locations in the Western Hemisphere the production of abacá, a hard fiber used in the making of marine and other cordage. The abacá program was instituted by RFC early in 1942. Within a short time after entry of the United States into World War II, the bulk of the Nation's supply of abacá fiber was cut off by the Japanese occupation of the Philippine Islands. Up to that time, the Philippines produced about 95 percent of the world's abacá supply. The remainder came from the Dutch East Indies. With the cooperation of the United Fruit Co., a concern with over 50 years experience in tropical agriculture, the Government undertook the installation of five plantations in four Central American countries to cope with the situation. Many difficulties were encountered in the process because of wartime scarcities in labor, machinery, shipping, etc., but by 1943 all of the plantations, consisting of approximately 28,000 acres, were installed. Soon thereafter, these plantations began to turn out fiber badly needed in the war effort, in time to augment the dwindling prewar stockpile. A tabulation of the production from these plantations from inception through the close of fiscal year 1952 follows: Under the 1950 act, Congress not only provided for the continuation of the original plantations but also for their expansion from the previous acreage (approximately 25,000) to a maximum of 50,000 acres. On August 21, 1950, the President directed the Corporation to expand to this authorized maximum. While the production from the Government-owned plantations is, at present, but 10 percent of the world production, it does nevertheless constitute approximately 25 percent of our current consumption and would provide a substantial part of the essential fiber needs of the country during an emergency. It is therefore to be looked upon as a stockpile in the ground, which has the effect of reducing the physical stockpile and lessening rotation problems. The major portion of the Corporation's efforts during the 1952 fiscal year dealt with the preliminary steps necessary toward accomplishing the acreage expansion directed by the President. Over 150,000 acres of land have been surveyed and analyzed in an effort to locate the approximately 25,000 additional acres required. Arrangements and agreements with foreign governments and management contractors are being worked out. The agreements with the governments are essential in order that firm understandings regarding duties, taxes, etc., may be had. In some instances, these must be considered by the legislative bodies of the countries involved. Actual expansion of 5,025 acres was authorized during fiscal year 1952. Work was begun on this acreage in October 1951, but had to be suspended from midNovember through March because of the rainy season. However, by June 1952, approximately 1,700 acres were planted and under cultivation. It is contemplated that the remaining 3,325 acres will be planted by the third quarter of fiscal year 1953. In addition, construction of the attendant labor camps, railroad facilities, drainage canals, etc., is underway, completion of which is anticipated at or about the same time planting is concluded. By the close of the year, the Corporation had narrowed down the vast new areas under consideration, and the list of prospective applicants to the limited number required for the expansion, and it is anticipated that the formal authori zations dealing with the bulk of the additional acreage needed will be made during fiscal year 1953. During the fiscal year ended June 30, 1952, abacá production, including tow, amounted to 32,041,250 pounds-30,861,900 pounds of fiber were sold and delivered during the fiscal year 1952 for a total price of $7,945,231. (Closing inventories were also sold, but deliveries could not be effected by June 30.) FEDERAL CIVIL DEFENSE ADMINISTRATION FEDERAL CIVIL DEFENSE ADMINISTRATION, Hon. BURNET R. MAYBANK, Chairman, Joint Committee on Defense Production, Senate Office Building, Washington 25, D. C. DEAR SENATOR MAYBANK: The following information is furnished in response to Mr. Harold Warren's letter of August 22, 1952, requesting a brief summary of the operations of the Federal Civil Defense Administration during the past year under the Defense Production Act: Under DPA Order No. 1, dated May 24, 1951, the Federal Civil Defense Administration was designated as claimant agency for all Federal, State, and local civil defense requirements. Under this authority, FCDA serves both as direct and indirect claimant. The agency is direct claimant for controlled materials (steel, copper, and aluminum) which are allocated by DPA, and indirect claimant for all types of equipment and other end items, as well as for materials other than controlled materials, which are needed for the Federal, State, or local civil defense effort. As indirect claimant, FCDA operates primarily through the NPA industry divisions. Prior to January 8, 1952, FCDA did not have authority to process applications requesting authorization to commence construction of civil defense projects, allotment of controlled materials, and priority assistance for materials other than controlled materials, needed in the construction. Scores of Federal, State, and local applications of this kind were submitted to NPA with FCDA recommendations concerning quantities of controlled materials to be allotted. On January 8, 1952, FCDA was given authority under NPA Delegation 14 to process applications for construction of buildings or other projects to be used exclusively for civil defense purposes. Projects involving partial civil defense factors are processed by NPA, usually after FCDA concurrence has been obtained. Under authority of DPA Order No. 1 and NPA Delegation 14, in the period January 8, 1952, to August 31, 1952, the following controlled materials allotments were made for civil defense programs as shown below: During the past year FCDA has given priority assistance to 134 companies furnishing class B products on Federal, State, and local civil defense contracts. Assistance in obtaining supplies for maintenance, repair and operations (MRO) was also given to 26 companies during the past 6 months. The Federal Civil Defense Administration has membership on the NPA Order Clearance Committee and the Small Business and Conservation Coordination Committees of DPA. This Administration is also represented on some 25 of the requirements committees of the NPA industry divisions. FCDA has reviewed and furnished recommendations to DPA regarding six applications for tax amortization. No major problems have been encountered by FCDA in carrying out its responsibilities under the Defense Production Act. So far, the program has been most effective in insuring the availability of materials needed for civil defense and which could be procured within the amount of funds available to Federal and State governments for such purposes. Sincerely, MILLARD CALDWELL. SMALL DEFENSE PLANTS ADMINISTRATION SMALL DEFENSE PLANTS ADMINISTRATION, Hon. BURNET R. MAYBANK, Chairman, Joint Committee on Defense Production, DEAR SENATOR MAYBANK: As requested in a letter of August 22, 1952, from your committee, we are pleased to submit the attached report on the operations of this Administration during the past year. The report is for proposed inclusion in the annual report to Congress of the Joint Committee on Defense Production. We will be glad to furnish any additional information, should your committee desire it. Sincerely, JOHN E. HORNE. OPERATIONS OF THE SMALL DEFENSE PLANTS ADMINISTRATION SINCE JULY 31, 1951 The Small Defense Plants Administration was created by section 714 of the Defense Production Act of 1950, as amended by Public Law 96, Eight-second Congress, enacted July 31, 1951. The Administration's statutory life, originally scheduled to end June 30, 1952, has been extended by Congress to June 30, 1953. Like its predecessor of World War II, the Smaller war Plants Corporation, SDPA was established by Congress to insure for small business a substantial role in the production of both military and essential civilian items. In passing the Defense Production Act in 1950, Congress had stated as basic policies that "small business enterprises be encouraged to make the greatest possible contribution toward achieving the objectives of this act" and that "a fair proportion of the total purchases and contracts for supplies and services for the Government shall be placed with small business concerns." During succeeding months, it became clear, however, that these congressional policies were not being placed in effect, and that small-business firms were, for the most part, being shut out of the defense effort. Faced with materials shortages on the one hand, and unable to get defense contracts on the other, many small businesses were headed for ruin. Other small businesses, fortunate enough to obtain contracts, had great difficulty getting the necessary financing to carry them out. It was to remedy this situation, to help small business do its share in building the Nation's defenses, that Congress established SDPA. Section 714 of the Defense Production Act assigns to SDPA responsibilities in regard to Government procurement, materials allocations, credit, and other phases of the defense program of concern to small business. These responsibilities are not, however, of an operational nature-that is, SDPA does not itself award contracts, allocate materials, make loans, and so forth. Instead, SDPA is responsible for consulting with other Government agencies, to which these functions have been assigned, to make certain that they give full consideration to the interests of small business in the development of their policies and programs; for reviewing the actions and proposed actions of these agencies to see that they do not work undue hardship on, or discriminate against, small firms; and for recommending to these agencies measures which will increase small-business participation in the defense effort. During the past year SDPA has conducted, on a broadening scale, programs of assistance to small firms in obtaining defense contracts and in obtaining the materials and financing needed to fulfill the contracts or to manufacture essential civilian items. SDPA also has served small business in other ways—for example, acting to insure for it a fair share of accelerated amortization privileges under each expansion goal in the Government's industrial expansion program, providing it with technical and management assistance, and serving as its representative on Government committees which determine over-all mobilization policies. Although significant progress has been made during the past year in bringing small business into the defense program, study of the current economic position of small firms indicates a need for continued and even expanded assistance to them. A recent study by the Administration indicates a continued worsening in the relative economic position of small firms. Briefly, the study shows that— 1. Sales and profits of small firms during the second half of 1951 failed to keep pace with those of big business. (Figures for the first half of 1952 are not yet available.) 2. Small business firms expect to reduce their expenditures for plant and equipment in 1952, while larger firms plan to increase their capital expenditures. 3. The proportion of military contracts going to small business continues to decline. A summary of SDPA's work during the past year, divided by program areas, together with data on the field operations of the Administration, the size of the SDPA staff, and the SDPA regional advisory boards, follows: GOVERNMENT PROCUREMENT The most important single mission of SDPA is the carrying out of the congressional policy that small business should receive a fair proportion of Government contracts for supplies and services. To enable SDPA to carry out this policy, section 714 of the Defense Production Act has given it certain responsibilities in regard to Government procurement. Chief of these are (1) to determine jointly, in cooperation with procurement agencies, that all or part of specific procurement contracts should be awarded exclusively to small firms, and (2) to certify as to the technical and financial capacity of small firms to fulfill specific Government procurement contracts. Insofar as engineering and financial requirements are concerned, this certification must be accepted as conclusive by the procurement agency. SDPA's programs of joint determinations and certificates of competency are discussed in detail below. SDPA's procurement authorities and responsibilities have been added to by the President. By Executive Order 10323, issued February 5, 1952, the President transferred to the Administration various procurement and other functions of the Office of Small Business, National Production Authority, including assistance to small-business men who are interested in forming defense production pools. Subsequently, by Executive Order 10370, effective July 7, 1952, the President delegated to SDPA the authority to approve small business production pools. Here is a brief review of each phase of the Administration's procurement program: Joint determinations Section 714 (f) (2) of the Defense Production Act authorizes the earmarking for small business concerns of all or part of specific procurements when it is jointly determined by SDPA and the procuring agency "(a) to be in the interest of mobilizing the Nation's full productive capacity, or (b) to be in the interest of the national defense program" to do so. This authority to earmark contracts for small firms is the most important single power available to SDPA for increasing small business participation in the defense program. This Administration early set as one of its major goals the establishment of effective joint determination procedures by each of the military departments. As a result of negotiations initiated by SDPA, the Department of Defense on March 27, 1952, issued a policy directive outlining the basic relationship of that Department and SDPA in making joint determinations. Establishment of the actual operating procedures for making the determinations was left, however, to the individual military departments. On April 17, 1952, the Department of the Air Force issued a directive establishing joint determination procedures which were acceptable to SDPA. The directive provided for the assignment of SDPA representatives to the Headquarters, Air Matériel Command, Wright-Patterson Air Force Base, Dayton, Ohio— purchasing center for 95 percent of Air Force items-to review proposed purchases and initiate joint determinations on one suitable for placement with small firms. Proposed purchases involving an expenditure of less than $25,000, and those of an emergency or classified nature, were excluded from the joint determination process. After long negotiation, the Navy and the Army followed the lead of the Air Force and established joint determination procedures which were acceptable to SDPA. The Navy directive, issued July 18, 1952, and the Army directive, issued August 8, 1952, are essentially similar to the Air Force directive, and provide for the assignment of SDPA representatives to major purchasing offices of those departments to review their proposed purchases and initiate joint determinations. SDPA representatives were assigned to the Headquarters, Air Matériel Command, shortly after the Air Force established its joint determination procedures. SDPA now is placing industrial specialists in major Army and Navy purchasing offices to initiate joint determinations on their purchases also. Further, the Administration has been discussing with major civilian procuring agencies the possible need for establishing joint determination programs in their agencies as well. In time, SDPA representatives may be stationed in the purchasing offices of certain of these agencies, also. Although the joint determination program is comparatively new, and has begun to operate in the three military departments during a slack purchasing period, as of September 5, 1952, SDPA representatives in 22 procurement offices already had initiated joint determinations on 246 contracts valued at $124,014,468. Of these, 126 contracts valued at $71,573,708 had definitely been earmarked for placement with small business. Because of the time lag between notice of proposed purchase and actual placing of contracts, however, only eight contracts, valued at $2,315,392, had as yet been awarded to small firms under the joint determination procedures. SDPA believes that the joint determination procedures will help to reverse the continued and serious decline in the proportion of military procurement going to small business. Prime contracts awarded to small firms (500 or fewer employees, as defined by the Department of Defense) during fiscal 1952 were only 17.6 percent of the total, compared with 20.9 percent in fiscal 1951 and 24.5 percent in fiscal 1950. Moreover, statistics recently published by the Munitions Board show that small concerns are receiving little more than half the procurements which they are capable of performing. Based on a review of contracts let by the military from January through May 1952, it is reported that 29.9 percent in dollar volume was suitable for performance by small business. Of that amount, only 59.6 percent was in fact awarded to small concerns. Success of the joint determination procedure in halting the downward trend in contract awards to small firms, and in bringing to small firms a larger percentage of the contracts which they are capable of handling, will of course depend on more than the issuance of departmental directives. In the final analysis, success will depend largely upon whether these directives, and the underlying policy of Congress, are followed wholeheartedly, rather than merely accorded lip service. The remainder of this calendar year will provide a test of the effectiveness of the joint determination procedure and the ability and willingness with which it is being carried out. Certificates of competency A second important SDPA power in the field of Government procurement is the authority to certify small-business concerns as competent, with respect to technical capacity and financial ability, to perform specific Government contracts. A contracting officer must accept a certificate of competency issued SDPA as conclusive on these matters and is authorized to place the contract with the concern certified as competent "without requiring it to meet any other requirement with respect to capacity and credit" (sec. 714 (e) (6) and (f) (1)). Since the beginning of its certification program, SDPA has issued 36 certificates relating to contracts valued at $36,801,535. In all but two cases, where competing firms quoted lower prices, the concerns so certified have been awarded the contracts, or are still being considered for the contracts. SDPA's certification authority has been used only sparingly so far, for reasons discussed later in this section. However, the use made of it to date already indicates that it can be of invaluable help to the small manufacturer who is in position to receive a contract provided that the contracting officer can be assured that he is a responsible supplier. Frequently, also, a certificate of competency will enable a small manufacturer to break the vicious circle of no financing in advance of a contract and no contract. without adequate financing. The small concern caught in this dilemma may be certified by SDPA in order that it will be awarded the contract, which then can be used as a basis for obtaining private or Government financing. |