investigation went into various phases of the project and all questions asked by the investigators were answered in a prompt and frank

manner.

The prime contractor is E. I. du Pont de Nemours & Co., Inc. The reason for getting the du Pont Co. into the picture was due to the fact that it was the only outstanding chemical concern in the country at that time which was not in the program. It has unlimited resources, the required specialized experience, and well-trained technical and construction personnel. At their headquarters in Wilmington, Del., there is a force of 1,800 technical and scientific employees. Under normal circumstances, a construction project could be more economically achieved by competitive bids among selected and competent contractors. This system, however, requires preparation before the advertising of detailed plans and specifications. In this case, conditions are not normal, security requirements must be centralized, time is of the essence, and the delay incident to the preparation of detailed plans and specifications could not be considered.

On the site, there was a supervisory group of approximately 80 du Pont employees representing conservatively 1,500 years of construction experience who have an average service of from 10 to 15 years each with the du Pont organization. In addition some 800 were employed in the technical and field-engineering group throughout the several areas.

Work was carried on 5 days per week, 9 hours per day, and premium time had averaged less than 5 percent of the total payroll. Management apparently recognized well-established rules and regulations customary in the industry as they affect the several crafts and did not permit special considerations beyond those well-established practices.

Construction subcontracts have been awarded for railroad, grading, road construction, electrical engineering, and concrete supply. Subcontracts for engineering design have been at fees less than the scale published by the American Society of Civil Engineers and the American Institute of Architects. Work stoppages have been negligible. Construction of the railroad was about 5 weeks behind schedule at the time of the investigation due to a delay in the receipt of steel rails, but delays were reported to have been few.

It appeared evident that the management was cost conscious. Spot checks of actual unit costs on various operations were tabulated and compared with the estimated costs. The element of competition between areas had been developed to a high degree. Daily and weekly average field ratings of employees in each area were made and distributed. The activity of the men left a favorable impression. The decisions of the engineering force were found to have been made after careful engineering studies as to the economics of the method in question.

The prime contractor did not maintain recruiting offices in various cities, a customary procedure on projects of this magnitude. The American Federation of Labor was used by the management as a recruiting organization and made recommendations for filling manpower requirements. Management considered that as a result of this arrangement recruiting costs were very much lower. This method has been the cause of adverse criticism.

The qualifications of subcontractors appeared to have been carefully checked as to personnel, equipment, financial standing, the size of jobs they had successfully completed, and their general reputation and integrity for good work.

Some difficulty had been encountered in getting deliveries of steel, and at times there were some idle men as a result.

The investigation covered many other phases of the operation at the Savannah River plant, including housing, land acquisition, competitive bids, plans and specifications, organization, personnel, record systems, warehousing, fees paid, employment methods, safety provisions, planning and scheduling, security and appropriations.

MACHINE TOOLS-PROGRESS REPORT

This committee on January 23 issued Progress Report No. 13 covering the subject of machine tools. The first part, after an introduction, dealt with the historical background of the industry, the defense requirements, the productive capacity existing, and the basic industry problems. In the second portion of the report attention was given to the actions to overcome bottlenecks, Government reserves of tools, subcontracting, and the manpower situation. Part 3 was devoted to the financial aspects of the program with particular reference to the functions of the General Services Administration.

In the introduction it was pointed out that the security of the Nation rests in a large measure on machine tools. Defense projects were, at the time the report was written, waiting for tools but the various programs undertaken to obviate the bottleneck were well on the way toward solving the problem.

The history of the machine-tool industry has been one of feast and famine. During World War II production reached a peak in 1942 of $1,320,000,000 but dropped in 1949 to $249,500,000. At the time of Korea, the machine-tool industry was at a low ebb. Employment was down to 37,000 workers, the lowest in over a decade. Government officials, at that time, did not consider machine tools to be a serious problem. One reason for this optimism was the vast quantity of tools in reserve inventories held by the services and the General Services Administration. Secondly, insufficient attention was given to the change in designs of weapons of war. Such changes required new machine tools and made obsolete many of the thousands of tools in reserve.

The report examined the difficulty of ascertaining exactly what were the over-all requirements for machine tools for a given period, as a basis from which to calculate the capacity necessary to meet such demand. The armed services themselves buy very few machine tools. Their contracts are for the production of end items and the contractors decide what kind of tools must be used to build individual components. Contractors are reluctant to order tools until the contract for the end item is awarded, Furthermore, different contractors would have different ideas as to the type of tool required since machine tools are extremely flexible.

It was quite some time after Korea before an expansion was noted in the machine-tool industry. There were several factors which held the industry back. One was the financial condition of the industry due to the declining demand for its products after World War II.

The sale of thousands of Government-owned surplus tools after World War II had aggravated this condition. The industry had insufficient capital to finance large inventories and to increase their facilities. The industry claimed that the Government's renegotiation policy was partially responsible for this situation. There was a lack of proper Government financial aid, since under the Assignment of Claims Act, as in force at the time of Korea, claims of the United States were prior to those of an assignee and hence commercial banks were reluctant to make loans to machine-tool builders. Builders were afraid of overexpansion because they had seen their plants stand idle during recent years. For some months after July 1950 they continued to favor their civilian customers. Long delays were experienced in obtaining approvals for certificates of necessity. The general price freeze on January 26, 1950, caught the machine-tool builders with a pricing structure that made it almost impossible for them to operate. The ceiling price was fixed at the delivered price as of that period. Since most machine-tool builders required a long lead time, deliveries made in January 1951 were at prices quoted prior to Korea, the low point of the industry for many years. As noted later, it was not until August 1951 that a price adjustment was worked out which was satisfactory to the industry. Shortage in skilled manpower was a continuing problem. Material shortages began to develop.

The report attacked each one of the problems mentioned and set forth the steps taken by the Government agencies to solve them. In the field of distribution the National Production Authority issued a basic regulation on February 28, 1951, requiring each manufacturer to schedule 70 percent of his monthly production to service contractors, with the remaining 30 percent to be used first to fill rated orders from other purchasers and then if any balance remained to fill unrated orders. Provision was made in the order to divert deliveries from one customer to another and to freeze a manufacturer's schedules for a 3-month period. In November of 1951 the regulation was amended to channel virtually all machine tools into direct military and defense supporting production. Order boards have been submitted to NPA since April of 1951. From these order boards NPA was able to expedite by diversion deliveries of tools to defense contractors.

On July 9, 1951, Mr. Charles Wilson, Director of Defense Mobilization, issued a directive setting forth measures to be taken to increase metal-working tool production. In the implementation of this directive, action was taken by a number of agencies.

The Office of Price Stabilization in August 1951 revised its regulations to permit machine-tool manufacturers to increase their baseperiod price by 12 percent before adding further adjustments for increased cost of labor, materials and subcontracting.

NPA acted to give machine-tool builders priority in diversion actions to see to it that machine-tool builders got the necessary machine tools to build other machine tools. NPA, also, under its controlled-materials plan, gave allotments at a high level so that the industry had sufficient tickets to get the materials needed. In addition, it granted a new program symbol Z-2 which had elements of preference over symbols allotted to other manufacturers. Since those steps were taken, there have been only isolated problems for the machine-tool industry in the materials field.

On the financial front the Assignment of Claims Act was amended on May 15, 1951, and in September 1951 simplified procedures were adopted for Government guaranty of V loans. The pool-order program, which was initiated in February by NPA, was made more attractive to the machine-tool industry in August 1951 by the addition of a provision permitting advances up to 30 percent of the amount of the contract. This program, which was similar to one carried on by the Defense Plants Corporation during World War II, was a device whereby the Government in effect underwrote the production of machine tools. NPA recommends the size, type, quantity, etc., of items to be ordered from each producer. General Services Administration acts as the contracting party for the Government. Under the terms of the contract the Government, through General Services Administration, agreed to take delivery of a tool if at its completion no user had appeared with a demand for the specific tool and to pay the manufacturer 821⁄2 percent of the producer's list price. The tool was to be stored and if the manufacturer subsequently obtained a customer for it, he could sell it, refunding to GSA the moneys received for it. If GSÁ removed the tool from storage and placed it in use, GSA would pay the manufacturer an additional 7%1⁄2 percent. In the event of termination of the contract GSA is obligated to pay to the producer all manufacturing costs attributable to machine tools not covered by a firm order at the date of termination. As of December 31, 1951, a total of 127 machine-tool pool contracts had been tendered, covering 74,295 tools valued at $1,165,000,000.

In addition to its pool-order program GSA, again acting on the recommendation of NPA, leased machine tools owned by the Government to defense contractors. In the labor field vigorous action was taken by the Department of Labor's Defense Manpower Administration to curtail the pirating of workers, recruiting of skilled and semiskilled workers, and encouragement of training programs.

In conclusion the report stated that the major bottlenecks to production had been broken and that the machine-tool industry would expand its production month after month. It was suggested that the pool order contracts be modified to remove a requirement that interest be paid on advance payments and that provision for profit be made on incompleted tools. It was also suggested that a renegotiation policy be laid down for the machine-tool industry. The problem of pirating skilled labor was also mentioned. Though there has been discussion between the Government agencies involved and the machine-tool industry, the basic pool order contract has not been changed and seemingly the industry is operating satisfactorily under its present terms.

ELECTRIC POWER STUDY-PROGRESS REPORT

Shortly before the adjournment of Congress, in October 1951, your committee directed its staff to conduct a study of the electric power program to determine its adequacy to support defense mobilization needs. Data were obtained from agencies of the executive department, State and Territorial regulatory commissions, local and regional associations, publishers interested in the electric power industry, operating electric utility companies, and industries using electricity in defense work. Progress Report No. 15 of the Electric Power Study was ordered printed January 15, 1952.

There seems to be general agreement that the requirements for electric power presently outstanding and foreseeable within the next few years are running a neck-and-neck race with capability. DEPA, Edison Electric Institute, and Electrical World estimated the total 1951 capacity available at approximately 75 million kilowatts. These are statistics for Nation-wide capability and do not point up the areas of critical shortage, because electric power is not interchangeable among all areas. In the past calendar year, shortages developed in the Pacific Northwest, the Southeast, and in the Pittsburgh, Pa., industrial area. Shortages also threatened in the Texas area.

All companies and agencies in the electric power industry had planned for expansion of capacity beyond the present supply. This was in accord with recommendations in the 1950 report of the National Security Resources Board that power system executives and Government officials take advantage of open capacity to bring generating reserves and transmission ties to fully adequate levels.

Those in charge of allocation policy must give due recognition to the vital need for electric power as an essential ingredient in the formula for successful defense mobilization. The exact amount of power required is a matter subject to honest differences of opinion. The question was and still is how much power do we need as distinguished from how much power can we get in an allocated economy. Your committee agreed that the armed services must get first priority; however, policy makers cannot afford to underestimate the need for adequate electric power to produce the items needed by the military services. In the face of current and past predictions that the Nation faces a power shortage by men competent in this field, especially in the Southeast and the Northwest, our policy makers both in Government and in industry must give full recognition to the lead-time factor.

The Administrator of DEPA has forecast that by the end of 1952 total generating capability will be slightly less than the total capacity requirements even if the whole 1952 program is achieved. Approximately 10 kilowatt-hours of electricity is required to manufacture a single pound of aluminum. With current discussions of an increase in Air Force strength, with its accompanying demands for more aluminum, it should be borne in mind that this in turn will greatly increase the demand for electric power. The Nation cannot afford to underestimate electric power requirements. The Defense Production Administrator appointed a four-man committee from nongovernmental circles to advise him on an electric power expansion program adequate to meet defense needs. It is imperative that they take the immediate action needed to bring that increased capacity into being It will then be necessary to make the increased allocations of raw materials required to effect the increased capacity consistently with other urgent programs, even though this means diverting these materials from some other program less essential to the national defense.

The report brings out that more hydroelectric power should be developed, with first consideration to the projects in those areas likely to have a shortage of power for the production of defense items. Lead time is required for planning these projects. No new hydroelectric project which has come to the attention of the committee could be completed in time to help meet the power needs in 1952 and 1953.