regulations, procedures, and policies which will cover such activities as allocation of industrial facilities, apportionment of scarce materials, allocation of skilled civilian personnel, letting of war contracts and other allocation of industrial services essential to prompt development of the war potential;

16. Review applications from the Departments for production facilities and, in cooperation with industry, preselect such facilities for specified end items, products, components, and component parts required to implement the plans for the Departments;

17. Formulate policies and programs for the maintenance of adequate reserves of industrial and nonindustrial facilities, machine tools, and industrial equipment, including the preservation and maintenance of Government-owned plant and facility reserves and the construction, conversion, expansion, or disposition of industrial facilities;

18. Conduct studies and make recommendations on those phases of industrial security which have to do with protective construction, prevention of sabotage, damage control, and priority for protection of essential facilities and installation; 19. Assemble information on industrial capacity, susceptibility of facilities to conversion and potential capacity to meet prospective requirements of the military services in time of emergency;

20. Formulate policies for the Military Establishment with respect to foreign trade and related matters and present the views of the National Military Establishment before those agencies concerned with international trade;

21. Make recommendations to appropriate authorities concerning estimates of requirements for the development, administration, or implementation of plans, programs, or activities which are within the cognizance of the Board. Specifically, the Board in accordance with procedures prescribed by the Secretary of Defense, shall participate in the coordination of those portions of the budgets of the Departments of the Army, Navy, and Air Force which are related to industrial mobilization planning and shall take the following action:

(a) At an appropriate time in advance of the presentation of the annual budget estimates, and in the ilght of the factors within the Board's purview, the Board shall present to the Secretary of Defense its recommendations as to the appropriate scope of the industrial mobilization planning effort for the National Military Establishment as a whole.

(b) Concurrently with its participation in the coordination of the budget, the Board shall study the individual industrial mobilization planning programs of the three departments and advise the Secretary of Defense as to their feasibility against the background of the strategic concepts of the Joint Chiefs of Staff.

V. RELATIONSHIPS WITHIN THE NATIONAL MILITARY ESTABLISHMENT AND WITH OTHER AGENCIES

1. The Board shall represent the National Military Establishment before other Government departments and agencies in all matters concerning industrial mobilization and, in addition, shall express to other National Military representatives on interdepartmental committees, boards or commissions any interest which the Munitions Board may have in matters under consideration;

2. The Board shall supervise the curricula and programs of the industrial college of the armed forces;

3. The Board shall advise the Research and Development Board of anticipated shortages of materials and production facilities of interest to the National Military Establishment in order to encourage research and development in the use of substitutes;

4. The Joint Chiefs of Staff shall keep the Board currently informed regarding the major material and personnel requirements of the military forces based on strategic and logistic plans, in order that the logistic feasibility of strategic operations may be broadly evaluated;

5. The Joint Chiefs of Staff shall keep the Board currently informed regarding strategic priorities so that priorities may be assigned to segments of production programs and the allocation of resources;

6. The Research and Development Board shall keep the Board informed concerning the material requirements for projects under development as soon as the programs appear promising in order that timely provision may be made for any necessary stock piling of such materials or for the reduction of stock-pile objectives;

7. The three military Departments shall submit to the Board their requirements for manpower, material, facilities, and services.

VI. ADMINISTRATION

The Board, subject to the approval of the Secretary of Defense, and the provisions of this charter, shall provide for its internal organization and shall establish its own rules of procedure. The following general policies shall govern the organization:

1. The principle of single command, military or civilian as appropriate, will be followed in the assignment of responsibilities to organizational elements within the Board. In the case of military personnel, the practice of a full tour of duty will, if practicable, be followed, and the positions shall be rotated between the three Departments.

2. The Board is authorized to consult with such persons within the National Military Establishment as it may wish, to call upon any agency of the National Military Establishment for information and assistance which it may require, and to solicit the help of any other individuals or agencies, both governmental and private, wherever it deems this to be appropriate. In addition, it is authorized to establish such continuing or temporary committees as may be necessary to conduct studies, assemble information or recommend policies. Full use should be made of existing committees within the National Security Organization.

3. The Board shall provide the Secretary of Defense with appropriate reports consolidating or summarizing data collected, developed, or maintained by the Board, and showing status or progress in the development or execution of plans, programs, and activities of the National Military Establishment which are within the cognizance of the Board.

4. The Board shall meet at the call of its Chairman, or at such times as it may fix, and the presence of three of the four members shall constitute a quorum. 5. The term "member", as used in paragraph 4 above, shall include an alternate as provided for in section II.

6. The Secretary of Defense shall provide the Board with such personnel, facilities, and other administrative services as he from time to time determines are required by the Board for the performance of its functions. Military personnel in approximately equal numbers shall be provided by each of the three military Departments, in accordance with the needs of the Board as approved by the Secretary of Defense.

EXHIBIT 27

JAMES FORRESTAL.

Hon. WILLIAM LEMKE,

TREASURY DEPARTMENT,
BUREAU OF FEDERAL SUPPLY,
Washington 25, December 1, 1948.

House of Representatives, Washington, D. C. MY DEAR MR. LEMKE: I refer to your letter of November 16, 1948, requesting information on behalf of the Subcommittee on Mines and Mining regarding the procurement of strategic and critical materials for the national stock pile.

In connection with the information requested in paragraph No. 1 of your letter concerning procurement of minerals and metals from foreign sources, the Bureau of Federal Supply, with the approval of the Munitions Board, has adopted and adhered to a policy of buying materials for the national stock pile at or below current market prices. Materials of a foreign source are generally contracted for on the basis of delivery to a United States port. In no instance have such materials been purchased at above-market prices. Where accomplishment of procurement objectives will be facilitated by the delivery of foreign materials to the Government at a foreign port or at the foreign source of supply, contracts will be entered into on this basis, provided the total cost to the Government will not exceed the corresponding market price for similar materials delivered to a United States port.

It is contemplated that no change will be made in the above policies, with the possible exception of crushing bort, which the Bureau hopes to obtain from the Belgian Congo. This bort would be procured at the London market price, but because of the fact that it would be furnished from increased production, the procurement would be from sources outside the usual channels of trade and delivery to the Government would be made in South Africa. Depending on the method of shipment, it is possible that the expense of transportation might cause

the total cost to exceed the corresponding cost of bort delivered in the United States through normal trade channels.

With respect to the information requested by you in paragraph No. 2 of your letter concerning price differentials in domestic contracts, the following is respectfully submitted:

(a) As indicated in the enclosed tabulation, six suppliers of domestic strategic and critical materials have been awarded contracts at prices above the applicable current market price in accordance with the price-differential principles of the Buy American Act. Of these suppliers, this Bureau, at the time of entering into contracts with them, had no information or reason to believe that they did not understand fully the requirements of the contracts or that they did not have sufficient experience in mining to understand what was required of them in meeting the obligations imposed by the contracts. This Bureau would not knowingly enter into a contract with a company or an individual if, for any reason, it should appear that the supplier could not carry out the terms of the contract. In fact, it is the policy of the Bureau, insofar as it is possible, to carefully investigate each new potential supplier with respect to its financial status, its source of supply, and its production capacity.

(b) The complete information requested by you in subparagraph 2 (b) of your letter is contained in the enclosed tabulation.

(c) The contract price of each contract listed in the enclosed tabulation is not in excess of 25 percent above the then current market price for similar materials of foreign origin.

In connection with the circumstances surrounding the procurement of strategic and critical materials from domestic sources, I understand that representatives of the Munitions Board have previously testified before your committee that, in their opinion, the matter of subsidizing any industry, whether for reasons of national security or otherwise, is a matter for determination by the Congress. This Bureau if also of that opinion and, if it is necessary to grant subsidies to domestic suppliers in order to obtain the production required to meet nationalsecurity demands, it is believed that this Bureau would have to look for legislative authorization to carry out such a policy.

I trust the above information will be satisfactory to your committee. If there is any further information desired, I shall be pleased to furnish it upon your request.

Very truly yours,

CLIFTON E. MACK, Director, Bureau of Federal Supply.

Contracts awarded by Bureau of Federal Supply for strategic and critical materials at prices above current quoted market price based on Buy

American Act

EXHIBIT 28

Hon. CLAIR ENGLE

House of Representatives.

DEPARTMENT OF THE INTERIOR,

OFFICE OF THE SECRETARY, Washington 25, D. C., May 14, 1949.

MY DEAR MR. ENGLE: Reference is made to your letter of April 29, with which you enclosed two copies of H. R. 976, as amended, and reported to the full committee on April 27.

While the amendments adopted by the subcommittee, as set forth in the copies of the bill, meet some of the specific objections mentioned in our testimony before your committee, they do not resolve the basic problem of subsidy legislation in respect to mining. The Department has opposed the open-ended type of subsidy legislation for certain basic reasons. On page 7 of H. R. 976 we find an expression of the fundamental dilemma which we feel is not up to Government to resolve. The phrasing of the bill from lines 8 through 12 indicates that the Government shall pay to a producer a reasonable profit based upon efficiency and the values of all recoverable metals and minerals contained in the ores. The question of what constitutes a reasonable profit is something that the Department of the Interior is not in a position to judge-those are matters which must be left to the producer. This is a fundamental question in all business: Should or should not the Government determine what constitutes a profit?

From an administrative point of view, the three provisions that you have incorporated in the new draft of H. R. 976 attempt to meet fundamental objections of this Department. Without discussing the practicality of these provisions (under sec. 4 (c)), it should be indicated that to enforce these provisions properly the executive agency would be required to police mine operations and the companies' books and production records. It is appreciated that enforcement is not mandatory, but with the inclusion of these provisions in the act, certainly the Director would be negligent if he did not take into account these requirements.

It has been our position that a contract negotiated directly with the Government—a contract made between the producer and the purchaser-is the only reasonable basis upon which the Federal Government can be of assistance. Once such a contract is signed, and there may be escape clauses negotiated or there may be options to terminate the contract included in the writing, the rest is up to the producer. No Government policing is required, there is no necessity for examining his books, there is no need for an extensive administrative division, there is no need for detailed rules and regulations. Although it is true that Government contracts are not always easy to negotiate, it should be pointed out to the committee that the Bureau of Federal Supply and other Government agencies are letting thousands of contracts to industry throughout the year. It is true that some of these contracts are not always satisfactory, but the same applies to relationship between various contracting parties within industry.

Although no attempt has been made in this letter to analyze each point in the bill in detail, it may be appropriate to make one observation regarding finances. Section 6 (c) requires that the Bureau of Federal Supply shall reimburse the Reconstruction Finance Corporation to the extent of the current market price for materials placed in the stock pile. From this provision it would follow that if for any reason insufficient funds were available to Bureau of Federal Supply to make such reimbursement, no production contracts could be consummated under H. R. 976.

Please be assured that the Department of the Interior does not desire to obstruct or prevent legislation that will benefit the minerals industry. Should H. R. 976 become law, this Department will make every effort to administer its provisions efficiently and effectively. We feel, however, that the bill as now written cannot be endorsed in view of the fundamental difficulties which we have endeavored to explain.

Sincerely yours,

WILLIAM E. WARNE,

Acting Secretary of the Interior.