TESTIMONY OF HONORABLE FARRIS BRYANT DIRECTOR, OFFICE OI" EMERGENCY PLANNING BEFORE THE BANKING AND CURRENCY COMMITTEE HOUSE OF REPRESENTATIVES March 29. I966 Mr. Chairman and Members of the Committee: I am happy to have this opportunity to discuss with you H. R. 13014. A bill which would extend the termination date of the Defense Production Act of 1950. as amended. for four years to June 30. I970. I have with :nc Mr. G. Lyle Belsley. Director of our Economic Affairs Office. Mr. M. M. Mcrker, our Legal Adviser. and Mr. Ernest Crooks, Industrial Specialist. I have also asked Mr. Louis Brooks of the General Services Administration. who is familiar with the details of the financial aspects of the Act, and Mr. A. A. Bertsch. Assistant Administrator. Industrial Mobilization. Business and Defense Services Administration. Department of Commerce, who is thoroughly familiar with the priorities and allocations aspects of the Act. to be present. These gentlemen will assist in responding to any questions you may have regarding my statement. The Defense Production Act has supported and facilitated the defense program in many ways since it became law on September 8. 1950. As originally enacted it was the authority for virtually all economic mobilisation measures taken during the Korean hostilities. Provision for price and wage controls and related credit controls, among others, were allowed to lapse in 1953 when inflationary pressures subsided. The authority to 0 2 require that production for the national defense be given preference over other business, as well as the authority to guarantee loans and enter into voluntary agreements. has continued to be used during the subsequent yea rs of cold war and extraordinary military expenditures. it is now being used to an increasing extent to meet problems arising as a result of hostilities in South East Asia. and will be used to an even greater extent if the :1an of those hostilities becomes greater. These continuing essential national defense programs are provided for under three remaining operative titles of the act. viz. Title I. Title III, and Title VII. I would like to describe briey at this time the current use of each of these authorities. The priorities and allocations authority of Title I is used to assure that materials and equipment are available at the time and place where they are needed to meet military and other essential production requirements. and to assure that defense orders take priority over all other orders. It in used to assure that esential production orders including the extensive research and development activities of the Department of Defense, the Atomic Energy Commission. and the National Aeronautics and Space Administration are filled promptly. Priorities assistanCe for the Nations defense program is carried out under the Defense Materials System regulations issued by the Depart- ment of Commerce. They operate by aiding in the placement of contracts and assuring prompt deliveries of military mate rials to defense contractors - 3 and their suppliers and subcontractors. They also require producers of basic forms of steel. copper. aluminum and nickel alloys to "set aside" certain percentages of their production {or defense-rated orders. These "set asides" assure that no individual producer will be required to accept an excessive proportion of defense-rated orders for particular materials at the expense of regular civilian business. The existence of the Defense Materials System is of immeasurable value to the national security because it provides, on a goingconcern basis, the ope rational setup that would have to be in existence in the event there is an expansion of the present emergency. One of the more important things that is inherent in the system is the mechanism {or :ollecting and evaluating defense requirements data in cooperation with the Department oi Defense. the Atomic Energy Commission, and the National Aeronautics and Space Administration. This function is the backbone oi the activity of controlling the flow of materials in an emergency. The Defense Materials System can be progressively enlarged with minimum efiOrt and time to provide for the control of materials needed to meet even greater war requirements than we are faced with today. During the Korean period it took more than a year to establish an operating system. The authorities under Title III of the Act also serve both current defense needs and preparedness measures. Section 301 provides for loan guarantees to defense contractors who need working capital or equipment for new defense production. Section 302 and section 303 provide lending and procurement authorities which in the past were highly instrumental in bringing about large scale expansion of productive capacity required for defense. In the past several years no new defense expansions have been financed under these authorities, and they have been in a standby status. However, they continue to be essential to the security of the country to meet unanticipated defense demands that might arise. The authorities provide the President with a flexible tool whereby he can take immediate action if the circumstances so require. It is contemplated that these authorities will be used to help meet expanding copper requirements which have been accentuated by the pressures of the Vietnam situation. On March 21. 1966. the President authorized the release of 200, 000 tons of copper from the National Stockpile. He has also concluded that a program for encouraging additional domestic copper production to meet these increasing require- ments through new purchases or commitments to purchase under section 303 of the Act should be undertaken on behalf of the national security. While some increased production capacity is now contemplated or already under way by some domestic copper producers. it. is believed necessary to accelerate the development of new and additional copper production. Accordingly; the Office of Emergency Planning under the - 5 President's finding. intends to authorize the General Services Adminis- tration. under provisions of Title III. to enter into negotiations with domestic copper producers to purchase Or make commitments to purchase copper in order to bring into being additional copper production as soon as possible. Contracts entered into under this authority will be within the limitations on the use of the Borrowing Authority included in section 304(b) of the Act. In view of the fact that national security interests require that the expansion of domestic copper production and supply be accomplished at the earliest possible time. priority attention will be given to those cases where additional copper production can be brought into being within a relatively short time. Title VII of the Act includes a number of supplementary authorities necessary to the exercise of those authorities granted in the preceding titles. but it also includes two specific authorizations of importance to the mobilization preparedness program. The voluntary agreements provisions of section 708 ptovide immunity from the antitrust laws to private parties voluntarily participating in actions found to be in the public interest as contributing to the national defense. There are presently outstanding 18 agreements of which 12 are in a standby status. These agreements are sponsored by various agencies of Government, principally the Department of Defense. The greater number deal with "integration committees" which consist of current and prospective contractors of the Department of Defense who meet to exchange and pool information. techniques. and processes. Their objective is to speed the development and prov 31-.r. cf systems whereby more efficient and uniform military items can be produced in the shortest time. They are of value both to current production and for rapid expansion of military production. The need for new committees by the Department of Defense arises as new military production problems develop. The voluntary agree- ments powers under section 708 are very valuable not only in expediting production. but in achieving the maximum results from the expenditures of defense dollars. Other agreements sponsored by Interior. the Maritime Commission. and the U. 5. Information Agency also serve important defense purposes. Another authority that would be continued by extension of the Act is that of the Joint Committee on Defense Production. This committee has served the valuable function of keeping the Congress and the public info rmed of all activities carried out under the Defense Production Act and other related programs. The other special authority in Title Vll is found in section 710(c). lt authorizes the creation of a reserve of persons from private life or govcrnment service capable of filling executive positions in the Federal Government. in time of mobilization. Pursuant to the procedure r 7 established by Executive Order 11179. dated September 22. 1964. nine departments and agencies having emergency mobilization responsi- bilities have 38 units of the Executive Reserve with an enrollment of approximately 3600 members. It is anticipated that by the end of Fiscal Year 1966_ 4. 000 Reservists will be enrolled in the programs and by the end of Fiscal Year 1967 the total strength of the Executive Reserve will be 5. 000 members. Eighty percent of the membership of the Executive Reserve represents a cross section of industry. The other twenty percent of the Reserve is made up of educators. lawyers. doctors. labor leaders, and permanent Government employees. Under this program each Federal department and agency having major mobilization assignments determines the number of executives it will need to fill key positions and it prescribes training and orientation programs for its members. OEP evaluates each unit of the program and coordinates the activities of the units. Candidates for membership in the Executive Reserve are subrritted to the Director of CE? for approval; if approved. the candidate can be designated for a te rm not to exceed three years. The Reservists participate in training programs on a national and regional basis and are given orientation and training on activities they would need to perform under emergency conditions. Since June 17. 1965, three national or regional conferences involving 1500 Executive Reservists have been held. Besides these joint training conferences - 8 of all agencies with units of the Reserve. numerous training conferences were conducted by the departments and agencies with components of the Reserve. Initially the Reserve was based on the assumption. that as in World War II and Korea. Federal direction in an emergency would be carried out largely by agencies in Washington. Since the early 1960's greater emphasis in the program has been given to training executives to under- take regional and field assignments. Lately. both regional and national assignments in Washington have been stressed at training conferences. The Executive Reserve is one of the most important elements in our efforts to develop programs which would make us capable of functioning efficiently in the event of an emergency. It will assure us of a number of trained executives who can immediately go into action and perform the functions that would be required by the Federal Gavemment in either a nucleananack type of emergency or a steppedwup limited war. Because of the continuing importance of all of these authorities to our current military effort and mobilization preparedness, we strongly urge approval of H. R. 13014 which will extend the effective date of the Defense Production Act. as amended. for 4 years to June 30. l970. We hope it will be acted on favorably by this Committee and the Congress.