MALONE, Mr. MARTIN, Mr. MONRONEY, Mr. MOODY, Mr. MORSE, Mr. MUNDT, Mr. MURRAY, Mr. NEELY, Mr. NIXON, Mr. O'MAHONEY, Mr. PASTORE, Mr. SMATHERS, Mrs. SMITH of Maine, Mr. SMITH of New Jersey, Mr. STENNIS, and Mr. UNDERWOOD) to the bill (S. 1397) to amend the Defense Production Act of 1950, and for other purposes, viz: On page 41, between lines 9 and 10, insert the following new section:

SEC. 109. Section 701 of the Defense Production Act of 1950 is amended to read as follows:

"SEC. 701. (a) (1) It is the sense of the Congress that small-business concerns be encouraged to make the greatest possible contribution toward achieving the objectives of this Act. In order to carry out this policy there is hereby created a body corporate under the name 'Small Defense Plants Corporation' (hereinafter referred to as the Corporation), which Corporation shall be under the general direction and supervision of the President. The principal office of the Corporation shall be located in the District of Columbia, but the Corporation may estab lish such branch offices in other places in the United States as may be determined by the Administrator of the Corporation.

"(2) The Corporation is authorized to obtain money from the Treasury of the United States, for use in the performance of the powers and duties granted to or imposed upon it by law, not to exceed a total of $ outstanding at

are

any one time. For this purpose appropriations not to exceed $ hereby authorized to be made to a revolving fund in the Treasury. Advances shall be made to the Corporation from the revolving fund when requested by the Corporation.

(3) The management of the Corporation shall be vested in an Administrator who shall be appointed by the President, by and with the advice and consent of the Senate, and who shall be a person of outstanding qualifications known to be familiar and sympathetic with small-business needs and problems. The Administrator shall receive compensation at the rate of $17,500 per annum. The Administrator shall not engage in any other business, vocation, or employment than that of serving as Administrator. The Administrator is authorized to appoint two Deputy Administrators to assist in the execution of the functions vested in the Corporation. Deputy Administrators shall be paid at the rate of $15,000 per

annum.

"(4) The Corporation shall not have succession, beyond June 30, 1953, except for purposes of liquidation, unless its life is extended beyond such date pursuant to an Act of Congress. It shall have power to adopt, alter, and use a corporate seal, which shall be judicially noticed; to make contracts; to lease such real estate as may be necessary for the transaction of its business; to sue and be sued, to complain and to defend, in any court of competent jurisdiction, State or Federal; to select and employ such officers, employees, attorneys, and agents as shall be necessary for the transaction of business of the Corporation; to define their authority and duties, require bonds of them, and fix the penalties thereof; and to prescribe, amend, and repeal, by its Administrator, bylaws, rules, and regulations governing the manner in which its general business may be conducted and the powers granted to it by law may be exercised and enjoyed. The Administrator shall determine and prescribe the manner in which the Corporation's obligations shall be incurred and its expenses allowed and paid. The Corporation shall be entitled to the free use of the United States mails in the same manner as the executive departments of the Government. The Corporation, with the consent of any board, commission, independent establishment, or executive department of the Government, may avail itself of the use of information, services, facilities, including any field service thereof, officers, and employees thereof in carrying out the provisions of this section.

“(5) All moneys of the Corporation not otherwise employed may be deposited with the Treasurer of the United States subject to check by authority of the Corporation or in any Federal Reserve bank. The Federal Reserve banks are authorized and directed to act as depositaries, custodians, and fiscal agents for the Corporation in the general performance of its powers conferred by this Act. All insured banks, when designated by the Secretary of the Treasury, shall act as depositaries, custodians, and financial agents for the Corporation. "(b) (1) The Corporation is empowered

"(A) to recommend to the Reconstruction Finance Corporation loans or advances, on such terms and conditions and with such maturities as it may determine, to enable small-business concerns to finance plant construction, conversion, or expansion, including the acquisition of land; or finance the acquisition of equipment, facilities, machinery, supplies, or materials; or to

finance research, development, and experimental work of new or improved products or processes; or to supply such concerns with capital to be used in the manufacture of articles, equipment, supplies, or materials for defense or essential civilian purposes; or to establish and operate technical laboratories to serve small-business concerns; such loans or advances to be made or effected either directly by the Reconstruction Finance Corporation or in cooperation with banks or other lending institutions through agreements to participate in insurance of loans, or by the purchase of participations, or otherwise;

"(B) to purchase or lease such land, to purchase, lease, build, or expand such plants, and to purchase or produce such equipment, facilities, machinery, materials, or supplies, as may be needed to enable the Corporation to provide small-business concerns with such land, plants, equipment, facilities, machinery, materials, or supplies as such concerns may require to engage in the production of such articles, equipment, supplies, or materials;

"(C) to lease, sell, or otherwise dispose of to any small-business concern any such land, plants, equipment, facilities, machinery, materials, or supplies; "(D) to enter into contracts with the United States Government and any department, agency, or officer thereof having procurement powers obligating the Corporation to furnish articles, equipment, supplies, or materials to the Government;

"(E) to arrange for the performance of such contracts by letting subcontracts to small-business concerns or others for the manufacture, supply, or assembly of such articles, equipment, supplies, or materials, or parts thereof, or servicing or processing in connection therewith, or such management services as may be necessary to enable the Corporation to perform such contracts; and

"(F) to provide technical and managerial aids to small-business concerns, by maintaining a clearing house for technical information, by cooperating with other Government agencies, by disseminating information, and by such other activities as are deemed appropriate by the Corporation. **(2) In any case in which the Corporation certifies to any officer of the Government having procurement powers that the Corporation is competent to perform any specific Government procurement contract to be let by any such officer, such officer shall be required to let such procurement contract to the Corporation upon such terms and conditions as may be specified by the Corporation. Subcontracts may be let upon such terms and conditions as the Corporation may deem appropriate in accordance with such regulations as may be prescribed under section 201 of the First War Powers Act, 1941, as amended.

"(c) (1) Whoever makes any statement knowing it to be false, or whoever willfully overvalues any security, for the purpose of obtaining for himself or for any applicant any loan, or extension thereof by renewal, deferment of action, or otherwise, or the acceptance, release, or substitution of security therefor, or for the purpose of influencing in any way the action of the Corporation, or for the purpose of obtaining money, property, or anything of value, under this section, shall be punished by a fine of not more than $5,000 or by imprisonment for not more than two years, or both.

"(2) Whoever, being connected in any capacity with the Corporation, (1) embezzles, abstracts, purloins, or willfully misapplies any moneys, funds, securities, or other things of value, whether belonging to it or pledged or otherwise entrusted to it, or (2) with intent to defraud the Corporation or any other body politic or corporate, or any individual, or to deceive any officer, auditor, or examiner of the Corporation, makes any false entry in any book, report, or statement of or to the Corporation, or, without being duly authorized, draws any order or issues, puts forth, or assigns any note, debenture, bond, or other obligation, or draft, bill of exchange, mortgage, judgment, or decree thereof, or (3) with intent to defraud participates, shares, receives directly or indirectly any money, profit, property, or benefit through any transaction, loan, commission, contract, or any other act of the Corporation, or (4) gives any unauthorized information concerning any future action or plan of the Corporation which might affect the value of securities, or, having such knowledge, invests or speculates, directly or indirectly, in the securities or property of any company or corporation receiving loans or other assistance from the Corporation, shall be punished by a fine of not more than $10,000 or by imprisonment for not more than five years, or bɔth.

"(d) Whenever the Corporation has completed any transaction under clause (B) or (C) of subsection (b) (1) of this section, it may transfer the plant, equipment, facilities, machinery, materials, supplies, leases, or other property resulting from such transaction to the Reconstruction Finance Corporation, and the Re

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