other Federal agencies and of commercial societies and industrial organizations. During the past year an increased number of specifications acceptable to industry were cleared by the office. Much work still remains to be done in these fields. War contract forms.-Considerable study has been given war contract forms since the last report covering the activities of this office. A new form of supply contract was tentatively approved by the War Department War Contract Board, and supply arm and service recommendations on this draft are now under consideration in this office. Basic materials. The study of basic materials essential to the Nation in time of war is a continuous function of the Planning Branch of this office and was carried on intensively during the past year. Stimulated by industrial leadership, improved technology, progress in chemistry, and the factors of recovery, the trends in the consumption of these materials have so changed in importance that revisions of previous plans and data are necessary. Meetings of the 17 active commodity committees under the supervision of the Commodities Division, Army and Navy Munitions Board, resulted in the revision of plans on 22 of the 23 strategic items. Foremost among the plans accomplished is the completion, after 2 years of preparation, of the steel plan and its approval by the Army and Navy Munitions Board and by the American Iron and Steel Institute. Of the 52 commodity studies which have been completed on critical and essential materials, 18 have been rewritten during the year. Present plans contemplate a complete revision of these studies at least once every 3 years. The continued interest of Congress in strategic materials was evidenced by the several bills introduced. Foremost among these was the bill providing for the acquisition of stocks of ferromanganese ore, chrome ore, tungsten ore, and pig tin for war reserves. This bill is before the House Committee on Military Affairs. Legislation pertaining to the export of tin-plate scrap, the export of scrap iron and scrap steel, and the manufacture and exportation of helium has also been the subject of consideration by this office in connection with our national defense, and reports and testimony thereon have been presented at the request of the Senate and House Committees on Military Affairs. Army Industrial College.-Under the mandate of the National Defense Act, charging the Assistant Secretary of War with the responsibility for war-time procurement planning and mobilization of industry, the Army Industrial College has been preparing officers for such duties. At this institution they become thoroughly imbued with the importance of the economic and industrial factors affecting war, with the difficulties to be met in the production of modern munitions of war, and with the realization of the necessity for united understanding between the users of munitions, the Army and Navy, and industry which provides the fighting forces with munitions. The personnel for the college is carefully selected from among those officers who have outstanding ability and have shown unusual interest in matters pertaining to procurement and industrial mobilization. Every effort is made to emphasize this phase of national defense and to make a detail to this institution more profitable and attractive. The officers of the Army and Navy engaged in procurement planning activities have been working closely together. Mutual confidence has been established which tends toward smoother coordination between these two services and results in more effective work. This understanding between the services and the sympathetic appreciation of each other's difficulties have been facilitated by the studies undertaken and the discussions of the mutual problems of the sister services at the Army Industrial College. The breadth of the field of study at the Army Industrial College has been widened to keep pace with the progress in national and international developments in industrial mobilization. The increasing importance of this entire subject has resulted in wide circulation of research studies conducted by the Army Industrial College in connection with the problems of procurement planning and industrial mobilization. Army officers as a class are unfamiliar with the processes used in mass production in this country, and, therefore, the importance of close contact between the Army and industry cannot be overstressed. The inspection trips which are made by the student body and instructors of the Army Industrial College have proven very valuable in attaining that end and in broadening the understanding of those taking advantage of this opportunity. CURRENT PROCUREMENT The work of the Current Procurement Branch of the office has, in the main, consisted of supervising the procurement activities of all the supply arms and services. This has been accomplished by personal contact with the main purchasing agencies, by routine check of reports required to be submitted, and by inspections of many of the principal industrial plants executing production contracts for the Government. These personal inspections of contractors' plants have proven beneficial in carrying on the work of this section. Material savings have been made in the funds allotted and a better understanding of the problems both of the manufacturers and this office has resulted. These personal contacts in the field have created a more understanding cooperation and have eliminated many of the difficulties heretofore encountered. Current procurement has been supervised by the office as in the past, with no radical changes in policies. The work of eliminating unnecessary reports, simplifying routine procedures and clarifying existing instructions governing procurement is continuing with gratifying results. As a result of this effort, purchasing officers throughout the Army, in the nonmilitary work of the Corps of Engineers, and in the Civilian Conservation Corps are operating in a uniform and generally satisfactory manner to minimize any evidence of dissatisfaction on the part of bidders and contractors with their treatment at the hands of the War Department. Continued effort is being made to broaden the already wide field of competition in all purchases and to correct any procedures which might restrict the number of competitors for the War Department's business. Material economies, as well as the attraction of desirable bidders, have resulted from this continuing action. In the interest of greater economy of money and effort, the number of purchasing officers is being reduced to a minimum consistent with effective operation. In order to simplify procurement instructions and to make them more readily available to officers on this kind of duty, a great deal of time and effort has been expended on the revision of Army Regulations covering the subject. As a result, these instructions are being clarified and made available in convenient form to purchasing officers. Aircraft procurement policy. The results obtained from the new aircraft procurement policy, which permits all qualified manufacturers to compete for Government business and at the same time protects the Government's interests, have been highly satisfactory and in my opinion fully justify its use. The point has now been reached, largely as a result of the changed methods of procurement, where the latest combat airplanes under construction may be considered to be, in general, the best and most highly efficient airplanes in the world. Not only have speeds, ranges, and ceilings markedly increased but bomb capacity is now in excess of that possessed by any other military aircraft. Furthermore, every combat airplane now being delivered to tactical units has its complete complement of instruments, armament and all other devices necessary for combat purposes, including both sending and receiving radio equipment of latest design. So far as the aeronautical industry is concerned, any fears for its collapse as a result of the new procurement system, initiated a few years ago, have proved to be unfounded. Every manufacturer who, during 1933 and 1934, was engaged in airplane construction for the Army is still in business, and in general such manufacturers are in at least as advantageous a financial position now as then. In addition, the War Department has awarded contracts, either for quantity procurement or on an experimental basis to companies that either were not in existence in 1933 or not then considered for military aircraft awards. Competition has been found to be keen and bids ranging in number from two to five, each accompanied by a physical airplane, have been entered in every competitive procurement undertaken for combat airplanes. The relative slowness of delivery in the first 2 years of operation of the policy was due primarily to the time required by the manufacturer to develop and construct his sample airplane. With this transition period past, deliveries are now made at the rate of approximately 500 airplanes per year. The necessity of reducing the time between the inception of airplane design and the delivery of planes of such design to the tactical units is being closely studied. Circular proposals are issued to the industry far in advance of availability of funds, in order to permit the awarding of contracts as soon as possible after appropriated moneys become available. In this way the industry is apprised early of the needs of the Air Corps. Tentative plans for the procurement of practically all aircraft for the fiscal year 1938 have already been made. Contracts in most instances will be consummated shortly after the funds become available. Additional reduction of time is now being accomplished by submitting the airplanes of the successful bidder to an accelerated service test for a period of 90 days, with the view of reducing to a minimum the necessity for change orders with their subsequent delay in delivery. During the early stages of competitive procurement, the fighting efficiency of our aircraft as compared with that of other nations neces sitated the placing of greatest emphasis on development and performance, with cost a secondary factor. Now that our aircraft have assumed their proper place among the world powers and the vitally important element of performance has been brought to its present high standard, the price factor is being given increasing consideration. Emphasis must be placed on the salutary effect of the present competitive system upon progress in military aviation. Since performance and advance in engineering and design constitute prime factors in determining the winner of any procurement competition, the inventive genius of the various competitors is necessarily keyed to a high pitch in an effort to surpass that displayed by other competitors and to offer the outstanding airplane of the type desired. Upon subsequent procurements of similar types, each competitor likewise feels. that he must surpass in military efficiency the airplane previously purchased in order to be considered for award. The advantage to military aviation of this constant striving between members of the industry is obvious. Commercial aviation also profits greatly thereby. Together with the competitive system, there has been instituted, where practicable, a policy of making purchases of two years' requirements of certain types of aircraft. This, because of the increased size of orders, permits manufacturers to tool up properly and results in materially reducing the cost to the Government per airplane purchased. Also, more rapid delivery is made possible and the necessity for manufacturers to submit sample airplanes each year is eliminated. Competitive purchasing. The outstanding tenet in the War Department's general procurement activities is honesty and economy of purchase. In accomplishing this purpose, the policy of buying by competitive bidding may well be considered the keystone. The law requires that all contracts, other than for personal services, with only limited and specified exceptions, must be made as a result of previous advertising. In conformity with this, the vast majority of Army buying all except a relatively small percent is done after formal advertising and the public opening of sealed bids, the awards being made to the lowest responsible bidder complying with the conditions of the invitation for bids, provided the bid is reasonable and to the interest of the United States. Constant effort is made by this office to strengthen the system of competitive purchasing, in compliance with law and as a means at once of assuring fairness and impartiality to dealers and manufacturers and of securing economy of purchase to the Government. NONSTATUTORY DUTIES Certain nonstatutory duties have been delegated to me to perform. The most important of these cover the sale or disposal of surplus property, the purchase or sale of real estate, claims-both foreign and domestic, and matters relating to national cemeteries, national military parks, and national monuments. Nothing unusual in the administration of these seems to have taken place during the past year. In my opinion, the interests of the Government have been fully protected insofar as possible in all cases which have come up in connection with this class of duties. National matches.-The national matches were held again this year with increasing success. One hundred and nineteen teams were in attendance, the greatest number ever to take part. The matches were conducted on a normal basis again with operating personnel from the Regular Army and Marines. As evidence of the increasing popularity of rifle shooting throughout the country, the sale of ordnance matériel through the Director of Civilian Marksmanship increased approximately 25 percent during the last 2 years. The War Department is contributing its share to the encouragement of this necessary element of national defense. This completes the survey of the activities of this office for the year. I contribute for the record these facts, largely based on the reports of the heads of the divisions of my office. LOUIS JOHNSON, |