Mr. Chairman and members of the committee, the committee on national defense of the Chamber of Commerce of the United States appreciates this opportunity of presenting their ideas with regard to this proposed legislation to your committee this morning.

Our committee has given a great deal of thought to this subject and we have made such investigations as we could in connection with it. Not only the committee on national defense but the Chamber of Commerce of the United States itself as an organization is very solidly behind this bill.

We e are represented here this morning by several business men who have had experience in furnishing munitions of war and equipment to the Government during the last war.

I also want to say that Brig. Gen. C. L'H. Ruggles, Assistant Chief of Ordnance of the Army, in charge of the manufacturing division, who is not a member of our committee, is here this morning. He is not on the program to make any statement, but I understand he will make a statement if you, Mr. Chairman, or your committee should call upon him, and he will be glad to answer any technical questions, or at least he will answer any technical questions which you may ask him and which he can answer.

I also want to refer to the presence of Maj. E. G. Curtis, who represents a number of engineering organizations and also the New York ordnance procurement division and the Reserve Officers' Association. Mr. Curtis, with your permission, will speak in favor of this bill this morning.

Mr. Chairman, the men who are here to present to you on behalf of the national chamber the need for educational orders in connection with the country's planning for industrial preparedness, are manufacturers who have had a wide experience both with the production of munitions in war times and with the peace-time planning for munitions production in the event of another emergency. They have been invited to come here by the president of the Chamber of Commerce of the United States to give you the benefit of their experience with the practical manufacturing problems involved in getting a commercial plant into war production.

Educational orders, such as are proposed in this bill (H. R. 450), are simply a common-sense means of assisting manufacturers to solve these practical problems in peace times rather than waiting until war time, when each day's delay in the production of the material needed by the country's military forces is costly, when a few months' delay may result in disaster.

Educational orders are not designed to be, nor will they be a profitable source of new business to American industry. Far from it. Certainly these manufacturers and the Chamber of Commerce of the United States are not in the slightest interested in such orders as a source of new business. We are interested in them from the viewpoint of national defense.

While of little significance commercially, these proposed educational orders are, in the judgment of American business men, of profound and far-reaching significance from the viewpoint of bringing the defense of our country abreast with the industrial era in which we live.

The Chamber of Commerce of the United States is interested in educational orders as an essential element in planning for the

Nation's defense, as a result of the action taken by its constituent members at the chamber's annual meeting in May, 1928. At that annual meeting delegates from member organizations adopted the following resolution:

Modern war is a war of machines and requires these machines in numbers heretofore undreamed of. The capacity of Government arsenals for the manufacture of these machines is small compared with the volume required in time of war. In order that industrial enterprise may in times of peace become familiar with munitions manufacture and be prepared to do its part in war production, it is essential that the national defense act should be so amended as to permit the Secretary of War to place with industries orders of an educational character for equipment, munitions, and accessories. In this manner only can commercial concerns obtain familiarity with war requirements and have their place in industrial war plans of the War Department.

As you gentlemen know, the Chamber of Commerce of the United States is a federation of business men's organizations; that is, of chambers of commerce and trade associations. At the present time nearly 1,700 such organizations, representing business interests in hundreds of cities throughout the country and in practically every line of industry in commerce, are in its membership. These organization members are the United States Chamber. It is their action, taken either through the votes of delegates at an annual meeting or through votes on a referendum, and their action alone, which commits the chamber to the principles and policies which it advocates.

We have been asked to present to you on behalf of the national chamber the reasons why the chamber advocates amending the national defense act so as to permit the Secretary of War to place with industries orders of an educational character for equipment, munitions, and accessories. I will outline the general relation of educational orders to national defense, as we see it, to be followed by my associates, who will give you the important practical aspects of this relationship drawn from their own experience.

The World War taught us one outstanding lesson in national defense the ultimate battle field where rests the final decision is the factory. Unless we have the facilities and know how to equip without loss of time a modern military force, in which the use of improved mechanical devices for firing and for the transport and protection of men is rapidly becoming more and more important, we are as helpless in face of a well-organized attack as knights on horseback in face of gunfire. To be prepared to raise and train a large army of men willing and eager to defend their country, and not to be prepared to place at their disposal the modern munitions and equipment they must have for an even break in battle is not to be prepared. It is as futile as it would be to build warships without guns, waiting until an emergency arose, not to make the guns, but to learn how to make them.

In the report of the War Industries Board, published after the war, appears this significant statement:

The prime characteristic of this war was the extent to which it involved the material resources of the participating nations. As attention was turned to immediate preparations it was soon felt that the problem of supplies was going to involve difficulties of the most far-reaching and important character.

We start, then, with the premise that industrial preparedness is a basic factor in any sound policy of national defense. By industrial preparedness we mean the planning ahead of time for the required

supplies and munitions, and the training ahead of time of the managers and workers of our factories so that when called upon they can begin producing war material with a maximum rapidity.

Let us look at that proposition for a moment. What are we doing to plan ahead of time for the required supplies and munitions?

Through the national defense act Congress has placed upon the Assistant Secretary of War responsibility for this planning work. There has been worked out by the proper authorities in the Army a basic mobilization plan calculated on a war of major effort. With this mobilization of man power in mind, the supply branches of the Army-that is, Quartermaster, Ordnance, Air Corps, Engineers, Signal Corps, Chemical Warfare Service, and Medical Departmenthave figured out their requirements.

This planning has been carried a step further. Through 14 procurement districts these requirements have been allocated to factories, including Government arsenals, capable of filling them in time of

war.

This planning has been carried still further than that. When a commercial plant accepts a schedule of production in case of war it is given specifications and manufacturing information. This is called the factory plan. Such plans involve not only the specifications and often detailed drawings showing the design of the thing to be produced, but required changes in the factory's layout and machinery.

All of this planning is on paper. It is necessary and it is good as far as it goes.

Now, what are we doing to train ahead of time the managers and workers of our factories so that when called upon they can begin producing war material with a maximum rapidity? This is the weak spot in our industrial preparedness. Let us look at it a moment. When we do we will see the important need for educational orders.

There are certain things which the Army and Navy need in war time for the production of which no previous training on the part of the managers and workers in our factories is required. These are commercial articles, such as shoes, clothing, and so forth.

There are other things which the military force needs which are not produced commercially. Ordnance, of course, for instance, rifles and artillery and their ammunition, is the outstanding example.

We do not have in this country any large privately operated munitions industry, as do some of the countries of Europe. Our Government arsenals have a maximum capacity to produce only from one-half of 1 per cent to 5 per cent of the total requirements in time of war of the various articles of ordnance equipment. For many indispensable articles, therefore, we must rely in war time upon commercial plants which have no experience in peace time with heir production.

These factories not only lack experience; they also lack the necessary dies, jigs, and fixtures to produce these noncommercial but indispensable munitions and equipment. The outstanding problem of industrial preparedness is how to provide commercial factories capablue of conversion to this specialized kind of war production with the minimum training of personnel essential to keep the art of manufacture alive and with the minimum equipment of

tools essential to insure a rapid conversion from ordinary peacetime to war-time production.

In 1922 the Secretary of War suggested a solution to this problem. His plan was "to give annually to a few private plants educational orders for small amounts of selected types of munitions which would serve the retention by such plants of a small nucleus of men capable of producing these types. ." He contemplated a distribution of these educational orders which would give some experience to as many different plants as conditions permit.

Nothing was done with this suggestion, probably because the accumulation of large quantities of war material during the recent war made the matter seem to be not pressing. In the meantime, more than 10 years have now elapsed since the war.

Our surplus war material, particularly ammunition, is rapidly being used up or becoming deteriorated, and most of our surplus equipment is practically obsolete. During this period on account of this surplus our commercial factories have manufactured practically no ordinance equipment or other specialized munitions. Practically all of them have scrapped tools for this purpose which they had during the war. In case of other articles, improvements in them would make new tools necessary anyway. Trained workers who understood the art of this kind of manufacture have been scattered. Truly not a happy situation to contemplate if we take industrial preparedness seriously as a basic element in any sound national policy of defense.

What is needed is some direct and common sense method to create and maintain in our industrial plants a knowledge and experience with the art of manufacturing specialized munitions. Each such plant would necessarily have on hand a complete set of dies, jigs, fixtures, and gauges, which in times of emergency could be used as a pattern for the rapid production of additional sets. Each such plant would have a personnel who had learned to iron out manufacturing difficulties in peace time and who in time of emergency could serve as the nucleus for the rapid training of additional workers. Secretary of War Davis has also suggested educational orders as a practical and economical method of accomplishing this purpose. This suggestion has appealed to the business men of the country, who have become increasingly familiar with the peace-time problems of industrial preparedness as a result of their cooperation with the Assistant Secretary of War in the procurement planning work his office is carrying on.

What is needed is action on the part of Congress which will give the Secretary of War sufficient discretion to place orders with the requirements of industrial preparedness in mind. This bill (H. R. 450), which your chairman, Mr. Morin, has introduced, does that.

As the matter now stands section 5 (a) of the national defense act requires the Secretary of War "to cause to be manufactured or produced at Government arsenals or Government-owned factories all such supplies or articles needed by the War Department as said arsenals or Government-owned factories are capable of manufacturing or producing upon an economical basis."

In practice this means that orders for articles of ordnance must in most cases be given to the arsenals, because the arsenals, on account

of their familiarity with such manufacture and their suitable equipment, can do the work cheaper than a commercial plant.

Relieving the Secretary of War of this requirement and authorizing him to place educational orders does not mean that arsenals as centers of munitions manufacture will be interfered with. The War Department will keep at all times a force of trained and skilled workmen at these arsenals to keep alive there the art of manufacture and to maintain the arsenals intact ready to receive the full load which has been allocated to them for war production. What the country needs to be prepared industrially is additional units of such manufacture in our commercial plants.

In addition to the limitations placed on the Secretary of War by section 5 (a) of the national defense act, there is another law which interferes with the placing of educational orders. This is section 3709, Revised Statutes, which reads:

All purchases and contracts for supplies or services in any of the departments of the Government, except for personal services, shall be made by advertising a sufficient time previously for proposals respecting the same, when the public exigencies do not require the immediate delivery of the articles or performance of the service

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In connection with this statute the Secretary of War has prescribed:

Except in rare cases, when the United States elects to exercise the right to reject proposals, awards will be made to the lowest responsible bidder, provided that his bid is reasonable and that it is in the interest of the Government to accept it.

This requirement of competitive bidding for all supplies to be obtained from commercial sources and then awarding the contract. to the lowest bidder places a serious limitation on the Secretary of War in carrying out the purpose of educational orders, which is to see to it that the country is industrially prepared.

For example, let us assume that the Ordnance Department advertised for certain munitions to be manufactured by commercial plants in the hope that such an order would operate to better equip such a plant for war production. What would happen? It is entirely likely that the lowest bidder might be some plant to which no war orders had been allocated, a plant which was in no way equipped or suitable for war production and a plant which bid very low merely to carry their overhead during a period of inaction or depression. Attempting to place educational orders under such circumstances is like taking a shot in the dark. What the country's plans for industrial preparedness need is a discretion on the part of the War Department to place orders which will educate those responsible commercial factories on which the country must depend in event of war. The bill on which these hearings are being held is designed to overcome these legal restrictions to which I have just referred by permitting the placing of educational orders with such responsible commercial plants.

Mr. JAMES. If one firm is well supplied with equipment, and so forth, all ready to produce, and another firm has no equipment, or very little equipment, it is not very likely that the smaller plant with no equipment will put in a lower bid than the other concern, is it?

Mr. TRIGG. It is possible, I should say.