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BUS. ADM.
LIBRARY

Vol. 27: No. 22
May 29, 1941

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WHAT ARE PRIORITIES?

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The Priorities system puts first things first. It is designed to implement the production and acquisition of defense material for the Army and the Navy:

When a manufacturer has an order with a preference rating he is required to make every effort to fill this order on the stipulated delivery date. If this occasions a delay in filling orders with lower preference ratings or no preference ratings at all, then the delay must be made.

It should not, of course, involve the delay of other orders with equal or higher ratings.

Preference ratings or priority ratings they are the same thing are rated in a ladder-like structure, ranging from high to low. A producer working on a number of rated contracts must handle them in the order of their importance.

This often requires the greatest skill in scheduling and production. When the producer has two or more defense jobs with different ratings he cannot put all his effort on the top job and finish that before he begins to think about the next one.

What he really does is to put his facilities to work on jobs with different ratings at the same time. If he cannot possibly produce them according to sehedule he must give preference, or priority, to the contracts with higher ratings.

circumstances of emergency,' defense orders shall "take priority over all deliveries for private account or for export..."

This authority of the President is now vested in the Priorities Division of the Office of Production Management and the Director of Priorities.

The Priorities Division has developed a system designed to assure efficiency, tralized control, and decentralized administration for the military program.

The task of handling priorities in the strictly military sphere is given to the Army and Navy Munitions Board and the appropriate representatives of the Army and Navy.

The task of over-all supervision, administration of priorities in the nonmilitary sphere, balancing military and nonmilitary needs equitably, and imposing industry-wide controls when necessary, is administered directly by the Priorities Division.

The Military Side Of It

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two very

Normal Needs Are Not Forgotten

The military and other defense agencies

important instruments in the problem of priorities. One of these is the Priorities Critical' List, listing over 200 primäry military items needed for defense and on orders for which Priorities Certificates can be issued automatically, to speed up production, by the contracting officers of the Army and Navy, coordinated by the Army and Navy Munitions Board.

The other instrument, the official directive, fixes the order of importance of these items..

It is by the directive that the broad objectives of the defense program, and the purpose for which material is needed, correlated in such a way to show which orders for items on the Priorities Critical List can be given ratings of A-l-a, which items should have ratings of A-1-6, and which come farther down the line.

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While the Priorities system is designed primarily to implement the production and acquisition of material for the Army and Navy, and for the aid of Great Britain, priority can be and is given to important civilian products.

Obviously, the most important civilian need is more important than the least essential military need.

The President was given authority to set up a Priorities system in Section 2-A of Public 671, which declares that under certain

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of products, and working almost entirely on defense.

Indiyidual Certificates

There are many refinements of this system. For example, a machine gun need not always take the same rating. If the gun is needed very soon, it may take a high rating. If it is needed later, it may take a low rating.

To repeat, it is a matter of first things first.

Civilian Contracts

The Priorities Division administers all the requests for preference ratings on civilian contracts. It determines preference ratings for those items, civilian and military, which do not appear on the Critical List. It handles the allocation of all materials, such as aluminum, subjected to industry-wide priority control.

These industry-wide allocations modify and take precedence over any individual Priority Certificates which might otherwise have been issued against such materials.

In administering its phase of the system the Priorities Division can take three broad steps:

1. Blanket ratings of a limited type designed to help certain companies or projects in urgent situations to obtain needed materials quickly.

2. Individual preference rating certificates issued to manufacturers for specific orders to meet specific problems.

Industry-wide priority control, usually involving the allocation of available supplies.

There are many cases in which blanket ratings are not appropriate, as when a manufacturer works half on defense and hall on civilian needs, and is engaged in some prime contracting for the Government and some subcontracting

Suppose a manufacturer of voice-recording apparatus, working for defense and nonde fense, is having trouble getting some essential part. It is important that he get the parts for the apparatus intended for defense, and it is desirable, though not imperative, that he get the parts for civilian work.

This manufacturer may be selling his devices to a jobber or wholesaler who himself is selling to both defense and nondefense users, so that it is difficult to trace the completed product directly to a defense use.

He may apply for a priority aid to the Priorities Division. If his plea is justified, a preference rating certificate will be issued. The manufacturer serves this certificate on the supplier, who then gives the order for the needed part preferential treatment.

It should be born in mind, however, that the Priorities Division tries whenever possible to avoid issuing priorities certificates in cases where the connection with the defense program is not clear.

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Industry-Wide Control

Blanket Ratings

Blanket ratings permit greater speed than the use of separate certificates because each manufacturer may deal with many suppliers with whom he may have placed a large number of different orders. Thus, it would take a different preference rating certificate for each contract if the separate certificate system were used.

It is much simpler to use the limited blanket rating system if the manufacturers form a homogeneous group, making the same kinds

In some vital areas, when shortages exist it becomes necessary that industry-wide, mandatory priority control be imposed, so that available supplies may be conserved and allocated wisely for both military and nonmilitary needs.

Aluminum is a case in point. In early 1941 it became obvious that there would not be enough aluminum for all defense and civilian reeds. And because the metal is vital in defense and widely used in civilian articles, it was decided to place it under industry--wide control.

At the same time aluminum was placed on the Priorities Critical List.

Putting aluminum on the Critical List meant that the Army and Navy Munitions Board could issue preference ratings against it. But since the metal was also put under industry-wide control, this meant that the allocations made by the Priorities Division would take precedence over individual certificates in case of any conflict.

3. Problems which lie outside the strictly military sphere, as limited by the Priorities Critical List, are handled directly by the Priorities Division of the Office of Production Management,

4. The automatic phase of the program as Handled by the Army and Navy is operated largely by means of individual preference rating certificates, assigned to prime contracts or extended to subcontracts for items on the Critical List.

The Priorities Division in handling its part of the job operates by means of individual preference rating certificates; industry-wide control; or limited blanket ratings.

Summary

5.

Thus, the Priorities system can be operated in many ways to meet many different problems. In summary, its basic principles are:

1. The Priorities system is designed primarily to aid the defense program.

2. The assignment of preference ratings for strictly military contracts is handled by Army and Navy representatives coordinated by the Army and Navy Munitions Board, and in this field the Priorities Critical List is the control that is the automatic assignment of ratings is not carried on outside the framework of the list.

The system is designed to insure that the economic system, in picking up its new load, will continue to function smoothly. It must never be forgotten, however, that this object and the speedy fulfillment of the defense program must always depend in the final reckoning on the ready and willing cooperation of the citizens.

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