Colonel ROYALL. I understand that today a great many more than 95 percent are being settled that way, and we believe that certainly 95 percent can be settled that way. Maybe we will have to provide scme business personnel to do it, but we don't need any statute to enable us to settle the contracts.

The CHAIRMAN. We have had evidence from the Navy Department and, I believe, your department, too, that some of these terminations have been hanging around 6 months without settlement.

Colonel ROYALL. That is right. That is an administrative matter, and it has got to be hurried up. This committee that they have got working on it is working on the administrative regulations, trying to expedite the settlement. That is a matter of efficient administration. Of course, today, everybody is more interested in fighting the war than they are in terminating contracts.

The CHAIRMAN. That is true.

Colonel ROYALL. And we have got to provide the machinery that can terminate them. We do not need legislation for that.

What this legislation is directed at is this, this situation: No matter how efficient we are going to be, there is going to be some delay in terminating the contracts. If you have a contract of $50,000,000, built in 10 plants, with 100 subcontractors and 150 sub-subcontractors, and 500 suppliers, you can't meet on Wednesday afternoon and settle it. It is going to take some time, no matter how efficient you are. But it is that interim of delay for normal and expeditious settlement we have got to provide for.

Mr. MAY. Mr. Chairman, isn't this the only question: I understand the Colonel's testimony here to mean that there is just one single little loophole in the thing that has got to be covered by legislation, that under the War Powers Act, which gives the President power to make settlements and advance payments, and so forth, and the regulations that they make under his Executive order, they can do everything but one little thing, and that is to adjust the accounts of these subcontractors that are in distress financially, or about to get in distress, or about to go broke?

Colonel ROYALL. We can do that today, sir; everything but one thing. May I make this one qualification? When the war ends I doubt that the War Powers Act would justify an Executive order that would permit advance payments and loans for the purpose of termination because it would be hard to say that it was facilitating the prosecution of the war. That is the reason the provisions for advance payments and loans are put in there, to meet that situation.

The CHAIRMAN. Of course, we could discuss this thing all day. We all have a pretty clear idea of what we want. I would like for the Colonel to look over this draft that was drafted by the drafting service here and also along with the help of the Appropriations Committtee. Mr. BURTON. There is one slight amendment that I would like to offer on page 2.

The CHAIRMAN. Well, this is just something to go by. We want to submit that and see what you think of it, Colonel.

Colonel ROYALL. Gentlemen, we will follow that suggestion and get right on it.

The CHAIRMAN. Very well.

(Whereupon the subcommittee proceeded to the consideration of other matters.)

TO AUTHORIZE THE SECRETARY OF WAR TO USE FUNDS FOR ADJUSTMENT OF CONTRACTS

TUESDAY, JUNE 29, 1943

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE OF THE COMMITTEE ON MILITARY AFFAIRS,

Washington, D. C.

The subcommittee met, pursuant to notice, at 3:20 p. m., in room 1310, New House Office Building, Representative Carl T. Durham (chairman) presiding.

Present: Representative Durham (chairman), Sikes, Martin, and Fenton.

Also present: Mr. H. Ralph Burton, general counsel, Military Affairs Committee.

The CHAIRMAN. This is a continuation of the hearings on H. R. 3022. It has to do with the termination of contracts.

STATEMENT OF THOMAS J. LYNCH, ASSISTANT GENERAL COUNSEL, TREASURY DEPARTMENT

The CHAIRMAN. Will you give to the stenographer your name and whom you represent and tell us what you people think of this proposed H. R. 3022?

Mr. LYNCH. Thomas J. Lynch, assistant general counsel, Treasury Department.

Mr. Chairman, we have had opportunity for the last few minutes to look at the revised draft. I would like to say in general, however, that the Treasury Department certainly would be in agreement with the principle and general objectives of this bill.

It is our understanding of the bill that it has for its purpose the relief of hardship situations that might befall war contractors upon termination of contracts where final audits, settlements, of their claims might take a considerable time, and in the meantime they would be without relief and, perhaps, without funds which would enable them to make necessary conversions.

Mr. BURTON. I would like to take the opportunity of interrupting you at this point to call attention to the chairman that the draft of the revised bill from which you are reading is one which was prepared since yesterday by the representatives of the War Department in conjunction with others and is not the revised draft which was prepared by the legislative counsel and which has been before you previous to this.

I have here copies, and hand them to you now, of this last revised bill which Mr. Lynch is reading.

The CHAIRMAN. You may proceed, Mr. Lynch, with your statement on this.

Mr. LYNCH. I should say that the interest of the procurement agency with respect to the proposal contained in this bill is, of course, primarily with reference to its lend-lease contracts. Of course, in that regard, the amount of procurement done by the Treasury Department which would fall under this bill would be just a fraction of the amount done by the War and Navy Departments. I wish we were in a position now to offer any help we might with respect to the details or technicalities of this bill.

I wonder if the committee would be good enough to indulge us, so that we might go over it from, let's say, its detailed provisions and technical aspects and supplement this statement with any suggestions that come from that? (See appendix 3, p. 138.)

The CHAIRMAN. That is all right. You may do that.

Of course, our problem here is to work out something to expedite the termination of the contracts, and we are trying to put the whole picture together, from the standpoint of the Treasury, War Departmont, Navy Department, and the Maritime Commission.

If you folks want a longer time to study this, I don't see any reason why the committee should not permit you to do it.

Mr. LYNCH, Mr. Thurman Hill, Chief Procurement Officer of the Treasury Department, is here.

STATEMENT OF THURMAN HILL, CHIEF PROCUREMENT OFFICER, TREASURY DEPARTMENT

Mr. HnL. I am somewhat puzzled as to the extent we may go in the loan feature, how broad that is. Of course, I have just had a brief opportunity to study it. It seems to me that an advance payment is an advance payment and a loan is a loan, and where they make the distinction here is a little difficult for me to ascertain.

The CHAIRMAN. Are you people at the present time having difficulty in terminating your lease contracts? Have you terminated some of those contracts ?

Mr. Hun. We have terminated a few.

The CHAIRMAN, Are you in the position to expedite those, or are you haying the same trouble that the War Department is having with the suboartractors throughout the country?

M. H. We have some difficulty. I think the general purpose of this bill is very good.

The CHAIRMAN. We believe so, too,

Mr Lyxon. If I may sar, Mr. Chairman, we don't expect to take a in submitting any suggestions that we have with reference 1. The reason for leaving the matter open, so that we may Ons is as I say, that we just received a copy of this and we she ala ke to have an opportunity to go over it in

TO CHATALAN Con'd von people submit a report by morning which we world being before the full committee! Would that give you

Mr. LYNCH. We will certainly make every effort to do it. I presume that you would like to have a "Yes" or "No" answer to that now. Is that a meeting that is scheduled now?

The CHAIRMAN. The full committee meeting is scheduled for tomorrow for further consideration of reporting the bill on this ter-· mination clause contract.

Mr. LYNCH. I will say, Mr. Chairman, that we will certainly make every effort to do it, and I will anticipate that we will be able to get something. We would like to submit this draft of the bill to officials in the Treasury Department who have not had an opportunity to see it. It may be a considerable task to get that done in the remaining hour or so this afternoon that we will have when we get back.

The CHAIRMAN. We certainly want to work out something satisfactory to you people-because you were included in the first draft of this bill, were you not?

Mr. LYNCH. We will certainly make every effort to have that done. The CHAIRMAN. Is that satisfactory to the committee? Who is here this afternoon from the War Department?

Mr. MARBURY. I am W. L. Marbury.

The CHAIRMAN. Very well, Mr. Marbury, you may proceed.

STATEMENT OF W. L. MARBURY, CHIEF COUNSEL, PURCHASING DIVISION, ARMY SERVICE FORCES

Mr. MARBURY. In accordance with the understanding had at the last meeting, representatives of the War Department and of your legislative counsel have cooperated in the preparation of a draft, a redraft of the bill which we submitted to the counsel for the General Accounting Office in substantially its present form-as a matter of fact, except for two changes, both of which have the tendency to limit the operation of the bill, rather than extend it.

We were advised just before this hearing was set that the Comptroller General felt that he could not express an opinion about the bill in the absence of further opportunity to give it study.

Under the circumstances, we thought that we would do whatever the pleasure of the committee is in respect to the bill. We have the draft.

Colonel Cutter, who assisted in the preparation of it, would be glad to explain the differences that exist between the draft and the committee draft that was under discussion at the last hearing.

Colonel Mechem would be glad to furnish the committee with any further information which the committee might desire as to the practical necessity for the bill and practical operations. We believe that the bill in its present form meets every objection which has been made or suggested to the bill and is now a highly desirable piece of legislation. At the same time, in view of the fact that we are not in a position to say that the General Accounting Office approves the bill, we seek further guidance from the committee as to what they want us to do now.

The CHAIRMAN. I think it would be well to have an explanation of the bill where such changes have been made in the bill, and if somebody is here from the War Department to make that, he can come around and proceed to make a statement.

The CHAIRMAN. You may proceed, Mr. Lynch, with your statement on this.

Mr. LYNCH. I should say that the interest of the procurement agency with respect to the proposal contained in this bill is, of course, primarily with reference to its lend-lease contracts. Of course, in that regard, the amount of procurement done by the Treasury Department which would fall under this bill would be just a fraction of the amount done by the War and Navy Departments. I wish we were in a position now to offer any help we might with respect to the details or technicalities of this bill.

I wonder if the committee would be good enough to indulge us, so that we might go over it from, let's say, its detailed provisions and technical aspects and supplement this statement with any suggestions that come from that? (See appendix 3, p. 138.)

The CHAIRMAN. That is all right. You may do that.

Of course, our problem here is to work out something to expedite the termination of the contracts, and we are trying to put the whole picture together, from the standpoint of the Treasury, War Department, Navy Department, and the Maritime Commission.

If you folks want a longer time to study this, I don't see any reason why the committee should not permit you to do it.

Mr. LYNCH. Mr. Thurman Hill, Chief Procurement Officer of the Treasury Department, is here.

STATEMENT OF THURMAN HILL, CHIEF PROCUREMENT OFFICER, TREASURY DEPARTMENT

Mr. HILL. I am somewhat puzzled as to the extent we may go in the loan feature, how broad that is. Of course, I have just had a brief opportunity to study it. It seems to me that an advance payment is an advance payment and a loan is a loan, and where they make the distinction here is a little difficult for me to ascertain.

The CHAIRMAN. Are you people at the present time having difficulty in terminating your lease contracts? Have you terminated some of those contracts?

Mr. HILL. We have terminated a few.

The CHAIRMAN. Are you in the position to expedite those, or are you having the same trouble that the War Department is having with the subcontractors throughout the country?

Mr. HILL. We have some difficulty. I think the general purpose of this bill is very good.

The CHAIRMAN. We believe so, too.

Mr. LYNCH. If I may say, Mr. Chairman, we don't expect to take a long time in submitting any suggestions that we have with reference to this bill. The reason for leaving the matter open, so that we may offer suggestions, is, as I say, that we just received a copy of this last draft, and we should like to have an opportunity to go over it in rather thorough detail.

The CHAIRMAN. Could you people submit a report by morning which we could bring before the full committee? Would that give you enough time, by 10 o'clock?