the latter more appropriately representing the construction period, replacements for 2 battleships may be commenced during the fiscal year 1941. A further unit is already eligible for its replacement to be started. With the replacement tonnage provided for in this bill, replacement units for 10 of the 15 battleships we were permitted to maintain under the Washington Treaty of 1922 will have been laid down, some of which soon will be ready to join up with the fleet. ACQUISITION AND CONVERSION OF AUXILIARIES In addition to the 52 auxiliary vessels referred to under "shipbuilding," the Department will have need for 22 other units (hearings, p. 50), most of which probably will be vessels acquired and converted. It is not feasible to estimate the cost in the absence of knowledge of the characteristics of the vessels to be acquired. The Department has supplied a purely conjectural figure of $91,000,000. Of this amount, $16,000,000 has been made available in title III of the Naval Appropriation Act, 1941. The accompanying bill carries the estimated remaining amount of $75,000,000. AVIATION For the current fiscal year funds and contractual authority heretofore have been made available for the procurement of 3,100 airplanes, which, in conjunction with planes on hand and on order, would give the Navy approximately 6,000 serviceable or project airplanes. The instant proposal, which the committee recommends for approval, looks to the addition or 4,028 more, with a delivery spread of all extending through December 1942. By that time, of course, normal attrition will have eliminated from the serviceable category a number (estimated around 1,000) of the planes presently on hand and which will be delivered between now and the end of 1942. The additional 4,028 planes are estimated to cost, including spare engines, $500,000,000, which does not, however, include their ordnance. For their procurement, the bill includes $375,000,000 of contractual authority, a portion of the $170,000,000 of immediate appropriation proposed, and the balance will be made up of such diversion as may be necessary of the $125,000,000 of contractual authority heretofore granted for the current fiscal year, which will be replaced by a draft upon the $170,000,000 of immediate appropriation. The $170,000,000 item of appropriation includes $45,000,000 for necessary plant expansion to take care of the program. Also, it would be available for making cash advances to airplane contractors. either under the instant program or programs formerly approved, as authorized by the act approved June 28, 1940 (Public, No. 671), and, thirdly, it would be employed to pay for planes now being ordered under contractual authority, which will be delivered earlier than originally anticipated. The entire proposal is here upon the recommendation of the Advisory Commission of the Council of National Defense as a part of the program for accelerating production, of which definitely projected procurements are an essential part. PUBLIC WORKS The estimate under this head calls for $40,750,000 of appropriation and $35,000,000 of contractual authority, and is responsive to the new ship expansion bill (Public, No. 757), and also, in the main, for going forward with the enlarged air base program. The projects are named in detail in the accompanying bill (pp. 9-23), and appear in the table commencing on page 68 of the hearings, except that the latter excludes the torpedo assembly-plant project at the naval torpedo station, Newport, R. I., which came in a later submission. All of the projects, consistent with the authority applying to all prior appropriations for the current fiscal year, may be awarded after negotiation upon a cost-plus-a-fixed-fee basis, the fee not to exceed 6 percent. Many of the instant projects have not been authorized. Those in that category have been inquired into in detail by the House Committee on Naval Affairs, and, with one exception, are recommended by that committee in H. R. 10200, reported to the House on July 25, 1940. The excepted item pertains to the provision of a large graving drydock in New York Harbor in cooperation with the Port of New York Authority. This proposition is the subject of special legislation (S. 4165) now pending in the House Committee on Naval Affairs. The committee, therefore, has excluded such item from the bill, resulting in a reduction of $7,000,000, of which $4,000,000 is in the nature of contractual authority. MUNITIONS The appropriation proposed under this head is $102,293,000, in conjunction with $26,230,000 of contractual authority. The bulk of the total is under the Bureaus of Ordnance and Ships, though there is an amount of $7,000,000 set up separately under the Marine Corps. The whole sum involved is to be applied, generally, as follows: Essential and critical items for the Marine Corps.--. Recommissioning vessels, rearming auxiliaries, supply deficiencies Total.... $29, 550, 000 28, 650, 000 15, 033, 000 55, 290, 000 128, 523, 000 TRAINING RESERVE MIDSHIPMEN Anticipating a demand for a large increase in commissioned line officer personnel, the Department plans partly to meet such situation by developing between four and five thousand young men who have had at least 2 years' university education. The plan calls for enlisting 5,000 youths in the volunteer branch of the Naval Reserve and to cruise them for 30 days to ascertain the ones who promise to make suitable officer material. The survivors of this first phase, estimated at 4,341, will be commissioned as midshipmen in the Naval Reserve and sent to certain schools, yet to be chosen, for an intensive 90-day course of training, after which, if they qualify, they will be commissioned as ensigns in the Naval Reserve, and, possibly, some 2,000 of them will be ordered to 5 months' duty of a specific nature with the fleet. Every stage of the program is a voluntary one, so far as the trainees are concerned, except, of course, that after commissioning, they may be ordered to active duty in time of war or national emergency declared by the President. The initial stages of the program, i. e., up to the active duty stage, are estimated to cost $3,189,780, to which should be added $750,000 included under Public Works, for the provision of facilities at such schools as may be selected for the 90-day training course. LIMITATIONS AND LEGISLATIVE PROVISIONS There are stated below three legislative provisions recommended by the committee, the first two of which are self-explanatory. The third is advocated by the Chief of the Bureau of Aeronautics of the Navy Department to cure a hindrance in the procurement of naval aircraft. Under the Vinson-Trammell Act of 1934, otherwise known as the Treaty Navy Act (48 Stat. 503-505), contractors for the vessels and aircraft therein authorized, including subcontractors where the amount involved exceeded $10,000, were required to pay into the Treasury profit in excess of 10 percent. This provision has been extended to apply to vessels and aircraft subsequently authorized, and, by the act approved April 3, 1939 (53 Stat. 555-560), was extended to include Army aircraft, such act also raising the profit limitation as to aircraft to 12 percent. The 10 percent as to naval vessels was not changed. The next step was the Act entitled "An act to expedite national defense, and for other purposes," approved June 28, 1940 (Public, No. 671), under the terms of which the excess profit to be paid into the Treasury in the case of naval vessels was reduced from 10 to 8 percent, and, in the case of Army and Navy aircraft, from 12 to 8 percent. This last step, i. e., fixing a profit limitation of 8 percent upon Army and Navy airplane contracts, including subcontracts in excess of $10,000, is operating to slow down Navy procurements because of the difficulty contractors are experiencing with subcontractors in getting them to accept orders under the reduced profit limitation. Unquestionably, there is a unanimity of opinion that all bottlenecks should be removed from the procurement of the most essential items of defense matériel, and airplanes stand at the top of materials in that category. Profit limitations do not now apply, public works contracts excluded, to any type of procurement of a military character, save complete naval vessels and aircraft. No restriction obtains as to guns, powder, mechanized weapons, or any other kind of munitions. It would seem, therefore, that a limitation running to aircraft and naval vessels alone is not entirely logical, particularly at this time, and certainly is illogical if it operates to impede the consummation of urgent defense programs. The proper procedure, the committee submits, is to subject profits upon all contracts in the defense program, deemed to be excessive, to a uniform rate of recapture, and it wishes to stress the fact that delay in the early settlement of this question and the question of amortization of plant expansions are daily hurting the advance of defense preparation. The provision proposed by the committee goes no further than Army and Navy airplane procurement. The change it recommends in the Act of June 28, 1940, has the effect of restoring profit limitation as to Army and Navy airplane procurement to 12 percent as provided in the act of April 3, 1939, supra. It continues the requirement that contractors for naval vessels shall be required to pay into the Treasury profit in excess of 8 percent. The three legislative provisions recommended follow: On pages 3 and 4, in connection with the appropriation "Military posts": Provided, That all construction for the Military Establishment which has been authorized or may be authorized prior to July 1, 1942, may be prosecuted with the approval by the Attorney General prior to his approval of title to the lands upon which such construction is to be placed, to such extent as may be deemed necessary or advantageous by the Secretary of War. On page 27, under "General provisions": SEC. 301. That during the period of the national emergency declared by the President on September 8, 1939, to exist, so much of section 6 of the Act approved May 6, 1939 (53 Stat. 683), as amended by section 2 of the Act approved June 30, 1939 (53 Stat. 989), as requires the head of each executive department (other than the Post Office Department) to submit to the Postmaster General quarterly reports relating to mail matter which has been transmitted free of postage, is hereby suspended, insofar as the War and Navy Departments are concerned. In compliance with paragraph 2 (a), rule XIII, there is submitted the following statement indicating specific amendment of a statute: On pages 25 and 26, under "Replacement, Navy"— EXISTING LAW SEC. 2. (b) After the date of approval of this Act no contract shall be made for the construction or manufacture of any complete naval vessel or any Army or Navy aircraft, or any portion thereof, under the provisions of this section or otherwise, unless the contractor agrees, for the purposes of section 3 of the Act of March 27, 1934 (48 Stat. 505; 34 U. S. C. 496), as amended (1) to pay into the Treasury profit in excess of 8 per centum (in lieu of the 10 per centum and 12 per centum specified in such section 3) of the total contract prices of such contracts within the scope of this subsection as are completed by the particular contracting party within the income taxable year; * * * (Public, No. 671, 76th Cong.). PROPOSED The first paragraph of Section 2 (b) and subdivision (1) of such Section 2 (b) of the Act approved June 28, 1940 (Public, Numbered 671, 76th Congress), are hereby amended to read as follows: "(b) After the date of approval of this Act no contract shall be made for the construction or manufacture of any complete naval vessel or any portion thereof, under the provisions of this section or otherwise, unless the contractor agrees, for the purposes of section 3 of the Act of March 27, 1934 (48 Stat. 505; 34 U. S. C. 496), as amended "(1) to pay into the Treasury profit in excess of 8 per centum (in lieu of the 10 per centum specified in such section 3) of the total contract prices of such contracts within the scope of this subsection as are completed by the particular contracting party within the income taxable year;". |