Progress toward completion of facilities covered by 11,052 certificates of necessity issued through June 30, 1952 (includes construction, machinery, and equipment)

Completion schedules.-Facilities expansion covered by certificates of necessity issued through June 30, 1952, is expected to reach virtual completion by the end of 1954, according to schedules of reporting companies. The great bulk, 94 percent, is scheduled to be completed and in operation by mid-1954, 86 percent by the end of 1953, and 48 percent by the end of 1952. Facilities due to reach completion after 1954 are mainly long-range ore-development projects.

Expansion programs scheduled to be completed by mid-1954 include facilities for alkalies and chlorine, pharmaceutical preparations, compressed and liquefied gases, hydraulic cement, steel works and rolling mills, aluminum refining, electrical machinery, railroad line equipment, petroleum pipelines, natural-gas transmission and distribution, and natural gasoline. Expansion programs presently planned to be over 95 percent completed by the middle of 1954 include those for pulp mills, synthetic fibers, industrial inorganic chemicals, petroleum refining, byproduct coke ovens, blast furnaces, welded and heavy riveted pipe, nonelectrical machinery, aircraft and aircraft engines and parts, and Great Lakes transportation.

Breakdown by construction and equipment.-The larger portion of the cost of the expansion program is in the machinery and equipment area, which accounts for 66.5 percent of the total. Construction costs amount to 28.6 percent, and land plus overhead costs account for the balance of 4.9 percent.

1 It is possible that these costs are actually slightly higher because of their possible partial inclusion in the construction or equipment figures.

Borrowing authority under section 304 (b) of the Defense Production Act, as amended

Section 304 (b) of the Defense Production Act, as amended, gave the President authority to authorize borrowings from the Treasury, not to exceed $2.1 billion, for the purpose of implementing sections 302 and 303 of the act. Section 302 permits direct loans for the purpose of expediting production or services essential to defense, and section 303 permits commitments to purchase metals, minerals, and certain other raw materials for Government use or resale, projects designed to encourage exploration, development, and mining of strategic and critical metals and minerals, installation of equipment and other special projects in the national interest the authority for which is not otherwise in existing legislation.

The 1951 amendment permits commitments to exceed the total authorized borrowing authority of $2.1 billion so long as the probable ultimate net cost to the United States Government does not exceed this amount. The borrowing authority must also finance working capital requirements for programs involving loans, advances to contractors, inventory purchases for resale, and other recoverable expenditures. Programs undertaken must be certified as essential by either the Administrator of the Defense Production Administration, the Secretary of Agriculture, or the Administrator of the Reconstruction Finance Corporation.

GROSS VALUE OF ACTUAL TRANSACTIONS
CUMULATIVE BY QUARTERS THROUGH JUNE 30, 1952

When borrowing authority is certified for any given program or type of assistance, by the appropriate executing agency, the total amount certified is certified as either "probable ultimate net cost," "working capital," or a combination of the two, depending on the type of assistance involved. "Probable ultimate net cost" is the estimate made, at the time of certification, of the eventual cost of the program or assistance to the Government. That portion certified as "working capital" represents funds which are expected to be returned to the Government, and are hence in the nature of a revolving fund.

The following table summarizes all transactions consummated through June 30, 1952, by the responsible executing agencies and by types of assistance.

Utilization of borrowing authority under sec. 304(b) Defense Production Act, as amended transactions consummated as of June 30, 1952, and borrowing authority authorized

Of the total borrowing authority of $2.1 billion authorized by statute, certifications as of June 30, 1952, amounted to approximately $1,344 million, leaving an unobligated balance of borrowing authority available for additional certifications of approximately $756 million.

MATERIAL EXPANSION PROGRAMS

Defense Production Administration in cooperation with the Defense Materials Procurement Agency, has sought to insure the development of sufficient raw material productive capacity to provide materials to complete the national stockpile expeditiously and to maintain the continued military production program, with a view to removing controls as soon as these defense objectives are attained. Development activities have not been limited to the United States but instead the development of new sources of supply has been actively encouraged in nations expected to be accessible in time of total war. In addition to expanding foreign supplies for United States use, raw materials production for the nations of the free world has also been encouraged through the activities of such agencies as the Economic Cooperation Administration and its successor, the Mutual Security Agency, and the Technical Cooperation Administration in the Department of State.

To carry out the defense program an organizational framework had to be set up. The decision was made at the highest level of the Government to build on the base of existing peacetime agencies. Originally, operational responsibility for metals and minerals was lodged in the Defense Minerals Administration (DMA) in the Department of the Interior. Later, the Defense Materials Procurement Agency (DMPA) was established on August 28, 1951, by Executive Order 10281 which centralized responsibility for the Government's efforts to stimulate increased production of strategic and critical metals and minerals both in the United States and abroad.

To secure major expansions, combinations of several types of Government assistance have been approved. For example, to assure the development of some new domestic copper deposits it has been necessary to give procurement contracts guaranteeing to buy all or a portion of the output for a period of 6 to 8 years at a floor price subject to escalation, authorize accelerated tax amortization of about 75 percent of the cost of the facilities, make loans of

several millions of dollars, and issue priorities for necessary construction materials, machinery, and operating supplies. Naturally, the combination of all forms of Government assistance is negotiated in such a way that the expansion is assured at the least cost to the taxpayer. In contrast to specific procurement contracts with individual producers which may require protracted and detailed negotiations in which many of the factors are difficult to determine, the Government in some instances has issued broad general floor-price guaranties which permit all operators to go to work at once without individual negotiations. For example, in the case of tungsten, where in early 1951 it appeared that requirements of the defense program would substantially exceed limited supplies, the Government announced that it would buy, at $63 a short ton, up to a limit of 3 million short tons, all domestic tungsten that could not be sold elsewhere during the ensuing 5 years. At the same time the domestic ceiling price was fixed at $65 a short ton. Under this guaranty the domestic miner did not need to waste precious time in negotiations covering ore bodies of very uncertain tenor, but instead he was permitted to proceed directly with mining operations and sales to industry.

The Defense Materials Procurement Agency (DMPA) operates within the framework of programs certified to it by the Defense Production Administration (DPA) in accordance with the joint memorandum of understanding. As of June 30, 1952, detailed resource expansion programs for the following materials had been certified:

In addition, the expansion of production capacity of several other metals and minerals, such as selenium, has been provided for by individual actions processed before detailed expansion programs could be developed.

A program to encourage domestic exploration for strategic minerals was announced by the Defense Minerals Administration (DMA) in the Department of the Interior in early 1951 after DPA approval and certification of Defense Production Act funds. Under this program the Government advances funds, on a matching basis related to the relative scarcity of metals and minerals, to provide capital for domestic exploration. As of the end of June 1952 nearly 264 projects in 27 States and Alaska had been authorized, and Government funds totaling about $8.8 million had been advanced. This program is now being implemented by the Defense Minerals Exploration Administration (DMEA) in the Department of the Interior.

During this year, emphasis on the use of borrowing authority under section 304 has been placed on the materials programs discussed above. In the charts below, the cumulative transactions for six of the most important metals are shown for the 1952 fiscal year.

The mechanism which the Defense Production Administration employs to coordinate the activities of the various Government agencies in the work of providing expansion of supplies of basic materials and reaching decisions as to the quantities which can enter the stockpile, is the use of two interagency committees. They are discussed in the following sections of the report.

Defense Materials Policy Committee

The Defense Materials Policy Committee was established late in December of 1951 to consider and act upon significant materials policy problems. The principal functions of the committee are the review of the following types of policies and problems: (1) Positions to be taken by the United States representatives in the International Materials Conference; (2) objectives, policies, and programs for the procurement of materials needed for the defense effort, at home or abroad; (3) plans and methods to control or limit price increases for needed materials, including multination action; and (4) plans, programs, and problems referred to the committee by the Office of Defense Mobilization, the DPA Administrator and the Defense Materials Operating Committee. The policy committee furnishes advice to the chairman for transmission to the Administrator on such problems and policies in the materials field.

The members of the Defense Materials Policy Committee, in addition to the DPA Administrator who normally serves as its chairman, consist of the heads or top-level representatives of the Department of State, Department of Defense (Munitions Board), Department of Agriculture, Department of the Interior, Department of Commerce (National Production Authority), Defense Materials Procurement Agency, Office of the Director for Mutual Security, Economic Stabilization Agency, Office of Price Stabilization, Office of Defense Mobilization, National Security Resources Board, and the Bureau of the Budget.

The Defense Materials Policy Committee, since its first meeting in January 1952, has developed and reviewed policy positions on: (1) International allocation of increases in supply brought about by a nation's own efforts; (2) international price agreements; (3) criteria for diversion or withdrawals of materials from the stockpile; (4) establishing preference ratings for export shipments; (5) policy for Government purchase under the Defense Production Act of stockpile materials for which current supplies are more than sufficient to meet current requirements.

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