UNITED STATES ARMY IN WORLD WAR II 

Special Studies 

BUYING AIRCRAFT: MATERIEL 

PROCUREMENT FOR THE 

ARMY AIR FORCES 

by 

Irving Brinton Holley, ir. 

CENTER OF MILITARY HISTORY 

UNITED STATES ARMY 

WASHINGTON, D.C., 1989 





Foreword

Buying Aircraft: Matériel Procurement for the Army Air Forces offers

the reader a liberal education in military procurement. It examines in

depth, and with judicious understanding, the following: procurement of

aircraft; budgeting and budgetary changes; contracting; design changes; the

nature and development of the aircraft industry; manufacturing techniques,

especially in the introduction of mass production into the aircraft industry,

and problems in the use of automobile assembly plants for making aircraft;

and the War Department's relations with Congress and the Comptroller.

Professor Holley recognizes the broad sweep and interrelationship of political, economic, legal, and military problems, and stresses the importance of

organization within both government and industry. The volume focuses

upon problems inherent in procurement, but does not concern itself with

air or ground force doctrine. Its subject matter is the procurement, not

the employment, of air power. Because Professor Holley's volume offers

concrete examples of problems involved in the design and purchase of

complicated and expensive items of military equipment over a period of

years, the experiences described should profit the officer engaged in procurement of missiles and aircraft today as well as the student of logistics,

and will add immeasurably to the thoughtful citizen's understanding of

national defense.

HAL C. PATTISON

Brigadier General, USA

Chief of Military History

Washington, D.C. 5 November 1962

vii
The Author

Irving Brinton Holley, jr., received his B.A. from Amherst College and

his M.A. and Ph.D. from Yale University. Enlisting in the Army, he rose

to the grade of staff sergeant as an instructor in aerial gunnery, attended

the Army Air Forces Officer Candidate School at Miami Beach, Florida,

and graduated in April 1944. After serving as a gunnery officer in the

First Air Force, he was assigned to technical intelligence at Headquarters,

Air Matériel Command, Wright Field, Dayton, Ohio. From 1945 to 1947

he was a member of the faculty of the Industrial College of the Armed

Forces.

In 1947 Mr. Holley accepted an appointment in the History Department of Duke University, where he is now a full professor. He holds a

commission as a lieutenant colonel, USAF Reserve, and has continued to

take an active part in reserve affairs.

Professor Holley is the author of Ideas and Weapons, published by the

Yale University Press in 1953, as well as numerous articles and reviews in

scholarly publications.

viii
Preface

Readers have a right to expect something in the way of answers to two

basic questions before they read further in this volume: What is it about

and for whom is it written? Although these questions seem simple enough,

neither of them can be adequately answered without considerable elaboration.

This book is about procurement in the broadest sense of the word. To

be sure, the mechanics of purchasing and contracting are considered at

some length, but the term procurement is here used to embrace far more

than is generally implied by the word itself. The chapters that follow

attempt to present the problem of air matériel procurement as a whole:

the computation of requirements, the evolution of internal organization,

the relationship and accommodation of conflicts between executive and

legislative agencies, the character and capabilities of the aircraft industry,

and many other similar facets are presented as the vital context without

which such topics as contract negotiation and facility expansion can

scarcely be understood.

Above all, the author wishes to make clear that he did not undertake

this book as an exercise in fulsome praise. He may have leaned in the

opposite direction, emphasizing unduly the failures while neglecting the

successes. But if this kind of history is to be useful and meaningful, it

cannot afford to devote its limited number of pages in adding to the paeans

of praise already in print. If the nation is to escape or even minimize the

blunders of the past, it cannot neglect to study its mistakes.

If the author has been frugal with praise, he has been no less cautious

in apportioning personal responsibility when discussing some of the more

egregious failures that marked the procurement program. The search for

scapegoats makes exciting journalism and can provide many a political football, but it misses the point. The really meaningful question to be asked

of disaster is not "Who was to blame?" but "What were the problems?"

Personal censure and recrimination are fruitless; to illuminate even a few

of the problems encountered is to help the future avoid the pitfalls of

the past.

In the main, then, individuals are accorded their privacy—in success as

well as in failure. The major exceptions to this rule are the leaders, both

political and military, in the highest echelons. Of necessity, as they themselves must recognize only too well, they forfeited their private lives when

ix
they climbed into the realm of folk heroes—or villains—and became a part

of the public domain.

This book was not written for the procurement specialist. Nor was it

written exclusively for the participants who helped shape many of the events

described; for the most part these individuals have left the scene and a

rising generation has taken their places. It is this new generation in particular to which this book is addressed. The author has kept his sights

consciously trained upon the ambitious young staff officer of tomorrow as

well as the general reader. His aim is to provide the broadest possible

synthesis of the problems of air arm procurement, giving a comprehensive

or general view of the sort required by those who aspire to exercise command as general officers. But the issues discussed here should have meaning for many more readers than those in the limited circle of air arm staff

officers, regular and reservist, seeking advancement; the themes developed

in this book should provide insights for officers in all the services. Moreover, since military expenditures constitute a major portion of the national budget, no student of public policy who would understand the implications of this spending in the national economy can ignore the intricacies

of air arm procurement.

Because this book has been written primarily for a generation that did

not experience the mobilization effort of the World War II years, the author

has spelled out in considerable detail the peacetime background of both

the air arm and the aircraft industry. Participants in the wartime procurement program may feel this belabors the obvious, but the author is convinced that the procurement story of the war era cannot be comprehended

unless one is well aware of the assumptions and premises generally held at

the time. And precisely because the attitudes were widely if not universally shared, they were often unstated. What everyone takes for granted

no one bothers to record. Unless this milieu can be recaptured, a subsequent generation will misunderstand the events of the war years and be

led to false conclusions regarding the lessons to be learned from them.

For example, the attitude of the aircraft manufacturers toward plant

expansions in 1940 is comprehensible only when seen against the events of

the depression just preceding. Readers in the postwar world, who know

the aircraft manufacturers only as industrial giants at the top of the national

economy, can appreciate the procurement problems of World War II only

when they are placed in the context of an industry ranking in fourteenth

or fifteenth place among the nation's economic groups. Or again, the decisions and plans of responsible air arm officials, particularly in the crucial

prewar months from September 1939 to December 1941, can best be appreciated when seen in the context of their long relationship with Congress

and the Comptroller General.

One final caveat remains to be stated. This volume makes no claim of

being a definitive account of the subject treated. While it is planned as an

integral work, one to be read as an inclusive account of the procurement

x
story as a whole, the writer has sought to avoid needless duplication of the

studies done by others in this field, notably R. Elberton Smith, The Army

and Economic Mobilization, a volume in the official history series,

UNITED STATES ARMY IN WORLD WAR II, and Alfred Goldberg's

chapters in W. F. Craven and J. L. Cate, THE ARMY AIR FORCES IN

WORLD WAR II, Volume VI, Men and Planes. With the needs of officers

preparing staff papers particularly in mind, the author has been at pains to

insert numerous cross references to those and many other published sources

bearing on the subjects discussed. The reader will also find, in addition to

the usual documentation, a large number of citations leading to archival

materials useful to those who wish further illustrative matter for staff

studies.

The author will be more than gratified if interested readers are sufficiently provoked to prove that his judgments and interpretations require

revision at some points. If this volume stimulates further study and a

continuing analysis of the problems of procurement, it will have served

its purpose well.

Whatever mistakes Buying Aircraft: Matériel Procurement for the Army

Air Forces may contain, whether of fact or interpretation, responsibility

rests firmly upon the author and not upon the literally hundreds of individuals who shared in one way or another in the preparation of this

volume. For their help, however, the author wishes to express his sincere

appreciation.

While the author is heavily indebted to the many writers of monographs

and special studies cited repeatedly in the footnotes, he wishes to single out

as particularly noteworthy the work done by R. R. Russel at Wright Field

and J. P. Walsh in the Eastern Procurement District headquarters.

The following individuals, all at one time or another associated with

OCMH, read and criticized the entire manuscript: Dr. Kent Roberts

Greenfield, Dr. Stetson Conn, Dr. John Miller, jr., Col. Seneca W. Foote,

and Mr. R. Elberton Smith. If their strictures on early drafts were occasionally painful, the author is conscious that the net effect of their efforts

has been highly constructive. Equally welcome were the evaluations of

two outsiders, Mr. T. P. Wright, vice president of Cornell University, and

General O. R. Cook, USAF, Retired, both of whom read drafts of the

book and prepared elaborate critiques from no other motive than a lifelong dedication to the problems of national defense.

Among those who went far beyond the requirements of their official

positions to facilitate the author's research, the following merit particular

attention: at Wright Field, Dr. Paul M. Davis and his staff in the Historical

Office; at the Industrial College of the Armed Forces, Dr. Marlin S.

Reichley and Miss Clara J. Widger with her library staff; at the National

War College, George Stansfield; in the Office of the Chief of Military History, Mr. Israel Wice and his staff, Dr. Robert W. Coakley, and Dr.

Richard M. Leighton; at the Air Force Historical Division Liaison Office,

xi
Dr. Alfred Goldberg; at the World War II Records Division, National

Archives and Records Service, General Services Administration, all those

anonymous people who repeatedly performed prodigies in locating obscure

and elusive documents from the mounting millions stored there. And for

assistance at virtually every turn over the several years during which this

book was in preparation, the author wishes to extend his particular thanks

to Mrs. Constance McL. Green, Miss Carol S. Piper, and Miss K. E. Brand.

The heavy task of editing the manuscript fell upon Miss Mary Ann

Bacon. If the author has bitterly complained that her blue pencil cut off

all the colorful peaks in his prose, he cheerfully concedes that she has also

managed to fill in most of his otherwise incomprehensible prose valleys.

For this he is truly appreciative, as he is to Mrs. Marion P. Grimes, the assistant editor. Mrs. Norma Heacock Sherris arranged the photographs.

Finally, the author wishes to acknowledge the patience, understanding,

and help rendered by his wife, Janet Carlson Holley, throughout the years

this volume was in preparation.

Washington, D.C. IRVING BRINTON HOLLEY, JR. 5 November 1962

xii
Contents

Chapter Page

I. INTRODUCTION ............... . 3

II. THE AIRCRAFT INDUSTRY ON THE EVE OF WORLD

W A R II .................. . 6

A Survey of the Industry ........... . 6

The Market for Aircraft ............ . 10

Research and Development ........... . 22

Production ................. . 2 6

Financing the Aircraft Industry: 1934-38 ...... . 33

III. CONGRESS AND THE AIR ARM ......... . 43

Authorized Strength: How Many Aircraft? ..... . 44

Authorizations, Appropriations, and Aircraft ..... . 63

IV. PROCUREMENT LEGISLATION, ORGANIZATION, AND

ADMINISTRATION ............. . 8 0

Organic Legislation for the Procurement of Aircraft ... 80

The Organization of the Air Arm for Procurement ... 93

The Administration of Procurement ........ . 106

V. PROCUREMENT UNDER THE AIR CORPS ACT ... . 113

Procurement: 1926-34 ............. . 11 3

Congressional Cloudburst ........... . 11 9

New Procurement Policy ............ . 128

VI. AIRCRAFT PROCUREMENT ON THE EVE OF WORLD

W AR II .................. . 13 2

The New Policy Reconsidered .......... . 132

The War Department Seeks a Solution ....... . 143

Peacetime Procurement: A Retrospect ....... . 146

VII. PLANNING FOR INDUSTRIAL MOBILIZATION ... . 150

T h e Problem ................ . 15 0

The War Department and Industrial Mobilization . . . . 151

The Air Corps Organization for Mobilization Planning . . 153

Air Corps Mobilization Planning ......... . 155

Air Corps Planning in Perspective ........ . 166

xiii
Chapter Page

VIII. THE TIDE TURNS ............... . 169

The President Proposes; Congress Disposes ...... . 169

The First Expansion Program .......... . 175

The Search for a Yardstick ........... . 186

IX. FOREIGN POLICY, POLITICS, AND DEFENSE .... . 194

Politics and Armament ............ . 194

Aircraft Exports and National Defense ....... . 196

Aircraft Exports and Mobilization Planning ..... . 205

X. REQUIREMENTS ............... . 20 9

An Essay on Requirements ........... . 209

Origin of the 50,000 Figure ........... . 221

XI. 50,000 AIRCRAFT ............... . 229

From Slogan to Program ............ . 229

There's Danger in Numbers: The President's "Must Program" .................. . 23 7

Return to Reality .............. . 243

XII. ORGANIZING FOR PRODUCTION ........ . 247

Posing the Problem .............. . 247

Evolution of an Organization .......... . 249

XIII. LEGISLATION FOR PROCUREMENT ....... . 274

Wartime Buying With Peacetime Laws ...... . 274

Improvising Legislation in a Crisis ........ . 283

XIV. THE PROBLEM OF INDUSTRIAL CAPACITY .... . 290

The Beginning of Facility Expansions ....... . 290

Enter Detroit: Air Arm Use of the Automobile Industry . 304

Expansion or Conversion? ........... . 316

The Facilities Program: An Appraisal ....... . 324

XV. THE NEGOTIATION OF CONTRACTS ....... . 330

The Transition to Wartime Buying ........ . 330

The Negotiation of Contracts .......... . 337

The Administration of Contracts ......... . 364

XVI. THE COST-PLUS-FIXED-FEE CONTRACT:

NEGOTIATION AND ADMINISTRATION .... . 372

Some Revolutionary Implications ......... . 372

The Fixed-Fee Problem ............ . 374

The Determination of Allowable Costs ....... . 379

Auditing and Accounting ........... . 390

The Problem of Property Accountability ...... . 397

The Relation of Primes to Subs ......... . 401

The Conversion of Fixed-Fee Contracts ....... . 410

xiv
Chapter Page

XVII. PRICE ADJUSTMENT ............. . 421

Escalator Clauses .............. . 42 2

Excess Profits and Voluntary Refunds ....... . 428

Statutory Renegotiation ............ . 42 8

XVIII. CONTRACT TERMINATION ........... . 446

The Background of Termination ......... . 446

The Character of the Termination Problem ..... . 447

The Organization for Termination ........ . 451

Some Illustrative Aspects of Administration ..... . 454

A n Afterword ................ . 46 0

XIX. ORGANIZATION FOR PROCUREMENT ...... . 462

Co-ordination, Control, and Command ....... . 462

Cross Procurement .............. . 48 0

Centralization an d Decentralization ........ . 48 7

X X . PRODUCTION ................ . 51 1

The Problem Defined ............. . 511

The Dilemma of Mass Production ........ . 512

Resolving the Dilemma ............ . 529

XXI. THE PROCUREMENT RECORD ......... . 548

A Statistical Summation ............ . 548

The Measure of Success ............ . 552

Counting the Cost .............. . 556

The Contribution of Industry .......... . 560

XXII. SOME CONCLUDING OBSERVATIONS ON MILITARY

PROCUREMENT ............... . 56 9

What Is Air Arm Procurement? ......... . 569

Procurement and Politics ............ . 570

Procurement Leadership in Wartime ....... . 571

Air Power and Organization .......... . 572

Appendix

A. MEMBERSHIP IN THE AERONAUTICAL CHAMBER OF

COMMERCE; 1938 .............. . 57 5

B. WARTIME PRODUCERS OF AIRCRAFT ...... . 576

C. MAJOR PRODUCERS OF AIRCRAFT ENGINES: JULY

1940-AUGUST 1945 .............. . 580

BIBLIOGRAPHICAL NOTE .............. . 58 3

GLOSSARY ..................... . 58 8

INDEX ....................... . 59 5
Tables

No. Page

1. Production of Aircraft Engines ............. . 7

2. Comparative Importance of Military and Civilian Markets ... . 21

3. A Comparison of the Aircraft Industry With the Automobile

Industry .................... . 2 7

4. Percent of Earnings as Dividends and Surplus, Eighteen Top Aircraft

Manufacturers: 1934-38 ............... . 3 4

5. Yearly Increment to Surplus or Deficit Compared With Yearly Increment to Deferred Development Charges, Eighteen Top Aircraft

Manufacturers: 1934-38 .............. . 3 5

6. Comparative Cost of Two-Engine and Four-Engine Bombers ... 142

7. B-24 Modifications at Willow Run ........... . 537

8. Engine Production by Type: 1940-45 ........... . 549

9. Engine Production by Horsepower: 1940-45 ........ . 549

10. Propeller Production: 1940-45 ............. . 549

11. Number of Airplanes Procured by Army Air Forces, by Type and by

Year of Acceptance: January 1940-December 1945 ..... . 550

12. Aircraft Deliveries to the AAF: July 1940-December 1945 ... . 554

13. Heavy Bombers Accepted by the AAF ........... . 555

14. Total Military Aircraft Production of Four Major Powers: 1939-44 555

15. AAF Cash Appropriations and Expenditures: 1935-45 .... . 557

16. AAF Expenditures by Major Categories: 1942-45 ...... . 558

17. Expenditures for Modifications and Research and Development:

1942-45 .................... . 55 8

18. Comparison of Civilian Payroll to New Aircraft and Research and

Development: 1938-41 ............... . 55 9

19. Average Unit Costs of Selected Aircraft: 1939-45 ...... . 560

20. Production of Turbojet Engines: July 1940-August 1945 ... . 562

21. Production of Automatic Controllable Pitch Propellers: July 1940-

August 1945 ................... . 56 3

22. Distribution of Employment in Airframe Industry: April 1945 . . 565

23. Direct Man-hours per Airframe Pound Accepted ...... . 565

Charts

1. Organization Chart Showing Channels of Communication Between

the Secretary of War and the Air Corps ......... . 95

2. Organization of OCAC, Washington Headquarters of Air Corps . . 96

3. Materiel Division, Wright Field, Dayton, Ohio ....... . 98

4. Composite Organization Chart Showing the Agencies Primarily Concerned With Air Matériel Procurement in the Two Decades After

the Air Corps Act of 1926 .............. . 103

xvi
No. Page

5. Army Air Forces Organization: 9 March 1942 ....... . 487

6. Organization of the Materiel Command: 19 October 1942 ... . 488

7. Organization of the Resources Control Section of the Production Division, Materiel Command: July 1943 .......... . 489

8. Army Air Forces Organization: 29 March 1943 ....... . 490

9. Hypothetical Learner Curve .............. . 536

Illustrations

U.S. Mail Plane Loading From Mail Truck .......... . 13

National Advisory Committee for Aeronautics ......... . 24

NACA Full-scale Wind Tunnel at Langley Field ........ . 25

Hand Assembly of Stearman Primary Trainers ......... . 30

T h e Morrow Board .................. . 4 7

House of Representatives Committee on Military Affairs ..... . 60

Maj. Gen. Oscar Westover ................ . 69

Boeing B-17 ..................... . 7 6

Douglas B-18 ..................... . 7 7

Maj. Gen. M. M. Patrick ................ . 89

Wright Field, 1935 ................... . 10 0

Wright Field, 1942 ................... . 10 1

Martin B-10 ..................... . 11 8

Maj. Gen. Benjamin D. Foulois .............. . 121

DC-2 Transports in Production .............. . 135

B-17 an d XB-15 ................... . 14 9

War Department Subcommittee of the House Appropriations

Committee ..................... . 17 6

Secretary Louis A. Johnson ................ . 177

Theodore P . Wright .................. . 19 2

President Asks Congress for 50,000 Aircraft .......... . 226

Curtiss XP-40 .................... . 22 7

British Spitfire .................... . 22 7

Douglas A-26 ...................... . 24 4

Martin B-26 ..................... . 24 5

Lt. Gen. William S. Knudsen ............... . 256

T h e B-24 ...................... . 30 6

T h e B-25 ...................... . 30 7

Brig. Gen. Charles E. Branshaw .............. . 466

Maj. Gen. Kenneth B. Wolfe ............... . 469

General Brehon B. Somervell ............... . 478

Brig. Gen. A. J. Browning ................ . 479

Secretary Robert P. Patterson ............... . 479

Maj. Gen. Oliver P. Echols ................ . 479

xvii
Page

Assembly Jig, B-24 Center Wing Section ........... . 525

B-24 Assembly Line, Willow Run ............. . 526

Boeing B-17 Assembly Line ................ . 541

All photographs are from the Department of Defense except for the following:

page 227, Air Force and Space Digest; pages 24, 25, 177, 192, and 479, National

Archives; pages 306, 525, and 526, Ford Motor Company; and page 226, Harris

and Ewing, Washington, D.C.

xviii

BUYING AIRCRAFT:

MATÉRIEL PROCUREMENT

FOR THE ARMY AIR FORCES

CHAPTER I

Introduction

The strength and structure of the

Military Establishment of the United

States are responsibilities of the American public expressing its will through

Congress. Since the Army is an operating agency with but limited voice in the

formation of national policy, it is incumbent upon departmental officials to submit accurate and meaningful reports to

the public and its representatives if they

are to provide an effective legislative

basis for the maximum in national security at the least cost.1

 Unfortunately

the information necessary for sound legislation has not always been readily available.

If the American public, congressmen,

editors, and the man in the street held a

number of serious misconceptions about

the Army's air arm and its state of readiness on the eve of World War II, it may

very well be that their erroneous impressions were derived from authoritative sources. General Malin Craig, the

Chief of Staff, himself assured the people

of the United States in his annual report

of 1938 that Army planes were "equal,

if not superior," to any in the world.2

Perhaps the aircraft were superior, but a

curious congressman might have been

forgiven had he asked on what foundation this assurance rested. The Chief of

Staff claimed that the outstanding performance of Army aircraft was "convincingly demonstrated" by the flight of six

Army bombers on a record-breaking

journey to Argentina.3 The long-distance flight, spectacular and significant

as it may have been at the time, was not

proof of tactically superior aircraft.

Even though the Chief of Staff's logic

might be imperfect, the inquiring congressman might still conclude that all

was well in the air arm—unless he read

further in the official reports of the War

Department for the year 1938.

In commenting on the air arm during the fiscal year just past, the Assistant

Secretary of War Louis A. Johnson differed with his military colleague and

sounded a warning. While the Army's

aircraft in 1937 had been, "in general,

the best and most efficient in the world,"

it now appeared that "our former technical superiority" was "no longer clearly

apparent." The tone of assurance in the

Chief of Staff's boast of aircraft "unexcelled" by the military planes of any

1

 Those familiar with the preparation of annual

reports within the Army might argue that no one

should attach too much importance to such documents, often prepared in haste and sometimes inaccurate. Nonetheless, that some officers recognized

their potential importance is attested by the 1934

annual report of Chief of Staff, General Douglas MacArthur, which is paraphrased above.

2

 Annual Report of the Secretary of War, 1938,

p. 34. 3

 Ibid.
4 BUYING AIRCRAFT

nation was not to be found in Johnson's

report:

"Recent advances in other countries

have equalled if not exceeded our efforts.

We have known for some time that foreign nations far surpassed us in the number of military aircraft at their disposal

but we also knew that we led the field

technically. It now appears that our research and development programs must

be accelerated if we are to regain our

position of technical leadership."

 4 Further, current production programs as

well as those contemplated for wartime,

he flatly declared, fell far short of providing even a minimum number of aircraft that "any realistic view of the problem would show to be necessary."

 5

If the Chief of Staff and the Assistant

Secretary of War appeared to contradict

each other, Secretary of War H. H.

Woodring did little to clarify the picture. Looking back five years, he recalled that the rest of the world was

"setting a fast pace" in the development

of air power, while the United States

was "floundering along in the ruck."

 6

By 1938 the Secretary of War felt free

to report a "far more encouraging situation."

 7

 This was a cryptically vague

and entirely relative characterization

that might have lent support either to

the optimistic view held by the Chief of

Staff or to the pessimistic one held by

the Assistant Secretary of War.

What, then, was the uninitiated citizen to believe? One official reassured

him, another warned him of imminent

danger, yet another left him undecided.

An inquirer might indeed conclude that

freedom of expression prevailed in the

War Department. Useful and thought

provoking as this diversity of ideas may

have been within the Department, the

contradictory reports published for public distribution indicated that Congress,

the President, and the man in the street

would have to seek further for the information so indispensable to an informed and intelligent national policy

on air power. This volume may make a

contribution toward that quest.

Did the United States have a superior

air force on the eve of World War II?

The question is now largely academic,

but it may well be asked because it poses

another, more useful question: exactly

what constitutes a superior air force?

Air power is something more than a

collection of aircraft, the ground installations necessary to keep them flying,

and the trained men needed to maintain

them in action. In addition, an air arm

requires a body of doctrine, for doctrines

regarding the strategic and tactical application of air power are as fundamental as the bombers and fighters that execute a wartime mission. Yet even to

stop here would be to confine the definition of an air force, by implication at

least, to the limits so frequently encountered in newspapers and newscasts. Almost equally important, and less frequently mentioned in public debate, are

4

 Ibid., p. 26. 5

 Ibid., pp. 26-27. 6

 Ibid., pp. 2-3. Compare this statement by Secretary of War Woodring with that on page 10 of

Final Report of War Department Special Committee

on Army Air Corps (Baker Board Report), 18 July

1934 (see below, Chapter III), which found U.S.

combat aircraft in 1934 "superior to those of any

other country." Jane's All the World's Aircraft (London: Sampson Low, Marston and Co., Ltd., 1935)

whose caustic editor, C. G. Grey, was certainly never

one to give an unduly favorable view of U.S. aviation,

placed this country at least two years in advance of

Europe in 1934. 7

 Ibid., pp. 2-3.
INTRODUCTION 5

a host of other ingredients that contribute to the sum total called air power.

Among these are the productive capacity

of the nation's aircraft industry and its

potential for expansion, the procedures

and practices by which the necessary

funds are secured from Congress, as well

as the forms and methods governing the

procurement of matériel.

In short, although the continuing national debate on air power policy generally takes place in terms of the quest

for quantitative and qualitative superiority, other factors essential to a superior

air force cannot be slighted with impunity. And in one way or another, the

general subject of procurement is related to all of them. It is no exaggeration to suggest that one cannot truly understand the problem of air power without first coming to appreciate something

of the enormous complexity of procurement.

The pages that follow seek to illustrate the almost infinite ramifications of

the procurement process and its intimate

relationship with virtually every other

activity of an air force. In addition, the

exposition should make it clear that the

elements of air power are never static.

Science probes further horizons, technology advances, and novel weapons are

perfected that require revised conceptions for efficient use. To survive in the

ultimate competition of war, an air force

must continue to perfect its techniques

of procurement no less than its doctrine

and its weapons.
CHAPTER II

The Aircraft Industry on the Eve of

World War II

A Survey of the Industry

A cross-section view of the nation's aircraft enterprises on the eve of World War

II reveals that the industry was in fact a

complex of manufacturing enterprises,

not all of which were primarily concerned

with airplanes. While airplane manufacturers as such constituted the aircraft industry in the popular sense, in reality the

term was far more inclusive, covering not

only manufacturers of airframes but all

those concerns producing engines, accessories, and component parts or subassemblies.

The designation aircraft industry thus

actually embraced four rather distinct

groups. First and best known were the

airframe manufacturers. These firms designed new aircraft and produced them,

sometimes fabricating nearly all of the

items within their own manufacturing organizations and sometimes merely assembling components and subassemblies

made elsewhere.

Engine manufacturers constituted a

second group. During World War I, aircraft engine production was virtually enfeoffed to the automotive industry. On

the eve of World War II this was no

longer true. By then seven or eight manufacturers specialized in the production of engines.1

 Two of these firms—

the Wright Aeronautical Corporation at

Patterson, New Jersey, and the Pratt and

Whitney Aircraft Division of the United

Aircraft Corporation at East Hartford,

Connecticut—dominated the field in

terms of numbers produced, dollar volume of business, and units of horsepower

delivered. (Table 1) A third concern,

the Lycoming Division of the Aviation

Manufacturing Corporation at Williamsport, Pennsylvania, shared significantly

in producing engines for trainers.

1

 House Subcommittee of Committee on Appropriations, Hearings on Supplemental Military Establishment Bill for 1940, May-June 1939, pages

319-20, mentions the following engine manufacturers: Allison Engineering Co., Indianapolis, Ind.;

Continental Motors Corp., Detroit, Mich.; Jacobs

Aircraft Engine Co., Pottstown, Pa.; Lycoming Division, Aviation Manufacturing Corp., Williamsport,

Pa.; Ranger Engineering Corp., Farmingdale, Long

Island, N. Y.; Pratt and Whitney Aircraft Division,

United Aircraft Corp., East Hartford, Conn.; and

Wright Aeronautical Corp., Patterson, N. J. To this

group should be added: Aircooled Motors (Franklin), Kinner Airplane and Motor Co., and Menasco

Manufacturing Co., all producing engines in a class

below 260 horsepower. Of the firms listed above,

Allison, Pratt and Whitney, and Wright Aeronautical

produced engines with horsepower ratings above

1000. For a contemporary survey of the engine industry, see Aviation, February 1939, pages 55ff.
AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 7

TABLE 1—PRODUCTION OF AIRCRAFT ENGINES

Source: W. B. Harding, The Aviation Industry, pp. 25-26.

Subcontractors constituted a third

group within the aircraft industry. Of

vital significance in wartime, subcontractors in peacetime were not only fewer but

not so well recognized as a definite group

with distinctive characteristics.2 There

were very few entirely vertical corporations in the aircraft industry producing

airframes, engines, and all major components, but most airplane manufacturers

did not rely heavily upon subcontractors

for components and subassemblies. Factors such as the absence of manufacturers

willing to accept subcontracts, the limited

number of units in production runs, the

need for close tolerances in precision

work, and the necessity for a high order

of production co-ordination in an area of

frequent and rapid design change, as well

as the desire of the airframe manufacturers to find employment for idle sections of their own production forces, all

contributed to the peacetime practice of

minimizing subcontract work. Even such

a relatively large-scale manufacturer as

the Boeing Aircraft Corporation fabricated all dies for presses, hammers, and

drawbenches in Boeing shops.3 When

the emergency arrived and it proved advantageous to depend upon an increasing

number of subcontractors, the lack of

widespread peacetime use of subcontractors made wartime expansion in the field

difficult. However, even though subcontractors were few in number during

the prewar years, they did constitute a

distinct part of the aircraft industry.

Vendors or suppliers were the fourth

and last group of the aircraft industry.

While subcontractors fabricated parts

and assemblies to order by special contract with an airframe or engine manufacturer, vendors supplied ready-made

items off the shelf. Such standard and

semistandard miscellaneous items as

wheels, pulleys, rivets, instruments, control cables, turn buckles, and the like

made up the vendor's stock in trade.

Some vendors, such as the Sperry Corporation, specialized in the field of instruments and controls; others concentrated

on difficult-to-manufacture items such as

exhaust stacks and collector rings or oleo

strut shock absorbers.4 Among the vendors,

2

 For the role of subcontractors in wartime, see

below, pp. 401-10. 3

 Aerodigest (January 1936), pp. 26-29.

4

 William Barclay Harding, The Aviation Industry

(New York: C. D. Barney and Co., 1937), pages 30-31,

lists the vendors doing a major portion of their business in aviation during 1937 as follows: Air Associates, Aero Supply, Breeze Manufacturing Co., Brewster Aeronautical Corp., Cleveland Pneumatic Tool

Co., Irving Airchute, and Sperry Corp. Propeller

manufacturers might be listed with this group except

that the most important happen also to be aircraft
8 BUYING AIRCRAFT

one will serve as a representative example. Air Associates, Incorporated, combined manufacturing with a mail order

house and general store business in aircraft parts. With one store in New York,

one in Chicago, and a third on the west

coast, Air Associates could supply such

standardized items of aircraft hardware

as fuel strainers, high pressure hydraulic

pumps, relief valves, safety belts, landing wheels, and nuts, bolts, and screws for

immediate delivery. Catalogues distributed to 20,000 buyers in a world market

attested the scale of the firm's operations.5

Vendors, whether supplying one complex

specialty item such as autopilots or ten

thousand minor hardware items from

rivets to landing wheels, composed a separate and important segment of the aircraft industrial world.

While the four separate groups—airframe manufacturers, engine manufacturers, subcontractors, and vendors—did

exist as identifiable entities, not every

concern can be neatly tagged as belonging to one or another. Vertical organizations such as the Curtiss-Wright Corporation cut sharply across the groups,

producing engines, airframes, and many

component parts within a single managerial domain. Some vendors did subcontract work in addition to selling items

from stock by catalogue. Moreover, as if

to foreshadow a practice that was to become a problem during World War II,

there were occasions when two airframe

manufacturers did subcontract work for

each other, thus becoming prime contractors and subcontractors at the same

time.

That the business of aircraft production was never an integrated enterprise

and never became a single, harmonious,

smoothly functioning group working entirely within the team rules of a trade organization is perhaps best reflected in the

experience of the industry with the National Recovery Administration (NRA)

in the early thirties. The various component portions of the industry had such

difficulty in finding common ground for

agreement that promulgation of an acceptable code proved impossible. When

the Supreme Court toppled the whole

NRA structure in 1935, the aircraft industry was still without a code.6

Although the aircraft industry was

thus in reality a complex of several industries, the airframe manufacturers definitely held the center of the stage. As

design initiators and as synthesizers of the

contributions from all the other groups

in the industry, the airframe manufacturers necessarily require more attention

and closer study of who they were, where

they were located, and what their peculiar problems were on the eve of the war.

Membership in the Aeronautical

Chamber of Commerce during 1938

amounted to some 86 manufacturers.

This included 8 engine firms, 34 airframe

firms, and 44 accessory firms. Of the airframe firms, more than half built only

small, low-powered civilian airplanes; 14

handled both civilian and military types;

or engine manufacturers. Three important propeller

manufacturers were Hamilton-Standard (a United

Aircraft Corp. subsidiary), Curtiss, and Lycoming.

Bendix Aviation Corp. was a leading vendor in the

years immediately before the war, but only about a

quarter of its total business lay in the aviation field;

therefore, along with RCA, which supplied radio

components, it cannot be clearly designated as an

integral component of the aircraft industry. 5

 Aerodigest (January 1932), pp. 36ff.

6

 L. W. Rogers, "Functions of the Aeronautical

Chamber of Commerce," Journal of Air Law (October 1935).
AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 9

and 4 worked almost exclusively on military contracts.7

 (See Appendix A.) This

listing does not include firms that for one

reason or another did not join the Aeronautical Chamber of Commerce. The

nonmembers were by no means all unimportant and small-scale producers, including among their numbers such widely

different manufacturers as Rearwin Aircraft and Engines, Inc., in the light airplane field and Glenn L. Martin in the

large transport and heavy bomber field.

When war came, the nation had about

eighteen to twenty manufacturers with

considerable experience in building military aircraft and about the same number

whose production, though largely in the

light airplane field, would qualify them

as experienced in component and subassembly fabrication. Taken together,

these manufacturers comprised the airframe industry; their skills and techniques would provide the essential basis

for the nation's wartime achievements in

aircraft production.8

A glance at a map of the United States

will show how the prewar industry was

located about the country. There were

four loosely defined areas of concentration: those on the west coast from Los

Angeles and San Diego to Seattle; those

on the east coast in an area of three or

four hundred miles about New York

(the Hartford-Buffalo-Baltimore axis);

the Detroit-Akron-Cincinnati triangle;

and the Wichita-Kansas City-St. Louis

triangle. Beyond the fact that the east

coast area produced most of the engines

and the west coast strip turned out a majority of the airframes, no very clear pattern of production by functional types

according to geographic location is discernible. Such widely dispersed plants

as Boeing in Seattle, Douglas in Santa

Monica, and Martin in Baltimore all produced bombers.

In the light of subsequent wartime

pressures for "strategic dispersal," it

should be profitable to digress here momentarily to consider why the nation's

aircraft industry grew up as it did. As in

the case of many another new business,

irrational factors such as the sheer accident of the founder's residence probably

decided the location of many plants.

Few, it appears, made their decisions

after a careful weighing of all considerations as did Martin before moving to a

site near Baltimore.9 Some selected a site

because local capital was available.

Douglas is reported to have been moved

by such an inducement. In other cases

the presence of other aircraft plants and

a pool of trained labor helped determine

site selection. Occasionally, as in the

case of Wright Aeronautical, a site was

chosen because local businessmen made

offers of excellent facilities such as a new

factory or free use of a municipal flying

field. Boeing is said to have gone to Seattle to be near the spruce supply so essential in early aircraft.10

 Year-round flying

weather and the presence of the big Navy

air arm installation at San Diego helped

attract Consolidated to California.11

There is no evidence to show that stra7

 House Subcom of Com on Appropriations, Hearings, Supplemental Military Establishment Bill for

1940, pp. 319-20. 8

 Air Commerce Bulletin (15 May 1938), p. 280.

9

 Glenn L. Martin, "Development of Aircraft

Manufacturing," Royal Aeronautical Society Journal

(October 1931), p. 894. 10

 Denis Mulligan, Aircraft Manufacture in Chicago (Chicago, 1939), pp. 30-32. 11

 Business Week (February 22, 1936), p. 44.
10 BUYING AIRCRAFT

tegic considerations played any part in

plant location before 1939.

When the war broke out in Europe in

1939 the nation's airplane builders were

represented in some forty firms whose

products ranged from puddle jumpers to

four-engine bombers and whose factories

were located anywhere from Hartford to

Seattle. Large or small, east coast or west,

all these manufacturers faced problems

of marketing, research and development,

production, and financing that, differing

in degree, were nonetheless common to

the aircraft industry as a whole. A detailed discussion of these four fundamental problem areas is needed to help lay

the basis for an appreciative understanding of the aircraft industry with which

the nation entered World War II.

The Market for Aircraft

In the aircraft industry in the United

States the curve of aircraft production has

reflected the curve of demand rather accurately—at least for the period following

the market crash of 1929 and during depression when manufacturers learned

that frequent design change and high

unit costs made the accumulation of unsold items in stock an almost certain prelude to disaster:12

Observed superficially, these figures

would seem to tell little more than the

rise and fall of sales in phase with the

business cycle of the nation, booming in

1929, hitting bottom in 1933, then staging a comeback, but still far below 1929

levels at the end of the period. Like most

statistics, however, these figures representing totals of annual production are

deceptive.

Mere numbers, lumping four-engine

bombers with two-place puddle jumpers,

fail to provide the essential truth. To

reduce the annual production totals into

meaningful segments, one must ask for

whom the aircraft were produced. In

broadest terms there are three markets

for the industry: the domestic market for

civilian aircraft, the domestic market for

military aircraft, and the export market

for both of these types. Each constitutes

a rather distinct problem.

Military aircraft sales, although smaller

in number of units than civilian sales, accounted for the larger portion of the industry's dollar volume. For example, in

1928 the 1,219 military planes sold were

valued at $19,000,000; in 1933, 466 at

$9,000,000; and in 1937, 949 at $37,000,-

000. In the field of civilian aircraft, the

figures for the same years were: 3,542,

$17,000,000; 591, $6,000,000; and 2,281,

$19,000,000.13

12

 Civil Aeronautics Administration (CAA), Statistical Handbook 1948, p. 43.

13

 Figures are from E. W. Axe and Co., Inc., The

Aviation Industry in the United States, Axe-Houghton Economic Studies, Series B, No. 6 (New York,

1938) (hereafter cited as Aviation Industry in the

U.S.), page 70, and Automotive Industries, February

23, 1935, page 295, and February 26, 1938, page 262. Values shown do not include parts. It will be noted

that the figures given here do not add up to the

production totals given in the earlier table. The

difference is accounted for by variant systems of

enumeration used by the two compilers, one listing
AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 11

Virtually the same pattern prevailed in

the field of aircraft engines.14 Clearly,

military sales, whether for domestic or

export destinations, constituted the most

important element of the aircraft market

even during the years of peace from 1928

to 1938. Without denying the importance of civilian aircraft to the health of

the aircraft industry, any appraisal that

fails to take full cognizance of the predominating role of the military market

will be entirely misleading. Bearing in

mind this relatively greater importance

of production for military users, it will

be easier to retain an adequate perspective when discussing, each in its turn, the

three major divisions—civilian, export,

and military—of the aircraft market.

The Domestic Civilian Market

Just as it is essential to separate civilian

from military sales to perceive the economic realities of the whole aircraft market, so too the civilian market must be

subdivided. On the eve of the war there

were in the United States more than

20,000 licensed pilots and 10,000 licensed

aircraft.15 However, these figures may

give a false impression. In a total of 1,823

civilian aircraft produced in 1938, only

53 were multiengine units. Expressed in

other terms, the aircraft industry turned

out 1,745 units in the one- to five-place

category, but only 42 units with capacities

ranging from five passengers up.16 If this

appears to suggest that small aircraft dominated the picture, one should note that

the larger aircraft represented an average

unit value of nearly $63,000, whereas the

average unit value of all the others

amounted to only a little more than

$3,500.17 Therefore, the most important

single element of the civilian market lay

in the sale of multiengine aircraft to commercial carriers or airlines. To understand the character of this key civilian

market, so important to the general

health of the aircraft industry, one must

look for the factors contributing to the

sale of transport aircraft in the betweenwars period.

By 1938 regularly scheduled commercial airline operations in the United

States were "big business," even if far below the railroads in capitalization, tonnage carried, and almost every other basis

of comparison. In that year some twentyodd domestic airlines operated along

30,000 route miles crisscrossing the entire nation. Something of the scale of

operations attained by these carriers is

indicated in the fact that they employed

almost 10,000 people, including 1,135 pilots and copilots, to handle well over a

million passengers a year. Revenue from

these operations totaled 40-odd million

dollars. And this, it should be noted, included domestic carriers only. Two

units produced, the other listing units sold, including

items from inventory. Moreover, some items listed

as export sales represented aircraft sold to buyers

in the United States; the same items were listed

again in the compilation of export sales. 14

 During the twelve-year period from 1926

through 1937, civilian aircraft sales exceeded military

sales (dollar volume) during two years only: 1929

and 1934. In 1930 sales were about equal. See n.

13, above. See also Barron's (February 3, 1936), pp.

7-10, table. 15

 Bureau of the Census, Statistical Abstract of the United States 1939, p. 433.

16

 CAA, Statistical Handbook 1948, p. 51. 17

 Aviation Industry in the U.S., p. 80.
12 BUYING AIRCRAFT

United States international or overseas

carriers employed 4,000 more people to

carry 100,000 passengers over a world network of 35,000 route miles.18

 By virtually any measuring stick—route miles, passengers carried, or mail ton-miles—the

airlines of the United States stood far

above those of the other powers.19 These

achievements stand out more vividly

when one recalls that only a decade earlier the nation's entire air carrier business involved 34 operators of short lines

employing 1,500 people, including 300

pilots, to handle an annual total of 48,000

passengers.20

In the decade of rapid growth between

1928 and 1938, the airlines became an

important customer of the nation's aircraft manufacturers. For the student of

military aircraft procurement problems,

the question of airline sales is significant.

Not only did airline sales contribute to

maintaining a high gross for the aircraft

manufacturers and hence foster a healthy

industry, airline purchases of big multiengine transports also stimulated production of a character involving technical

problems closely akin to, if not precisely

the same as, those encountered in the

production of military aircraft.

Certain critical factors fostering the

growth of the air carrier industry stand

out. They can be readily identified, and

even if one cannot assess their relative

value in promoting airline growth, mere

recognition provides a useful impression

concerning some of the types of variables

determining the sale of aircraft to airline

operators and thus contingently affecting

the production of military aircraft.

The Air Mail Act of 1925, often called

the Kelly Act after its congressional sponsor, opened the door to private contract

mail carriers that replaced the government-operated carrier system in use since

1918. Designed as a virtual subsidy to

stimulate the development of airlines,

the Kelly Act along with its subsequent

amendments achieved its objective, and

by 1927 contract carriers handled all airmail. It was, however, in the administration of the act that the aircraft industry

felt its full impact. Since the Post Office

Department established rigid requirements of financial responsibility in letting airmail contracts, only contract operators with the greater capital resources

continued to bid.21 Thus, while the Kelly

Act may be said to have marked the inception of a substantial system of scheduled carriers, from its very passage the

administration of the act tended to encourage the few, well-financed operators

rather than the many, struggling, smallscale operators lacking financial support.

To the aircraft manufacturers both the

act and its administration spelled good

news. Private contract carriers, seeking

lower operating costs in order to underbid, would demand from the industry

aircraft of increasingly higher perform18

 CAA, Statistical Handbook 1948, pp. 61-83. 19

 Great Britain Air Ministry, Department of Director-General of Civil Aviation, The Civil Aviation Statistical and Technical Review, 1938 (London,

His Majesty's Stationery Office, 1939), Table IV, compares British, French, Russian, German, and U.S.

airlines. 20

 CAA, Statistical Handbook 1948, pp. 61-83.

21

 Henry Ladd Smith, Airways: The History of

Commercial Aviation in the United States (New

York: A. A. Knopf, 1942), pp. 94ff. This readable

volume contains a running account of the growth of

airlines. The author's generalizations and interpretations, although often unsupported by the evidence,

are both interesting and provocative.
AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 13

U.S. MAIL PLANE LOADING FROM MAIL TRUCK, September 1922.

ance, whereas earlier the Post Office had

operated its own depot for rebuilding and

repair, keeping the few available aircraft

in operation as long as possible, having

little incentive to replace equipment frequently.22

 Moreover, the stipulation of

financial reliability imposed by the Post

Office increased the probability of airline

credit arrangements satisfactory enough

for aircraft manufacturers to risk extensive production outlays on transport airplanes for airline operators.

A second landmark appeared in 1926

with the passage of the Air Commerce

Act. Encouraged by the precedent of

federal aid to seaboard navigation, airline

operators and aviation enthusiasts persuaded Congress to assume a similar burden for aerial navigation in the form of

radio stations, emergency landing fields,

and beacons under Department of Commerce sponsorship. Freed from the obligation of facing the heavy capital charges

involved in these necessities, the air carriers could devote more capital to aircraft

development.

The regulatory agency established by

the Air Commerce Act of 1926 was the

Bureau of Air Commerce, a unit within

the Department of Commerce. Legislation in June 1938 transferred the functions of this bureau to an independent

executive agency, the Civil Aeronautics

Board (CAB) although its administrative

organization, the Civil Aeronautics Authority (CAA), remained in the Department of Commerce. At the same time,

22

 F. A. Spencer, Air Mail Payment and the Government (Washington, Brookings Institution, 1941),

p. 25.
14 BUYING AIRCRAFT

Congress substantially enlarged the scope

of the agency's powers. Whatever its

form or title, the appearance of a federal

agency to regulate air traffic had a profound impact on commercial aviation.

Broadly speaking, the Air Commerce

Act of 1926 was a piece of organic legislation, collecting the fundamental laws

of air carrier operations into a single

comprehensive system.23 While its provisions for aids to navigation gave the air

carriers immediate and substantial financial relief, the act's other sections involving uniform traffic and air safety regulations as well as licensing, registration, and

inspection requirements, also contributed toward the establishment of a stable, healthy, and vigorous airline industry in the United States.

The tendency toward consolidation received substantial encouragement in 1930

when the McNary-Watres Act amended

the Kelly Act in such a way as to give even

greater discretionary powers to the Postmaster General in awarding mail contracts. Since the incumbent Postmaster

General favored a system of integrated

airlines, many small lines combined into

networks until a handful of powerful operators dominated the field.24

 By 1934

three airlines flew 65 percent of the nation's route miles, carried 90 percent of

the mail, and received 88 percent of the

federal mail subsidy.25

A third landmark in the history of the

nation's airlines was the precipitous rise

in passenger traffic that coincided with

the era of consolidations. Between 1928

and 1934 airline operations moved off on

a new tangent as passenger traffic began

to replace mail as a major source of revenue.26

 Passenger volume increased from

less than 50,000 in 1928 to almost 500,000

in 1934, climbing steadily thereafter.27

A number of factors probably contributed to this new trend. A steadily improving safety record may have helped to

win the public to air travel.28 A somewhat more measurable contributory factor was the sharp decline in fares. From

12 cents a mile in 1929, the average passenger fare tumbled to 5.7 cents a mile

in 1935. Just how far the air travel fare

had to fall in order to challenge the railroads competitively is indicated in the

1929 air rate, which was three and onehalf times higher than the average rail

fare per mile in that year.29 Yet another

element apparently contributing toward

the rise of passenger traffic on the airlines

was a provision of the McNary-Watres

Act of 1930 changing the method of computing mail payments. The pound-permile formula gave place to a new computation based on the amount of space

available. This made it advantageous for

23

 Air Commerce Act (44 Stat 568), May 20, 1926.

For evidence of federal aids to navigation, see Air Commerce Bulletin (April 15, 1935), statistical tabulations on airways. 24

 For a general discussion of airline mergers, see Smith, Airways, ch. 11, especially p. 243. 25

 Ernest Gugelman, The American Aviation Industry (New York: D. D. Magruder, Inc. [1934]). p.

15. Between 1928 and 1934 the number of domestic airline operators dropped from 34 to 24. By 1938

the number had been reduced to 16. CAA, Statisti- cal Handbook 1948, p. 61. 26

 J. A. Frederick, Commercial Air Transportation

(Chicago, 1945), p. 375, Figure 42. Passenger rev- enue exceeded mail revenue for the first time in 1935. 27

 CAA, Statistical Handbook 1948, p. 70. 28

 Ibid., p. 93. Passenger fatalities dropped from 28.2 per 100 million passenger-miles to 4.7 between

1930 and 1935. See also, M. J. Meehan, "Progress in the Aeronautical Industry," Survey of Current Business (March 1936), pp. 16-18. 29

 Aviation Industry in the U.S., p. 41.
AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 15

operators to acquire new and larger aircraft, which, when not filled with mail,

invited passenger traffic.30 Such types as

the Ford Trimotor, the Curtiss Condor,

and the Douglas DC-2, appearing in succession, did much to popularize air travel.

The appearance of passenger revenue

as a major element in the air carrier business marked a definite turning point in

the history of air transport. It came just

in time to cushion the airlines when the

federal government abruptly canceled all

private airmail contracts in February

1934. The airmail scandals of 1934 with their

involved interplay of political and economic competition cannot be recounted

here at length, but it will be useful to

take note of the episode since it shed

light upon the peculiar antagonisms behind the record of military aircraft procurement discussed in a subsequent chapter. In February 1934 the President

issued an Executive order canceling all

airmail contracts and transferring operations to the Army.

When Army airmen attempted to fly

the mails on short notice, lacking adequate equipment and training for the

task, they were beset with disaster. After

a week of midwinter flying and almost

daily crashes, the score of catastrophes

stood at five pilots dead and six seriously

injured. Soon afterward the President

rescinded his ban and began negotiations

to return the mails to the private air carriers. It was against this setting that Congress passed the Air Mail Act of 1934,

which abandoned the subsidy character of

previous airmail legislation and reverted

to rigid emphasis on low bids regardless

of responsibility, reliability, or pioneering investments, all considerations favored in previous awards. As one writer

subsequently declared, the 1934 airmail

legislation as finally passed had a "punitive aroma."

 31

The airmail carriers must have felt that

the 1934 legislation really was "punitive"

since their airmail subsidy fell from 23

million dollars in 1933 to 12.5 millions in

1935. Nevertheless, the airlines did not

collapse. The volume of mail carried by

air mounted rapidly throughout the thirties and by 1939, even under the less favorable legislation of 1934, mail revenues

to the air carriers exceeded the sums received before the subsidy legislation had

been annulled.32 More important, however, was the rising volume of passenger

traffic, which had turned upward before

the 1934 legislation was enacted and

which was further stimulated thereby.

Had the subsidy cut come earlier, for example in 1928, it might well have been

fatal, but in 1934 mail revenues no longer

constituted the predominant percentage

of air carrier income. By 1938, passenger revenue constituted 57.6 percent of

the carriers' income, and the potential

market had scarcely been tapped since

airline passenger-miles amounted to but

6.8 percent of Pullman passenger-miles.33

30

 McNary-Watres Act, April 29, 1930, sec. IV.

31

 Hugh Knowlton, Air Transportation in the

United States (Chicago, University of Chicago Press,

1941), p. 10. 32

 CAA, Statistical Handbook 1948, p. 80. 33

 CAA, Statistical Handbook 1945, p. 33, and

CAA, Statistical Handbook 1948, p. 79. The character of the potential passenger volume for air carriers

in 1938 is suggested by the fact that ten years later

the airlines were carrying 48.5 percent as much traffic as Pullmans. In 1938 it was estimated that less

than one-half of one percent of the population flew

each year. Air Commerce Bulletin (October 15,

1938), p. 98.
16 BUYING AIRCRAFT

The transition of the airlines to a primary interest in passenger traffic had a

clearly discernible effect upon aircraft

manufacturing in the United States.

Many carriers bid on mail contracts at a

loss rather than lose their routes, hoping

to combine mail and passenger volume

for a profit. Faced with almost certain

loss unless costs could be pared, operators

were more than ever anxious to procure

aircraft with improved performance.

Engines that could be operated 200 hours

rather than 100 hours between overhauls

meant increased services at lowered costs

and a possible profit. In the same fashion,

the transition to passenger traffic fostered

a still greater interest in high performance aircraft since airlines studies revealed that improved equipment had a

marked influence on passenger volume.34

Speed in particular had sales appeal. Between 1934 and 1938, the average air

speed of the airliners advanced from 127

to 163 miles per hour as one carrier after

another secured new equipment with

which to hold or capture passenger

traffic.35

From two directions, then, cost cutting and passenger transport, the carriers

were induced to procure new equipment,

and four out of five of the biggest operators sold stock in the mid-thirties to raise

the necessary funds.36 That this meant

life-giving business for the aircraft manufacturers is clear from the fact that the

five largest carriers at that time maintained fleets ranging from fifteen to

nearly sixty units.37 Replacement of any

substantial portion of these fleets opened

the possibility of true production line

output of multiengine aircraft for the

first time.

The shift to passenger traffic and the

declining mail subsidy might in themselves have effected something of a boom

in aircraft manufacture, but by a peculiar coincidence a technical revolution

appeared on the very eve of the airmail

fiasco. The last transcontinental airmail

run before the private contracts were

canceled was flown in a Douglas DC-2 on

her maiden record-breaking trip across

the nation in thirteen hours and four

minutes. With successful completion of

the record transcontinental flight, the

14-passenger 200-miles-per-hour Douglas

airliner rendered obsolete virtually every

other airliner in the country. The technical revolution, as embodied in the

DC-2, like most revolutions, did not

come from any single drastic step forward

in design but rather from the cumulative

effect of several significant innovations.

By coincidence, the development of

monocoque, all-metal structures replacing the wood, wire, and fabric structures

of the previous decade appeared just

when a series of major innovations in design provided power plants with vastly

more output per pound of engine. The

appearance of the DC-2 incorporating

all these advances in a brilliant new synthesis forced one carrier after another to

discard existing equipment, often long

before its actual usefulness had gone, in

favor of the new and markedly superior

Douglas airplane. There followed a profitless prosperity for the carriers, who were

forced to pour the earnings of their growing passenger traffic back into new equipment. The cost of replacement mounted

34

 Aviation Industry in the U.S., p. 55. 35

 CAA, Statistical Handbook 1945, p. 31. 36

 Barron's (February 22, 1937), p. 9. 37

 Aviation (April 1937), p. 77.
AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 17

sharply, rising from approximately $30,-

000 per unit before the technical revolution to something in the neighborhood

of $60,000 after the appearance of the

DC-2.38 The process of replacing equipment was so expensive the airlines continued to show deficits until 1939 despite

substantial increases in revenue.39

Perhaps the clearest index to the impact of the technical revolution on the

airlines is to be found in the size of the

total air fleet maintained by the carriers.

From a peak of 497 units in 1930, the

number fell to 260 in 1938; there were

actually fewer units licensed in 1938 than

in 1928 despite the enormous increases

in passengers, mail, and express carried

by the airlines. Not only did the precipitous renewal of almost the entire carrier

fleet result in a growing emphasis on production but it also brought to a head all

the contingent problems of the technical

revolution in aircraft manufacturing.

Larger, more expensive, and technically

novel aircraft required enlarged facilities,

new financing, and extensive tool replacement, all within a very short period

of time.

In sum, then, down to fiscal year 1938

there were three outstanding factors conditioning the airline market for aircraft:

the Air Mail Act of 1925, the Air Commerce Act of 1926, and the shift from mail

to passenger traffic as a primary source of

revenue. Each in some measure encouraged the growth of air carriers as customers for aircraft and in varying degree

strengthened the aircraft industry as an

element of national defense. The carrier

market was, however, only one aspect of

the three major market areas, domestic,

export, and military, that occupied the

industry in the late thirties.

The Export Market

In terms of sheer numbers of units,

sales of aircraft abroad were by no means

inconsiderable. From a mere 37 exported in 1922, the year of doldrums following World War I, exports mounted,

erratically and with annual fluctuations,

to a total of 631 units in 1937. Aircraft

engine exports climbed from 147 in the

rock-bottom year 1922 to 1,048 in 1937.

Foreign sales in spare parts, replacements,

and accessories tell a similar story, growing from $250,000 in 1922 to something

over $12,000,000 in 1937. Taken together, aircraft, engines, parts, and accessories in the export trade represented a

sizable volume of business for the nation's aircraft industry, in all, over $39,-

000,000 in 1937.40

As an important attribute to national

defense, aviation was subsidized in one

form or another by all the major powers.

For this reason, none of the great nations offered much in the way of markets

for aircraft exported from the United

States, at least not in normal times of

peace. The bulk of the peacetime export market went to lesser states. Almost

any year chosen at random demonstrates

this distribution. In 1929, for example,

38

 Aviation Industry in the U.S., p. 80. Barron's

(February 22, 1937) gives a somewhat higher figure,

running from a pre-1934 cost of approximately

$85,000 to a post-1934 figure around $120,000. 39

 Barron's (January 15, 1940), p. 25.

40

 Aviation Industry in the U.S., p. 90, based on

data compiled from The Aeronautical Chamber of

Commerce of America, Inc., and the Bureau of Air

Commerce sources. After World War II the name of

the chamber was changed to Aircraft Industries Association. See also, CAA, Statistical Handbook 1945,

p. 123.
18 BUYING AIRCRAFT

only 12 aircraft were exported to Europe,

but Latin America took 196. In 1936,

when 61 units went to Europe, 192 went

to Latin America.41 Moreover, since the

majority of aircraft were exported to the

lesser states and smaller powers, the total

number of units in any one contract was

almost necessarily small and credit arrangements were frequently involved, if

not actually precarious.42

Regulations conceived to protect the

national interest by restricting the export

of military secrets constituted a second

determinant in the aircraft export trade.

These regulations, applying to military

aircraft only, required a two-year time lag

in the release of current aircraft designs

to foreign states. After the passage of the

neutrality legislation of the mid-thirties,

the export license requirements provided

an even greater measure of control than

had existed theretofore. In favor of these

security restrictions, it was argued that

the nation's technical secrets and margin

of design superiority were safeguarded.

Critics, especially aircraft manufacturers

who suffered from the curb, raised a number of points in opposition to the security

measure.43 Restrictions on exports, especially those on export of military aircraft

already on contract, reduced the number

of units of any one design that could be

produced in a single production run.

Perhaps the most important of all the arguments against export curbs on military

aircraft was the contention that mere export curbs would not prevent foreign

states from securing the most recent military aircraft design details and incorporating them in their own aircraft designs

at will. Since the development of facilities and productive capacity was, in the

long run, probably as vital to the nation's

security as any particular design detail,

the export curb to all intents and purposes encouraged or reinforced the creation of productive capacity in foreign

states. Finally, there can be little doubt

but that restrictions on the export of most

recent military designs placed manufacturers in an unfavorable competitive position when pitted against other exporting nations.44

Military officials, confronted with frequent proddings from manufacturers,

attempted to liberalize the export restrictions as far as possible in order to

encourage a healthy aircraft industry.

Nonetheless, they continued to insist on

the principle of a time lag before releasing current production models for the

export market.45

A less tangible but no less influential

determinant of aircraft exports is to be

found in the political and diplomatic

sphere. This type of influence on exports

may be illustrated best by the case of the 41

 Aviation, March 1930, p. 596, and April 1937,

pp. 84-85. 42

 For some revealing insights on the subject of

aircraft export sales, see Special Com Investigating

the Munitions Industry, U.S. Senate, Hearings (popularly called Nye Hearings), pt. III, 73d Cong, February 24, 1936, and pt. IV, 73d Cong, Exhibit 304,

p. 894. 43

 For an instance of a manufacturer's protest

against curbs on exports, see D. L. Brown, "Export

Volume and Its Relation to Aviation Progress and

Security," Aerodigest (December 1934), pp. 15ff.

44

 Competition in the export market between the

two wars was sharp. British exports topped those of

the United States down to the early thirties, and

pressed close behind thereafter. See Air Ministry,

Dept of Civil Aviation, Civil Aviation Statistical and

Technical Review 1938; Aviation (October 1938),

p. 35; Automotive Industries (March 1939), pp. 574-

75.

45

 See ch. IX, below, for a fuller discussion of the

export ban.
AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 19

neutrality legislation of the middle thirties. From the aircraft manufacturer's

point of view, considerations such as

those raised by the discretionary powers

given the President in the neutrality legislation for invoking the ban presented

imponderables against which it was virtually impossible to plan. The character

of this difficulty becomes evident when it

is observed that China was the most important single buyer of aircraft exports

from the United States. In the period

from 1925 through 1934 the Chinese purchased 6,986 aircraft, while between 1935

and 1938 the number reached 12,406. In

both periods the Chinese accounted for

something over 13 percent of the nation's

total export volume.46 Had the President

found it politically and diplomatically expedient to elevate the China Incident to

the rank of a war, by the terms of the

neutrality legislation much of this important export trade would have dried up.

Thus, the aircraft manufacturer's export

trade no less than his sales to domestic air

carriers was ultimately and most vitally

subject to political decisions often far beyond the scope of any individual manufacturer's ability to influence or even to

predict.

In the face of all the imponderables

and complexities confronting aircraft

manufacturers who pursued the export

market, one might well be inclined to ask

why they continued to show such aggressive interest in the field. A cursory analysis of aircraft exports in almost any year

may reveal the answer. With the crash of

1929 and 1930, the total value of aircraft

production fell from $91,000,000 to approximately $61,000,000. In this same

period, however, exports fell off only

about $250,000, providing between eight

and nine million dollars' worth of business to the industry.47

 Expressed in terms

of payrolls and employment, the importance of this volume of business in the

depression is easily recognized. In 1937

exports amounted to approximately onethird of the nation's total aircraft production, but this third accounted for an estimated 50 percent of the industry's net

profits.48 Unhampered by statutory profit

limitations in pricing, export items returned a larger profit than could be extracted in the domestic trade.

While the above illustrations refer to

aircraft exports, virtually the same conclusions could be drawn with regard to

engines, spare parts, and accessories. In

fact, engine exports outstripped aircraft

sales annually by almost two to one. During the two worst years of the depression,

1932 and 1933, when aircraft sales ranged

between 300 and 400 units, engine sales

totaled 2,356 and 2,901.49

In short, despite serious obstacles, the

export business was extremely worthwhile to aircraft manufacturers in the

United States. It might even be argued

that the export business was essential to

the health of the nation's aircraft industry. By raising the volume of output it

46

 Elsbeth Estelle Freudenthal, The Aviation Business: From Kitty Hawk to Wall Street (New York:

Vanguard Press [1940]), Table IX, p. 141, and Table

XIX, p. 271; Harding, Aviation Industry, p. 3; Bureau of the Census, Statistical Abstract of the U.S.

1938, p. 458.

47

 L. W. Rogers, "Analysis of Aviation Exports,"

Aerodigest (April 1931), p. 45; CAA, Statistical Handbook 1948, pp. 43, 58. 48

 Aerodigest (July 1938), p. 34; Aviation (April

1938), p. 31; Denis Mulligan, Aircraft Manufacture

in Chicago (Chicago, 1939), p. 8. 49

 Air Commerce Bulletin (15 May 1938), p. 280.
20 BUYING AIRCRAFT

increased the probability of mass production and strengthened the nation's position of readiness for war. But even at

their best, the domestic carrier and export markets were less important to the

cause of national defense than the market for military aircraft in the United

States.

The Domestic Military Market

A simple statistical presentation of the

total military and commercial aircraft

market, both as to numbers and value,

should provide a useful point of departure in an analysis of military sales.

(Table 2) These figures reveal a good

deal about the market for military aircraft in the United States. The dollar

value of military sales exceeded that of

civil sales by a considerable margin despite the lower total number of military

units sold. On the basis of continuity

and high dollar volume, the military

market would appear to have offered an

attractive field for aircraft manufacturers. Further detailed study, however,

confutes the impression.

Aircraft average unit costs were rising

sharply throughout the period of the

technical revolution:50

The average unit cost of military aircraft

was far in excess of the civil aircraft average unit cost. Several factors contributed.

The air arm was building an increasingly

larger percentage of bombers, which

tended to drive up the average. Where

there had been but one bomber to every

four pursuit planes in 1926, by 1937 there

were eleven bombers to nine pursuits, and

the bombers were in many cases fourengine rather than two-engine craft. The

complexity introduced with the technical

revolution sent engineering costs alone

up some 48 percent in the transition from

wood to tubular metal structures; with

the coming of monocoque structures, engineering costs mounted another 50 percent. Many of the heavy charges encountered in military aircraft were not found

in most of the civilian types. The early

B-17, for example, contained more than

$10,000 worth of instruments, not to

mention armament and other special

military accessories.51

The higher average unit cost of military aircraft stemmed not alone from

sheer size or complexity; rather it was

more directly the result of military emphasis on high performance. Inasmuch

as engine horsepower is an important factor in high performance, a comparison

will explain the relationship between the

higher costs of military aircraft and performance requirements. In 1937 civil

aircraft engine production amounted to

2,289 units, but 1,393 of these fell in the

under 50 horsepower category and all the

rest save 88 were below 600 horsepower.52

Military aircraft, on the other hand, used

no engines in the 50 horsepower category

and from a total of nearly 1,800 engines

produced for military use, 1,276 were in

50

 Aviation Industry in the U.S., p. 71.

51

 Testimony from Hearings before the Subcom of

the Com on Appropriations, House, 75th Cong, 1st

sess, 1938 Military Establishment Appropriations

Bill, March 1937, pp. 520-22. 52

 CAA, Statistical Handbook 1948, p. 51.
AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 21

TABLE 2—COMPARATIVE IMPORTANCE OF MILITARY AND CIVILIAN MARKETS

Source: Figures for first three years are from Automotive Industries (February 23, 1935), page 295. Figures for last three years are from

Aviation Industry in the United States, page 70, based on Aeronautical Chamber of Commerce sources.

categories above 700 horsepower.53 Thus,

aircraft manufacturers who wished to

compete for the military market were

forced to operate with an ever larger capital structure to carry the charges involved

in the exceedingly high average unit cost

for military aircraft and engines. In addition, the necessity of turning out aircraft of progressively superior performance to meet the tactically competitive

requirements of the military market involved the annual investment of large

sums for research and development in

contrast to the civil aircraft market,

where a single basic design occasionally

continued to amortize initial development costs over a period of several years.

As a result of the characteristics described above, the market for military

aircraft tended to remain in the hands of

a comparatively few manufacturers. In

1937, for example, all Army aircraft procurement was with 10 manufacturers, all

Navy with 8. And this was from a field of

98 aircraft manufacturers of whom 48

were in active production. In the case of

engines, the concentration of business in

the hands of a few was even greater. From

a total of 23 aircraft engine manufacturers in 1937, the Army's entire procurement came from 3 concerns and the

Navy's came from 2.54 Expressed in

somewhat different terms, the concentration of the military market can be seen

in the fact that less than a dozen firms

manufactured all but 200-odd of the 4,977

aircraft produced for the Army and the

Navy between 1931 and 1937.55 From

1931 through 1937 seven of the largest

manufacturers could account for the following percentages of their business

through government contracts:56

53

 Automotive Industries (February 26, 1938), pp.

262ff.

54

 Air Commerce Bulletin (15 May 1938), p. 280;

Aviation in the U.S., pp. 100-101. 55

 Aviation Industry in the U.S., app. VI. Based

on Aeronautical Chamber of Commerce figures.

Four firms produced three-quarters of this total for

the period: Douglas produced 1,194 aircraft for the

Army and the Navy between 1931 and 1937, Boeing

684, Curtiss-Wright 681, and North American 551. 56

 Freudenthal, Aviation Business, Table VI, p.

128, based on Com on Naval Affairs, House, Hearings

on Investigation Into Certain Phases of the Manufacture of Aircraft and Aeronautical Accessories . . . ,

February 2-March 8, 1934 (hereafter cited as Delaney

Hearings), and Subcom on Aeronautics of the Com

on Naval Affairs, House, Rpt on Investigation Into

Certain Phases . . . , April 10, 1934 (hereafter cited

as Delaney Report), items 18 and 37, respectively, in

Sundry Legislation Affecting the Naval Establishment: 1933-1934, 1st and 2d sess, 73d Cong (hereafter cited as Sundry Naval Legislation, 1933-34).
22 BUYING AIRCRAFT

From these observations a few general

conclusions may be drawn regarding the

military aircraft market. In dollars, it

was the predominant aircraft market,

though profits in the field were subject to

statutory limits in some cases. In addition, the insistent requirement for ever

better performance in military aircraft

made the military market probably the

most difficult to enter in the technological

sense. The need for continuing research

and development along with the growing

complexity and size of military aircraft

made of the military market a costly business, a veritable bottomless pit for funds.

And all this, of course, was expense incurred in addition to the investments that

all aircraft manufacturers, whether seeking the military market or not, had to

face in securing the new facilities and the

new tools required by the technical revolution in aircraft structures. As a consequence, the seemingly attractive military

market was confined more or less to a

dozen manufacturers specializing in military types, and even within this group,

four firms received the bulk of the business, largely because they were capable of

pursuing a thoroughly aggressive policy

of research and development.

Research and Development

In the aircraft industry, the injunction

"design or die" has always been virtually

axiomatic. Superior performance expressed in higher speeds, greater ceilings,

heavier loads, and longer ranges wins

contracts. To stay in business, manufacturers soon learned that they must maintain engineering staffs capable of exploiting the latest findings of aeronautical

science, translating theory into practical

designs. Where there had been but 30

aircraft design groups in the industry of

1918, by 1939 there were 125 different

research and development staffs specializing in aircraft, engine, and accessory

design work.57

The competitive pressure for improved

performance made flux in design wellnigh continuous, research and development an unending process. The phrase

research and development is glibly repeated in discussions of military appeals

for higher appropriations, but one seldom

finds it concisely defined. In the aeronautical field, as elsewhere, research is of

two kinds, fundamental and applied; the

former is the peculiar province of the

scientist, the latter the task of engineers.

Where one deals in abstract theory, the

other must make practical application.

Thus research and development has come

to be a shorthand expression for the whole

spectrum from the most theoretical exploration of fundamental theory down to the

most practical attempts to solve design

problems in particular instances.

In aviation, as with other scientific

fields, the quest for underlying scientific

principles has been carried on extensively

in the universities. During the first two

decades of flying, few universities offered

courses specializing in the aeronautical

sciences, but after 1926 the Guggenheim

57

 AAF Hist Study 50, Materiel Research and Development in the Army Air Arm: 1914-1945, p. 78.
AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 23

Fund greatly strengthened fundamental

research in the aeronautical sciences with

large endowments to nine universities

strategically dispersed over the nation.58

Yet, despite the presence of excellent facilities in several universities, in 1939

only one-seventh of one percent of the

Air Corps' research budget, or approximately $15,000, went directly to university research contracts. While indirect

contracts and industrial utilization of

university facilities increased this figure

somewhat, the universities did not match

the volume of activities in fundamental

research carried on by the federal government.59

Among the federal agencies concerned

with aeronautical matters, one, the National Advisory Committee for Aeronautics (NACA), stood pre-eminent in the

field of fundamental research. This executive agency, established by Congress

in 1915 to supervise and direct the scientific study of flight, had grown by 1938

into the nation's leading center of fundamental research. The initial appropriation of $5,000 in 1915 increased during

the between-war years until it annually

totaled nearly $2,000,000. Following the

curve of appropriations, NACA grew

from a small group of scientists to a technical staff of more than 500 people administering and operating an elaborate

installation of research facilities located

at Langley Field, Virginia. This research

plant included laboratories for engine

and instrument tests, machine shops, a

flying field, and wind tunnels. All together, the NACA boasted 11 wind tunnels, among which were a 60 by 30 foot

full-scale tunnel, an eight-foot, 500-milesper-hour tunnel, and other equipment

such as vertical and refrigerated tunnels

for specialized types of aerodynamic research.60

Although in many respects inferior to

the research facilities available to European powers, the equipment for fundamental research in the United States, both

federally and university sponsored, represented a marked increase over the inadequate equipment of 1918. Over the

twenty-year period between the wars, the

nation acquired perhaps a dozen centers

of advanced aeronautical research, of

which the NACA facilities were the best.

These research centers were significant

assets, not only for scientific achievement

but also as training schools for the vitally

necessary aeronautical engineers of industry. Science may calculate the ultimate

level of aircraft performance, but it is

applied research and development carried on by the industry's engineering and

design staffs that regulate the actual pace

of technical progress.

Army policy on aeronautical research

went through several phases in the

between-war years. From the armistice

until 1926 there was a certain amount of

wavering between a policy of support for

both fundamental and applied research

and a policy of concentrating expenditures in applied research. From 1926 until 1938 it was Army policy to follow the

latter course almost exclusively.61 The

58

 Final Report of the Daniel Guggenheim Fund

for the Promotion of Aeronautics, 1930. 59 AAF Hist Study 50, pp. 62, 83-85.

60

 Ibid., p. 65. 61

 For a lengthy discussion of the vicissitudes of

air arm research and development policies, see

Rotary-Wing Aircraft in the Army Air Forces: A

Study in Research and Development Policies, 1946,

by Irving B. Holley, jr., filed in Wright Field Historical Office (WFHO); and AAF Historical Study

50, page 75.
24 BUYING AIRCRAFT

NATIONAL ADVISORY COMMITTEE FOR AERONAUTICS ANNUAL MEETING, October 1939.

preoccupation with applied research was

particularly evident on the eve of the war

when some 60 percent of the available

research funds actually went to industry

in contracts for experimental and service

test items.62

 Thus, although the sums

specifically earmarked by the air arm for

research were relatively small, the matériel development contracts awarded to

industry represented a hidden subsidy of

significant proportions.63 But this form

of research subsidy was not without drawbacks.

During the years from 1926 to 1938 the

practice among virtually all manufacturers seeking Army contracts for experimental air matériel was to bid as low as

possible, even accepting a loss, on experi62

 AAF Hist Study 50, p. 75.

63

 Ibid., p. 49. The following tabulation shows

the breakdown for R&D funds for 1937-39:
AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 25

NACA FULL-SCALE WIND TUNNEL AT LANGLEY FIELD, 1930's

mental work in the hope of recouping

later with high-volume production contracts. As long as this practice prevailed,

manufacturers had little incentive to execute any form of experimental work

other than that promising some more or

less immediate return in a subsequent

production contract to amortize costs.

Under the pressure of this economic restraint, manufacturers were unwilling to

indulge in extensive fundamental research. Then, early in 1939, the Air

Corps promulgated a new policy that can

best be called pay-as-you-go research.

Designed to unshackle the pace of design

flux from the manufacturers' fears that

subsequent production contracts might

not be forthcoming, the pay-as-you-go

policy developed an unexpected byproduct. Not only did the policy tend to

speed the pace of design change but it

also encouraged individual manufacturers to move into the field of fundamental

research, since it was no longer necessary

to look for immediate results with which

to amortize costs. This trend toward industrial participation in fundamental research created a host of new and difficult

administrative relationships between industry and the Army that were still un-
26 BUYING AIRCRAFT

resolved when the coming of war greatly

aggravated the matter.

The acceleration of design change

after 1938 presented a problem of critical

significance to the aircraft industry.

Mass production required standardization. Rapid flux in design is the very

antithesis of this. If a manufacturer introduces major design changes in each

successive aircraft turned out, efficient

production in the sense of large-quantity

fabrication by repetitive machine process

is patently impossible. Fluid design

changes and a high rate of production are

mutually exclusive.64

To explore this problem further, it is

necessary to make a brief survey of the

evolution of aircraft production patterns

during the twenties and thirties.

Production

The term production, unless narrowly

defined, can lead to endless trouble in

any discussion of the aircraft industry.

In aviation circles it means not mere

fabrication of items, but mass production,

or the approach to mass production in

numbers sufficiently great to justify abandoning the handmade, custom-tailoring

method of individual unit fabrication in

favor of techniques commonly associated

with mass production in almost any industry: straight-line assembly, conveyor

belts, large runs in unit fabrication, and

the like.

The aircraft industry conception of the

term production was quite different from

that of the automobile and other mass

production industries. Table 3 reveals

much about the nature of the aircraft industry. The automobile makers in 1937

turned out some 1,500 times more units

than did the aircraft builders and did the

job with a labor force only eight times

larger. To be sure, the automobile is

less complex than the airplane, but the

explanation for the difference in production efficiency is indicated in the different

wage patterns of the two industries. For

example, in 1937 aircraft workers averaged a 42.3-hour week at an hourly rate

of $0.666, while automobile workers

worked an average of 35.9 hours each

week but drew pay at an average hourly

rate of $0.891.65 This spread may reflect

labor's more effective organization in the

automobile industry, but clearly the differential was made possible by high volume, which justified a high degree of

production tooling to cut unit costs.

As late as 1939, when foreign orders

were already mounting, one typical aircraft manufacturer, and a highly efficient

one too, turned out only two or three

units a day in comparison with Detroit's

production of two or three automobiles

per minute. Behind this contrast stands

the machine. Where Chevrolet's investment per worker in plant and equipment

amounted to $2,600, Martin, a leader in

the aircraft field in 1939, had an investment of about $800 per worker.66

64

 CofAC to Chief, Mat Div, 1 Mar 39, and reply,

10 Mar 39; Memo, CofAC to ASW, undated, WFCF

1943, 121.6 Costs, R&D Policy. See also, Air Board

Rpt, 23 Mar 39, and TAG to Chiefs of Arms and

Services, 15 Sep 39, WFCF 1940, 320.2 Army Aviation.

See Chapter VIII in Holley's MS monograph, RotaryWing Aircraft in the Army Air Forces: A Study in

Research and Development Policies.

65

 Bureau of the Census, Statistical Abstract of the

U.S., 1939, p. 329. 66

 Fortune (December 1939), pp. 74-75; and George

Bryant Woods, The Aircraft Manufacturing Industry (New York, Boston: White, Weld and Co., 1946),

p. 4.
AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 27

TABLE 3—A COMPARISON OF THE AIRCRAFT INDUSTRY WITH THE AUTOMOBILE INDUSTRY

a

 For aircraft, value of product includes value of aircraft and parts. For automobiles, value of product denotes value of automobiles only.

Comparisons of average dollar output

per employee afford another index to the

aircraft industry's lack of tooling. In

1937 aircraft workers at something over

$4,400 in product value per worker lagged

far behind automobile workers, averaging more than $15,000 in product value

added per worker.67

Thus, although the aircraft industry

turned out an increasing number of units

in the years following the slump, aircraft

production was not to be confused with

production in the automobile industry,

where the term meant something quite

different. The following figures indicate

the relatively inferior rank of aviation in

the nation's business as a whole in 1936:68

Total Value

Product of Product

Automobiles and trucks ........... . $2,448,000,000

Farm implements ................ . 420,000,000

Cans ............................ . 375,000,000

Refrigerators (retail) ............. . 328,000,000

Typewriters and office equipment . .. 153,000,000

Aircraft parts and engines ......... . 86,000,000

Combining all these factors—low unit

volume, low gross dollar volume, and

lack of production tooling—the plight of

the aircraft industry in the late nineteen

thirties can be summarized as follows:

low-priced airplanes waited upon the introduction of production techniques in

the industry, but high-volume production could be justified only by a mass

market, which waited upon low-priced

airplanes. Until some escape from this

circle could be found, true mass production in the aircraft industry would remain out of reach. This was the situation

prevailing when the crisis appeared in

Europe.

Genuine mass production did exist in

one branch of the industry. While aircraft manufacturers turned out dozens of

units, engine manufacturers turned out

hundreds. Where the major aircraft

builders often produced several models

in a year, every one a distinct production

problem requiring independent tooling,

two or three engine manufacturers dominated the field with a restricted number

of models that they sold for use with numerous different airframes. By way of

illustration, as early as 1930, when four

leading airframe concerns delivered a total of only 428 military aircraft, a single

engine firm produced 666 engines for

military use.69

67

 Computed from Bureau of the Census, Statistical Abstract of the U.S., 1939, p. 803. 68

 Figures for 1936. Harding, Aviation Industry,

p. 69.

69

 Paul A. Dodd, Financial Policies in the Aviation

Industry, Ph.D. Thesis, University of Pennsylvania,

1932 (Philadelphia, 1933), apps. F, G, H.
28 BUYING AIRCRAFT

Several factors operated to the advantage of the engine builders. To begin

with, the total market for aircraft engines

was somewhat greater than that for airframes since airframes normally outlasted

engines and most aircraft users procured

spare engines in quantities ranging up to

100 percent of the number of aircraft on

hand. In addition, aircraft engines, while

still under development and subject to

continual changes in design during the

nineteen thirties, were not in the midst

of a violent technological revolution as

was the case with airframes. For a comparable revolution in the engine field

one might consider the problems subsequently encountered in shifting from reciprocating to jet engines.70

The implications of high-volume output in the aircraft engine field were nowhere more apparent than in the new

Pratt and Whitney engine facility constructed during 1930 in East Hartford,

Connecticut. Here was mass production

a whole decade ahead of the airframe

builders. The major unit of the Pratt

and Whitney plant consisted of a single

floor area 1,000 feet long and 400 feet

wide. Down the center of this area ran

an aisle 15 feet wide. Railroad sidings

and truck platforms brought in raw materials at one end of this structure where

electric trucks hauled color-coded tote

boxes from department to department as

fabrication progressed with aluminum

machining on one side of the main center

aisle and steel machining on the other.

Cross aisles facilitated the flow of parts

that moved from machining departments

to the assembly line where engines grew

with the accretion of parts as they moved

toward the final inspection point. Beyond the inspection point were located

another set of railroad sidings and truck

platforms to haul away the finished product.71

 This was a mass production facility. East Hartford had followed the lead

of Detroit and pointed the way for the

aircraft industry to pursue. Though few

of the other engine establishments were

so spectacular as the Pratt and Whitney

plant, as a group the engine builders were

acutely conscious of the need for efficient

assembly line operation.72

The rising volume of aircraft sales in

the nineteen thirties, while small in

number and less concentrated than in the

case of engines, did have a very real influence on airframe production techniques. Larger orders meant longer runs,

justifying the use of more production

tooling. But "larger" is a relative term,

and increases from three to thirteen airplanes on a single contract did not spell

Detroit-style production. More significant in the middle thirties was the impact

of the technical revolution.

With the arrival of 40- to 60-place commercial aircraft and four-engine monoplane bombers of monocoque construc70

 For a discussion suggesting some of the considerations that led the aircraft engine industry into

successful production ahead of the airframe industry, see A. H. Leak, "Coordinating Aircraft Engine

Design and Production," SAE Journal (February

1939), pp. 85-92.

71

 J. W. Marshall, "Line Production the Keynote

of New Pratt and Whitney Aircraft Plant," Iron

Age (July 17, 1930), pp. 152-55. See also Moritz Kahn, "Aircraft and Engine Factory Layout," Aerodigest (January 1936), p. 29. Mr. Kahn was at the

time of writing a vice president of Albert Kahn, Inc.,

industrial architects and engineers, a firm that played

a significant part in subsequent wartime expansion

of the aircraft industry. 72

 The Ranger Engineering Co. facility, built in

1928 at Farmingdale, Long Island, is a case in point.

See Aerodigest (January 1937), pp. 21-23.
AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 29

tion sporting wing spans of 60 to 100 feet,

one manufacturer after another found his

existing facilities utterly inadequate. As

fast as available funds and new contracts

would permit, the major airframe builders abandoned or enlarged their old facilities—some of them World War I remainders, some of them makeshift conversions

from other uses—in favor of new plants

constructed specifically for airframe production.73

 In 1935 Consolidated left

Buffalo and a twenty-year-old plant with

a patchwork of additions sprawling from

it, to occupy an entirely new San Diego

facility of modern design with a floor area

of only slightly less than 450,000 square

feet.74 During the following year Boeing

increased floor space to something over

400,000 square feet with a new 60,000-

foot addition. This new facility had a

single unobstructed assembly area measuring 200 by 300 feet, complete with

overhead monorail for the installation of

heavy subassemblies such as engines, as

well as numerous floor channels with outlets for electricity and compressed air to

run power-operated assembly tools.75

In explaining Curtiss' decision to expand, President G. W. Vaughan probably spoke for the airframe industry at

large when he pointed out that the facility expansion that accompanied the 1929

boom had provided floor space fully adequate until about 1937. Then "it became

apparent that aviation was embarking

upon an era when quantity production

was at a greater premium than at any

time in the industry except during the

hectic days of the World War." As a consequence, along with most of the other

major aircraft manufacturers, CurtissWright planned heavy capital expenditures for increased floor space. Significantly, here as elsewhere in the airframe

industry, the expansion of facilities was

based upon probable future space requirements rather than current ones.76

In like fashion, between 1935 and 1939

many of the major airframe producers

moved into modern facilities in excess

of those required or justified by the prevailing backlog of orders.

Unfortunately for the cause of national

defense, the appearance of facilities fully

adequate for continuous, straight-line operations did not actually herald the day

of mass production. After the mid-1930's

the airframe manufacturers did equip

themselves with an impressive array of

facilities, but, hampered as they were by

the lack of orders for large numbers of

units justifying long production runs,

they continued to fabricate airplanes in

piecemeal fashion with handwork the

rule rather than the exception. Photographs of the major manufacturer's assembly floors in this era reveal forests of

stepladders and but few of the line techniques so characteristic of the auto industry.

During the decade of the thirties important strides were taken toward the

eventual achievement of the mass production goal. New tools are a case in

point. As the thirties progressed, more

and more high-speed, labor-saving devices were to be found in the industry.

Almost any well-equipped facility in

1938 could be expected to include high73

 For a discussion of this question, see W. J.

Austin, "Modern Construction Needs of the Industry," Aerodigest (October 1937), p. 40. 74

 Aerodigest (June 1938), pp. 34-39. 75

 Aerodigest (February 1937), pp. 32-34. 76

 Aerodigest (June 1938), p. 40.
30 BUYING AIRCRAFT

HAND ASSEMBLY OF STEARMAN PRIMARY TRAINERS AT DOUGLAS PLANT, 1939

speed presses for forming, brakes for

shearing, nibblers and bandsaws for sheet

cutting, as well as a variety of special precision finishing machines for honing, lapping, and polishing. Pneumatic riveting

devices and electric spot-welding equipment were in use to speed assembly, while

some of the more recent developments of

the industrial world such as optical comparators and Magnaflux units provided

accurate, efficient inspection at a production tempo.77

Of more interest are those special tools

that made possible exceptional savings in

production. When Lockheed installed a

big 2,000-ton Farrel-Birmingham forming

press standing over 25 feet high, it was

reported to be the largest in the aircraft

industry, but soon afterward North Amer77

 Extensive surveys of the status of the aircraft industry with regard to tools are hard to find. Most

of the articles in the aviation magazines and technical journals are cursory at best, usually dealing in

experiences encountered with a single tool or type

of equipment. As an example of this type of literature, see J. B. Johnson, "Magnaflux—What Does It

Show," SAE Journal (February 1939), pp. 59-67. For

the most authoritative general survey, see T. P.

Wright, "American Methods of Aircraft Production,"

Journal of the Royal Aeronautical Society (March

1939).
AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 31

ican installed a 3,000-ton model and Baldwin-Southwork produced a 5,500-ton version for use in forming dural parts.78

With these presses, aircraft manufacturers

could turn out sheet metal parts of far

greater size and complexity than ever before. Less awe-inspiring than the big

presses, but no less significant to the prospect of speeding production, were other

special aircraft innovations such as wood

and rubber dies, hydraulic stretching devices, and wheeling machines to form intricate shapes at low cost.

One of the heaviest elements of cost for

production tooling in most modern industries is encountered in the fabrication

of dies for use in forming presses. Where

automobile manufacturers retooled once

a year, spending millions in the process,

aircraft manufacturers introduced major

design changes in the midst of production runs many times within the course

of a year. To invest large sums of capital

in production tools that might shortly be

scrapped was neither desirable nor possible under the high-cost low-volume condition of the industry. Fortunately, aircraft manufacturers were able to devise

an escape through technology. Unlike

the automobile builder, who worked almost entirely with steel, the aircraft manufacturer frequently dealt in lighter metals. As a result, designers discovered that

it was possible to construct inexpensive

dies for forming presses by replacing tool

steel with zinc, which could be readily

altered when design changes so dictated.

In time, wood and hard rubber dies replaced even the inexpensive zinc dies

with further savings in costs and increase

in output.

In the quest for lower production costs

some manufacturers went even further

than the low-cost die and developed the

stretching machine, a hydraulic ram device in which jaws gripped sheet stock at

the edges and drew it over a wooden

frame die. In this fashion such curved

surfaces as engine cowling plates and

wing tip bows could be formed at little

expense. To achieve the same ends by

entirely different means, other manufacturers resorted to the wheeling machine,

a novel device in which an operator fed

sheet stock between two power-operated

crowned wheels, tangent to one another,

and formed curved sections of sheet by

skillful manipulation.79

Cheap dies, stretching devices, and

wheeling machines were, of course, only

a few of the many production innovations

that aircraft manufacturers were using on

the eve of the war, but they typified the

trend toward increased production without the necessity for heavy investment in

more or less permanent tooling. Significantly, aircraft manufacturers in the

United States were primarily concerned

with production tools that cut costs.

Those that emphasized labor reduction

or high-speed output but involved higher

costs remained little exploited until the

arrival of a war market.

Although airframe manufacturers frequently used the word production in the

78

 Aerodigest (April 1937), p. 72, and (January

1939). p. 95.

79

 For some interesting comments on production

equipment by the president of an aircraft tool firm,

Engineering Research Co., see H. A. Berliner, "Special Machines Designed for Flexibility in Aircraft

Production," Aerodigest (January 1939), pages 65-66,

and "European Aircraft Production," Iron Age (November 4, 1937), page 45.
32 BUYING AIRCRAFT

late thirties, the industry as a whole was

production conscious only to a very limited degree. Perhaps the best evidence of

this is to be found in the administrative

organizations evolved to produce airplanes. In one typical large-scale manufacturing establishment there were several groups of functional specialists: an

aerodynamics group, a landing gear

group, an electrical group, a fuselage

group, a weight control group, and, finally, a general group handling details

for all groups including such matters as

specifications, preparation of handbooks,

operating manuals, spares lists, bills of

materials, production releases, and contract requirements.80

 Clearly, the engineers dominated the field. Emphasis was

on design engineering rather than production engineering, which was lumped

in with half a dozen other unrelated administrative chores. Until high volume

demanded a change, emphasis would continue upon design rather than upon

production.

More evidence of the absence of production-mindedness in the aircraft industry is to be found in a closer analysis.

After twenty years of operations, most

manufacturers continued to use locally

designed, nonstandard business forms,

which prevented the speedy accumulation and tabulation of data for production control purposes. The automobile

industry had already pointed the way to

what could be done with standard forms

and punch-card business machines in

securing production efficiency through

stock control, unit cost control, and

planned machine loading. However,

while some aircraft builders recognized

the usefulness of these innovations, there

were still many who lacked even an adequate stock control system, without which

any significant level of production was

patently impossible.81

Still another index to the lack of production-mindedness amongst aircraft

manufacturers before 1939 was the scarcity of articles in the aircraft technical

journals and periodicals discussing production problems and production tooling. For every infrequent article on tooling and production engineering in the

thirties, one can find literally hundreds

of articles on experimental engineering

and design.82

One manufacturer, who felt that his

facility was approaching mass production

when it turned out twenty-five units per

week, summed up the essential dilemma

of the industry concisely. Radiator caps,

he reported, cost 20 cents each in small

quantities. Produced in lots of 500 or

more, the price dropped to 10 cents, but,

with an annual output of only 550 airplanes, to produce 500 caps at one time

would mean to accumulate an inventory

with a once-a-year turnover. When applied to a full line of parts, this process

not only involved a high risk of obsoletion in a field of rapid design change

but also tied up large sums of working

capital.83

80

 For discussion of an illustrative administrative

organization, see Aerodigest (June 1938), p. 39.

81

 A revealing view of the industry's lack of production-mindedness is contained in L. Cruikshank,

"Standardized Records and Record Keeping," Aerodigest (February 1936), page 24. 82

 R. H. Holmes, "Some Principles for the Design

of Aircraft Tooling," Aerodigest (November 1937),

page 24, offers an example of the infrequent production engineering discussion. 83

 W. T. Piper, "Pioneering in Mass Production,"

Aerodigest (September 1937), pp. 56ff. Piper was, at
AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 33

Without working capital, the introduction of production tooling would be difficult if not impossible. Without improved

tooling, low-cost aircraft were not to be

expected. Unless the industry could turn

out low-cost aircraft, the mass market—

barring war—could never be tapped. For

this reason, the problem of how the aircraft industry was financed in the years

just before World War II takes on particular significance.

Financing the Aircraft Industry:

1934-38

The financial position of the aircraft

industry, and particularly the means by

which it obtained money, was in the midthirties an element in the nation's defense

no less vital than the available strength in

aircraft reported each year to Congress.

In theory at least, aircraft manufacturers

could obtain working capital in three

ways: by reinvesting profits, by borrowing, or by selling stock.

For a generation familiar with the millions of man-hours and billions in dollar

values that have characterized the aircraft industry since World War II, it may

be difficult to recall just how small the

prewar business actually was.84 As late as

1938, Moody's Industrials, a widely used

barometer of corporate activity, did not

consider aircraft manufacturers significant enough to include them in the firm's

annual statistical survey of operating ratios for the nation's major industrial

groups.85 It is against this backdrop that

the problems of the aircraft industry's

search for funds must be examined.

As a source of capital, profits in the

prewar industry appeared favorable—at

least on the surface. A composite financial statement for the eighteen top aircraft manufacturers shows a rising curve

of net profits:86

Net

Year Profit

1935 .................... . $1,749,000

1936 .................... . 5,225,000

1937 ..................... 8,191,000

1938 .................... . 17,139,000

This curve seems to spell increasing prosperity, but the round numbers in themselves are deceptive. In the first place,

the eighteen top aircraft manufacturers

necessarily involve both Curtiss-Wright

and United Aircraft, whose corporate

earnings include the profits of their engine manufacturing operations along

with airframe production, weighting the

composite picture abnormally. Moreover, the dollar return of the industry is

meaningless unless measured against sales

or capital invested.

Profits as a percentage of sales advanced

from a deficit in 1934 (again using the

eighteen manufacturers' composite statethe time of writing, general manager of the Taylor

Aircraft Corporation, one of the more important

manufacturers of small, low-powered airplanes. 84

 G. M. Williams, "Growth of the Aircraft Industry," Prospects and Problems in Aviation, a series of

papers presented at the Chicago forum on aviation

(Chicago: The Chicago Association of Commerce,

1945), p. 3.

85

 Moody's Manual of Investments: American and

Foreign: Industrial Securities edited by J. S. Porter

et al. (New York: Moody's Investors Service, 1938,

1940, 1941) (hereafter cited Moody's Industrials), p.

145.

86

 Aircraft Industry Financial Summary, 19 Sep 47,

National Archives, Rcds of Presidential Comms, etc.,

Rcd Group 220, Rcds of President's Air Policy Comm,

MG2-3.
34 BUYING AIRCRAFT

TABLE 4—PERCENT OF EARNINGS AS DIVIDENDS AND SURPLUS, EIGHTEEN TOP AIRCRAFT MANUFACTURERS: 1934-38

Source: Aircraft Industry Financial Summary, 19 Sep 47;

Modley, Aviation Facts and Figures: 1945, p. 38.

ment) to 10.9 percent in 1938.87 Profits

as a percentage of capital invested, or net

worth, looked even better, rising from 2.9

percent in 1935 to 15.4 percent in 1938.

Aircraft manufacturers' profits were certainly improving substantially during the

middle thirties, and, in comparison with

some of the nation's key manufacturing

enterprises outside the aircraft field, they

were generally superior in the second half

of the thirties in terms of percentages.88

A composite financial statement can be

misleading, however, for the generally

prosperous upcurve of profits obscures

the fact that individual firms, even the

biggest and strongest in the field, might

be encountering disastrous deficits. Boeing, for example, turned in a profit of 7.3

percent of sales in 1936 but suffered a

deficit of 27.7 percent of sales in 1938,

even though the composite figures for

these years reflect a general increase.89

Granting the existence of rising profits,

it is important to determine where the

profits went in order to appraise the industry's capital position. The figures in

Table 4 show that the shareholders were

not carrying away an abnormal portion

of the net. As a matter of fact, aircraft

dividends were less than was typical

among the nation's manufacturing industries. A substantial share of the industries earnings, an average of 57.4 percent

in the period shown, was available to

plow back into the business.

The amount available as surplus may

appear impressive. But compared with

deferred development charges (which give

some clue to the industry's heavy capital

requirements), it is evident that the sums

available as surplus for plowing back into

the industry may not have been adequate

for the abnormal capital requirements of

aircraft manufacturers in the thirties,

when both plant replacement and design

change had to be pursued aggressively to

ensure competitive survival. (Table 5)

The relationship of surplus (undistributed earnings) to deferred development

charges (current costs earmarked for future payment) does not necessarily provide an infallible criterion for measuring

the degree to which profits were available

for use in plant expansion, tool replacement, and design change or development

work, since different manufacturers followed different bookkeeping practices in

arriving at deferred development charges

as published.

87

 Ibid. Profits as a percentage of sales for the period 1934-38 were as follows: 1934, -.42 percent;

1935, 4.01 percent; 1936, 7.95 percent; 1937, 6.85 percent; 1938, 10.9 percent. Compare these figures with

those of Aircraft Industries of America, Aviation

Facts and Figures: 1945, R. Modley, ed. (New York:

McGraw-Hill Book Co., 1946), page 48, based on 12

rather than 18 firms. 88

 See tabulations of percent net income to net

worth and percent net income to sales presented in

Moody's Industrials, 1940, pp. a175ff. 89

 Moody's Industrials, 1940, p. a40ff, and Aircraft

Industry Financial Summary, 19 Sep 47.
AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 35

TABLE 5—YEARLY INCREMENT TO SURPLUS

OR DEFICIT COMPARED WITH YEARLY INCREMENT TO DEFERRED DEVELOPMENT

CHARGES, EIGHTEEN TOP AIRCRAFT

MANUFACTURERS: 1934-38

Source: Aircraft Industry Financial Summary, 19 Sep 47.

A common practice in the thirties was

to prorate experimental costs over the

production life of a given aircraft model,

which normally continued to sell for several years. More customary was the practice of selecting a fixed number of aircraft

sales against which to prorate development costs. If sales failed to reach the

predetermined figure, the firm would

show a loss for that particular model.

Some manufacturers restricted development costs to the sales of a given model

in its initial year of production, showing

a profit or loss depending upon the model's sale in that year. It is evident that

profits and ultimately the capital available for plowing back into the industry

could, within certain limits, be juggled

at will by a careful selection of bookkeeping methods and thus make it possible to

show a profit or loss in any given year

almost according to desire.90

Wide deviations in deferment policies

suggest grave dangers in seeking an index

to the industry's ability to finance itself

from earnings by comparing surplus with

deferred charges. In addition, the existence of these differing policies suggests a

revealing insight into the sometimes surprising spread between extremely high

and low bids in price competition on

comparable items. Comparisons of one

manufacturer with another, in the light

of widely different accounting practices,

are dangerous to make and difficult if not

downright impossible to use with accuracy.

One more factor affects the role of

profits as a source of operating capital.

In 1934 Congress passed the VinsonTrammell Act setting a legal profit limit

of 10 percent on Navy contracts, including aircraft. Not until later were the provisions of the act extended to cover Air

Corps contracts. However, insofar as

Navy contracts contributed to the industry's gross during the middle thirties, a

ceiling was imposed on the amount of

capital aircraft manufacturers could derive from profits.91

 While this ceiling did

impound profits of the engine and accessory manufacturers, in practice airframe

producers seldom computed profits on

military contracts in excess of the ceiling

imposed.92 The Vinson-Trammell Act

90

 For a brief discussion of deferred development

charges, see Aviation Industry in the United States,

page 97, and Appendix Table IX, Analysis of Deferred Development Expenses, showing deferred

charges as a percent of sales and as a percent of total

assets; and amortization of development as a percent

of sales and as a percent of deferred development. 91

 Vinson-Trammell Act, 73d Cong, 2d sess, March

27, 1934 (48 Stat 503). 92

 The two major engine producers showed profits

over a ten-year period ending in 1937 averaging 17

percent (Harding, Aviation Industry, pp. 25-27). Air

Corps audits and cost studies covering thirty contracts in 1937 and 1938 showed that accessory manu-
36 BUYING AIRCRAFT

prohibited profits over 10 percent but

did not guarantee profits up to that figure. Losses, especially those incurred on

research and development or experimental contracts, could and sometimes did

absorb the entire margin allowed on

more successful production contracts. Although subsequent amendment mitigated

this type of loss somewhat, the outlook for

creative profits from military contracts

was far from bright in the late thirties,

a time when manufacturers were looking

for capital with which to refurbish the

industry.

Even more than legal limits and bookkeeping procedures, the dynamic character of aircraft design itself contributed

significantly to the limits on profits during the prewar years of rising sales. The

inadequacy of earnings to meet these research charges is suggested by the fact

that twelve leading manufacturers poured

$5,200,000 into development costs during

1937-38 and deferred sums during the

same period amounting to $2,300,000, or

nearly half of the total allocated to development.93

 While deferred charges are

perhaps unreliable as a measure of capital requirements, other figures contain

the same implications. Over the period

1934-38, the aircraft industry as a whole

is reputed to have put 9.4 percent of its

gross into research, whereas profits

amounted to but 5.8 percent of gross.94

In a period of rapid technical flux, investment in a particular design involved a

continuing gamble, for new and more extensive capital outlays on still more advanced designs might be and frequently

were required long before the previous

model had amortized itself, thus impelling further investment of earnings or

deferment of charges or both.

So long as the aircraft industry continued to experience a high rate of design

change and a low level of production,

even a rising general level of profits

proved inadequate as a source of capital.

Leaving in abeyance for the moment the

relative adequacy of profits as a source of

capital, it may be useful to consider borrowing, the second source of capital available to the aircraft builders.

The aircraft industry, like most of the

nation's industries, regularly resorted to

the banks for cash to meet short-term requirements such as initial inventories or

labor costs before payments on delivery

of finished products. Bank loans, however, represented only a small portion of

the industry's total current assets, about

2 or 3 percent in 1937 and 1938.95 Moreover, these commercial loans did not represent new capital in the strict sense of

the word. They were limited in volume

by the liquid assets of the borrower

rather than by the prospect of future

earnings, as would be the case with funded

debt or long-term interest-bearing bonds.

facturers averaged profits of 20 percent. Airframe and

accessory manufacturers, excluding one serious airframe contract debacle, showed an average profit of

18 percent (Chief, Finance Div, to Maj Gen H. H.

Arnold, 1939, AAG 120 Misc, Funds and Disbursements). For evidence of profits in earlier years, see

Freudenthal, Aviation Business, Table V, p. 123, derived from Delaney Hearings, p. 496, and Aviation,

October 1938, pp. 35-36. 93

 Aircraft Industries Assn., Industry Planning

Memorandum, Financial, Series 13-2, October 1,

1947, Table IV, Composite Balance Sheet for Twelve

Leading Airframe Manufacturers, AIA office files.

94

 J. Lloyd, "Stockholders' Panorama of the Aircraft Industry," Magazine of Wall Street (November

18, 1939). pp. 146-65. 95

 AIA, Industry Planning Memorandum, cited

n. 93.
AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 37

For a number of reasons the aircraft

industry was unwilling or unable to secure capital in the bond market. Longterm debt, whether in the form of mortgages, notes, or bonds, would require

fixed interest charges that must be met

annually or cumulatively as a part of

fixed overhead. So long as the aircraft

industry remained dynamic, both as to

design and as to production levels, earnings would continue to be problematical

and always something of a gamble. Because of these circumstances, the aircraft

manufacturers in the thirties continued

the practice of the twenties and acquired

almost no funded debt.96 One important

exception to this pattern involved a near

disaster.

In 1929, near the peak of the boom,

the Glenn L. Martin Company moved

into an efficient new plant at Middle

River not far from Baltimore, Maryland.

The collapse of the market curtailed the

company's plans to finance the new undertaking with equity capital and, instead, Martin turned to funded debt with

6 percent 5-year notes for some $3,000,-

000. The continuing depression and a

series of misfortunes reduced Martin

earnings to deficits despite the fact that

the company was a leader in the design

field. Unable to meet its obligations maturing in 1934, Martin went through

Section 77B of the Federal Bankruptcy

Act. The company recovered when the

arrival of war sales helped liquidate the

notes that had been renegotiated to 1939,

but the painful experience stood as an

object lesson for all aircraft manufacturers to see.97

 Since such a leader in the

aircraft field as Martin skirted disaster

with funded debt, it is not difficult to appreciate the reluctance of the industry at

large to consider such borrowing to raise

capital. Obviously, then, only one source

of capital, the stock market, remained to

be tapped.

There were serious disadvantages in

any extensive use of equity capital. Every

share sold in the market diluted managerial control. Moreover, if a given manufacturer intended to rely upon the market for capital to any great extent over a

prolonged period of time, he must show

occasional profits and pay encouraging

dividends or his source of capital might

dry up.

There were numerous factors in the

middle thirties militating against the sale

of aircraft manufacturers' securities. First,

some of the major producers, burdened

with the unfortunate heritage of the

speculative boom, were heavily overcapitalized. Overcapitalization implied a dilution of earnings. Prudent investors normally eschewed the offerings of all such

corporations. Second, the high rate of

design flux obviously ate heavily into

profits, promising the investor a low

yield, if any, so long as the pace of development continued to be rapid. Frequent

federal investigations of one character or

another constituted a third factor weighting the balance against equity capital.

Ever since the Hughes investigation of

1918, special hearings on the aircraft industry, congressional or otherwise, followed one another almost annually, and

96

 Dodd, Financial Policies in the Aviation Industry, pp. 86-90; Harding, Aviation Industry, Title XI,

p. 64.

97

 Fortune (December 1939), pp. 73-77; Aviation

Industry in the U.S., pp. 185-89. Curtiss-Wright also

labored under a heavy burden of funded debt in the

1930's.
38 BUYING AIRCRAFT

each raised as many problems as it solved,

creating a state of permanent uproar, unrest, and uncertainty throughout the industry generally by raising fears of intervention, nationalization, or at the very

least, profit limitation. Still another consideration affecting the investor's judgment against aircraft shares is to be found

in the very complexity of the industry itself. Dynamic problems of design and

production, uncertainties resulting from

the political influences affecting the sale

of aircraft, and, not least in this enumeration, the diversity of accounting procedures, warned against investment in the

aircraft industry.

Among the many pressures against investment in aircraft manufacturing were

the warnings of the nation's brokers and

market analysts. The aircraft business,

warned a writer in Barren's, was "swift,

turbulent and erratic," clearly "a field for

speculation and not for investment."

 98

A few months earlier, the Magazine of

Wall Street declared that there were only

twenty-two interesting investment opportunities among the sixty-odd corporate

aircraft offerings of the nation and at least

half of the twenty-two were regarded as

shaky and liable to go under entirely or

submit to merger.99 More significantly,

even investment research organizations

warned that there were no "gilt edged

securities" in the aircraft industry, where

shares tended to fluctuate more violently

than securities in most other manufacturing industries. The best that could be

said of investment in aircraft manufacturing shares seemed to be that it was

speculative and therefore "potentially

profitable."

 100

 In short, the experts

warned that the aircraft industry presented far too complex a picture for safe

investment.

In view of the apparently overwhelming number of considerations advising

against investment in aircraft securities,

it is certainly surprising to find that the

industry was able to raise significant sums

in the stock market. From 1936 right on

down through the war years of peak production, every aircraft manufacturer who

placed offerings in the market was able

to sell stock in quantities sufficient to

cover current losses and meet working

capital requirements.101 Perhaps the

clearest indication of this willingness to

absorb aircraft securities is to be seen in

the case of Lockheed. Reorganized in

1933 after a period in the hands of a receiver, the corporation had three times

sold shares to bring in working capital

by 1938. That such a firm could enter

the market that frequently and still acquire capital readily is indicative of the

availability of equity capital to the industry despite the forebodings of the

brokers.102 Between 1933 and 1939, Bell,

98

 H. Lawrence, "New Wings for Aviation," Barron's (January 25, 1937), p. 15. 99

 C. M. Turner, "Aviation Begins to Earn Money,"

Magazine of Wall Street (October 10, 1936), pp.

760-62.

100

 Harding, Aviation Industry, chs. V-VIII. 101

 Aircraft Industry Financial Summary, September 19, 1947, summary and conclusions based on composite of annual statements of eighteen leading airframe manufacturers. 102

 Aviation Industry in the U.S., pp. 182-84. From

1938 to 1941, the Big Six—Boeing, Consolidated,

Douglas, Lockheed, Martin, and North American—

all airframe manufacturers, raised their capital and

plant by $67,000,000, $23,000,000 or approximately

one-third of which came from the sale of securities.

See F. A. Callery, "Review of American Aircraft Finance," Air Affairs (Summer 1947), p. 485.
AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 39

Boeing, Curtiss-Wright, Douglas, Fairchild, Lockheed, Martin, Northrop, Republic, and United, to name a few of the

larger firms, raised a total of more than

$30,000,000 in new capital with anywhere

from one to three offerings.103

This curious ability to secure equity

capital in spite of the numerous drawbacks calls for an explanation. In the

first place, there is some evidence to indicate that aircraft shares were heavily if

not largely held by speculators rather

than investors and therefore somewhat

less subject to the normal demands of

prudent investment.104 Thus, while it is

true that even shares bought at the market low in 1937 or 1938 would yield only

a return ranging from 1.5 to 4.5 percent

at best, speculators, anticipating substantial market advances with the probable

coming of war, might well be willing to

buy aircraft shares.105 Secondly, whether

those who bought aircraft shares were

speculators or investors, they appear to

have been swayed more by anticipation

of future prospects than by the current

technical adequacy, managerial competence, or financial position of the industry.106

While the stock market proved to be

a comparatively ready source of capital

for the aircraft industry, each new stock

issue imposed its obligation of dividend

payments to keep the market interest and

each new share diluted earnings and magnified the problems of corporate control.

At best the stock market was a last resort,

and the extent to which the industry relied upon equity capital is a rough measure of the inadequacy of earnings to meet

the demands of the industry. However,

this rough measure provides only a relative comparison of these sources of capital; the central problem still remains: to

determine the financial condition of the

aircraft industry as a factor in its ability

to meet the war crisis when it arrived.

The record of rising profits in the

1935-38 period gives a superficial picture

of prosperity and fiscal soundness. The

volume of business was certainly rising,

yet this in itself was no positive indication that the industry was attaining a

sounder financial structure. To secure

such an indication some yardstick other

than profits is essential.

The current ratio of the aircraft industry offers one useful index of the industry's financial position. In effect, the

current ratio of an industry, the ratio of

its current assets to its current liabilities,

is a statement of its working capital position. The current ratio indicates the

margin by which available assets, such as

cash, inventory, and other easily convertible resources, cover claims such as notes

and accounts payable. The lower the

current ratio falls, the closer the industry moves to the bare break-even point.

A decreasing ratio spells a relatively weak

financial position, for an industry with

assets barely able to meet its obligations

is obviously ill prepared to meet abnormal capital demands or adverse business

conditions. The utility of the current

103

 Aircraft Industry Financial Summary, 19 Sep 47,

summary and conclusions based on composite of annual statement of eighteen leading airframe manufacturers. 104

 Woods, Aircraft Manufacturing Industry, p. 35. 105

 Modley, Aviation Facts and Figures: 1945, Table

4-10, p. 48. 106

 See, for example, page 492, comments of F. A.

Callery, cited n. 102, and analysis of the Brewster

firm's fund-raising experience in relation to production record, in Aircraft Industry Financial Summary,

19 Sep 47.
40 BUYING AIRCRAFT

ratio as a yardstick is further enhanced by

the circumstance that it provides a basis

for comparison between industries without regard for differences in scale of operations.

A comparison of current ratios between

the nation's manufacturing industries in

general and the airframe industry in particular reveals that during the prewar

years airframe manufacturers came to occupy a less favorable financial position

than other manufacturers. The following figures indicate the extent to which

this was true for an important portion of

the industry:107

1935 1936 1937 1938

300 manufacturers

(nonaircraft) ........ . 4.8 4.2 4.0 4.9

6 major airframe firms... 4.9 5.4 2.8 3.5

Enlarging the size of the sample to embrace twelve leading airframe manufacturers does not improve the general picture. The average current ratio for the

larger group was 2.0 in 1937 and 2.7 in

1938. This was in contrast to the relatively superior current ratio of 4.0 or

higher for the nation's manufacturing industries as a whole.108

 These considerations suggest that the rising curve of aircraft profits was deceptive as a guide to

the financial position of the aircraft industry. As the volume of sales mounted,

the industry incurred obligations that

pressed the industry closer to the bare

level of solvency. The financial position

of the aircraft industry on the eve of the

war became increasingly stringent as current commitments expanded toward the

danger point.109

The importance of a declining current

ratio as a yardstick to the financial position of the aircraft industry is suggested

in a comparison of working capital to

sales. Where twelve leading aircraft manufacturers increased their working capital 2.6 times between 1934 and 1938, sales

in these years increased almost exactly

fivefold.110 All this came at a time when

design change and factory refurbishment

imposed an abnormally heavy capital requirement upon the industry.

It is possible to identify still other operating ratios that tend to substantiate the

current ratio observations. The relationship of inventory to current assets is just

such a ratio. A large inventory is a distinct disadvantage because it ties up working capital and increases the probability

of losses resulting from design changes

that leave obsolete stock in storage. Since

the nation's typical prewar manufacturing industry maintained an inventory valued between 40 and 50 percent of current

assets while the airframe manufacturers

carried inventories valued at 50 to 60 percent of current assets, the inventory capital requirements of the aircraft industry 107

 Figures computed from Moody's Industrials.

Current ratio for U.S. industries 1935-37 based on

316 firms in 1938 edition, p. 41a; 1938 figures based

on 307 firms in 1941 edition, p. 46a. Current ratios

for six leading airframe manufacturers (Boeing, Consolidated, Douglas, Lockheed, Martin, and North

American) from financial statements of these firms

in 1940 edition of Moody's Industrials. 108

 Aircraft Industries Assn., Industry Planning

Memorandum, Financial, Series 13-2, 1 Oct 47, Table

4, Composite Balance Sheet for Twelve Leading Airframe Manufacturers.

109

 Computed from financial statements of six leading airframe manufacturers in Moody's Industrials,

1940. For a discussion of the need for adequate capitalization, see L. L. Putnam, "Too Much Money or

Too Little—Both Bad," Airway Age, vol. 12 (May 2,

1931), 481-84. 110

 Aircraft Industry Financial Summary, 19 Sep 47.
AIRCRAFT INDUSTRY ON THE EVE OF WORLD WAR II 41

were surely equal to and probably greater

than those of most of the nation's manufacturing industries.111

 Under these circumstances, a diminishing current ratio,

narrowing the gap between current assets

and current liabilities, constituted a serious difficulty adversely affecting the aircraft industry's financial position in the

crucial years just before the war.

In assessing the industry's financial condition as an element of the nation's air

power on the eve of World War II, the

question of the tangible curbs imposed

on plant expansion or research and development by capital inadequacies is an

insufficient standard of measurement.

The attitudes of the directors, corporation officers, and managers who determined policy throughout the industry

were likewise important. Most of these

men had occupied responsible positions

of one sort or another during the preceding decade. The memory of the boom

era and its extravagant overexpansion of

production facilities and subsequent contraction, collapse, and disaster must have

been a painful reality to many of them.

The financial position of the aircraft industry in the late thirties, when set

against the backdrop of disasters experienced in the early thirties, could scarcely

avoid filling industry leaders with a zeal

for caution, a reluctance to undertake

commitments beyond their ability to consummate, and an almost obsessive desire

not to expand capacity beyond the point

of anticipated market requirements.

These attitudes, seldom directly expressed

and therefore hard to document but not

necessarily less real for that reason, may

offer an important clue to the fuller understanding of the era following 1938.

As the crisis mounted and the nation

moved slowly toward a war footing, a substantial explanation of manufacturers' reluctance to expand to meet anticipated

war orders might be found in the industry's financial position, where a shrinking

current ratio heralded a decline to the

bare level of solvency and, on occasion,

even a dip into deficits.

Yet, despite all its pressing problems,

the aircraft industry on the eve of the

war was not in a fundamentally unhealthy

condition. The rising ratio of earnings

to net worth clearly reflected a sound

earning power. To be sure, within the

general pattern of this healthy condition,

the industry was confronted with a knotty

problem, an abnormally acute demand

for capital resulting from the peculiar

coincidence of requirements for funds to

push development endlessly while at the

same time effecting major plant refurbishments. So voracious was the cry for

capital that even this admittedly healthy

industry with rising profits was unable to

meet its needs. Clearly, the only practical

solution was to be found in a high volume of production, which might pile up

earnings faster than research and development or facility expansion costs could

consume them. Sales, then, held the key

to the industry's fiscal difficulties. And

111

 Ratio of inventory to current assets for industry

in general based on 307 firms, 1934-38, Moody's Industrials, 1941, p. 46a. See also 1938 edition, p. 41a.

The ratio for aircraft industry is based on an unfortunately small sample covering the years 1934-38,

Moody's Industrials, 1940, pp. 177-179a. Comparable

data for 1939 in L. O. Ballinger and T. Lilley, Financial Position of the Aircraft Industry, Business Research Study, No. 28, Harvard Business School, October 1943, confirm this sample. The author is indebted to this excellent study, covering a somewhat

later span of years than those discussed here, for a

number of valuable insights into the problems of aircraft industry finance.
42 BUYING AIRCRAFT

so long as a major portion of the market

comprised military aircraft, the volume

of aircraft production in the United

States would in a large measure depend

upon the size of the appropriations voted

for that purpose by Congress.
CHAPTER III

Congress and the Air Arm

Soon after the outbreak of World War

II in September 1939, it became evident

that the United States was woefully underarmed. The dramatic assaults of the

Luftwaffe drew particular attention to

the small size of the air arm and touched

off a round of charges and countercharges

seeking to pin down responsibility. Some

blamed Congress; congressmen were inclined to blame the War Department or

the Bureau of the Budget.1 Seen in the

perspective of time, these allegations

and recriminations have little significance save insofar as they demonstrate

the complexities of the processes by which

air strength is decided.

The Constitution empowers Congress

to raise and equip armies for the common

defense. From its earliest sessions, Congress appropriated funds and passed enabling legislation for military purposes,

but the distinction between policy legislation on the one hand and appropriations on the other was never clearly

drawn. "Legislation by appropriation"

occurred frequently as overlapping committees considered un-co-ordinated departmental bills piecemeal. With the

passage of the epoch-making Budget and

Accounting Act of 1921, however, Congress introduced revolutionary changes

in organization and procedure. In place

of piecemeal consideration of estimates

by the standing committees of the House

and Senate, henceforth all money bills

were to be considered by a Committee

on Appropriations in each house. These

committees held full jurisdiction over all

estimates but were specifically enjoined

against the inclusion of legislative matter

in appropriation acts. Military policies

of statutory character thus fell within the

purview of a Military Affairs Committee,

while consideration of estimates to provide funds to carry out these policies fell

to an Appropriations Committee.2

The upper limit of strength for the air

arm was determined by legislative authorization while the lower limit was determined by the funds actually appropriated. Since the processes of authorization

and appropriation involved utterly different sets of factors and were considered

by two entirely distinct committees in

both the Senate and the House, each must

be analyzed in turn. 1

 See, for example, remarks on the War Department by Representative J. Buell Snyder, Chairman,

House Appropriations Subcom, quoted in Elias Huzar, "Military Appropriations, 1933-42," Military

Affairs, VII (Fall 1943), 141; remarks by Representative R. A. Collins, of Mississippi, Cong Rcd, March

3, 1939, p. 2223. For a prewar instance of War Department efforts to pass responsibility to Congress,

see Baker Board Report, pages 48, 54.

2

 For a discussion of the effect of the Budget and

Accounting Act of 1921 upon congressional organization and procedures, see William Franklin Willoughby, The National Budget System, With Suggestions for Improvement (Baltimore: The Johns

Hopkins Press, 1927), chs. II, IV.
44 BUYING AIRCRAFT

Authorized Strength: How Many

Aircraft?

The National Defense Act of 1920 constituted a major revision in the legislative

basis of the War Department.3 Supposedly, it represented the best accumulated

experience of the World War I years

codified into statutory form. Building on

the precedents set by the various arms and

services in years gone by, the act made

no attempt to determine the strength of

the Military Establishment other than to

impose a ceiling on officers and men and

to apportion manpower to the arms and

services according to their relative importance. Under this provision the Air

Service was allotted a ceiling of 16,000

men and 1,514 officers; no mention of

strength in aircraft appeared in the act.

That the troop basis may have been a

faulty premise upon which to regulate

air arm strength is suggested by the precedent and practice of the Navy. Congress

decided upon the number and type of

major vessels required for the national

defense and then provided the manpower

necessary to operate them. In arranging

for a manpower allotment in the Air

Service without any reference to aircraft

strength, the officers who helped to draft

the Defense Act and the congressmen

who voted for it apparently did not anticipate the strategic potentialities of the

air weapon. As a consequence, during

the early twenties, the number of aircraft

available depended upon the accidents

and contingencies that determined the

funds given to the Air Service and not

upon policy based on strategic considerations.

Funds specifically earmarked for the

procurement of new aircraft fell from

$6,000,000 in 1921 to something over

$2,500,000 in 1925.4 Lacking well-defined objectives, Air Service officers resorted to expedient makeshifts determined by each year's appropriation.

Long-term program planning proved to

be impossible, and without comprehensive aircraft procurement programs projected over several years, the Air Service

soon acquired a heterogeneous collection

of equipment of questionable military

utility. Responsible officers began to

doubt whether the Air Service could perform the limited tactical role then envisioned for it. To remedy this situation,

the Secretary of War appointed a special

board under the chairmanship of Maj.

Gen. William Lassiter to consider a thorough reorganization suggested by the

Chief of the Air Service.

The Lassiter Board

The War Department's special board

appointed in March 1923 to study the

Air Service could scarcely be said to have

been weighted in favor of the air weapon.

Five of its seven members were high-ranking officers on the General Staff; another

came from the Quartermaster Corps.

Only one, the lowest ranking member,

was an Air Service officer, and much of

his service had been with balloons. Nevertheless, after deliberations lasting more

than a month, the Lassiter Board submitted a report that surveyed the air

3

 National Defense Act, June 4, 1920 (41 Stat 759),

amending the earlier organic statute of the Army,

National Defense Act, June 3, 1916.

4

 See War Department Appropriation Act (41 Stat

953) for fiscal year 1921 and successive years.
CONGRESS AND THE AIR ARM 45

power problem with unusual perception.

Even today the report retains a cogency

that commends it to all who seek an understanding of the air weapon. Borrowing freely from the Italian air power theorist, Giulio Douhet, the board divided

air power into two categories: air service

and air force. The former consisted of

those units whose primary function it

was to provide service as auxiliaries to the

ground arms. Artillery-spotting and observation aircraft fell in this group. The

latter embraced pursuit, bombardment,

and attack or close support units capable

of offensive roles. Both air service and

air force were conceived as organic parts

of the ground organization, with the number of aircraft required depending upon

the number of divisions, corps, and armies contemplated for the ground force

in the event of war. On this premise the

Lassiter Board visualized a war strength

of 8,756 aircraft. The peacetime establishment was set at the minimum necessary to provide an adequate cadre from

which to expand to the planned war footing. The board set this cadre requirement at 2,500 aircraft, of which fewer

than 25 percent were to be used for flying training. Approved by the Secretary

of War, the Lassiter Board report became

the fundamental air arm policy of the

War Department after April 1923.5

The Lassiter report followed the concept implicit in the Defense Act of 1920

in premising air strength upon the Army

ground force or a troop basis. In the absence of a well-defined and experienceproven doctrine on air power, the troop

basis concept provided a convenient formula for deciding how many aircraft the

Army needed. As early as March 1917

the formula had been employed in planning the air component for the millionman army then being organized.6

 General Staff officers continued to use the

formula in planning studies during and

after World War I, although some Air

Service officers, notably Brig. Gen. William (Billy) Mitchell, protested that

the number of aircraft required should

bear no relation whatsoever to the number of men in the Army as a whole.7

These voices of protest were ignored for

the time being, and air strength continued to be determined by the number of

troops available to the Army.

Each time budgetary retrenchment cut

back the size of the Army in the early

twenties, the Air Service suffered its share

of the necessary reduction in manpower.

Manpower deficiencies led the General

Staff to cut Air Service strength more

than 500 aircraft below the approved

minimum.8 Congress, legislating through

appropriations, went further, until by

June 1925 the air arm had on hand only

5 1,436 aircraft, of which 1,040 were obso- The full text of the Lassiter report is nowhere

available in published form; the Library of the Industrial College of the Armed Forces contains a

mimeographed copy of the original. Details concerning the board and the fate of the report, as well

as a precis of its text, can be found in Hearings before the Select Committee on Inquiry Into Operations of the United States Air Service, House, 68th

Congress, 1924-25 (hereafter cited as Lampert Hearings), I-VI, passim, especially 1727-28. See also,

WPD staff paper prepared for the Howell Comm

Aug 34, mimeographed, Historical Background,

WPD-OPD files 888-92. 6

 Lampert Hearings, p. 1257. 7

 Ibid., p. 1894. See also, Irving Brinton Holley, jr.,

Ideas and Weapons, (New Haven, Conn.: Yale University Press, 1953), ch. X, passim. 8

 Lampert Hearings, p. 1739.
46 BUYING AIRCRAFT

lete or obsolescent and only 396 were

classified as standard.9

Air Service officers who protested the

condition of the air arm were joined by

interested manufacturers in search of contracts. Their combined cries, in conjunction with a series of allegations as to war

profiteering and patent abuse and the

Mitchell air power controversy, produced

an investigation by a congressional committee under the chairmanship of Representative Florian Lampert of Wisconsin.

The Lampert Committee

After taking several thousand pages of

evidence during 1924 and 1925, the Lampert Committee reported a number of

specific recommendations to Congress.

In substance the committee confirmed

the findings of the Lassiter Board: the

lack of an effective Air Service procurement program had helped to reduce the

nation's aircraft industry as well as the

air arm itself below an effective minimum

level.10 Since War Department representatives reiterated their intention to fulfill the Lassiter 2,500 aircraft program,

pointing out that the Department had

actually favored the Air Service with

funds originally allocated for other uses,

the committee members were led to believe that budget cuts rather than War

Department antagonism accounted for

the prevailing state of the air arm.11 To

rectify this situation the committee recommended, among many other things,

that a definite five-year program of procurement be prepared and that Congress

appropriate $10,000,000 each year for

new aircraft, leaving the exact number to

be procured to the military authorities.12

Air Service officers and aircraft manufacturers must have been pleased with

the Lampert report, but the committee's

recommendations were little more than

pious hopes in no way binding upon the

War Department or Congress since the

recommendations were not immediately

enacted into statutes. The Lampert Committee hearings were by no means wasted

effort, however. Shortly before the committee published its final report, and perhaps as a counteroffensive in anticipation

of that report, the Secretaries of War and

Navy asked the President to set up a

board to study air power and the national

defense. The President complied, appointing a board under the chairmanship

of the distinguished banker and Morgan

partner, Dwight W. Morrow.

The Morrow Board

After hearing nearly a hundred witnesses and adding four volumes of testimony to the five volumes already published by the Lampert Committee, the

Morrow Board submitted its report to

the President.13 While not absolutely

binding upon the War Department, the

Morrow recommendations, as the considered findings of the chief executive's appointees, carried a weight with War Department officers not generally accorded

the earlier congressional report. The

9

 Hearings before the President's Aircraft Board,

1925 (hereafter cited as Morrow Hearings), p. 1680. 10

 House Rpt 1653, 68th Cong, 2d sess, December

14, 1925 (hereafter cited Lampert Rpt), pp. 4-5. 11

 Lampert Hearings, p. 1827.

12

 Lampert Rpt, p. 9. 13

 S Doc 18, 69th Cong, 1st sess, Aircraft in National Defense (hereafter cited as Morrow Rpt), November 30, 1925.
CONGRESS AND THE AIR ARM 47

THE MORROW BOARD AND DOUGLAS TRANSPORT at International Air Races, Mitchel

Field, N.Y., October 1925.

Morrow Board recommendations differed

markedly from those of the Lampert

Committee in a number of points not

pertinent here but, with respect to the

question of air arm strength, the two reports agreed on the need for a comprehensive program of aircraft procurement

projected over a number of years. Although the Morrow Board favored a fiveyear procurement program, in general it

was far less emphatic than the Lampert

report had been, especially when dealing

with technical details. For example, by

referring the whole question of aircraft

strength to the War Department as a subject for "further study under competent

authority," the board evaded one of the

major problems that had led to its appointment. The board was equally vague

about funds, suggesting only that special

appropriations from Congress were

"worthy of consideration" over the next

few years.14

When at last the protracted investigations were over and Congress began to

formulate new legislation to cure the ills

of the Air Service, there seemed to be general agreement among the investigators

on three points concerning air arm

strength: a continuing procurement program should be adopted; Congress should

appropriate more money for new aircraft;

and decisions on the exact numbers and

composition of the air weapon should be

left to the War Department. In this setting Congress passed the Air Corps Act of

1926, a landmark in air arm history.

14

 Ibid., p. 21.
48 BUYING AIRCRAFT

The Air Corps Act

Following a lengthy study, which made

extensive use of the evidence published

by the Lampert and Morrow groups as

well as by a number of others, the House

Military Affairs Committee finally reported out a bill setting up an Air Corps

as a combat arm of the line. The bill

proposed increased personnel authorizations to be made by additions to the Army

total rather than by transfers from the

allocations of other arms and services, a

provision shrewdly drawn to avoid antagonizing the ground forces. The bill

further proposed to authorize a minimum

of 2,200 aircraft for the Air Corps. Only

standard units not yet declared obsolete

were to be included in this number, although the 2,200 total did cover allocations for National Guard and Organized

Reserves use as well as provision for an

annual replacement increment of approximately 400 aircraft "on order."

 15

Here was specific congressional authorization for a fixed number of aircraft, a

policy formulated by the Military Affairs

Committee rather than by the Appropriations Committee. But why the figure

2,200? Just as neither the Lampert nor

the Morrow report felt competent to decide upon the necessary minimum number of aircraft, the House Committee

turned to the military for advice on this

point and selected the 2,200 figure on the

word of the Secretary of War.16

Throughout the twenties, the most enthusiastic advocates of air power protested against War Department unfriendliness toward the air arm. Had the charge

been entirely true, the Department would

certainly never have sought to preserve

the Lassiter program, since the conveniently vague Morrow report provided an

easy way to escape responsibility for a

drastic cut in the Lassiter recommendation. The 2,200 figure offered by the Secretary of War was far more vulnerable

for a reason virtually ignored by the air

power advocates. The 2,200 aircraft authorization was premised upon the troops

available within the statutory limits on

the Army rather than upon a survey of

requirements based on the strategic and

tactical potential of the air weapon without reference to the size of the Army. By

deciding upon the number of troops and

then determining how many aircraft this

number of men could maintain, General

Staff planners made the tail wag the dog.

It was as if the Navy had decided on the

number of carriers it should have by

building enough to use up the men left

over after the destroyers and cruisers were

provided with crews.

The House and Senate debated the Air

Corps bill at length and with great care,17

but neither made extensive changes in

the committee draft except in the matter of procurement procedures.18

 One

change, however, although explained on

the floor of the House as a simple technicality, was to have far-reaching effects.

15

 House Rpt 700, 69th Cong, 1st sess, on H.R.

10827. 16

 Ibid., SW to Chairman, House Military Affairs

Com, March 2, 1926.

17

 For the principal debates see Cong Rcd, 69th

Cong, 1st sess, pp. 8750-67, 10401-03, 10486, 11982,

12254, 12268-73, as well as Senate Rpt 830 and

House Rpt 1527. For a full record of the debate,

see history of bill under H.R. 10827 in index volume

for 69th Congress, 1st session. 18

 For the changes in procurement procedures, see

below, ch. V.
CONGRESS AND THE AIR ARM 49

Since the clause authorizing 2,200 aircraft included 400 aircraft "on order,"

the House accepted without debate a request to amend the total to 1,800 aircraft,

removing all reference to those "on order" to avoid ambiguity in construction.

From the record it seems clear that the

legislators believed this adjustment introduced no vital change in the bill.19

The next ten years were to demonstrate

how mistaken they were.

In its final form, the Air Corps Act of

2 July 1926 established a five-year program authorizing the Secretary of War

to "equip and maintain a number not to

exceed 1,800 serviceable airplanes." To

maintain this level of strength the act

further authorized the Secretary of War

to replace obsolete or unserviceable aircraft from time to time, provided such

replacements did not exceed approximately 400 aircraft annually. The language of the act appeared mandatory in

specifying that the increases above the

prevailing level of strength were to be

distributed over five years with an increment of approximately one-fifth of the

total number of aircraft procured in each

year.20

Inasmuch as the first-line or standard

aircraft on hand in the Air Service just

before the passage of the act numbered

only 184 (even including all aircraft procured after the Armistice the figure rose

to but 396), the restrictive language of

the legislation appears to be anomalous.21

By insisting upon a gradual increase to

minimum strength over a five-year period, the legislators seemed to leave the

nation with its defenses below the minimum they considered necessary for years

to come. Neither economy nor a failure

to appreciate the needs of defense dictated the restrictive provisions, however.

They were deliberately inserted with the

best of intentions. Were the Air Corps

to procure the increase to full strength

all at once (the difference between the

1,800 authorized and those on hand, or

some 1,400 to 1,600 aircraft), it would

create a hump. Five years later, when

all these aircraft became obsolete at the

same time, the Air Corps would have to

replace virtually the whole force, imposing an enormous load upon an industry

vitally weakened by the lack of military

contracts in the intervening years.

The 1,800 Program in Operation

The limitation on annual replacements

to approximately 400 aircraft turned out

to be unfortunate. Given a total of 1,800

aircraft with a useful tactical life of approximately five years before becoming

obsolete or obsolescent, there should have

been 360 replacements each year just to

keep the force from obsolescence.22 This

19

 Cong Rcd, May 3, 1926, p. 8757. For evidence

that the aircraft "on order" should be in excess of

the 1,800 ceiling, see testimony of the Chief of the

Air Corps, in House Hearings on War Department

appropriation for 1928, December 29, 1926, page 501. 20

 Air Corps Act of July 2, 1926 (44 Stat 780). See

especially sec. 8.

21

 Cong Rcd, May 5, 1926, p. 8758. The figures

given are for March 1926. All aircraft in excess of

the 396 postwar items were obsolete and eight or

more years old, at best little more than junk. 22

 The 360 annual replacements are derived by

dividing 1,800 by 5, the arbitrary life figure determined by the Air Corps with the approval of the

War Department. Actually, of course, the tactical

utility of an aircraft is determined by the character

of enemy equipment; thus, an aircraft could be obsolete the day it came off the production line. The
50 BUYING AIRCRAFT

left approximately 40 aircraft, or 2.2 percent of the total strength, to replace those

aircraft dropped from the records each

year by crashes resulting in a total loss.

Since the average annual number of total

wrecks over a five-year period amounted

to 8.27 percent of the available force, the

annual loss of aircraft through crashes exceeded the number of replacements authorized over and above those procured

to replace obsolete equipment.23 On this

account alone the Air Corps could never

expect to reach the authorized strength

of 1,800 aircraft unless it reduced the accident rate to the vanishing point. Since

the ratio of accidents to flying time was

already exceptionally low, there was little

likelihood of escape in this direction from

the effects of the ceiling of 400 on replacements despite continual improvement in

the accident ratio.24

There was yet another factor intrinsically a part of the Air Corps Act that prevented attainment of the full number of

aircraft authorized. Experience revealed

that upward of 25 percent of the available

aircraft strength was normally out of commission during years of peace. Some 15

percent of the force was constantly undergoing overhaul at major repair depots while another 10 percent was often

grounded temporarily at air stations for

minor repairs or as a result of parts shortages.25

 The number of aircraft actually

available for tactical missions in an emergency was thus only approximately 75

percent of the strength annually reported

to Congress. Since emergency conditions

might reasonably be expected to increase

the repair burden, not to mention operational losses, the M-day strength of the

Air Corps was considerably lower than

it appeared to be on paper.

The number of aircraft out of action

for repairs could have been reduced

sharply by substantial increases in maintenance, labor, and expansion of depot

facilities, but this would have involved

large appropriations of a sort Congress

was reluctant to make. This situation

was accentuated by the fact that the large

number of aircraft immobilized for repairs placed an extra strain on those remaining in the field. The aircraft still

operational would then require extra

repairs, which increased the maintenance

burden in the already overworked depots.26

One possible way out of the dilemma

imposed by the restrictive legislation was

to extend the life of all aircraft through

administrative action. By keeping aircraft in an active status for more than

five years before declaring them officially

obsolete, it would be possible to increase

the number of first-line aircraft on hand

without exceeding the limitation on annual replacements. Although the dangerous implications in such a step were

readily apparent, when faced with the

budgetary limits of the early thirties the

Air Corps decided to adopt this course

in order to secure a larger force.

five-year-life figure was an administrative convenience based more on past experience with regard to

safe operation than on tactical utility, vis-a-vis a

potential enemy. 23

 ACofAC to Exec OASW, 25 Feb 32, AHO Plans

Div, 145.91-28. 24

 See, for example, Hearings on WD appropriation for fiscal year 1933, p. 995. 25

 Testimony of CofAC, in Hearings on WD appropriation for fiscal year 1938, March 1937, p. 517.

Air Corps testimony at appropriation hearings for

other years gives figures varying only slightly from

these. 26 Ibid., pp. 517-18.
CONGRESS AND THE AIR ARM 51

By arbitrarily declaring the life of all

tactical aircraft to be seven years and of

all training aircraft to be nine years before classification as obsolete, the Air

Corps was following a frugal but hazardous policy.27

 Commercial practice, as indicated by insurance write-down procedure, called for obsoletion after three

years.28

 To be sure, the technical revolution in the early thirties, with the transition from wood, wire, and fabric construction to all-metal monocoque units,

did actually lengthen the safe life span

of aircraft. Nonetheless, it is highly significant that the reported practice of the

Royal Air Force in 1937 was to write off

all tactical aircraft as obsolete after two

years.29

Experience over the years following

1926 thus clearly demonstrated that the

aircraft program set forth in the Air

Corps Act was unworkable. Even if Congress had followed the act to the letter,

providing approximately 400 replacement aircraft each year, it would never

have been possible to reach a total of

1,800 without arbitrarily extending the

life of each aircraft beyond five years.

Even then, had the 1,800 goal been

reached, only about three-quarters of

that number would actually have been

tactically available. When the five-year

program officially expired in 1931, the

air arm, with a strength of 1,476 serviceable aircraft, was not up to the minimum

contemplated in the Air Corps Act.30

Understandably enough, Air Corps officials began to urge a reopening of the

aircraft program question.

Agitation for Reconsideration

The Chief of the Air Corps cast about

for a means of relief. He first tried to

secure an interpretation of the act that

would remove the offending restrictions.

The phraseology of the act provided for

not more than 1,800 "serviceable" aircraft. By arbitrarily defining "serviceable" as exclusive of those awaiting overhaul in depots, conservatively estimated

to be 12.5 percent at all times, it was possible to maintain that the true ceiling

should be 2,058. The Judge Advocate

General accepted this interpretation and

the Attorney General subsequently

handed down an opinion reaffirming it.31

But the House Appropriations Committee felt otherwise.

In preparing budget estimates for 1933

the Air Corps went ahead on the assumption that 1,800 rather than 2,058 represented the allowable ceiling. During the

hearings that followed, an air arm spokesman did mention the fresh interpretation,

but the moment was inopportune, and

the Appropriations Committee refused

to accept the higher figure. This was

27

 Memo, CofAC for ASW, 10 Sep 37, AHO Plans

Div, 145.93-269. See also, Budget Officer to CofAC,

17 Dec 38, WFCF 1940, 112.05, and Memo, ACofAC

for Chief, Mat Div, 10 Apr 35, quoted in E. H. Spengler, Estimating Requirements for AAF Equipment,

Supplies, and Spare Parts, WFHO, 1945, p. 3, AHO

2802-2A. 28

 See L. L. Putnam, "Too Much Money or Too

Little . . .," Airway Age, XII (May 2, 1931), 484. 29

 The Economist, CXXVI (February 20, 1937), 401.

It seems clear that RAF obsoletion policy was based

on the high rate of performance change, which is to

say tactical utility, rather than upon the "safe life"

of the aircraft.

30

 Aircraft Year Book 1932, p. 76. 31

 36 Op Atty Gen 418, which mentions Army

Judge Advocate General opinion of 11 January 1930.

Abstract of former in 10 USCA sec. 292b, but Digest

of Judge Advocate General of the Army Opinions,

1914-40, inexplicably omits the latter opinion.
52 BUYING AIRCRAFT

quite understandable, for a desperate and

economy-minded Congress was under

great pressure to put immediate retrenchment ahead of potential defense regardless of the fine-spun legalisms of the Judge

Advocate General and the Attorney General.32

Failing to escape via interpretation, the

Chief of the Air Corps looked for another

way out.33 His proposed solution was a

frontal assault on the act itself. To this

end, he offered an amendment to eliminate the offending clauses. But the General Staff rejected the plan to remove what

it termed a "very wise limitation" with

the comment, of dubious logic and relevancy, that the "advancement of commercial aviation" would render less necessary

each year "the expenditure of increasing funds for replacement of Army airplanes."

 34

 Blocked in this attempt, the

Air Corps chief waited a year before turning to another line of assault. The Morrow Board five-year program was set up

only as an immediate goal in an era of

rapid development. The time had now

arrived, the air arm leader asserted, for

a complete reassessment of existing aircraft strength authorizations in the light

of the most recent developments.

After extensive studies made in conjunction with the War Plans Division

(WPD) of the General Staff, the Air Corps

submitted a program of defense requirements.35

 The planners considered such

factors as the nation's geographic situation, coast line, and critical areas, the air

power of rival states, and the increasing

vulnerability resulting from the extended

range of aircraft. Here was a genuine attempt to derive aircraft requirements

from the tactical and strategic situation

of national defense and not, as hitherto,

from some such consideration as the number of ground troops available. Moreover, the planning staff did not ignore the

all-important premise on which requirements computation existed: the air arm's

strength in peace rests upon the assumption that it will be an M-day force sufficiently strong to provide adequate cover

during the augmentation of skeletonized

units of the Army to war strength. The

Air Corps proposal visualized aircraft

needs as centering upon four major areas

—the continental United States and its

three vital outposts, Panama, Hawaii,

and the Philippines. To each of these

areas the planners assigned aircraft in

terms of the number of groups or squadrons sufficient to provide the minimum

force believed necessary.

The staff planners' allocations of aircraft by functional types provide a revealing measure of the evolving air power

concept of the period. With bombardment groups receiving a larger share of

strength than any other class, it is evident

that the Air Corps had thrown off the

shackles of close-support dogma that had

characterized air arm policy ever since

World War I. This apparent change in

air power thinking should not, however,

overshadow another and perhaps more

32

 Testimony of ASW (Air) F. T. Davison, January

15, 1932, in House Hearings on WD appropriation

for fiscal year 1933 and comments thereon by Representative Collins, pp. 1095-97, as well as testimony

of CofAC, p. 993, giving testimony similar to that in

the previous year's hearing, p. 681. See also, House

Rpt 1215, 72d Cong, 1st sess, May 5, 1932, p. 15. 33

 ACofAC to Exec OASW, 25 Feb 32, AHO Plans

Div, 145.91-28. 34

 Memo, CofS G-4 for DCofS, 5 Feb 32, AHO

Plans Div 145.91-28. 35

 ACofAC to AG, 15 Mar 33, WFCF 1940, 381.
CONGRESS AND THE AIR ARM 53

surprising aspect of the proposed program. Although the Air Corps planners,

working in conjunction with the General

Staff, supposedly based the new statement

of requirements upon a fresh reconsideration of all the elements of national defense, when the various groups and squadrons were added up in terms of aircraft,

the total amounted to approximately the

same number provided in the act of 1926.

Under the circumstances, it is difficult to

escape the suspicion that the planners

contrived their strategic requirements to

coincide with the aircraft already authorized, a case of cutting the pattern to suit

the cloth on hand.36

Section nine of the Air Corps Act had

established the office of Assistant Secretary of War for Air. So long as this office

functioned, the Air Corps enjoyed a

highly effective though informal channel

of communication to the Secretary of

War on matters of policy. When the

Roosevelt administration came to power

the Office of Assistant Secretary for Air

was not filled and many of its functions

reverted to the Chief of Staff.37 This shifting of responsibility, coinciding with the

aircraft requirements program, led the

War Department to appoint a board of

officers under the Deputy Chief of Staff,

Maj. Gen. Hugh A. Drum, to undertake

a comprehensive survey of the air arm.38

The Drum Board

The directive received by the Drum

Board in August 1933 instructed the

members to prepare plans for air operations in conjunction with the "color

plans" of the War Plans Division.39 The

board was instructed to accept the assumption that 1,800 aircraft were available for assignment. This premise the

board immediately rejected as unsound

since 1,800 aircraft not only were not

currently available but never would be

so long as a considerable percentage of

the force remained out of operation at

all times for overhaul and repairs. To

rest its study of requirements directly

upon fundamentals, the board resolved

to survey anew the whole question of

defense requirements.

The vital areas of national defense, decided the Drum Board, were the continent itself and Panama and Hawaii, but

not the Philippines, although the board

recognized that air support for the latter

would be considered, "should the national policy ever change." As an M-day

force, which would be required to defend

these vital areas until the nation mobilized, it was assumed that the peacetime

air arm should be at all times capable of

a maximum effort. Exactly what this entailed, the board set out to determine.

The Drum Board's formula for deciding upon the air strength necessary for

the nation ran somewhat as follows:

36

 Since the number of aircraft assigned to different

types of groups differed from time to time, it is impossible to compute the exact number of aircraft involved in the Air Corps plan. 37

 Although usually attributed to an economy

move, the decision not to fill the ASW (Air) office

may have come in response to the vigorous exercise

of prerogatives by the Chief of Staff, General MacArthur. 38

 Testimony of Brig Gen Andrew Moses, in Com

on Military Affairs, House, 74th Cong, 1st sess, Hearings on H.R. 7041, April 1935.

39

 This paragraph and the several that follow concerning the Drum Board are based on the records of

the board itself, including the report, exhibits, and

related papers filed in AFCF 334.7 Drum Board.

See bulky file, this reference. See also testimony of

CofAC, in Hearings on WD appropriation, for fiscal

year 1935, February 1934, p. 468.
54 BUYING AIRCRAFT

Naval aviation should be equal to or

greater than any anticipated enemy force.

Air Corps units in the possessions should

be "strong enough to meet a sudden

emergency" and maintain themselves until reinforced. Observation or Army cooperation aircraft should exist in numbers sufficient to equip all units to be

mobilized on M-day. Finally, there

should be a General Headquarters

(GHQ) Air Force "of sufficient strength

and composition" to "insure superiority

in theaters where important air operations are contemplated." The GHQ Air

Force was conceived as a self-contained

organization capable of strategic missions

against the enemy's economy as well as

operations in direct support of the ground

arms.40

The Drum Board's analysis seemed to

raise as many questions as it answered.

What theaters of operations and what

potential enemies did the board have in

mind? The maximum coalition visualized by the Drum study consisted of the

British Empire in alliance with Japan, a

combination selected not on ideological

grounds but only to envision the worst

possible military situation. Another question raised by the Drum study concerned

the curious contrast between the formula

for aircraft strength suggested for the

Navy's air arm and that proposed for the

Air Corps. The Navy formula was simple and clear-cut, growing easily out of

the slogan "second to none." It was tangible, capable of reduction to relatively

exact numbers. The Air Corps formula,

on the other hand, rested upon a vague

series of ill-defined variables that made

it difficult to derive a number so objective and so matter of fact that it could

not be easily challenged by a congressional committee.

The Drum Board report recommended

that the Air Corps be brought up to full

strength with 1,800 aircraft, and that it

not go beyond this figure if additional

aircraft could be procured only at the

expense of the other arms and services.

However, the board did amend its conclusions in two important respects. Recognizing that the number of aircraft out

for normal overhaul prevented the Air

Corps from ever operating at full

strength, the board favored the addition

of an overhaul factor to the strength authorized by statute. At 12.5 percent of

1,800, or 225 aircraft, this would bring

the actual authorization to 2,025. The

figure was still further increased to 2,320

by the board's subsequent recommendation of a 25 percent "war reserve" for

certain tactical units that were expected

to continue in operation during an emergency until reinforced by newly mobilized units.41

When the Drum report was filed in its

final form late in 1933, the War Department had a new statement of requirements supposedly based upon the very latest political and diplomatic situation. In

precise figures the report called for 2,320

aircraft, only a very few more than the

number the Secretary of War had asked

for when submitting a program to Con- 40

 Wesley Frank Craven and James Lea Cate, eds.,

"The Army Air Forces in World War II," vol. I,

Plans and Early Operations, January 1939 to August

1942 (Chicago: The University of Chicago Press,

1948), pp. 45ff.

41

 Testimony of CofAC, in Hearings on WD appropriation for fiscal year 1935, February 1934, pp.

472-75.
CONGRESS AND THE AIR ARM 55

gress before the passage of the 1926 legislation. Moreover, the 2,320 figure did

not really constitute an increase but

rather a readjustment of strength to ensure a minimum of 1,800 tactically available aircraft at all times, conforming to

the original intent of the Air Corps Act

and the five-year program. Once again,

the evidence strongly suggests that the

strategic requirements were drawn to fit

the available force.

The increase in the number of aircraft

recommended by the Drum Board thus

turned out to be no increase at all, only

a proposal to bring the air arm up to the

level authorized by Congress nine years

earlier. And even this concession, the

Chief of the Air Corps argued, was quite

inadequate since the 12.5-percent overhaul factor allowed fell short of the 15-

percent factor actually experienced in the

field, to say nothing of aircraft inoperable while grounded for station repair

and because of local parts shortages.42

Nonetheless, even while grumbling at the

report's shortcomings, Air Corps officers

went ahead and planned procurement

for the next fiscal year on the basis of

the augmented program.43 Whether War

Department officials believed this augmentation was merely a clarification of

the 1926 act requiring no new legislation

or expected Congress to pass a new act

to authorize the greater strength is not

clear. The latter alternative seems unlikely since the Drum Board report was

classified as secret and filed away, its existence unknown to Congress.

The 2,320 aircraft program was not destined to remain buried in General Staff

files for long, however. Once again the

air arm became the subject of political

controversy involving investigations that

dragged out the War Department's linen

for public washing. In the course of the

investigations during 1934, War Department officials revealed the existence of

the Drum report in response to a congressional request for information, but

the details of the 2,320 program were not

readily available to members of Congress

until nearly a year later when published,

and then only in part, in the report of a

board headed by Newton D. Baker, a former Secretary of War. This long delay

in bringing the new program before Congress antagonized the chairman of the

House Military Affairs Committee and

led him to suspect the General Staff of

seeking to stifle air arm growth.44 It was

just such suspicions that placed congressmen in the mood to launch an investigation of the air arm. The airmail scandal

provided Congress with a reason, and

soon not one but several investigations

were to probe the air arm.45

The Baker Board and the

Howell Commission

When it became evident that the Air

Corps would be investigated by a number of congressional groups, each submitting different and perhaps conflicting

42

 Ibid., p. 475. 43

 Acting Exec OCAC to Chief, Mat Div, 14 Jun 34,

and 1st Ind, Chief, Mat Div, to CofAC, 27 Jun 34,

WFCF 334.7 (1937).

44

 Comments of Representative J. J. McSwain,

Chairman, Military Affairs Com, House, 74th Cong,

1st sess, Hearings on H.R. 7041, April 1935, pp. 127,

129-30. 45

 During the early thirties the Black, Nye, and

Rogers investigations, to name but the more outstanding, all probed Air Corps policies at length.
56 BUYING AIRCRAFT

recommendations, the Secretary of War

decided to act. Following the traditional

pattern of parrying congressional investigators with Executive appointees, the

Secretary beat Congress to the draw in

April 1934 by establishing a board under

chairmanship of former Secretary of War

Baker to consider the Air Corps and national defense in the broadest context.

The board followed these instructions

and submitted a report of great importance to the Air Corps in many phases of

its operations. Here only the recommendations concerning aircraft strength are

pertinent.46

Inasmuch as General Drum served as

a member of the Baker Board, it is no

surprise to find that the new board accepted the recommendations of the earlier Drum Board without challenge. "As

a first objective," the Baker report asked

for 2,320 aircraft, "the minimum considered necessary to meet . . . peace-time

Army requirements." While recognizing

that further studies might reveal the need

for increases beyond the 2,320 figure, the

Baker Board followed the Drum Board in

declaring that such increases were not to

be accomplished at the expense of the rest

of the Military Establishment.47 Since a

majority of the Baker Board were men

who, on the record, were not enthusiastic advocates of air power, this relatively

modest recommendation for increase in

strength could scarcely have been unexpected by the Air Corps, but the air power

enthusiasts had another string to their

bow.48

Under the terms of the Air Mail Act

passed in June 1934, the President was

authorized to appoint a committee to

study the whole question of aviation in

the United States. He did so early in

July. Officially designated the Federal

Aviation Commission, the group was

popularly known as the Howell Commission after its chairman, Clark Howell,

distinguished editor of the Atlanta Constitution and a longtime Democratic National Committeeman.49

 Those who advocated radical increases in air strength

may have pinned their hopes upon this

body, for the Howell Commission began

its five months of deliberation just two

weeks before the Baker Board made its

final report. They were doomed to disappointment. Significant as many of the

Howell recommendations may have been,

insofar as they touched on air strength,

the commission accepted without question the findings presented by the Drum

Board and reiterated by the Baker Board.

The proposed 2,320 program was accepted as a "working basis," qualified

only by the proviso that changing world

conditions might again reopen the question.50

Had it wished to do so, the Howell

Commission may not have been able to

differ with the Drum and Baker conclusions. Covering the whole field of aviation and restricted as to funds and time,

46

 See below, for example, p. 159, n. 18. 47

 Baker Board Rpt, pp. 31, 67. 48

 Of the five officers on the Baker Board, only one

was an air officer. Of the six civilians, all supposedly

chosen for their professional association with air

matters, two, Edgar H. Gorrell and Baker, were

clearly on the record as seeing the air power problem through General Staff eyes. This would appear

to leave the board six to five in favor of a conservative solution for the air arm question. 49

 S Doc 15, 74th Cong, 1st sess, Rpt of the Federal

Aviation Comm, January 22, 1935. 50

 Ibid., p. 121.
CONGRESS AND THE AIR ARM 57

the commission almost necessarily had to

decide not to duplicate the work of the

earlier board. Moreover, the General

Staff made it quite clear that the commission would do well not to meddle with

the Baker findings. A request for military witnesses to appear before the commission was brushed off with the comment that the officers were too busy and

would remain so for one or two months.

And, unless the commission was willing

to accept the Baker Board report as it

stood, the Secretary of War declared that

it would be necessary to present in closed

session "considerations that must govern

those responsible for the national defense

but which cannot be made public."

 51

Confronted with broad hints of War Department hostility toward reconsideration of the air power question, the

Howell Commission skirted the issue by

accepting the Baker report strength figures.

Even if the Howell group had been

aggressively determined to explore the

question of air arm strength from fresh

evidence, there is good reason to doubt

that much would have been accomplished

in gathering advice from officers in the

branch involved. While the commission

hearings were taking place, the War Plans

Division circularized instructions to the

entire Army for the guidance of all called

to testify. Officers were directed to familiarize themselves with "approved War

Department policy on each of the subjects

discussed" and to "conform to these principles" when giving testimony. If called

upon for individual, unofficial opinions,

officers were authorized to express their

private views provided they were clearly

identified as such.52 Experience in numerous earlier public hearings had effectively demonstrated that most officers

would be extremely reluctant to express

privately held views that were markedly

at variance with the positions officially

held by their superiors, even when specifically authorized to do so.53

The frontal approach to the ear of Congress was closed or at least made dangerous, and individual officers would not

attempt flanking tactics by carrying their

views and proposals to congressmen privately. War Department directives had

also covered the flanks:

"No officer will officially, or otherwise,

transmit to any person or agency outside of the War Department, other than

through the prescribed channels, any recommendations relative to the introduction, amendment or enactment of military legislation general in scope, or any

information intended to be used in the

formulation or consideration of such legislation . . . unless specifically authorized

by the Secretary of War."

 54

 Nor was this

regulation a dead letter. When the Chief

of Staff, General Craig, suspected Air

Corps officers of political activity, he

urged the Chief of the Air Corps to locate

the offenders. The latter admonished

his officers, saying, "Expressions of per51

 SW to Federal Aviation Comm, 31 Aug 34,

mimeograph copy, WFCF 1935, 334.8.

52

 Memo, WPD for All General Staff Divs, Arms,

Services, etc., 11 Sep 34, WFCF 1935, 334.8. 53

 Support for this contention is abundantly clear

throughout the Lampert and Morrow Hearings.

Lampert, pp. 1682-83, 1574-76, Morrow, pp. 569-70,

593-633, especially pp. 617-18. 54

 TAG to Chiefs of Arms, Services, et al., 20 Feb

31, quoted in full in Appendix XII of MS, The

Army and Congress, 1949, a study of Legislative and

Liaison Div SSUSA by Lt Col R. E. Jackson, Jr. See

also, G-1 to CofS, 13 Jul 38.
58 BUYING AIRCRAFT

sonal opinion which are at variance with

War Department plans and policies,

when stated to persons outside the military service, may result in building up

opposition within Congress to constructive measures or appropriations recommended by the responsible authorities."

 55

 Only the official view must reach

Congress.

While on the one hand War Department regulations and directives of one

sort or another sought to ensure that no

opinions of contradictory character

reached Congress from individual officers, the Department was elsewhere engaged in setting up machinery to facilitate the flow of official views toward the

Hill. Although it was common practice

for the War Department to maintain

liaison officers with the Senate and House

committees, in the early thirties none

served with the House because of a temporary dispute over jurisdiction. Possibly as a way round this dispute, the Chief

of Staff's office had designated several officers to "cultivate" congressmen in order

to have contacts well placed to advise on

the merits or faults of pending legislation. A number of officers were so employed "with excellent results."

 56

A free flow of ideas from the War Department to Congress held high promise

of mutual advantage. But in facilitating

the flow of official views while inhibiting

if not preventing the expression of ideas

and opinions from individual officers, the

War Department may have deprived Congress of free access to the fullest range of

data available.57

The Baker and Howell groups accepted the Drum report plan for 2,320

aircraft program as it stood. Both rubberstamped the Drum program without any

pretense of going behind the staff studies

upon which the program rested. For this

reason, criticisms of the proposed program might equally well be directed at

the investigators' lack of initiative as at

War Department efforts to control the

evidence presented to them. However,

the Baker and Howell groups were of

significance in the question of air arm

strength. Their reports were most useful. They brought the Drum study out

of its secret classification in War Department files and set up the 2,320 aircraft

program as a target figure for public discussion, an action without which authorizing legislation was scarcely expected

from Congress.

A New Target: 2,320

A few months after the Baker Board

submitted its report in July 1934, the

chairman of the House Subcommittee on

War Department Appropriations wrote

the Secretary of War asking what had

55

 Actg CofAC to All Concerned [throughout Air

Corps], 6 Nov 35, AFCF 321.9A Organization. See

also buck slip, O.W. [CofAC, Maj Gen Oscar Westover] to Gen Craig, 26 May 36, same file. 56

 See MS, Evolution of the Legislative Branch

(Legislative and Liaison Br, OCofS, photostat copy

covering period 1902-37).

57

 That many congressmen were willing and even

anxious to hear individual officers express views at

variance with the official War Department position

is indicated by remarks sprinkled throughout the

budget hearings and verbatim transcripts of the investigations mentioned above. For a formal statement see W. F. James, Chairman, House Military

Affairs Com, lecture before Army War College, 16

Jun 27, WF, CADO, Aco 3/75. Particularly revealing are the concluding remarks of the commandant

of the college who begged the congressman to ask

questions at hearings: "Information often never gets

to Congress unless Congress pulls it out of us."
CONGRESS AND THE AIR ARM 59

been done by administrative action to

fulfill the board's recommendations and

what legislative action would be required.58

 In addition to demonstrating

the initiative and interest of Congress,

this request reflected the importance and

prestige attached by members of Congress to such civilian or civilian-influenced bodies as the Baker and Howell

groups. This respect for special civilian

boards was by no means an isolated case.59

When considering the question of aircraft strength, some congressmen not only

showed a willingness to accept the recommendations of the boards but to favor

even more generous increases in strength.

Unfortunately for the Air Corps, the

first bills introduced in Congress to implement the increase proposed by the

Baker and Howell groups died in committee. Two factors may have contributed to this fate. The first session of the

Seventy-fourth Congress—January to August 1935—was considerably exercised

over alleged profiteering in aircraft contracts, and on this score alone the time

was scarcely propitious for special legislation to augment the air arm. Moreover,

one of the more extensively considered

bills, calling for 4,834 Army aircraft, coupled the increase with a controversial plan

to establish a Department of Air.60 The

proposed increase dropped from sight

when the more elaborate departmental

proposition did not emerge from committee.

Balked in his first attempt to implement the proposed increase in air

strength, the chairman of the House

Military Affairs Committee, Representative J. J. McSwain of South Carolina,

dropped another bill into the congressional hopper soon after the next session

began in 1936. This time he tried a new

line of attack. The Air Corps Act of

1926, he said, authorized 1,800 aircraft

for the Army and 1,000 for the Navy, a

ratio of 9 to 5. Since that time Congress

had increased the Navy's authorization to

2,190. If the original ratio were to be

preserved, then the Air Corps should

have 4,000 aircraft.61 Representative

McSwain justified this 40-percent increase

over the 2,320 figure recommended in the

Baker report by pointing out that progress had been rapid in aviation since the

Baker Board convened, and some European powers were reputed to have between 5,000 and 10,000 military aircraft.62

 The House passed the McSwain

bill calling for 4,000 aircraft in five years

and sent it to the Senate, where the measure was referred to the War Department

for comment.

In reply, the Secretary of War wrote

that the 2,320 aircraft favored by the

Drum and Baker Boards constituted the

minimum safe peacetime strength. Since

58

 Chairman, House Subcom on WD Appropriation, to SW, December 7, 1934, cited in House Hearings on WD appropriation bill for fiscal year 1936,

p. 49. 59

 See, for example, remarks of Representative

Dockweiler, a member of the War Department appropriation subcommittee, who urged compliance

with the Baker Board recommendations, erroneously

describing the board as "entirely civilian," hence not

"militaristic," Cong Rcd, February 11, 1936, p. 1819. 60

 H.R. 7041, introduced by Representative McSwain, Chairman, Com on Military Affairs, House.

Text in full in Hearings on the bill, 74th Cong, 1st

sess, April 1935. 61

 Cong Rcd, February 13, 1936, p. 1992. The McSwain bill was H.R. 11140. 62

 House Rpt 2230, 74th Cong, 2d sess, March 24,

1936, p. 2230.
60 BUYING AIRCRAFT

CHAIRMAN MCSWAIN presiding at a meeting of House of Representatives Committee on

Military Affairs, 1935.

the world situation was growing worse,

the need for increases over this figure was

''more imminent than remote." Therefore the War Department felt that the

proposed ceiling of 4,000 aircraft would

not be excessive; a flexible, open-end, unlimited authorization might even be preferable. Nevertheless, despite this willingness to accept increases in air strength,

the Secretary informed the Senate that

the War Department could not favor the

McSwain bill since it was "not in accord

with the financial program of the President." The Bureau of the Budget, speaking for the Chief Executive, had written

the War Department that only 2,320 aircraft, without limit as to time, would be

approved by the President.63

Under a long-standing rule of the Bureau of the Budget, the various department heads were forbidden to foster legislation involving expenditure without

first securing Presidential approval.64

This common sense ruling sought to protect the Executive budget by preventing

63

 SW to Senator Morris Sheppard, Chairman, Senate Military Affairs Com, May 26, 1936, quoted in

full in Senate Rpt 2131, 74th Cong, 2d sess, May 12,

1936. 64

 Bureau of the Budget Circular No. 49, 19 Dec

21, quoted in full in Willoughby, National Budget

System, pp. 65-66. Reissued periodically in the years

following 1921.
CONGRESS AND THE AIR ARM 61

end-run Treasury raids, un-co-ordinated

legislation backed by heads of departments to the detriment of the comprehensive, integrated Presidential fiscal program. As a financial measure the system

was undoubtedly sound. Here, however,

fiscal considerations obtruded upon professional military opinion. Because it

was not immediately expedient from a

fiscal point of view, the President was rejecting a bill designed to provide longterm authorization of aircraft for national

defense. The consequences of this circumstance were in all probability unrecognized at the time, but they were serious.

Two alternatives confronted the Senate Military Affairs Committee. One

called for 4,000 aircraft in five years; the

other called for 2,320 aircraft without

time limit. The committee settled the

matter by reporting out a bill authorizing

2,320 "immediately."

 65

 This bill passed

the Senate. When the Senate and House

conferees met to resolve their separate

bills, they compromised on 2,320 aircraft,

making no mention of the time limit. In

this form the bill passed both houses and

became law.66

The 2,320 Act

The bills reported out after detailed

consideration by the House and Senate

Military Affairs Committees both contained careful provision for a time limit.

Without such a time specification the authorization might mean virtually nothing. Experience under the Air Corps

Act of 1926 had shown that even where

a time clause had been inserted, the funds

might not be forthcoming. Where the

time factor was omitted there would be

still less leverage, less positive assertion

of "the will of Congress," with which to

persuade the Bureau of the Budget and

the appropriations committees of the necessity to provide funds to procure the

full number of aircraft authorized. Despite this obvious record of past experience, the bills' conferees dropped the time

clauses in their efforts to reach an acceptable compromise. Legislative mechanics, the hasty compromise of the conferees, intruded upon the clear intent of

the bills as originally framed.

The 2,320 act, as approved by the President on 24 June 1936, authorized augmentation in the strength of the Air

Corps above the 1,800 figure established

in 1926. The language of the act, subsequently a matter of dispute, stipulated

that the increase authorized should not

exceed 2,320 aircraft.67 This figure remained the official ceiling on the size of

the air arm until 1939, when the rush of

events once more forced a reopening of

the question.

It is difficult to determine whether

Congress established a peacetime air

strength in the 2,320 ceiling that the

War Department considered adequate.

The Secretary of War flatly asserted on

the public record in 1937 that 2,320 aircraft were "sufficient for our needs." At

65 Senate Rpt 2131, 74th Cong, 2d sess, May 12,

1936. 66

 House Rpt 2994, 74th Cong, 2d sess, June 15,

1936, and floor discussion, Cong Rcd, June 19, 1936,

p. 10217.

67

 49 Stat 755, June 24, 1936. Although an authorization of 2,320 aircraft in lieu of the 1,800 prescribed

in the Air Corps Act of 1926 was the clear intent of

the 1936 statute, the language used in the act actually allows for an alternative interpretation in which

the 2,320 aircraft are considered to be in addition

to the 1,800 already authorized.
62 BUYING AIRCRAFT

the same time he admitted that peacetime strength should approximate "rather

closely" the requirements for war.68 A

year later the Chief of Staff called the

2,320 program "adequate," although subject to revision as world conditions

changed.69 At the same time, when a

congressman asked the Chief of the Air

Corps if the 2,320 program would provide "all justifiable advance preparation"

for a defensive war, the Chief of the Air

Corps replied that the program offered

"a proper minimum force."

 70

 Here were

public assurances from highly placed officials on the adequacy of the 2,320 program. These assurances are hard to reconcile with statements made elsewhere.

There is reason to believe that the

Chief of the Air Corps described the

Baker Board's 2,320 program as "a proper

minimum force" only in deference to the

budget program and not from conviction.

Three years earlier, soon after the Baker

report appeared, the Air Corps had officially protested to the General Staff that

the 2,320 program was inadequate.71 Certainly nothing had occurred on the international scene after that date to reduce

the requirement. In a similar vein, there

appears to be a discrepancy in the public

statements coming from the Office of the

Secretary of War. In his 1937 report the

Secretary declared that the 2,320 aircraft

program was not only sufficient but approximately equal to war needs. Yet only

about a year earlier, his predecessor had

officially informed Congress that the need

for increases over 2,320 was "more imminent than remote," saying that he would

have urged an authorization of 4,000 or

more aircraft were it not for budgetary

curbs.72 If Congress at times seemed confused in handling military legislation

during the between-war decades, the military authorities were certainly partly responsible.

An Evaluation

The question of how many aircraft

should be authorized for national defense

resolves itself into two other questions:

Who shall determine how many? How

shall that figure be determined? To the

first the answer is clear. The Constitution gives Congress the job. But inevitably Congress must rely upon the professionals, the military experts, for detailed

advice.73 The military experts were quite

willing to give advice, declaring that it

was not a difficult problem for a trained

general staff to determine the force

needed to ensure success.74 Since Congress showed itself after 1933 generally

anxious to give the air arm adequate and

even generous support, any inadequacies

68

 Annual Report of the Secretary of War, 1937,

p. 5. 69

 Testimony at Hearings on WD appropriation

for fiscal year 1939, February 1938, pp. 10, 34. 70

 Ibid., p. 428. 71

 CofAC to TAG, 1 Nov 34, AFCF 335.5 Baker.

72

 See Senate Rpt 2131, 74th Cong, 2d sess, May 12,

1936. 73

 Far from seeking to take such decisions from

Congress, responsible officers urged Congress to take

an emphatic stand on such questions as over-all

strength. See, for example, testimony of General

MacArthur at Senate Hearings on WD appropriation for fiscal year 1936, 27 Feb 35, pp. 4-6. While

willing to give advice, military officials were usually

anxious to have Congress make the decisions. In

the absence of clear and emphatic policy decisions,

legislation by appropriation became unavoidable.

See also, Elias Huzar, "Congress and the Army: Appropriations," American Political Science Review,

XXXVII (August 1943), 673. 74

 Baker Board Rpt, p. 11. See also, SW to Federal Aviation Comm, 3 Aug 34, WFCF 1935, 334.8.
CONGRESS AND THE AIR ARM 63

in the strength authorized would appear

to be the responsibility of the Air Corps

and the War Department rather than of

Congress.

The evidence available indicates that

the failure of the air arm to present its

best case to Congress arose in part from

the position of the Air Corps within the

War Department. While the General

Staff actually did treat the Air Corps as

a favored child, it was repeatedly asserted

that advances in air strength were desirable but not advisable if such gains could

only be made at the expense of the other

arms and services, which always lingered

perilously near and sometimes below the

starvation level. Thus the revision of

air arm needs reaching Congress was always tempered by the thoroughly understandable desire of the General Staff to

ensure equitable recognition for all its

arms and services. Since the Constitution gives Congress the task of deciding

on questions of military strength and

Congress relies on the military experts,

it would appear to be a clear obligation

of Congress to ensure for itself the fullest

presentation of the pleas of every claimant agency.75

In the final analysis it is clear that Congress, the General Staff, and the Air Corps,

not to mention the President and the Bureau of the Budget, must share the responsibility for determining the air

strength of the nation. In one way or another all must bear some measure of responsibility for the size of the air arm

actually on hand when the nation finally

entered World War II. The subsequent

efforts of the politicians and of the officers

each to transfer this responsibility to the

other were entirely unjustified as the record clearly shows. But the issue of who

should determine air strength was only

the first half of the problem. Just how

the necessary number of aircraft should

be determined posed an equally vexing

problem.

Authorizations, Appropriations,

and Aircraft

If air power advocates were disappointed with the number of aircraft authorized by Congress during the years

between wars, they were even less satisfied with the number they actually received. That the funds appropriated were

never sufficient to bring the air arm up

to authorized strength is immediately

evident from the record. Just why this

was the case is somewhat more difficult

to perceive. For this reason, an analysis

of congressional appropriations for aircraft in the twenties and thirties may be

useful.

Air Strength in the Booming Twenties

After the confusion of the early twenties, the Air Corps Act of 1926 promised

to usher in a new and orderly era by authorizing a minimum force of 1,800 aircraft to be acquired in five annual increments beginning in 1926. Since the act

was passed in July, after the current fiscal

year had begun, a supplemental appropriation was required to finance procurement of the first increment. The act itself actually called for a supplemental es75

 Some congressmen saw the issue clearly and submitted bills for a separate air force as the only remedy. However, the separate air force question is so

tangled with other issues and motives that it is impossible to single out any one bill as an effort primarily intended to exploit air power to the utmost.
64 BUYING AIRCRAFT

timate, but Congress adjourned without

appropriating the necessary funds. Thus

congressional inaction delayed the beginning of the five-year program by a full

twelve months. Furthermore when air

officers subsequently presented their estimates for fiscal year 1928, they asked for

94 fewer aircraft than the number originally specified for the first increment of

the program. Under congressional prodding, the airmen revealed that the Bureau

of the Budget had compelled this reduction.

Still other factors tended to subvert the

intent of Congress. The sudden expansion imposed by the Air Corps Act of

1926 disrupted the normal operation of

the air arm. An increase in the total

number of aircraft involved a commensurate increase in trained personnel. To

secure trained crews, the Air Corps had

to break up tactical units in order to find

men to run its expanded training schools.

This created a greater demand for training aircraft and a temporarily diminished

requirement for tactical types. For this

reason, when the Bureau of the Budget

imposed limitations on the air arm estimates it was the tactical aircraft that suffered. From the 94 aircraft in the first

increment selected for elimination by Air

Corps officers, 65 were bombers and 20

were attack aircraft.76

When the Air Corps presented estimates for the second increment of the

five-year program in the budget for fiscal

year 1929, Congress appeared to be in a

mood to deal generously. The House

Appropriations Committee considered

the program one of the primary objectives of the Military Establishment and

drafted a bill to provide more than

enough aircraft to complete the second

increment. This supposedly more-thanadequate treatment was deceptive. The

45 aircraft over and above the second increment quota did not make up the deficiency suffered during the previous year.

Moreover, the second increment represented quantity and not quality. To keep

the tax bill low and still meet the program target in terms of numbers of aircraft, the appropriations committeemen

decided to procure some 27 fewer bombers than the original program called for,

substituting in their stead a larger number of less expensive units, including 150

observation aircraft of a design already

obsolescent.77

Justification for the procurement of

obsolescent aircraft rested on a bald appeal to economy and nothing more. The

Air Corps had on hand several thousand

Liberty engines that could be used in conjunction with the obsolescent observation airplanes. To refurbish each of

these ten-year-old power plants required

an expenditure of but $700, whereas each

new engine purchased would cost approximately $7,000. War Department

spokesmen made it abundantly clear that

they considered procurement of less expensive and obsolescent aircraft types a

dubious expedient at best, but the congressmen persisted in their course.78

Even so, as a general rule Congress

treated the air arm as a favored child

76

 House Hearings on WD appropriation for 1928,

December 29, 1926, pp. 498, 506.

77

 House Rpt 497, 70th Cong, 1st sess, January 31,

1928, pp. 6-13. 78

 Ibid. See also, testimony of ASW (Air) Davison,

January 6, 1928, House Hearings on WD appropriation for 1929, pp. 449, 464.
CONGRESS AND THE AIR ARM 65

among the arms and services.79 Favored

or not, when the boom years ended, the

Air Corps had not yet reached the minimum strength in aircraft authorized by

Congress in the summer of 1926. If the

boom years failed to build up the nation's air defense, the depression years

were to prove little more successful.

Air Strength in the Depression Years

Even when the depression led to a

clamor for economy in federal expenditures, congressmen continued to speak

favorably of strengthening the nation's

air defense. But speaking favorably

about the aircraft program and appropriating money for it were two entirely

different propositions. Thus in January

1930, when reporting out the War Department appropriation bill, the House

committee proudly noted that the measure provided funds for the full fourth

increment of the five-year program. As

had been so frequently the case, the "full

increment" was achieved only by resorting to a maldistribution of types. While

the total number of aircraft procured was

up to schedule, there were serious shortages among the combat types specified in

the program.

The Appropriations Committee tried

to avoid the onus of providing less than

the program called for by undermining

the very premise of the program itself:

The Five Year Program is not a hard fast

schedule which must be adhered to rigidly.

It is nothing more than an authorization . . .,

subject, of course, to considerations and

eventualities that could not be foreseen

when the program was adopted. It would

be a mistake to expect or require strict ad- herence to a procurement program for a

product so unstable that obsolescence oc- curs between order and delivery dates. Pro- curements are so nearly in accord with the

program that there is no room for complaint.80

The same committee that declared authorizations were little more than suggestions to be accepted or ignored at will

had only a year before asserted precisely

the contrary. To justify a heavy appropriation covering aircraft procurement to

meet the authorized program, the committee had then argued that the expenditures could not be avoided "without

disregarding the law."

 81

Something of the contradiction inherent in reporting out a bill providing for

a "full increment" and then admitting

that the aircraft to be procured were not

the proper types was repeated in 1931.

The House Appropriations Committee

reported a measure that provided for the

last increment of the five-year program,

bringing it nearly to the verge of completion with the number of aircraft on

hand and on order falling only 66 short

of the authorized goal of 1,800 units.82

But the committee's report did not mention that the final increment finishing

the five-year program was a full year

after the originally contemplated terminal date. When the five-year program

was formulated in 1926, it was the clear

79

 For examples of Senate and House efforts to

make up program deficiencies, see Senate Rpt 381,

70th Cong, 1st sess, February 24, 1928; House Rpt

850, 70th Cong, 1st sess, March 7, 1928; Senate Rpt

1565, 70th Cong, 2d sess, January 28, 1929.

80

 House Rpt 97, 71st Cong, 2d sess, January 6,

1930, pp. 13-14. 81

 House Rpt 1991, 70th Cong, 2d sess, January 3,

1929, p. 3. 82

 House Rpt 2179, 71st Cong, 3d sess, January 5,

1931, pp. 3. 12-13.
66 BUYING AIRCRAFT

intent of all that the question should be

thrown open for reconsideration and revision after the five years had elapsed.

The five years slipped by, but Congress

did not attempt to determine anew

whether the authorized ceiling of 1,800

aircraft was adequate.

There was a second discrepancy in the

committee's report on the appropriation

measure for fiscal year 1932. By suggesting that the five-year program would be

nearly finished in 1932, since aircraft "on

order and on hand" would total almost

1,800, the committee denied the whole

conception of the program as it was understood in 1926. The original program

set a target of 2,200 aircraft of which 400

were to be "on order." In the money

bill for fiscal year 1932 this was reduced

to 1,800 exclusive of those on order, and

was interpreted to mean the program was

finished when the 1,800 total included

those on order.

By the winter of 1933-34, at the very

bottom of the depression, the pressure

for economy led Congress to abandon all

attempts at immediate completion of the

five-year program. The evident condition of the Treasury took precedence

over the potential requirements for national defense. Although the congressmen had been continually reasserting

their desire to favor the aircraft program,

the dictates of economy proved more potent.83

 As a consequence, the rate of attrition exceeded the rate of replacement.

Where the Air Corps planned to procure

370 aircraft for fiscal year 1934, economy

cuts actually left them only 17 units. In

the face of such crippling reductions, the

Chief of Staff, General MacArthur, appeared before an Appropriations Subcommittee to protest that the nation's

defense had been dangerously impaired.

He advocated appropriations to complete

the five-year program without delay.84

General MacArthur was only reiterating what War Department spokesmen had

said all along: the 1,800 program was a

minimum necessity. Cuts below authorized strength not only resulted in fewer

aircraft on hand but hurt the nation's

future air defense as well, for a reduction

in training aircraft during the depression

resulted in a smaller reserve of trained

men from which to expand in an emergency. Even if a miracle of mass production should provide more than enough

aircraft in a future crisis, there would be

great difficulty in expanding the training

program fast enough from the minute

resources available as a result of the depression cutback in aircraft.85

 Moreover, a failure to procure the program

quota in any one year could not be made

up by increased procurement the following year because this would result in too

many aircraft becoming obsolete at one

time. Although War Department officials were fully aware of this situation

from the unhappy experience of the early

twenties, they explained the matter to

Congress only occasionally and rather

casually.86

The several years of retrenchment in

the aircraft program caused the nation's

83

 House Rpt 1215, 72d Cong, 1st sess, May 5, 1932,

pp. 2-4, 15n; House Rpt 1855, 72d Cong, 2d sess,

January 12, 1933, p. 14.

84

 Testimony in House Hearings on WD appropriation for 1935, January 25, 1934, pp. 12-18. 85

 Annual rpt of ASW Davison, 1932, pp. 40-41. 86

 See, for example, testimony of CofAC Westover,

in House Hearings on WD appropriation for 1937,

December 30, 1935, p. 307.
CONGRESS AND THE AIR ARM 67

air arm to fall far below authorized

strength. For the five years ending in

June 1932, the Air Corps procured an

average of 418 aircraft a year, just about

all the aircraft allowed within the letter

of the Air Corps Act, which restricted

annual procurement to "approximately

400." During the next four-year period

ending June 1936, the Air Corps procured an average of only 132 aircraft a

year. Thus by the beginning of 1937, at

a time when Congress had already raised

the number of units authorized from

1,800 to 2,320, the Air Corps was 1,247

aircraft under authorized strength.87

Relief Funds for the Air Arm

There was a very substantial appeal to

congressmen in the idea of using relief

money for military purposes. Relief appropriations were popular with great

numbers of voters, whereas large sums

earmarked for new aircraft nearly always

evoked the charge of militarism, at least

from a vociferous minority. And in early

1934 the Air Corps needed assistance desperately. Of more than $8,000,000 appropriated for new aircraft in that fiscal

year, all but about $1,500,000 was held

back by Executive action for reasons of

economy. By the same token, about half

the appropriation for maintenance and

operations was withheld, reducing the

Air Corps to a limping pace. In the face

of this situation the War Department applied to the Public Works Administration for $39,000,000 to procure new aircraft, receiving $7,500,000.88

 Although

this more than replaced the amount of

the 1934 appropriation for new aircraft

that the President had impounded as an

economy measure, it did not actually operate to restore the full program. Even

a generous grant of relief money could

not restore the aircraft program to the

position it would have enjoyed had the

original appropriation not been impounded. There were delays in securing the relief allotment, each of which

delayed the signing of aircraft contracts,

enlarged the gap between procurements,

fostered the tendency of humping, and

in general disrupted the efficient execution of the program by breaking the essential cycle of annual procurement and

obsoletion, which ideally should be

spread evenly across the years.

Relief money, air arm officials concluded, was no substitute for regular annual appropriations. When a congressman protested that the reluctance of the

Air Corps to apply for relief funds did not

sound logical in the light of the prevailing shortages in the aircraft program, the

Chief of the Air Corps explained just why

relief funds were so unworkable. Those

who doled out relief money attached all

sorts of conditions to its use. It must be

spent within a stated period, it must be

distributed over a certain geographic

area, and it must ensure jobs for a large

number of people in a relatively short

time. Obviously, the requirements of

procurement by competitive bidding precluded the possibility of following the

87

 House Hearings on WD appropriation for 1938,

March 25, 1937, pp. 516-17. The shortage indicated

includes 742 aircraft on order but not on hand.

88

 Testimony of General MacArthur in House

Hearings on WD appropriation for 1935, January

25, 1934, p. 24; Senate Hearings, March 12, 1934,

pp. 33-34. See also, House Rpt 869, 73d Cong, 2d

sess, March 5, 1934, p. 3.
68 BUYING AIRCRAFT

relief administrators' stipulations. If contracts were to be handed out on the basis

of relief needs rather than upon demonstrable superior performance, the air arm

could scarcely avoid procuring inferior

aircraft. The Air Corps could easily use

a hundred million in relief funds, provided it was not tied up with "a lot of

strings."

 89

The Air Corps did not even request

relief funds during fiscal year 1936, although large sums were available for

military use and continued to be available through fiscal year 1940.90

 The

House Appropriations Committee joined

with Air Corps officials in condemning

the use of relief funds for military purposes—but for very different reasons. Relief funds appropriated in lump sums left

to the Executive large areas of discretion

over which Congress necessarily released

control. The committee realized full

well that this procedure left control of

the funds to the private negotiations of

such relief administrators as Mr. Harold

Ickes rather than to the public record of

congressional hearings and congressional

debates published for all to study and

criticize. To this end, the committee

urged Congress to resume its constitutional duty to raise and support armies

and not to delegate this vital function.91

Congress as a whole ignored this suggestion and continued to leave the disposition of large sums to Executive discretion

for several more years.

The congressmen might have been

somewhat less willing to leave the apportionment of relief funds for military purposes in Executive hands had they been

fully aware of the backstairs pressures

brought by those attempting to influence

the administrators. Although it is impossible to believe that any congressman

was entirely blind to the practice, many

must have been unaware of the extent to

which administrators were plagued. One

prominent aircraft manufacturer, for example, proposed a plan to channel

$10,000,000 from the relief fund to the

Army and another $10,000,000 to the

Navy for aircraft procurement. "This

recommendation is entirely unselfish . . .,"

he asserted, stemming from a desire to

further the aim of the administration in

creating jobs.92 The same manufacturer

wrote Maj. Gen. Oscar Westover, Chief

of the Air Corps, elaborating upon the

$10,000,000 plan and urging the air arm

to take the initiative in seeking the

funds.93 The next day the manufacturer

telephoned General Westover to report

that James Roosevelt was "arranging with

Colonel Watson" to let him on the Houston when the President started on a fishing trip. "My friend says he can't guarantee the thing, but he says that Jimmie

said he thought he could fix it." The

manufacturer urged the Chief of the Air

Corps, "Get busy on it, and if you can

avoid the Director of the Budget, I would

89

 House Hearings on WD appropriation for 1935,

February 14, 1934, pp. 487-89, and February 15, 1934,

pp. 528-29. See also House Hearings for 1936, January 29, 1935, p. 559. 90

 House Hearings on WD appropriation for 1936,

January 29, 1935, p. 557. For emergency funds allocated to WD, see Elias Huzar, The Purse and the

Sword, Control of the Army by Congress Through

Military Appropriations, 1933-50 (Ithaca, N.Y.:

Cornell University Press, 1950), Table III, p. 141. 91

 House Rpt 869, 73d Cong, 2d sess, March 5, 1934,

p. 2.

92

 Telg, Mr. . . . to James Roosevelt, 4 Jul 38, AFCF

112.4 Allotment and Appropriation of Funds (A). 93

 Mr. . . . to "dear Oscar" [Westover], 12 Jul 38,

same file.
CONGRESS AND THE AIR ARM 69

GENERAL WESTOVER

certainly do it. If you can't, then let me

know and I will get Jimmie busy on the

Director of the Budget." The manufacturer was explicit in his promises to the

general: "If you get in any trouble . . .

I will have influential men there from

New York. . . ."

 94

The air arm reaction to this approach

was characteristic of the military response

to political dealings in general. While

admitting that the funds were alluring,

the Chief of the Air Corps replied with

conscious rectitude that it would be impossible to proceed in the matter in view

of certain previous "definite and positive" agreements made with the President

and the Bureau of the Budget.95 Backstairs proposals such as this were probably unavoidable in the allocation of relief funds.

If the air arm was both unable and unwilling to deal politically and relief funds

were inherently unworkable, there was

no alternative but to resort once again to

the normal process of annual appropriation. This, of course, returned the question from the White House to the Hill.

The change of scene was disappointing to

those who looked for prompt completion

of the aircraft program, for the delays

that had long hampered air arm exploitation of relief funds returned again in new

guises.

Further Delays in Reaching

Full Strength

Although by the mid-thirties the Air

Corps was certainly not the runt of the defense litter, all was not well. In 1935, nine

years after the five-year program began,

the Air Corps was still 25 percent under

the aircraft strength officially authorized

by Congress in 1926. Despite the desire

of many in Congress to eliminate this lag,

there were a number of obstacles to an

immediate solution of the problem. Even

military spokesmen, who might be expected to advocate immediate completion of the program, testified before Congress against any plan to make up the

deficiency in one jump.96 To reach full

94

 Phone Transcript, Mr. . . . to Gen Westover,

13 Jul 38, same file. 95

 Westover to Mr. . . ., 20 Jul 38, same file.

96

 See, for example, testimony of ASW Woodring,

Senate Hearings on WD appropriation for 1937,

March 3, 1936, p. 25.
70 BUYING AIRCRAFT

program strength at one time, they

pointed out, would incur a series of evils

each almost as detrimental in its effect as

the original understrength condition.

The tactical effectiveness of the nation's

aerial defense would rise and fall in a

sawtooth pattern as each group of newly

purchased aircraft gradually moved toward obsolescence followed abruptly by

replacement. Moreover, to absorb the

demand for large numbers of aircraft

within a short span of time, the aircraft

industry would have to expand its facilities, only to face a long period almost devoid of military orders until another peak

load appeared several years later.

Capital diverted to the expansion of

production facilities to meet abrupt demands for large numbers of aircraft

could not be extracted readily for reinvestment in research and development

work during the subsequent slack periods

of low demand. Without capital for research and development, the aircraft industry could not hope to produce the superior aircraft so much desired by the air

arm. In this situation, Air Corps spokesmen could scarcely be reproached for not

pressing Congress for large appropriations to bring the program to completion

at once.

If air arm officers were above reproach

in not having asked for too many airplanes, were they equally faultless in not

asking for enough? After careful calculation, air staff planners had determined

that it was essential to procure 800 aircraft each year for several years to keep

pace with attrition as well as obsoletion

and at the same time build up to the

strength authorized in 1936. Having determined the 800 figure, the Air Corps

went to Congress with estimates for fiscal

year 1937 calling for no more than 457

aircraft. An explanation for this seeming contradiction is readily apparent. No

matter how much the Air Corps may have

desired funds for 800 aircraft, the Bureau of the Budget set the ceiling at 457

and no higher figure could be advocated

before Congress.

In the final analysis Congress and not

the Bureau of the Budget determined

the size of the appropriation for aircraft.

In this instance, a probing congressman

was helpful enough to ask about the full

increment of 800 aircraft and how much

more it would cost than the 457 in the

estimate. The Chief of the Air Corps replied to the question briefly and there

the matter dropped.97 The opportunity,

once presented, did not arise again. For

want of a substitute program worked out

in detail, and for want of a willingness

to press such a plan when the opportunity

offered, the air arm let another fiscal year

slip by without bringing the air weapon

up to authorized strength. When offered

no carefully formulated alternative to the

budget program, Congress could do little

but accept the Executive estimate substantially as it was presented. Some responsibility for the air arm failure to

reach authorized strength must therefore

rest on military shoulders.

Among the many factors contributing

to the lag between aircraft on hand and

strength authorized was the general rise

in prices that characterized each succeeding year after 1932 or 1933. The original Air Corps estimate for fiscal year 1935

called for 348 new aircraft. Congress appropriated funds for the aircraft, but

97

 House Hearings on WD appropriation for 1937,

December 31, 1935, p. 341.
CONGRESS AND THE AIR ARM 71

sharp increases in unit costs occurring

after the year's program had been set up

resulted in procurement of only 222 aircraft.98

In the following fiscal year the adverse

effect of rising prices was even more pronounced. Because of Bureau of the

Budget restrictions, the Air Corps estimate asked Congress for only 547 new

aircraft, far below the number required

to advance toward full program

strength.99 This was only the beginning

of difficulties. Between the printing of

the budget and the time the Appropriations Committee sent a bill to the House,

aircraft prices increased so sharply that

the funds proposed in the budget would

buy only 450 aircraft, a number barely

sufficient to offset the normal attrition

rate for obsolescence and washouts.100

Congress farsightedly added some $4,500,-

000 to the budget funds earmarked for

new aircraft to offset the price rise, but

even this increase proved insufficient.

Prices continued to rise, and by the year's

end the funds were sufficient to procure

only 361 aircraft despite the generous efforts of Congress in appropriating more

funds than the President asked for.101

At the root of the trouble lay the longtime lag between budget planning and

the ultimate contract and subsequent delivery of new aircraft. Many months

elapsed from the initiation of a budget

until final appropriation, but by no

means did appropriation mark an end to

the delays. There were contracts to be

negotiated and still further months to

wait before new aircraft actually reached

Air Corps stations. Even where contracts

were all drawn and required only formal

approval of the appropriation to go into

immediate effect, deliveries usually were

months and even years into the future.102

Contracts were not always ready for

signature as soon as the appropriation

bill became law. In fact, at one time

during the depression, aircraft procurement officers were specifically instructed

to award contracts as late as possible in

the fiscal year to slow the rate of cash

withdrawals from the Treasury so as to

help balance the budget.103 This process, so familiar to every bill-paying householder, reflected a thoroughly understandable maneuver on the part of the

President. It became politically expedient to protect the Treasury, so the President ordered a delay in obligating funds.

Delay, coupled with the rise in prices,

resulted in procurement of fewer aircraft. It was the President who issued

the orders, but it was the congressmen

who received the blame.

At times the congressmen became exasperated with the perversities of an

aviation program that refused to reach

completion in the face of determined

efforts to that end, and they had ample

grounds for annoyance. Not only were

they disturbed by the effect of the time

lag between appropriation and actual

delivery of aircraft, but in addition they

felt they had been deceived when, on occasion, air officers failed to obligate all

98

 House Hearings on WD appropriation for 1936,

January 29, 1935, p. 535. 99

 Ibid., pp. 556-57. 100

 T. B. Parks in Cong Rcd, February 19, 1935,

pp. 2214-15. 101

 House Hearings on WD appropriations for 1937,

December 30, 1935, pp. 322-23.

102

 Ibid., pp. 327-28. 103

 CofAC to Chief, Mat Div, 5 Aug 37, quoting

Budget Office, WD, to CofAC, 3 Aug 37, AFCF

112.4-A.
72 BUYING AIRCRAFT

the funds of one fiscal year before the

next year's appropriation bill became

law. Why frighten the voter-taxpayers

with appropriations larger than need be,

argued the legislators, if the funds will

not be spent until a later fiscal year.104

They were further annoyed to learn that

air arm officers were asking funds for production contracts when even the types to

be procured had not yet been decided

upon.105 Since months and even years

might elapse between the formulation of

estimates and the final steps of procurement, this was not really surprising.

Moreover, considering the rapid pace of

design change in aeronautics, rigid decisions as to specific aircraft types in the

early phases of budgetary planning might

have led to the procurement of obsolete

weapons. For many reasons, then, it was

difficult if not impossible to close the gap

between original estimate and final aircraft, even though these reasons were

often obscure to the bedeviled legislator.

There were a number of circumstances

that led to the rapid price rises of the

middle thirties. One set of motivating

causes can be grouped under the heading

of social legislation. A second set of factors arose from the increasing technical

complexity of aircraft. Four-engine

bombers began to replace twin-engine

bombers, and the relative proportion of

bombers to pursuits increased fivefold in

the decade from 1927 to 1937. Improved

communications equipment, variable

pitch propellers, and the introduction of

many sensitive instruments for flight and

navigation combined with hundreds of

other technical innovations to make each

individual aircraft a more intricate and

more expensive piece of equipment than

ever before. Probably the most obvious

index of this rising curve of complexity

is to be found in terms of the upward

trend in gross weights. A single-place,

single-engine fighter weighed 1,600

pounds empty in 1918 and 2,200 pounds

in 1933; by the end of the thirties the

same type of aircraft ranged between

5,500 and 6,000 pounds.106

The appropriation dollar also purchased fewer aircraft pounds with each

passing month. Appropriations that

seemed adequate when air officers prepared estimates became hopelessly inadequate when the time arrived to sign

contracts with individual aircraft manufacturers. Attack bombers, for example,

priced at $60,000 each in original estimates, actually cost about $110,000 apiece

in the contracts finally drawn several

months later, a characteristic pattern

throughout the latter half of the thirties.107

Congress Tries Some Short Cuts,

1935-38

If prices continued moving up between

the time of estimate and the time of contract, the simplest solution was to ask

104

 House Hearings on WD appropriation for 1937,

December 30, 1935, p. 310; House Hearings on Naval

appropriation for 1937, March 2, 1936, pp. 520-21. 105

 Ibid. See also, House Hearings on WD appropriation for 1937, December 30, 1935, p. 335.

106

 Figures taken from specifications in The Official Pictorial History of the AAF, pp. 186ff. See

also, for description of increased complexity of aircraft and the rising proportion of bombers, House

Hearings on WD appropriation for 1938, March 25,

1937, pp. 520-22. 107

 House Hearings on WD appropriation for 1938,

March 29, 1937, p. 559.
CONGRESS AND THE AIR ARM 73

Congress for more than enough funds to

absorb the difference. Unfortunately,

such an obvious maneuver was difficult

to execute. In the middle thirties every

extra dollar added to appropriations for

the military forces had to be made in the

very teeth of a popular clamor for the

most stringent economies. There was as

well the not inconsiderable protests of

the pacifists. Confronted with large

bodies of hostile opinion, the congressmen had to resolve conflicting objectives.

They had to provide sufficient defense

without laying themselves open to the

charge of war mongering and find ways

and means to improve defenses without

presenting the bill to the taxpayers—at

least not right away. To serve these mutually exclusive ends, Congress resorted

to numerous expedients.

One short cut was to use "contract authorizations" in lieu of outright appropriations in any given fiscal year. By this

device Congress authorized the air arm

to obligate certain sums in contracts for

which payment would not fall due until

a period beyond the fiscal year in question. By resorting to contractual authorization, in addition to the funds actually appropriated, congressmen hoped

they would leave air arm officers free to

negotiate contracts and in general to advance the business of defense without

having to present the unwelcome tax bill

until at least a year later.108

Contract authorization may have been

a politically expedient device, but there

were certain very real drawbacks in its

use. When Congress voted for increased

contract authorizations rather than outright appropriations, the air arm was unable to contract for aircraft until late in

the fiscal year. The sheer complexity of

aircraft production was such that hundreds of thousands of dollars in tooling

costs and inventory charges were encountered before a single aircraft started down

the assembly line. To help manufacturers over these financial hazards, the

War Department had instituted a system

of partial payments or progress payments

to be made in advance of actual deliveries

as the preparation for production reached

certain predetermined goals. This procedure required large sums of cash soon

after the signing of a contract. Where

Congress provided contract authorization and left the actual appropriation of

cash for the next fiscal year, the requirement for cash disbursals shortly after formal approval of contract made it necessary to delay contract negotiations until

just before the next fiscal period, when

cash would be available to honor the obligation.109

 This defeated the intent of

Congress.

Another drawback in the use of contract authorizations lay in their administrative complexity. Appropriations ran

for one year before reverting to the Treasury. Contract authorizations ran for two

years. But funds authorized in one fiscal

year had to be paid out during the next.

Thus in any given year the air arm appropriation might include funds to cover

previous contract authorizations, authorizations projecting into the fiscal period

ahead, and funds for current obliga108

 For a frank expression of this evasion, see Senate Hearings on WD appropriation for 1938, May 26,

1937, p. 61. 109

 Ibid., pp. 65-66.
74 BUYING AIRCRAFT

tion.110 Occasionally some members of

Congress appeared bewildered by this

maze of overlapping types of appropriations and confessed themselves to be a

bit uncertain about the precise nature

of a current appropriation measure.

During the late thirties Congress tried

yet another device in an effort to satisfy

the demand for a defense air arm at full

strength without greatly increasing the

tax bill. This time the plan consisted

of a reduction in the number of spare

engines to be procured, using the funds

thus gained to buy more aircraft. In

1937 the Appropriations Committee took

the initiative in reducing the number of

spare engines from 100 percent to 50 percent of the number of aircraft on contract. From the funds so saved, the committee contemplated procurement of

fifty-eight additional aircraft, which

promised to help close the gap between

available strength and strength authorized.111

 Air Corps officers protested that

this policy merely robbed Peter to pay

Paul. Without an ample reserve of spare

engines, they insisted, the Air Corps

could not make full use of its increased

strength in aircraft. Marked fluctuations

in the average number of engines in overhaul at any one time made it imperative

that the reserve of spare engines be ample to cover the local needs of a widely

distributed and ever-shifting air force.112

In the face of air arm protests, Congress continued the 50 percent spare engine policy again in 1938. It was easier

for congressmen to point to the tangible

evidence of a rising total of aircraft in

replies to the taxpayers' questions than

to refer to a change in spare engines policy that was elusive if not entirely meaningless to the average citizen. Justifications based on the Navy's policy of 33

percent spare engines were irrelevant,

for the Navy kept 50 percent of its aircraft strength in reserve at all times, creating in effect a 100-percent engine reserve even before procuring a single

spare engine.113 The Chief of the Air

Corps publicly declared that the 50 percent spare engine policy of Congress was

positively dangerous, but the policy continued.114

 One congressman expressed

the problem concisely: the legislators

were anxious to get more aircraft but

they were reluctant to go over the Bureau of the Budget figure.115

 By remaining within that figure, congressmen could

make the President shoulder the taxpayers' protests.

There was no escape from the conflicting and mutually exclusive objectives of

more aircraft and lower taxes, but with

some ingenuity the extremes could be

made less antagonistic. By the middle

thirties the Navy had devised a scheme

that the Air Corps might have emulated

with profit. The Navy's plan was simple.

Instead of lumping all aircraft procurement under one budget heading for "new

construction," there were two headings:

"new construction" and "replacement

110

 For an example of the overlapping appropriations and contract authorizations, see House Hearings on WD appropriation for 1939, February 8, 1938. 111

 House Rpt 1979, 74th Cong, 2d sess, February

10, 1936. 112

 House Hearings on WD appropriation for 1935,

February 15, 1934, pp. 554-55.

113

 Harding, Aviation Industry, p. 28. 114

 House Hearings on WD appropriation for 1939,

February 8, 1938, pp. 420-21; Senate Hearings, April

1, 1938, pp. 3-5. 115

 House Hearings on WD appropriation for 1938,

March 29, 1927, p. 57.
CONGRESS AND THE AIR ARM 75

aircraft."

 116

 By segregating those items

intended to maintain the force at its current level from those that would increase

the force, the Navy sugar-coated the pill.

Instead of confusing the congressman

with involved charts and intricate tables

of figures, the Navy scheme offered but

two quantities, one for augmentation,

one for replacement. When so tagged,

both groups presented psychological hazards to the congressman. If he voted

against "replacement," his constituents

could criticize him for weakening national defense. If he voted against "augmentation," they would charge him with

failing to strengthen national defense.

On the other hand, by lumping both

types of procurement into a single figure,

the Air Corps' estimates obscured the

precise character of aircraft requirements.

Congress was by no means solely responsible, however, for the protracted

delays that marked the air arm's attempt

to reach the full strength authorized.

The Air Corps itself shared heavily in

this responsibility.

The Air Arm Imposes Delays

Air arm leaders on occasion followed

policies closely akin to those employed

by Congress in stressing the appearance

of strength rather than the real thing.

During fiscal year 1938, for example, the

Air Corps tried the experiment of lumping two years' supply of bombers in one

year while buying no pursuit aircraft and

then reversing the procedure in the following year, buying all pursuits and no

bombers. By increasing the number of

units on contract, the unit price decreased, making it possible to secure

more aircraft with the same amount of

money.117 This was a persuasive argument when presented to the Appropriations Committee; unfortunately it ignored a most important consideration.

The "two year's supply" plan brought

in more units from the funds available,

but it failed to take cognizance of the air

arm role as an M-day force to be maintained in a condition of constant readiness

against surprise attack. By purchasing

an excess of one type and none of another

type each year, the Air Corps threatened

to remain in a continual state of disequilibrium insofar as tactical aircraft were

concerned. If pursued extensively, this

policy of quantity rather than quality

might give the air arm its authorized

strength but at the price of combat effectiveness, although it must be admitted

that the increased number of aircraft on

any one contract resulted in longer production runs, which strengthened the

capacity of the industry for mass production.

While the two-year supply procedure

did undoubtedly appear to favor numbers rather than performance, the Air

Corps did not pursue the policy consistently. Indeed, Congress criticized the

air arm for doing just the opposite—delaying production contracts in order to

get some new development lying over the

horizon. Air Corps spokesmen denied 116

 House Hearings on Navy appropriation for

1936, March 13, 1935, p. 546. Contrast the Navy's

breakdown with the statement of General Drum on

the Air Corps' needs, House Hearings on WD appropriation for 1936, January 14, 1935, p. 53.

117

 House Hearings on WD appropriation for 1939,

February 8, 1938, pp. 438-39, and for 1938, March 29,

1937, pp. 552, 557.
76 BUYING AIRCRAFT

BOEING B-17

the charge of delays, pointing out that

funds had to be obligated within the fiscal year or revert to the Treasury, but

they were quite willing to admit that the

air arm actively favored quality rather

than quantity.118

The Chief of the Air Corps made no

secret of the circumstance that the funds

appropriated by Congress sometimes

bought fewer aircraft than intended in

the original estimates for the simple reason that manufacturers turned up at the

last minute with superior aircraft of

radically improved performance—at a

higher price.119 To ignore this advanced

equipment would be to arm the nation

with weapons less than the best.

In theory at least, there was no alternative to buying the latest and the best

aircraft available, even though it inevitably meant buying fewer units with the

funds available. Such a course was the

ideal and sometimes the Air Corps pursued it. In practice, however, Air Corps

officials did not wish to risk irritating

congressmen, who seemed inclined to

judge air defense in terms of numbers

of aircraft on hand rather than in terms

of quality, performance, or tactical suitability.

An episode in April 1937 will illustrate this tendency. The chairman of

the Appropriations Subcommittee that

handled War Department estimates admitted to the House that he had no great

familiarity with military matters. Nevertheless, he recorded his protest against

the "unwise" tendency in the air arm to

build larger and more expensive bombers such as the Boeing B-17.120

 Less than

two months later the effect of this type

of criticism became evident. The estimates for fiscal year 1938 called for 177

118

 House Hearings on WD appropriation for 1938,

March 29, 1937, p. 557. 119

 House Hearings on WD appropriation for 1937,

December 30, 1935, pp. 323-24, 338. 120

 Cong Rcd, April 29, 1937, pp. 3984, 3988-89.
CONGRESS AND THE AIR ARM 77

DOUGLAS B-18

B-18 twin-engine bombers and 13 B-17

four-engine bombers. After operational

tests by tactical units, the GHQ Air

Force "strongly recommended" that only

the B-17 be procured. To buy the more

expensive bomber, however, would be to

buy fewer bombers. In the face of congressional criticism, Air Corps officers

felt it was "impractical" to do so unless

the Secretary of War was personally willing to "accept the responsibility to Congress" for decreasing the total number of

aircraft in the 1938 budget. Estimates

for the four-engine bombers were thus

deferred until fiscal year 1939.121 As a

consequence the B-17 units, considered

vital to the nation's defense, were not

procured until the crisis had already arrived.

The search for quality rather than

quantity was not the only Air Corps policy that retarded completion of the authorized aircraft program. Another factor was the air arm's insistence upon a

"balanced program" in which procurement of new aircraft remained in phase

with the construction of new facilities

and the addition of personnel. Experience in past years had revealed what happened when Congress provided new aircraft without increasing the funds available for trained personnel for them. Even

worse was the situation in which manpower increased without a commensurate increase in funds for housing. By

the same token new aircraft, unless supported with adequate technical facilities

—air bases with depot repair shops and

the like—did not really strengthen the

121

 2d Ind, OCAC to TAG, 9 Jun 37 (basic unknown), WFCF 452.1 Four Engine Bomber 1936-39.

A comparison of the B-17 and B-18 in terms of performance indicates why the decision to delay the

B-17 was so critical:
78 BUYING AIRCRAFT

nation's aerial might. Technical construction—barracks, airstrips, and expensive machine tools in repair depot shops

—did not fare as well as aircraft when it

came to appropriations. As a result aircraft, although usually understrength,

generally ran ahead of personnel and

supporting facilities. Since the appropriation acts carried restrictive clauses

specifying not less than a fixed amount

to be spent for aircraft, air arm leaders

could not correct the imbalance by administrative action.

Repeatedly during the thirties Air

Corps officers proposed means for overcoming the lack of balance in manpower,

air weapons, and supporting facilities.

One such recurring suggestion involved

a plan to secure in addition to the regular itemized appropriation a lump sum

left entirely free for commitment according to administrative discretion. Such a

fund would have provided an escape from

the embarrassment of having more aircraft than there were trained pilots to fly

them, but Congress was unwilling to

grant funds without earmarking them

rather closely. Legislative fear of Executive encroachment accounted for at

least some of this opposition.122

Failing to secure funds with which to

rectify impossible situations, air arm officers tried another expedient. This time

the plan was to forestall trouble in advance by providing Congress with a

comprehensive scheme or "balanced program" in which aircraft, personnel, housing, training, and technical facilities were

all carefully dovetailed into a five-year

plan by which trained pilots would be

ready when aircraft left production lines

and adequate barracks would be built

and waiting for the arrival of newly recruited troops.123 Above all, those who

planned for the air arm wished to avoid

the condition created by Congress in fiscal year 1937 when $41,000,000 of total

appropriation of $59,000,000 went to the

purchase of new aircraft, leaving only

$18,000,000 for personnel, maintenance,

operation, training, development, and

construction of base facilities—an almost

impossible situation.124

Unfortunately, by 1938 the popular

hue and cry called for big increases in

manpower, and air arm officials, who had

reluctantly curbed the heavy bomber program they really desired in order to keep

it in phase with the limited number of

men available, found themselves confronted with an abnormal increase in

manpower granted by Congress in response to popular pressure.125

 This was

frustrating to air arm officers when the

crisis arrived because it left them highly

vulnerable to uninformed criticism for

not having demanded a larger number

of aircraft.

Early in February 1938, the Chief of

the Air Corps optimistically reported

that the end was in sight. If all went

well and Congress appropriated the funds

as planned, the Air Corps would be able

to complete the 1926 "five-year" program,

as modified and revised in 1936, during

122

 Cong Rcd, March 14, 1934, p. 4506.

123

 Acting CofAC to TAG, 5 Aug 36, 321.9A OCAC

Organization, and AFCF 360.01A WD Policy Toward

Aviation. 124

 Memo, Brig Gen G. R. Spaulding for CofS, 26

Mar 37, AFCF 112.4A, Allotment of Funds. 125

 TAG to CGGHQAF, 28 Mar 38 and TAG to

CofAC, 11 Apr 38, 322.9A OCAC Organization,

AFCF.
CONGRESS AND THE AIR ARM 79

the fiscal year 1940.126 Who was responsible for this long delay? No one could

point to any single group for censure.

All who participated in the budgetary

process—military officers, Executive

agents, and legislators—shared in the result. At best, the limited funds made

available by Congress for aircraft procurement in the between-war years reflected the severe limitations if not the

inadequacies of the nation's system of

budgeting for defense. But even lavish

appropriations, had they been voted,

would not have ensured an adequate

air force if the air arm's methods of procurement were not also suitably perfected.

126

 House Hearings on WD appropriation for 1939, February 8, 1938, p. 437.
CHAPTER IV

Procurement Legislation, Organization,

and Administration

Organic Legislation for the Procurement

of Aircraft

The Statutory Tradition

The legal basis upon which the great

bulk of all military procurement has

rested is Section 3709 of the Revised

Statutes. This section is a codification

of a statute enacted in 1861, which itself

rested upon earlier precedents dating

back to the eighteenth century.1 The

essentials of Section 3709 are contained

in a very few words: "All purchases and

contracts for supplies . . . shall be made

by advertising. . . ." In short, to prevent

favoritism in the award of public contracts, the law required advertisement or

a public invitation to bid followed by

the award of contracts upon the basis of

proposals received. The basic statute

authorized exceptions to this requirement when the "public exigency" imposed need for immediate delivery, but

the spirit and intent of the law are clear.

Subsequent legislation made the intent

even more specific. A statute of 1884

provided, "the award in every case shall

be made to the lowest responsible bidder for the best and most suitable articles. . . ."

 2 Contracting officers who

sought exceptions to this ruling ran

headlong into an opinion of the Attorney General of the United States, who

expressed a continued confidence in the

wisdom of competition in public contracts when he held that all such contracts must be made according to Section

3709 of the Revised Statutes, save where

specifically exempt by law.3

There were significant exceptions provided by the express will of Congress.

Where but one manufacturer produced

a given item, advertisement for bids

could be waived. In an instance such as

this, the manufacturer was known in the

jargon of the services as a "sole source."

Another exception, closely related, involved the circumstance in which the

manufacturer held a patent on an item

sought by the government. Here, too,

public advertisement for bids would be

to no purpose since only the patent

holder could reply. Still another exception authorized by statute permitted the

purchase of items that were parts of items

already in use. In an organization such

as the air arm, where spare parts played

1

 Cited as Rev Stat 3709. Based upon act of March

2, 1861 (12 Stat 220), 41 USCA 5.

2

 Act of July 5, 1884 (23 Stat 109). 3

 22 Op Atty Gen 1, December 20, 1897.
PROCUREMENT LEGISLATION, ORGANIZATION, ADMINISTRATION 81

an unusually important role, this exception could be of considerable importance.4

 These and a few other similar

deviations granted by Congress did permit some escape from the compulsions

of the basic statutes, but probably the

most significant modification, insofar as

military contractors were concerned, appeared in a law enacted in 1901.

The 1901 statute drew several of the

previous stipulations into a single law,

adding a noteworthy innovation: "Except in cases of emergency or where it is

impractical to secure competition . . . the

purchase of all supplies . . . shall be made

only after advertisement and . . . shall be

purchased where . . . cheapest, quality

and cost of transportation and the interests of the Government considered."

 5

While reiterating the earlier provisions

for protecting the interest of the public,

these provisions would appear to broaden

the law and leave a wide margin of discretion to responsible officials in the War

Department. Both the words the interests of the Government considered and

the words where, it is impracticable to

secure competition leave a great deal of

latitude to the contracting officer. Nevertheless, even though this statute appeared to grant generous exemptions

from the mandate to make all military

contracts by competition for low bid,

in practice contracting officers seldom

awarded on any other basis. A number

of considerations conspired to this result.

Statutes usually require interpretation.

In the normal course of events the laws

governing procurement became encrusted with legal barnacles as court decisions, rulings of the Comptroller General, and opinions of Attorneys General

or Judge Advocates General operated to

define the scope of executive discretion.

Just how far this process of legal accretion could go is suggested in the thirteen

separate opinions as to what is and what

is not a "public exigency" that annotate

Section 3709 of the Revised Statutes.6

Beset with rulings and opinions on every

hand, contracting officers were inclined

to use the safe ground of compliance with

the stipulations placing purchases for the

government on a competitive basis.

There were urgings other than legal

opinions that induced contracting officers to award on low bid rather than exercise discretion. Low bids could be

determined objectively, whereas "quality" or "the interests of the Government"

were largely matters of opinion. Being

human, contracting officers naturally

tended to the safer course since it was

far easier to point out the money saved

in awarding to the low bidder than it

was to prove an alleged increase in quality, performance, or convenience to the

government to be obtained from an

award to other than the low bidder.

Even the exceptions specifically authorized by Congress were seldom fully

exploited in practice because of the conservative tendencies of contracting officers working in the shadow of the military prison at Leavenworth. Competitive

procurement with award to the low bidder was the deeply entrenched tradition

of military procurement in the United

States when World War I arrived to upset the normal pattern. 4

 SW D. F. Davis to Judge A. C. Denison, 1 Dec 25,

Morrow Hearings, p. 1820. The exceptions are listed

here, but their authorizing statutes are not shown. 5

 Act of March 2, 1901 (31 Stat 905), 10 USCA 1201. 6

 See 41 USCA 5, sec. 40.
82 BUYING AIRCRAFT

Procurement Legislation

in World War I

In war the regular peacetime procedures for procurement are inadequate.

Speed is more important than price; a

dollar saved may mean a battle lost. Congress recognized this when framing the

basic statutes governing military procurement. In emergencies the Secretary of

War and his agents did not need to resort

to price competitions; they could negotiate contracts in whatever appeared to be

the best interests of the government.7

This left the selection of contracting procedures to the discretion of the officials

representing the War Department.

Broadly speaking, the choice consisted of

two forms, the fixed-price contract and

the cost-plus contract, each representing

a fundamentally different philosophy of

contractual relationship.

The fixed-price or lump-sum contract,

as it was sometimes called, was the conventional form used in peacetime.

Whether it was awarded to the low bidder as a result of public advertisement

and competition or by negotiation and

agreement as to price at the discretion

of departmental officials, the fixed-price

contract set in advance the price to be

paid by the government. The contractor assumed all risks, and in return he

was free to increase his profit by improving his efficiency and lowering his costs.

For some undertakings, however, the

fixed-price form of contract is impractical. Where the product is novel and

costs are hard to estimate in advance,

contractors are understandably reluctant

to assume the risks involved, especially

in a period of rising costs in material and

labor. To induce manufacturers to bid,

officials in the War Department turned

to the cost-plus form of contract.

Cost plus is actually a generic term

embracing a number of variations, but

all share one element in common: the

government and not the contractor is expected to assume most of the risks. The

latter merely passes his bills for such items

as labor and material to the government

for payment. His profit for managerial

services is then computed by one of several methods. In World War I, profits

on this form of contract were computed

as a percentage of cost. Such contracts

were known as cost-plus-percentage-ofcost (CPPC) contracts. The weakness

of such an arrangement is obvious. The

contractor had little or no incentive beyond patriotism to hold costs down and

considerable incentive for pushing costs

up to enlarge his profit.

The dilemma confronting procurement officials within the War Department is readily apparent. They had to

draft a contract by which the government

assumed the risks but still left an incentive sufficiently strong to induce contractors to hold down costs. Since airplanes

had never been mass produced before

World War I and the hazards of such an

operation were great, it was, logically

enough, the members of the Aircraft

Board who devised a modified version

of the cost-plus contract to resolve the

dilemma.8 Under the terms of the mod7

 Ibid., sec. 43.

8

 The Aircraft Board was a subordinate agency of

the Council of National Defense established by the

Defense Act of 1916. Until October 1917 the board

was known as the Aircraft Production Board. See

C. L. Lord and A. D. Turnbull, History of Naval

Aviation (New Haven, Conn.: Yale University Press,

1949), p. 118.
PROCUREMENT LEGISLATION, ORGANIZATION, ADMINISTRATION 83

ified cost-plus, or bogey, contract, as it

came to be called, the government undertook to pay the contractor for all

labor, materials, depreciation, and overhead charges, as well as for all special

tools and all additional facilities required, retaining title in the case of the

latter two items. In addition, the government would pay the contractor a

profit or fee representing a percentage

on a cost, to be estimated in advance.

Thus if actual costs exceeded estimated

costs, the contractor could not increase

his profit. On the other hand, the advance estimate of cost was to provide a

basis for incentive. To encourage contractors to strive for reduced costs, the

modified contract offered them a premium of a substantial percentage of any

money saved by cutting actual costs below the initial estimate.

The modified cost-plus, or bogey, contract, when applied to airplanes and engines during World War I, made it possible for manufacturers to make rather

surprising profits. The Packard Motor

Car Company's contract for Liberty engines is a case in point. Government

officials set the bogey price in advance

at $6,087 per engine. With a 15-percent

fee, the manufacturer received a profit

of $913.05 per unit regardless of what

the engines eventually cost. After it became apparent that actual costs would

run somewhat less than originally estimated, the bogey was renegotiated downward to $5,000 and the fee was reduced

to 12.5 percent. Even so, Packard managed to earn a profit of $3,750,000 by

bringing actual engine costs down to less

than $3,200 per unit. But this was only

one element of profit, for the contractor

received in addition 25 percent of the

savings or spread between the bogey and

the actual costs.9

All together, in fees and premiums, the

Packard Company would have earned

just under $6,500,000 profit had the contract run to completion. And this, it

should be understood, was a contractor

with somewhat less than $6,000,000 invested in the plant turning out the engines. Nor were these profits an isolated

exception. The Dayton-Wright Airplane

Company, which manufactured the only

tactical aircraft to go into mass production in the United States during World

War I, was in a position to pile up more

than $6,000,000 in profits from fees and

premiums on a bogey contract even

though the corporation's invested capital only amounted to about $1,000,000

supplemented by an advance of $1,500,-

000 from the government.10

Just before the end of the war, public

disclosure of apparently excessive profits

on air matériel helped to provoke a revulsion to the whole principle of costplus contracts for military procurement.11

In Congress this attitude was reflected in

charges of profiteering leveled at contractors and financial profligacy on the

part of responsible public officials. The

War Department suffered savage attacks

from the floor of the House, which usually charged scandalous waste in the con9

 C. E. Hughes to Atty Gen, 25 Oct 18, Hughes

Rpt, in Cong Rcd, December 30, 1918, pp. 906-07. 10

 Ibid.

11

 S. M. Brannon, JAGD, Discussion of the Legal

and Contract Phases of Procurement Planning, for

ASW Conference of Planning Branch Officers, 13

Nov 34, in ICAF doc file, Contracts. Actually the

estimated scale of profits shown were not in every

case realized because of termination or renegotiation,

but the cost-plus principle was discredited in the

public mind regardless of subsequent changes.
84 BUYING AIRCRAFT

tracting procedures of the War Department.12

 Without question there was

waste in the wartime contracts for aircraft, but a good deal less than half of

the money spent for air matériel—airplanes, engines, and accessories—used the

cost-plus contract and its variants.13

Much of the waste was inherent in the

compulsions of war regardless of the contract form employed. Nevertheless, the

cost-plus contract was a dog with a bad

name that Congress would not forget.

Something of the congressional reaction to the procurement experience of

1917-18 is evident in the report of a committee investigating wartime expenditures. This committee recommended

abolition of the cost-plus contract even

for use in wartime, and urged Congress

to revoke the power of the Secretary of

War to suspend competitive bidding during emergencies as provided in the Revised Statutes, Section 3709.

Finally, the committee actually asked

Congress to amend Article III of the Constitution so as to stretch the definition of

treason to cover profiteering on war contracts. After World War I, procurement

officers of the War Department had to

begin their normal peacetime operations

in an atmosphere of distrust. Over their

heads hung the threats of irate congressmen urging the Department of Justice to

bring to book those responsible for wartime losses.14

Procurement Under the

General Statutes 1918-26

The alleged war scandals, as one manufacturer called them, colored procurement practices for a number of years

afterward. The sins of the parents set

the teeth of the children on edge. Procurement officers, fearing investigation,

were inclined to insist upon public advertisement and competitive proposals,

with awards to the lowest bidders. By

following the most stringent provisions

of the statutes and avoiding the discretionary exceptions, they apparently hoped

to safeguard themselves.15

In some cases, of course, there was no

escape from the use of discretion. When

a manufacturer turned up with a new

design that promised revolutionary improvements in performance, War Department officials had no alternative but

to negotiate with the manufacturer in an

attempt to agree upon a mutually satisfactory price. It would be impossible

for the government to call for competitive bids on a design the government did

not yet possess.

Contracts for experimental airplanes

were thus negotiated, but almost all other

contracts, especially those calling for airplanes in production quantities, were let 12

 See, for example, the charges of Representative

W. J. Graham of Illinois, chairman of the postwar

committee investigating wartime expenditures. His

claim that the War Department spent a billion dollars on aviation and failed to put a single fighting

aircraft on the front before the armistice is simply

not true. Cong Rcd, June 1, 1920, pp. 8144-51. 13

 Hughes Report, Cong Rcd, December 30, 1918,

p. 885. Of approximately $100,000,000 spent for air

matériel, $57,000,000 went out under fixed-price contracts and some $43,000,000 went out under modified

cost-plus contracts.

14

 House Rpt 816, 66th Cong, 2d sess, April 1, 1920.

Congress did not accept all the committee's recommendations. The National Defense Act of 1916, as

amended through 4 June 1920, continued to authorize the President in time of war or when war was

imminent to place contracts without regard to the

existing statutes (Section 120). 15

 For manufacturers' protests on this situation, see

Lampert Hearings, pp. 1505-06 and 1404.
PROCUREMENT LEGISLATION, ORGANIZATION, ADMINISTRATION 85

upon a competitive basis according to

the provisions of the statutes. The Air

Service spent about $22,000,000 for aircraft in the five-year period 1920-24. Of

this, less than $3,000,000 went for the

design and development of new types.

The spread between the two figures indicates the large amount expended on a

competitive basis for items in quantity

in contrast to the relatively small sum

involved in negotiated contracts for experimental items.16

Strict compliance with the statutes governing procurement wrought a number

of harmful effects entirely unintended by

those who framed the laws. The case of

the Martin bomber in 1919 and 1920 illustrates some of the unexpected evils

stemming from an insistence upon price

competition. During World War I,

Glenn L. Martin worked to perfect a

superior bomber. The War Department

acquired the design rights by purchase.

In 1919 the bomber appeared to be the

most promising aircraft of its kind in the

field. Air Service officers planned to procure 200 units, but they did not invite

Martin to negotiate privately on a satisfactory price. Instead, they put the design out to open competition. When the

bids were unsealed it was discovered that

the Curtiss Aeroplane and Motor Company rather than Martin quoted the lowest price. Two other firms received increments of the order, but Martin, the

designer, received no contract at all because he had increased his bid on the

production order to amortize the losses

he incurred during the initial trial and

error experimental phase. Rival firms,

with no such costs to cover, were in a

position to bid lower.17

The evil consequences of a rigid resistance upon competitive bidding appeared

abruptly. Deprived of his airplane, Martin no longer had any incentive to improve that particular design. Worse yet,

deprived of a profitable production contract as a means of reimbursing his earlier

investment, Martin was soon unable to

finance further development work.18 The

statutes intended to protect the public's

interest here operated to the reverse effect

and retarded the pace of research and development.

A sequel only served to confirm the

point that aircraft contracts made under

the general procurement statutes discouraged the designer and tended to drive

him out of business. Some time after

the ill-fated Martin bomber affair, the

Navy's Bureau of Aeronautics negotiated

an experimental contract with Curtiss to

build a torpedo-carrying scout-bomber

with performance (in terms of range, ceiling, speed, and load) well in advance of

current aircraft. The design proved difficult to execute. Curtiss pioneered in

the use of new metal alloys to combine

strength for bomb carrying with lightness for range. After two years of engineering endeavor the Curtiss staff turned

out a superior aircraft, the CS-2, but the

effort absorbed $180,000 over and above

the contract price negotiated with the

Navy. When the Navy sought to purchase forty such aircraft from Curtiss, the

16

 Gross expenditures for the period are from Lampert Report, page 3. Experimental expenditures are

from testimony of G. C. Loening, based on data inserted in the Congressional Record, January 7, 1925,

by Representative F. La Guardia (Lampert Hearings, page 455).

17

 Morrow Hearings, p. 1438. 18

 Ibid., p. 1440.
86 BUYING AIRCRAFT

company quoted a price calculated to recoup the firms' loss during the experimental phase. The Navy's cost analysis

experts calculated that the Curtiss bid

was several thousand dollars higher a

unit than it should be. Unable to agree

upon a suitable figure, the Navy put the

design out to competition, and Martin

won with a low bid at $23,000, a figure

free from the burden of amortization

that increased the Curtiss bid.19

Although it so happened that in underbidding each other for production

contracts Curtiss and Martin may have

achieved a certain rough justice, there

were instances under the existing procurement statutes where the designer

who failed to get a production contract

to amortize his losses had to go out of

business.20 What is more, the operation

of the general procurement statutes had

still more unfortunate consequence.

When the government procured a design

for a new or experimental aircraft in a

negotiated contract, the assumption was

that the designer had turned over a set

of drawings, calculations, and specifications, which could be used as the basis

of a competition for the production contract. As a matter of fact, no drawings

of experimental aircraft were ever quite

so complete. Invariably a good deal of

shop practice was implicit in the drawings. Symbols and endorsements upon

the drawings that might mean much to

the staff of the designer were meaningless when handed over to a rival firm

chancing to bid low on a production

order.21 No one realized this more than

the Curtiss and Martin engineers who

tried to build each other's designs. In

fact, Martin appreciated this difficulty so

acutely that he ignored the CS-2 drawings entirely and had his engineers make

up a completely new set of drawings

that Martin shopmen would understand.

Using a physical sample of the Curtiss

CS-2 rather than Curtiss blueprints, the

Martin engineers designed the whole aircraft anew, introducing changes where it

seemed advisable and even running an

entirely new stress analysis on the design.22

 The finished product was quite

literally a new aircraft.

Here was the ultimate futility: a close

adherence to the general procurement

statutes by the military services led aircraft manufacturers into a dog-eat-dog

era of destructive competition that penalized the very firms doing most to advance

the art. Manufacturers who redrafted

each other's designs for production in

quantity were engaging in a costly duplication of effort to be condemned on the

score of waste alone, not to mention the

absurdity involved. And in addition, as

the manufacturers themselves admitted,

no contractor pushed vigorously to improve a design in the hands of a rival.23

Officials in the War Department were

well aware of this situation even before

the CS-2 case came to prominence.

Wherever possible, they took steps to

remedy the difficulty.

Protests From the Aircraft Industry

Of all the complaints the aircraft manufacturers leveled against the procure- 19

 Lampert Hearings, pp. 1144-45; 1404-05; 1628-

29.

20

 Morrow Hearings, p. 1439. 21

 Lampert Hearings, pp. 1401-02.

22 Ibid., pp. 2278-79, 2282. 23

 Ibid., p. 2281.
PROCUREMENT LEGISLATION, ORGANIZATION, ADMINISTRATION 87

ment procedures of the government, none

reflected such ire as the charge that federal contracting officers failed to respect

design rights as proprietary. This, the

manufacturers contended, was an issue

of the first importance.24 From this unhappy practice, the manufacturers believed, stemmed many if not most of the

other ills besetting the industry.

While most manufacturers were quick

to place the blame for the ills of the industry upon the shoulders of federal contracting officers in general and their procurement procedures in particular, there

were some few who recognized that at

least a part and perhaps most of the trouble experienced by the industry came as

a result of overexpansion during the war

years. But whether excess capacity from

overexpansion or faulty procurement

procedures lay at the root of the trouble, everyone seemed to agree that the

aircraft industry was heading for the

rocks. The Aeronautical Chamber of

Commerce in 1924 found the industry

dwindling to the point where it would

soon "cease to exist."

 25

 Howard Coffin,

wartime head of the Aircraft Production

Board, reiterated his report of 1919 when

in 1925 he urged immediate action "to

prevent a vitally necessary industry from

entirely disappearing."

 26

 Others sang

the same refrain in calling for reforms

in the procurement practices of the government where aircraft were concerned.

The wails of protest raised by disgruntled manufacturers undoubtedly helped

bring about the appointment of the Lampert and Morrow investigating groups.27

Both boards considered, among all the

other aspects of aviation, the broad question of federal procurement policies relating to aircraft. They gathered extensive evidence from manufacturers and

government officials alike and spread

upon the record a large number of proposals for reform.

Among the manufacturers there was

general agreement as to the ills of the

industry. Rightly or wrongly, they attributed the trouble to the failure of the

government to regard designs as proprietary, to a lack of continuity of orders,

to the destructive pricing policies of contracting officers, and to the competition

of government factories. In identifying

these evils the industry spoke almost with

one voice. But making complaints and

proposing specific correctives are two entirely different matters. When faced

with the opportunity of suggesting concrete proposals, the members of the Aeronautical Chamber of Commerce merely

listed their criticisms and then sidestepped the question of detailed recommendations with the comment that any

method of procurement overcoming the

ills listed would be acceptable to the industry.28

 Possibly the manufacturers

realized that any legislation they as a

group proposed for the revision of pro24

 Rpt of the Special Com of the Aircraft Industry

to the Members of the Industry, January 5, 1925,

signed by representatives of virtually all leading aircraft manufacturing firms. (Reprinted in Lampert

Hearings, pp. 1369-71.) Almost every manufacturer

appearing before investigating committees at one

time or another voiced the protest. 25

 Aircraft Yearbook, 1924, p. 1. 26

 Lampert Hearings, p. 1219. For the full text of

the Report of the American Aviation Mission, July

19, 1919, called the Crowell Report, in which the

condition of the aircraft industry in the United States

is reviewed, see ibid, pp. 1221-35.

27

 Ibid., pp. 45-57. 28

 Reply of Aeronautical Chamber of Commerce

to questionnaire of Morrow Board, October 9, 1925,

in Morrow Hearings, p. 1415.
88 BUYING AIRCRAFT

curement procedures might well be enacted. Then, if the revisions proved unworkable in practice they would be in a

poor position to complain. Possibly they

came to the realization that the problem

was infinitely complex.

Perhaps no one should have appreciated the complexity of the aircraft procurement question more completely than

Howard Coffin, whose wartime role had

plunged him into the very midst of the

question. Congress, he declared, had

hitherto placed too much reliance upon

"curbstone opinions." Having said this,

Coffin proceeded to deliver a curbstone

opinion. Even while admitting that he

was not prepared to make any very profound analysis of the question, he urged

Congress to pass legislation permitting

the allocation of production contracts to

a small group of manufacturers arbitrarily selected as the best qualified. This,

of course, was a revolutionary proposal

that would do away with the requirement

for competitive bidding, but Coffin offered no suggestion as to how it could

be achieved without raising the cry of

favoritism.29 In a similar vein Grover

C. Loening, an aircraft manufacturer and

pioneer designer, favored legislation to

permit a "parceling out" of contracts to

the established firms maintaining research staffs, provided it could be done

without "too much wet-nursing." He

too had no suggestions as to just how

this could be accomplished.30

Glenn L. Martin favored limiting competition to those firms with adequate facilities. The decision as to just which

firms were so qualified Martin would

leave to the discretion of the contracting

officers. No legislation would be required, he felt, provided Congress as well

as the Secretaries of War and Navy could

be made to understand why such discretionary powers were necessary.31

 There

was much to be said for Martin's reluctance to draft fresh legislation. As one

witness told investigating congressmen,

"new laws search folk's corns out like

new boots."

 32

 Nonetheless, whether one

followed Coffin and Loening in a legislative solution or Martin in an administrative one, the objective was the same.

Each favored enhanced discretionary

powers that would allow contracting officers to limit the competition for government contracts to a select group of

manufacturers and, where desirable, permit the allocation of contracts to particular firms.

The manufacturers' spokesmen were

not alone in advocating increased powers

for contracting officers. One government

official after another testified in favor of

giving a broader range of discretion to

the Secretaries of War and Navy in the

procurement of aircraft. Even while admitting the danger of favoritism, Assistant Secretary of War D. F. Davis urged

that the proprietary rights of manufacturers be respected and some means

found to give production orders to designers—to help them amortize their experimental costs—without resort to competitive bids.33

 The Assistant Secretary

of the Navy, Theodore Roosevelt, Jr.,

echoed the idea, pointing out that the

statutes governing procurement were de29

 Lampert Hearings, pp. 1236, 1250, 1264. 30

 Ibid., pp. 912-13, 922.

31

 Ibid., p. 2279. 32

 Ibid., p. 833. 33

 Ibid., pp. 659, 680.
PROCUREMENT LEGISLATION, ORGANIZATION, ADMINISTRATION 89

GENERAL PATRICK

signed to preserve the public funds, but

that it would be a poor economy indeed

to preserve the public purse at the expense of adequate aerial defenses for the

nation.34 The Secretary of the Navy was

most emphatic: "The principle of competitive bidding is not adapted to aircraft in the present state of the art."

 35

In light of the unanimity of opinion

among industrialists and federal officials

regarding procedures for aircraft procurement, it is perhaps not surprising

that both the Lampert Committee in

Congress and the President's appointees

on the Morrow Board advocated a drastic and even revolutionary change in the

laws governing the procurement of aircraft. Both groups recommended legislation that would amend the existing

statutes so as to recognize the manufacturer's proprietary interest in his designs

and permit the purchase of air matériel

without competitive bidding. These

were radical proposals in complete defiance of the historic statutory safeguards

on public purchasing, but there was good

reason to believe they would be enacted

when the Sixty-ninth Congress met and

began to consider legislation on aviation

matters early in 1926 since nearly everyone concerned with aircraft procurement

officially or unofficially seemed to favor

the suggested changes.36

The Air Corps Act of 1926

Section 10 of the Air Corps Act of 1926

prescribed an elaborate procedure for the

procurement of aircraft.37 Its first subsections—10a to 10i—provided for design

competitions to encourage the development of aircraft. They required the Secretary of War and the Secretary of the

Navy to advertise in at least three aviation periodicals inviting sealed bids containing not only a graduated table of

34

 Ibid., p. 2345. For an excellent exposition of

why the Air Service wished to place contracts without competition, see testimony of Maj. Gen. M. M.

Patrick, Chief of Air Service, January 27, 1926, in

Hearings before the House Military Affairs Com,

69th Congress, 1st session, January 19 to March 9,

1926, pp. 287-89. 35

 SN to Judge Denison, 17 Nov 25, in Morrow

Hearings, p. 1734. 36

 The Comptroller General was an important exception. Although the War and Navy Departments

had signed an agreement with the Aeronautical

Chamber of Commerce promising to "sustain the

principle of proprietary design rights," he abstained

from ruling on the matter until a specific case came

up. Until he did rule on the question, the agreement of the departments and the representatives of

industry was relatively meaningless. See testimony

of C. L. Lawrence, president of Aeronautical Chamber of Commerce, in Morrow Hearings, p. 1416. 37

 See ch. III, above, for the influence of the act on

air strength.
90 BUYING AIRCRAFT

prices on varying quantities of aircraft

but, in addition, an aircraft design formulated to meet the rather general specifications laid out in the invitation to bid

—or the circular proposal, as it was commonly called. Moreover, Section 10 of

the act specified a technique of evaluation by which a board, acting for the

Secretaries, assigned a figure of merit expressed in percentiles on each feature of

the design.

The design competition feature of the

Air Corps Act was an outgrowth of a procedure favored by Representative McSwain, a most active member of the

House Military Affairs Committee. By

this device the congressman hoped not

only to stimulate the inventive genius of

the country but also to protect the public from abuse. Every phase of the competition was to receive the fullest publicity. To assure the board's objectivity,

its conclusions, expressed as numerical

ratings, were to become a matter of public record and subject to challenge by

losing competitors, who were provided

with formal machinery of appeal. The

design competition, McSwain hoped,

would provide the government with a

means of garnering the best in aeronautical advances without limiting the field

to a few big aircraft firms.

The act was not, however, intended to

impair the established industry for the

benefit of the struggling inventor. Section 10j amounted to a "Buy American"

provision. It stipulated that only nativeowned and native-operated plants would

be eligible for contracts to supply military aircraft. This did not prevent the

departments from taking advantage of

unique advances made abroad. Section

10k, one of the most important of the

act, authorized the Secretaries to purchase aircraft, parts, and accessories for

experimental purposes in the United

States or abroad, with or without competition. The provision gave the Secretaries a power they had long exercised

under a number of legal makeshifts.

Section 10k flatly authorized negotiated contracts in the purchase of items

for experimental purposes, a provision

no one would dispute. In the years to

follow, however, there was a good deal

of discussion about the meaning of the

rest of the subsection, which read: "if

as a result of [experimental procurement]

new and suitable designs considered to

be the best kind for the Army or the

Navy are developed, [the Secretary] may

enter into contract, subject to the requirements of paragraph (j) ["Buy American"] . . . for the procurement in quantity of such aircraft, aircraft parts or

aeronautical accessories without regard

to the provisions of paragraphs (a) to (e)

[relating to design competitions]." The

phraseology would appear to authorize

the Secretaries to give a contract for an

experimental aircraft without competition and then follow it up by signing a

negotiated or noncompetitive contract

with the same manufacturer if it appeared that the experimental contract

had resulted in a superior item desirable

in quantity. This view is reinforced by

the circumstance that although several

provisions of the section are specifically

excluded—Sections 10a to 10e and 10j—

there is no mandatory reference to a subsequent clause requiring competitive bidding under certain circumstances. Had

this interpretation continued to prevail

and had the Secretaries continued to feel

free to negotiate contracts for production
PROCUREMENT LEGISLATION, ORGANIZATION, ADMINISTRATION 91

quantities following an initial experimental contract, many of the difficulties

of the decade before World War II might

have been avoided.

Sections 101 and 10m reflect the deepseated distrust Representative McSwain

felt for negotiated contracts consummated behind closed doors. Section 10l

provided for extensive government audits of contractors' books, so that even

experimental contracts negotiated at the

discretion of the Secretaries would be

subject to public scrutiny as a check

against abuse. Section 10m required the

Secretaries to make annual reports to

Congress revealing the names of all competitors, prices paid, and the like. A provision, McSwain felt, that would provide

"a printed record to be published to the

world," and would stigmatize favoritism

with publicity.38 What McSwain did not

then realize was that Section 101 burdened Congress with an executive function it was ill-equipped to perform.

Section 10q is one of the most difficult

features of the Air Corps Act to understand. On the surface it appeared clear:

in procuring aircraft according to designs presented "prior to the passage of

this act," designs that had been "reduced

to practice" and found suitable, the Secretaries were authorized to negotiate contracts. The subsection, it would seem,

merely permitted the departments to exclude from the mandates of the act those

aircraft developed before the passage of

the act. And so it was interpreted by all

in authority after 1926. There is a good

deal of evidence indicating that Congress

may have had no such limited intent.

During the discussions preceding the

passage of the act, Representative Fred

M. Vinson of Kentucky, who was then

a member of the Committee on Military

Affairs, undertook a detailed, item-byitem analysis of Section 10. In dealing

with 10q, he said: "This section would

authorize the Secretary, when in his

opinion the best interests of the Government would be served, to contract for

quantity production of aircraft upon designs . . . reduced to practice and found

suitable for the purpose intended." He

made no mention of any qualifying

clause "prior to the passage of this act."

Moreover, to show that he visualized 10q

as having general application, he went

on to describe a hypothetical situation

in which a manufacturer builds an aircraft with a markedly superior performance the air arm simply must have. To

advertise for competitive bids on such a

design by the traditional statutes would

be absurd since there would be no guarantee that the low bidder could produce

an airplane matching the performance

of the original sample. Section 10q,

Vinson noted, would obviate this difficulty.39

There is further evidence suggesting

that 10q was intended to confer upon

the Secretaries a continuing power to

negotiate contracts for aircraft previously reduced to practice by manufacturers. Representative McSwain had discussed the provision when it appeared

in his earlier bills. Far from regarding

it as a stopgap applying only to aircraft

designed before the passage of the act,

he described its operation at length, even

to the point of stating that it might seem 38

 House Rpt, 1395, June 7, 1926, to accompany

H.R. 12471, 65th Cong, 1st sess, p. 5. 39

 Cong Rcd, June 29, 1926, p. 12271.
92 BUYING AIRCRAFT

out of harmony with the many safeguards imposed in the other sections of

the act. He declared that he expected

the departments to use design competition as the normal approach to procurement, although he admitted they might

resort to 10k and 10q legally. But, he

added, if the authorities abused the

privilege, he would be "the first man to

rise" seeking to repeal or amend the

act.40 Pledges such as this would be

quite unnecessary had 10q applied only

to those few aircraft designed before

passage of the act, since its applicability

would, under that interpretation, have

expired almost immediately.

All the evidence leads to the conclusion that the framers of Section 10 probably intended to permit the Secretaries

to procure aircraft without competition

when the airplanes represented new designs that had been reduced to practice

by manufacturers and had been proved

superior in actual flight tests. Whatever may have been the intent of Congress, the bare wording of the act itself

clearly limited the application of 10q to

designs presented before July 1926, and

the Secretaries were prohibited from

availing themselves of the powers they

were intended to have. The wording

was unfortunate because it impeded procurement for years to come and inhibited the development of aircraft for military use. Congressmen might be to

blame for this legislative mischance, but

the full text of the act was referred to

the War Department for study, and there

was ample opportunity to discover the

disparity between what the congressmen

said in debate and the way the act actually read. For want of an organization

in the air arm adequately equipped to

deal with legislation, the text of the act

returned from the War Department with

the approval of the appropriate officials.41

There remains to be considered only

one provision of the act. Section 10t

stipulated that whenever the Secretaries

entered into contracts for aircraft, they

were authorized to make the award to

the bidder they determined to be "the

lowest responsible bidder" that could

satisfactorily perform the work required

"to the best advantage of the Government." Only the President and the federal courts could review the decisions of

the Secretaries as to the awards, their interpretations of the provisions of the contracts, and the subsequent administration of the contracts. Section 10t was

revolutionary in that it granted the Secretaries a very large measure of discretion. Not the lowest cash bid but the

lowest responsible bidder won the award,

and the Secretaries were to make the determination free from the hampering

threat of subsequent reversal by reviewing authorities. This was clearly to the

advantage of the air arm and promised

a solution for many of the troubles besetting aircraft procurement in the years

before 1926, provided always, of course,

the incumbent Secretaries were willing

to exercise their discretionary powers.

But in 10t, as in the previous subsections, the officials of the War Department who gave their approval so readily

40

 Cong Rcd, June 10, 1926, p. 11113. See especially, McSwain to Woodhouse, printed in full there.

41

 See, for example, SW Davis to Representative

James, and Chief of the Air Service, Gen Patrick, to

James, June 22, 1926, approving sec. 10; both in

Cong Rcd, June 29, 1926, p. 12278.
PROCUREMENT LEGISLATION, ORGANIZATION, ADMINISTRATION 93

failed to see the significance of one particular word. The act read: "Hereafter

whenever the Secretary of War . . . shall

enter into a contract. . . ."

 42

 Did this

mean in every case? If so, 10t would

appear to conflict with the provisions of

10k and 10q by requiring competitive

bidding. Uncertainty on this point was

to give a handle to subsequent interpretations that inconvenienced the air arm

considerably.

For good or for ill, the Air Corps Act

of 1926 became the basic law of the air

arm and Section 10 determined the forms

of procurement for nearly two decades.

In retrospect, what precisely were the

objectives of Section 10? Perhaps the

best statement of the aims behind the

section were expressed by Representative

J. J. McSwain, the measure's most active

sponsor, as he looked back years later.

His intention, he wrote, was to stimulate

inventive ingenuity in America, protect

the government from the evils of favoritism, protect the government against

unreasonable charges, and ensure the

development of an adequate aircraft industry as a national resource in time of

war.43 Surely all these objectives were

present in the Air Corps Act, but they

were not equally weighted. Price and

performance received more consideration than did the health of the industry,

not so much in the act itself but in the

interpretations that soon grew up around

the act.

Whatever may have been the intention of those who framed the act, its significance stems from the circumstance

that it was, after all, the fundamental

procurement law of the air arm. Regardless of intent or subsequent interpretation, somehow the Air Corps had

to procure airplanes within the terms of

the law as it stood on the books, for until World War II there was no legislation enacted to alter Section 10 significantly. The success of the act hung

largely upon its execution.

The Organization of the Air Arm

for Procurement

A knowledge of the organizations controlling procurement in the air arm is

essential to an understanding of the procurement process. The form or structure of an organization tends to influence

the conduct of the operations it undertakes, and where tours of duty are short

and shifts in personnel are frequent it

is the organization rather than the people in it that provides continuity.

Several agencies were involved in procurement. Under the terms of the National Defense Act of 1920, the Chief of

Staff and the Assistant Secretary of War

occupied parallel positions. Where the

former supervised military matters, the

latter supervised procurement and procurement planning. While the two were

expected to co-ordinate their actions,

each was responsible in his own sphere

and each had equal access to the Secretary of War. The chiefs of arms and

services thus conducted their procurement operations under two heads: they

looked to the Chief of Staff and his general staff sections for supervision in the

42

 Italics supplied by author. 43

 Representative McSwain to President of Aeronautical Chamber of Commerce, 5 Oct 33, app. C in

Recommendations on National Aviation Policy, prepared for Howell Comm by ACC, 12 Sep 34, in AIA

file 19. See also, Cong Rcd, June 29, 1926, p. 12270, as

well as House Rpt 1395 on H.R. 12471, 69th Cong,

1st sess, June 7, 1926.
94 BUYING AIRCRAFT

matter of requirements, both quantitative and qualitative, but they looked to

the Assistant Secretary of War and his

staff for supervision in the forms and

methods of procurement to be employed.44

Supervision by the Assistant Secretary

of War involved a number of steps. It

was his office that drafted and revised

the Army Regulations pertaining to procurement, a contribution of considerable

importance in overcoming the lack of

uniform procedures that had vexed

Army purchasing during World War I.

In addition, his staff worked constantly

to minimize dissatisfaction with the

Army's procurement methods by hearing complaints from bidders and contractors. By reviewing contracts before

approval to ensure compliance with existing statutes and the various regulations of such executive arms as the

Treasury and Labor Departments, the

Assistant Secretary sought to prevent

troubles before they developed. In general, the function of the Assistant Secretary was to ride herd on all those arms

and services performing procurement

functions.45 Insofar as the air arm was

concerned, the Air Corps Act of 1926

altered this arrangement slightly by creating an Assistant Secretary of War for

Air.46 The statute left the duties of this

office undefined, but in practice the incumbent advanced the interests of the

air arm by providing an additional avenue to the Secretary of War.

Thus, from 1926 on, the Chief of the

Air Corps, as the head of one of the procuring arms and services, was the responsible officer who made decisions on matters of air matériel procurement within

the supervisory purview of the Assistant

Secretary and subject, of course, to the

final approval of the Secretary of War.

To assist him, the Chief of the Air Corps

maintained a staff known collectively as

the Office, Chief of Air Corps (OCAC).

Chart 1 suggests the several routes by

which problems confronting the air arm

might be brought to the attention of the

Secretary and illustrates the relative position of the Air Corps in the hierarchy

of the War Department.

The Structure of OCAC

Chart 2 reveals that the staff of the

Office of the Chief of the Air Corps was

organized into functional units more or

less corresponding with those of the General Staff, although the units had different names. In addition, the Air Corps

Board, the Air Corps Technical Committee, and the Procurement Planning

Board, serving as advisors to the Chief

of the Air Corps, were in effect adjuncts

of OCAC even though they did not sit

in continuous session.

In a sense, all the staff divisions of

OCAC worked on planning, but primary

responsibility for over-all planning for

the Air Corps rested with the Plans Division. Among the many projects undertaken by this division, those of particular relevance to procurement concerned

the preparation of war plans—the air

arm aspects of the War Department's

44

 41 Stat 764, sec. 5a, and 5 USCA 182. 45

 The duties of the Assistant Secretary of War

and the Office of the Assistant Secretary are defined

in Army Regulation 5-5. See also the annual reports of the Assistant Secretary for 1937 and 1938

for the OASW role in current procurement. 46

 Act of July 2, 1926, sec. 9 (44 Stat 748), 5 USCA

182a.
PROCUREMENT LEGISLATION, ORGANIZATION, ADMINISTRATION 95

CHART 1—ORGANIZATION CHART SHOWING CHANNELS OF COMMUNICATION

BETWEEN THE SECRETARY OF WAR AND THE AIR CORPS

"color plans"—the formulation of requirements to meet these plans, and the

drafting of legislation as a basis for congressional action in authorizing programs.47

 Although the organization chart

suggests that the Air Corps Board functioned in an advisory capacity to the

Chief of the Air Corps, in practice it

functioned as a service group to the

Plans Division, turning out studies on

doctrine, technical equipment, and policies in general, including many bearing

in one way or another upon the question of procurement.

In matters directly concerning procurement, the Supply Division of OCAC

was the agency of primary concern. In

one form or another and under different

names from time to time, the organization for handling matériel questions in

OCAC always posed a peculiar problem

since the headquarters and all the other

staff divisions of OCAC were in Washington, while after 1926 the staff for matériel was actually located at Wright

Field at Dayton, Ohio, with only a small

liaison section in Washington.48

47

 For a view of Plans Division functions in practice, as differentiated from the role assigned by directive, see R&R, Actg Chief, Plans, to Exec, 23 Aug 38,

AHO Plans Div 145.91-244. 48

 See AAF Hist Study 10, p. 27.

PROCUREMENT LEGISLATION, ORGANIZATION, ADMINISTRATION 97

Just as the Air Corps Board served in

practice as a special adjunct for the Plans

Division regardless of what its directives

might say, so too the Air Corps Technical Committee and the Procurement

Planning Board were closely related to

the functions of the Materiel Division.

Each of these special groups performed

a co-ordinating function of particular

importance. The Technical Committee, with representatives from the Materiel Division reflecting the engineering and manufacturing point of view

and representatives from the Operations

Division defending the user's point of

view, sought to resolve the conflicting

objectives of these groups. The committee's task was to make an acceptable or

workable recommendation for the Chief

of the Air Corps to use as a basis for his

decision on matériel problems.49

The role and composition of the Procurement Planning Board were similar

to those of the Technical Committee,

but there the decisions to be reached

were fiscal rather than technical. The

board's central function was to try to

match the funds available to the aircraft. In short, the board had to compromise the desired with the possible.50

While the Technical Committee and the

Procurement Planning Board did make

recommendations that led to decisions

issued in the name of the Chief of the

Air Corps, the great bulk of the work

relating to procurement came to Washington from the Materiel Division at

Wright Field.

The Materiel Division

The functions of the Materiel Division insofar as procurement was concerned may be explained by considering

its five major sections. (Chart 3)

The operations of the Engineering

Section were fundamental to the activities of all the other branches, for it was

from the various experimental aircraft

and accessories sponsored by this section

that the items subsequently procured in

quantity were ultimately selected. The

staff of the Engineering Section endeavored to keep itself informed about advances in science and technology on

every horizon in order to formulate programs of experimental development resulting in superior air weapons. The

Engineering Section initiated contracts

with industry for the manufacture of

experimental items, prepared specifications to secure uniformity and acceptable quality where standardization was

possible, and tested the prototype models turned out by the contractors. Finally, when users of finished equipment

returned reports of unsatisfactory performance, the Engineering Section

sought to rectify the shortcomings. The

entire Materiel Division was shorthanded in the decade before the outbreak of war, but nowhere was the lack

of skilled officers more acute than in the

Engineering Section. For example, as

late as 1937, there were only four proj49

 AR 850-25, as issued in the years before World

War II, outlined the functions of technical committees for the arms and services generally but left the

mechanics of administration undefined. No analytical history has been written to evaluate the role

of the Air Corps Technical Committee before the

war.

50

 For a discussion of the Procurement Planning

Board, see Memo, Chief, Proc Sec, for Chief, Mat

Liaison Sec, with Incl, 1 Jun 34, WFCF 334.8 Hearing 1935; and testimony of Brig Gen H. C. Pratt,

February 14, 1934, House Hearings on WD appropriations for 1935.

PROCUREMENT LEGISLATION, ORGANIZATION, ADMINISTRATION 99

ect officers in the Aircraft Branch to

monitor all the various aircraft projects

under way at that time.

To the Procurement Section fell the

actual business of conducting the purchasing operations of the Materiel Division. Procurement Section officers

drafted the circular proposals that were

distributed to the aircraft industry. It

was they who drew up the contracts,

checked them for legal sufficiency, and

negotiated with manufacturers over the

terms to be included. If changes were

required in the terms once the contract

had been signed, it was the officers of

the Procurement Section who helped

process the necessary legal papers, and

it was they who arranged for the inspection of the final product before acceptance. In the Procurement Section the

shortage of officers was also chronic. Despite the expenditure of more than

$30,000,000 for air matériel in 1937, to

consider but a single year, there was

only one officer available at Wright Field

to supervise the important function of

inspection. Although there were more

than a dozen officers carried on the Procurement Section roster, most served as

resident representatives in the factories

of manufacturers holding Air Corps contracts and only a few remained at Wright

Field to conduct the involved operations

centering there.

Of the three remaining sections of the

Materiel Division, the Industrial Planning Section, which also played a vital

role in the Materiel Division, will be

treated in a subsequent chapter.51 The

Field Service Section performed the supply and maintenance services of the air

arm and thus is of marginal interest save

insofar as the section initiated the purchase of spare parts, supplied information on requirements, and compiled the

unsatisfactory reports that influenced the

procurement process. The last section

of the division to be accorded the status

of a major unit was the Patent Liaison

Section, a designation that is misleading

since the staff of the section generally

consisted of only one officer from the

Judge Advocate General's Department.52

All five sections of the Materiel Division were located at Wright Field, an

elaborate air base consisting of landing

fields, hangars, workshops for handling

maintenance and housing tests, laboratories for conducting research and development work, and offices containing

not only the files of contracts and related correspondence but complete sets

of specifications as well. A summary of

the paper work turned out at Wright

Field during 1938 indicates the scope of

the administrative functions carried on

by the division: over 63,000 copies of

specifications were printed during the

year for distribution to manufacturers;

53,000 engineering change notices were

mailed to contractors; nearly half a million pages were prepared to keep the

Status of Equipment Book ever current,

and the division's big machines turned

out three miles of blueprints, for the

most part consigned to manufacturers at

work on contracts covering aircraft or

accessories for the War Department.53

51

 See ch. VII, below.

52

 The three preceding paragraphs are based on

the following: Mat Div GO 6, 9 Dec 36, and Chief,

Mat Div, to CofAC, 5 Nov 37, AHO Plans Div 145.91-

391.

53

 Annual Rpt of Mat Div, draft copy, 27 Aug 38,

WFCF 321.9 Annual Rpt 1938.
100 BUYING AIRCRAFT

WRIGHT FIELD, 1935, BEFORE EXPANSION

Procurement of air matériel involved

three echelons between the Secretary of

War on the one hand and the manufacturer who actually fulfilled a contract

on the other. Each of the three—the

Assistant Secretary and his staff, the

Chief of the Air Corps and his staff,

and the Chief of the Materiel Division

and his staff—constituted a clearly defined administrative entity, different in

location and personnel. Concerning the

organization of these three echelons there

need be no confusion, but the definition

of their functions is by no means so simple. The exact line of demarcation between the three was not always clear.

Where duties were assigned by statute—

as for example in the Air Corps Act of

1926, which required the Secretary of

War to approve contracts purchased under its terms—there was no confusion,

but where no statutory provisions were

present there was a good deal of uncertainty and overlapping. Acute problems

of co-ordination and command appeared

on every hand to complicate procure-
PROCUREMENT LEGISLATION, ORGANIZATION, ADMINISTRATION 101

WRIGHT FIELD, 1942, SHOWING EXPANSION OF FACILITIES

ment operations as officers in each of the

several echelons tried to perform their

duties.

Problems of Co-ordination

and Command

One of the most important misunderstandings that troubled procurement op

erations grew out of the failure of air

arm officers and general staff officers to

reach a meeting of minds on doctrine

regarding the tactical and strategic employment of air power. So long as there

was an Assistant Secretary of War for

Air, the air arm could count on ready

access to the department head, regardless of the attitude of the General Staff.

While this had certain advantages, it suffered the disadvantages of channeling

problems past the Chief of Staff rather

than through him—and problems he did

not handle he could scarcely be expected

to appreciate, let alone solve.54 The

54

 For a discussion of the problems in command

raised by the existence of an Assistant Secretary of
102 BUYING AIRCRAFT

decision of President Roosevelt in 1933

not to appoint an Assistant Secretary of

War for Air terminated the uncertainty

in the chain of command induced by the

existence of this official, but almost immediately a new dilemma appeared.

During 1935 the War Department established the General Headquarters Air

Force, which, in the minds of the airmen if not to all others in the Army,

was to constitute a great concentrated

striking force of strategic air power at

the disposal of the high command. Even

if this force turned out to be something

less than great, and even if there were

no complete accord in the matter of doctrine, there could be no denying the

importance attached to the quality of

the aircraft procured to perform the special functions of this striking force. In

such a situation there was need for the

most proficient co-ordination possible between the users (the GHQ Air Force)

and the suppliers (the Air Corps). Despite this obvious need for co-operation,

the War Department created the GHQ

Air Force not as a subordinate section

of the Chief of the Air Corps but rather

as a virtually independent command reporting directly to the Chief of Staff.

There were many reasons for making

this arrangement, but none of them obviated the difficulties in the procurement

process that resulted from the separation

of users and suppliers.55 Since the only

authoritative channel between the two air

arms lay through the Chief of Staff, and

since the airmen often believed this official to be unappreciative if not actually

hostile to their concepts of air power,

they regarded the arrangement as highly

unsatisfactory. The experience of World

War I, when the users, represented by

the Division of Military Aeronautics,

and the suppliers, represented by the

Bureau of Aircraft Production, were

similarly separated, gave ample evidence

of the need for closer co-ordination than

the existing organization could provide.56

The problems of co-ordination and

command that disturbed the functioning of the air arm were by no means all

external to the Air Corps itself. One of

the most difficult questions, one that appeared again and again, was the matter

of the relationship of the Washington

headquarters to Wright Field—the relationship of OCAC to the Materiel Division. For the first ten years after the

passage of the Air Corps Act in 1926,

the Materiel Division functioned on a

bureau basis as an organic part of the

Washington headquarters, though physically located in Ohio. A small liaison

staff remained in Washington to handle

papers for the remote division, but this

staff was a service agency only.

During 1935 and 1936 criticism of the

prevailing arrangement led to the creation of a Supply Division in OCAC as

the primary advisory agency on matériel

for the Chief of the Air Corps. This

removed the Materiel Division from its

War for Air, see testimony of Chief of Finance et al.,

in House Hearings on WD appropriation for 1935,

January 26, 1934, pp. 59-60, 465-66, and Senate Hearings on same, March 12, 1934, pp. 27-28, as well as

Baker Board Report, p. 66. 55

 For a discussion of the various factors influencing

policy regarding the chain of command for GHQ Air

Force, see AAF Hist Study 10, passim.

56 The precedent from World War I is treated at

length in Holley, Ideas and Weapons, Chapter IV.
PROCUREMENT LEGISLATION, ORGANIZATION, ADMINISTRATION 103

CHART 4—COMPOSITE ORGANIZATION CHART SHOWING THE AGENCIES PRIMARILY

CONCERNED WITH AIR MATÉRIEL PROCUREMENT IN THE TWO DECADES

AFTER THE AIR CORPS ACT OF 1926

position as the advisory staff for the air

arm on matériel matters and led to the

anomalous situation in which the Chief

of the Supply Division in Washington,

a major, exercised more power and made

more decisions than did the Chief of the

Materiel Division, a brigadier general,

at Wright Field. (Chart 4) After a

year of this system, the Chief of the Materiel Division moved to Washington to
104 BUYING AIRCRAFT

assume his rightful role as primary adviser on air matériel matters, retaining

both the Supply Division in Washington

and the Materiel Division in Ohio with

somewhat duplicating functions and a

good deal of uncertainty regarding the

exact responsibilities of each.57

As though the relationship of the Materiel Division to OCAC were not a sufficiently complex problem in itself, in the

mid-thirties a General Staff directive

complicated the matter still further by

ordering the Chief of the Air Corps to

reactivate the Air Corps Technical Committee, which had been allowed to fall

into disuse. The prevailing Army Regulation on technical committees for the

arms and services in general left the precise powers of the committees vague and

ignored the special circumstances raised

by the widely differing organizations

upon which such committees were imposed. The new Air Corps Technical

Committee was to begin operations by

confronting the Chief of the Air Corps

with an interesting problem in command: he had to determine between the

relative merits of the recommendations

of the Technical Committee on one

hand and the Materiel Division on the

other.58

As a result of organizational uncertainty and instability, the system for procurement was forever in flux. Officers

were so occupied accustoming themselves

to new administrative arrangements that

they found little opportunity to perfect

the operation of the minor mechanics

in the procurement system. The whole

procedure for procurement never really

became a well-oiled routine. This situation was further complicated by the

high rate of turnover in personnel. To

acquire only the barest rudiments in the

extremely technical area of administration involved in monitoring an experimental engineering program, conducting

aircraft design competitions, and negotiating contracts requires long years of

training and experience. Rapid turnover in personnel militated against the

training of a highly proficient staff of

procurement specialists save where civil

service employees supplemented the military staff.

Even if the philosophy implicit in the

Army practice of assuming that assignment confers competence is correct, it

must be recognized that the individual

officer assigned to procurement duties,

competent though he may have been,

found the frequent shifts in organization

confusing. And, as a result, few officers

could be expected to understand the full

implications of the operations they conducted. Thus, despite the well-nigh continual search for improved organization

and administration that marked the

growth of the Air Corps in the decade

before the war, there remained a number

of inadequacies in the staff.

Some Staff Difficulties

Perhaps no single shortcoming of the

air arm was more crucial than its apparent inability to handle legislation advantageously. And the formulation of

legislation, whether seeking enlarged appropriations or a revision in the statutes

57

 AAF Hist Study 10, pp. 55-58. 58

 TAG to CofAC, 24 Oct 36, AFCF. See also AC

Project Rcds, folder 18, Policies, Procedures and Organizations Governing Supply Functions of the Mat

Div (Lyon Papers).
PROCUREMENT LEGISLATION, ORGANIZATION, ADMINISTRATION 105

governing purchasing, was of central significance to procurement.

Among the several staff divisions of

OCAC, the Information Division might

be expected to have played an active

part in handling legislation for the Air

Corps. It did not do so. The Information Division, as its name suggests, was

an office for handling information, not

for evaluating it. The use of the word

information in place of intelligence in

the division title is highly significant.

The Military Intelligence Division of

the General Staff, G-2, fought vigorously in the between-war years to prevent any encroachment upon its functions by the arms and services. For this

reason OCAC never developed an agency

to perform the intelligence function in

the fullest sense of the word. As a consequence, the Information Division did

little concerning legislation but maintained a reference file of current bills

and reports. There was no effort to provide the air arm with strategic and tactical intelligence concerning the highly

important battles on Capitol Hill. At

best, the Information Division before

the war was scarcely more than a public

relations office and a convenient reference library for OCAC.59

 In general,

all questions of legislation were referred

to the Plans Division for consideration.

No single unit of OCAC was more

important than the Plans Division.

Upon the division's officers hung responsibility for much of the creative planning for the air arm. Unfortunately,

the division also suffered from the usual

shortage of personnel—as late as 1938

there were only four officers assigned to

this vital activity.60

There were able officers in the Plans

Division, but ability alone was no substitute for effective procedures in handling problems. Especially was this

true in the involved business of legislation. Plans officers themselves were

aware of the deficiencies in their office

routine for dealing with legislation.61

They realized that some sort of system

was essential since the number of bills

churned out by a single Congress was

often staggering. In one session, for

example, Plans officers found themselves

confronted with more than 140 bills to

study, and, where the bills moved forward, they had committee reports and

amendments in the House and Senate

to watch with care and report upon.62

Plans Division officers tried to formulate standing operating procedures for

use in processing legislation, but there

were no real specialists in the subject.63

In general, work on legislative matters

was just an additional duty. When confronted with highly technical problems

such as the legal aspects of procurement,

Plans officers tended to look about for

experts on whom to rely. In the matter

of legal questions, with which procurement legislation abounded, perhaps not

unnaturally the Plans officers turned to

the lawyers most readily available, officers with commissions in the Judge Advocate General's Department assigned to

59

 AAF Hist Study 10, p. 26.

60

 Ibid., pp. 36-38. 61

 Memo, Actg Chief, Plans Div, for CofAC, 28

Dec 35, AHO Plans Div 145.91-31. 62

 Memo, Chief, Plans Div, for CofAC, 26 Nov 35,

AHO Plans Div 145.91-31. 63

 OCAC Office Memo, 10-27, 18 Feb 36, AHO

Plans Div 145.91-30.
106 BUYING AIRCRAFT

the Patent Section of the Supply Division or the Materiel Division. The opinions rendered by these patent lawyers

on the legal points raised in pending

legislation on procurement, as one might

suspect, frequently tended to be highly

technical, narrowly defined, and legalistic. Without in any way disparaging

the talents of the lawyers, their outlook

was extremely cautious and, as the subsequent discussion of procurement legislation shows, the interests of the air

arm were at times adversely affected as

a result. Opinions legally sound might

satisfy a judge but they leave a congressman unmoved. For want of legislative

specialists, air arm legislation suffered.

There were civilian specialists on procurement at Wright Field, men widely

familiar with the intricacies of procurement legislation, but Wright Field was

far from Washington. When the Plans

Division found it necessary to report on

a measure before action by Congress,

often there was no time to refer the matter to the trained staff at Wright Field,

and Plans officers had to act as best they

could with commensurately inadequate

results.64

The net result of these several circumstances was to leave the Plans Division

a faulty instrument for dealing with legislation, especially procurement legislation originating outside the Air Corps.

Throughout the prewar years there was

an elaborate administrative hierarchy

extending on down from the Secretary

of War to guide procurement, but for

all the achievements of these tiers of

agencies, they were weak in at least one

vital respect: they failed to establish

adequate devices to deal with the essentially political problems underlying the

procurement of air matériel. This circumstance made the tasks of procurement officials immeasurably more difficult.

The Administration of Procurement

An Air Corps study prepared in the

mid-thirties, in an elaborate chart purporting to trace the exact formalities

that resulted in the procurement of aircraft in quantity, described the chain of

events that led from the idea for an aircraft to the finished product.

First, a tactical unit initiated a request for a new item of equipment. The

request was then studied by the Air

Corps Board, where the idea was considered in terms of its relationship to

doctrine. On the basis of this analysis,

the Air Corps Technical Committee

propounded a statement of military

characteristics—desired attributes such as

speed, load, range, armament—which the

committee sent to the General Staff for

approval. If the General Staff found

the proposed statement of military characteristics acceptable and within the

scope of official Army doctrine, the approved paper was returned to the Technical Committee, where a development

project was officially set up and the Engineering Section of the Materiel Division was authorized to procure a design

either by direct purchase or by holding

a design competition as prescribed in

Sections 10a-10i of the Air Corps Act.

If the resulting design was approved by

the Technical Committee, the Engineer64

 See, for example, the action of OCAC on S. 215

(the Logan Bill), 74th Cong, 1st sess, WFCF 334.8 and

032, 1935. passim.
PROCUREMENT LEGISLATION, ORGANIZATION, ADMINISTRATION 107

ing Section proceeded to purchase an

experimental item with the assistance of

the Procurement Section. If tests by the

Engineering Section showed the experimental item to be acceptable, it was

approved for trial. Then, if the General Staff and the Assistant Secretary of

War gave their assent, the Procurement

Section prepared a contract for a service

test quantity, that is, the number of aircraft deemed necessary to secure an adequate test of tactical suitability in the

field. This number ranged from three

or four to a full squadron of thirteen or

more depending upon the type of aircraft and the novelty of its design.

When the tactical unit in the field completed its service test, its recommendations went to the Technical Committee

where, if the evidence warranted, a decision was made to recommend the aircraft for standardization, another way of

saying that the committee recommended

the aircraft for purchase in quantity.

If the General Staff and the Assistant

Secretary of War approved, the Engineering Section recorded the design in

its book of standards and, when funds

became available, the Procurement Section proceeded to procure in quantity.

The elaborate ritual described may

look very official and impressive, but it

is doubtful if any airplane ever followed

the route there prescribed. The specified procedure, like most complicated

prescriptions, does not reflect reality. It

is at once too simple and too complex.

It does not begin to show the many concurrences and authoritative approvals

required at stages along the way. The

purchase of an experimental item was

never a simple matter between the Engineering and Procurement folk at Wright

Field. With a formal development directive in hand from the Technical

Committee, it was still essential to secure the approval of a number of other

officials such as the budget officer.65

And even after a contract had been negotiated, it did not become valid until

forwarded to the Chief of the Air Corps

who, by law, had to secure the approval

of the Secretary of War.

On the other hand the route set forth

in the Air Corps study is idealized and

unrealistic in that it prescribes a procedure far too regular and stereotyped.

In practice many of the steps were

omitted. The functions assigned to the

Technical Committee, for example, were

often taken over by the Chief of the Air

Corps relying upon advice from the Materiel Division, and more often than not

ideas for new aircraft originated elsewhere than with the tactical units.66

Yet, for all of these discrepancies, the

study illustrates clearly, if perhaps imperfectly, how much emphasis air arm

officials placed upon authorization and

co-ordination.

Procurement officials, living always in

the shadow of congressional investigation, were particularly insistent upon

getting formal authorizations and approval of their decisions by higher authority. They were equally zealous in

co-ordinating with all appropriate agen65

 See, for example, Actg Chief, Mat Div, to CofAC,

16 Mar 35, WF Proc and Contract files, 360.01. See

also, Materiel Division study concerning development, standardization, and procurement planning . . .

[1936], AF Documentary Reference and Research Br,

document file, Doc 13/US/14. 66

 For a rather different version of the route from

idea to aircraft, see Mat Div Bull No. 30, 30 Aug 35,

AF Doc Reference and Research Branch doc file,

Doc 13/US/11.
108 BUYING AIRCRAFT

cies. Co-ordination, as any staff officer

knows, all too often means getting a signature scratched upon a document even

though the signer has little idea of its

contents. Officials concerned with procurement repeatedly issued directives

perpetuating and even enlarging the

practice since officers in each echelon

hoped to spread responsibility as broadly

as they could and if possible shed it entirely either up or down the line in the

event of a kickback.

Some of the required co-ordinations

and approvals were entirely necessary,

but whether they resulted from necessity

or from a desire to provide self-defense,

the number of steps in the processing of

paper work for procurement seemed always to grow greater. As a result, the

already inherently complex pattern of

procurement tended to consume increasingly longer periods of time between the

inception of a design and the day when

it reached mass production.

By the end of 1937 the average time

lapse between idea and aircraft was five

years. At least six months went into the

formulation of specifications for an aircraft desired to meet a particular tactical need. One or two years more passed

during the development of an experimental item for evaluation, which was

itself a time-consuming process. Service

tests by tactical units often required another six months to two years, and at

every step in between these operations

there were delays of greater or lesser

duration as papers shuttled through the

in and out baskets at each staff echelon.67

Five years was only an average figure.

Actually, the elapsed time varied widely

depending upon the particular form of

procurement involved, for the time required to conduct a formal design competition was obviously far greater than

that required to buy an aircraft already

perfected by a manufacturer and available for purchase on a sole source basis.68

One prolific source of delays lay in

the change orders frequently encountered in contracts for experimental aircraft. When in the course of such a contract the manufacturer devised changes

in design or construction that improved

the product, the government's interest

was clearly served if the improvement

could be incorporated, regardless of the

specifications. But who was to pay for

such modifications? While the contractor was always anxious to improve his

product, there was a limit on the number of changes he could undertake

without running his costs above the

price set in his contract. Where air arm

officials felt the proposed modification

was not only desirable but essential, they

would consent to a change order that

virtually amounted to an amendment of

the contract, providing for agreed upon

increases in the manufacturer's compensation to cover the cost of the variation

over the original specification.

Air arm officers believed that contractors abused the change order privilege

on occasion. A contractor could bid

low in his initial response to a circular

proposal, then, having won the contract,

he could proceed to recoup the losses

inevitable on his low bid by persuading

67

 CofAC, Lecture, Current Procurement and Allied Problems, Army Industrial College, 11 Dec 37,

ICAF files.

68

 ESMR 50-101, 31 Oct 34, WFCF, 008 Policy:

Procurement.
PROCUREMENT LEGISLATION, ORGANIZATION, ADMINISTRATION 109

procurement officers to allow him a number of change orders each with its allowance of increased compensation. To offset the temptation presented by this

possibility, the officials who negotiated

change orders surrounded them with

nearly all of the elaborate procedures

of a contract itself. Since a change order involved an expenditure of funds,

approval of the highest echelons of authority was required. The net result

of all these formalities was an increase

in the time between the signing of an

initial contract and the delivery of the

first item. But paper work, the necessity of securing formal approval and the

desired co-ordination, was not the only

cause of delay growing out of change

orders. There was an element of delay

inherent in the negotiation itself. Procurement officers were particularly on

guard against the efforts of manufacturers to increase prices unduly by this

backdoor route, and in pursuit of this

end they ran headlong into manufacturers with precisely the opposite intention.69

 Since anticipated costs in any

proposed modification were hard to estimate, the negotiators for the two different interests were sometimes completely unable to agree upon a figure.

Meanwhile, precious time sped past and

the gap between idea and completed aircraft grew larger and larger.

The gap between drawing board and

flying field may not have been of critical importance in peacetime, but in war

victory might hinge upon an ability to

reduce the span appreciably. The nation that can create new aircraft rapidly

and then inject modifications on the assembly line with a minimum of delay

and confusion obviously has the advantage. Insofar as procurement officials

delayed the process of modification by

encumbering it with legalistic requirements and formalities, they set up stumbling blocks that would one day have

to be removed when the nation went to

war. The rigid time-consuming contractual formalities that grew up in peacetime were utterly unsuited for the demands of war.

At best, the progression from idea to

aircraft was a difficult journey. It would

have been difficult in a long-established

organization where each office was

manned by highly skilled specialists with

years of experience. How much more

involved the task must have been in an

organization where the very form of the

structure as well as the rules of the game

seemed to be in an almost continual flux

and the officers in charge were subjected

to rotating tours of duty. In spite of

this serious handicap, the procurement

staff at Wright Field did manage to

hammer out a number of highly effective operating procedures, most notably

those that made possible an objective

evaluation of aircraft and aircraft designs submitted by rival manufacturing

concerns.

In perfecting administrative tools to

assist in the selection of superior equipment, Air Corps officers had a number

of historic precedents on which to draw.

As far back as 1907, when the Signal

Corps called for bids on its first airplane,

69

 For an interesting example of a manufacturer's

attitude on change orders, see testimony of J. L.

Callan, January 28, 1925, in Lampert Hearings, p.

1499ff. For restrictions placed on the free use of

change orders, see AC Policy 133 in Digest of Policy,

9 Apr 37, AFCF 161. See also, CofAC to Chief, Mat

Div, 13 Dec 35 and 23 Mar 36, AFCF 161.
110 BUYING AIRCRAFT

there was a substantial problem of evaluation.70

 Air officers acquired a great

deal of experience over the next thirty

years, and by the end of the 1930's they

could boast of a system that went far

toward fulfilling the ideal of objective

evaluation.

The first step in the formal process of

evaluation was the appointment of two

or three separate boards of officers. The

first, composed of pilots, put each airplane entered in competition through

a series of tests to determine its maximum performance: speed, rate of climb,

service ceiling, endurance, and so forth.

The second board was composed of engineering officers who studied each aircraft in competition from the standpoint

of engineering and design. They reported on the features that favored ease

of maintenance or simplified engine

change, on the relative ease with which

each airplane in competition might be

put into mass production, and so on.

The third board, made up of officers

from tactical units, evaluated the entrants in terms of their suitability for

the specific tactical function expected of

them. A transport, for example, would

be expected to excel in load-carrying

capacity, whereas a fighter might be

judged more heavily on high speed and

maneuverability. Sometimes both performance and engineering features were

evaluated by the same board, but the

characteristics evaluated remained as described above.

In a contest amongst a number of airplanes, absolute objectivity in the selection of the best is no doubt unobtainable. The use of three separate boards,

each with different personnel, made possible, however, the virtual elimination

of errors stemming from an improper

relationship between an officer and a

manufacturer. Not only did the number of members on each board dilute

the importance of any individual member's contribution, the very existence of

three separate boards, each representing

a different point of view, served to subordinate further the ultimate importance

of any single member. Moreover, the

boards were not generally appointed until a short time before the actual evaluation, thus reducing the period during

which any very purposeful influencing

might be attempted by the manufacturers.

Once satisfied that the system of multiple boards provided sufficient safeguards against collusion, procurement

officials took further steps to perfect the

operation of the boards themselves.

With the best of intentions, sincere but

inexperienced officers might unwittingly

blunder in their evaluation and selection unless guided by a standing operating procedure especially contrived to

ensure the highest possible degree of

objectivity. Such a procedure actually

had been fashioned by the middle thirties. To begin with, each board was required to submit a formal memorandum

report on its findings. These staff papers, following a prescribed format, were

in themselves a strong incentive to objectivity since they required that all con70

 The Army's first airplane specification issued

23 December 1907, is found in Charles deForest

Chandler and Frank P. Lahm, How Our Army Grew

Wings (New York: The Ronald Press, [1943]), pages

145-61 and Appendix 6. For an interesting comparison with British techniques of evaluation, see Army

Military Airplane Competition, 1912, Report of

Judges Committee. (A command report available in

the Library of Congress.)
PROCUREMENT LEGISLATION, ORGANIZATION, ADMINISTRATION 111

elusions be deduced from facts presented

as evidence in the body of the report.

In addition, each board had to use a

prescribed formula by which each item

in competition could be graded by a

system of points ranging down from a

maximum of 1,000. For all those characteristics subject to exact measurement,

the formula provided a precise conversion into points. For features not susceptible to exact measurement, the board

had to assign points arbitrarily. This

was not entirely objective, but, since

each assignment so made had to be fully

justified in the final report in relation

to the other competitors, the opportunity for gross injustices in the award of

points was substantially minimized.71

In practice, understandably enough,

the evaluation of aircraft in competition

often fell somewhat short of the ideal

pattern prescribed. Records of the Materiel Division reveal that many of the

boards appointed to appraise aircraft fulfilled the provisions of their directive

imperfectly and incompletely. Many of

their omissions were undoubtedly attributable to inexperience. Some were the

fault of the system itself. For example,

the board conducting the engineering

phase of the evaluation procedure was

required to assess the aircraft at hand in

terms of its adaptability to quantity production. With one eye cocked on the

ever-present possibility of war, this provision made sense. But what did the

board regard as mass production? Was

it a dozen units or 50 or 500? Moreover, the board evaluated the aircraft

itself, not the manufacturer. Was he

equipped with tools and talent, with

capital and all the other essentials of

mass production? These the boards ignored in making their evaluation even

though the Air Corps Act explicitly authorized the Secretary of War to reject

any bid if it served the public interest

to do so, and an award to a manufacturer unable to produce his winning aircraft in quantity clearly fell within this

discretion.

The operation of evaluation boards

in the prewar years was indeed imperfect; nevertheless, to minimize the importance of the system for objective

evaluation would be a grave error. The

real significance in the formulation of a

technique for the impartial determination of winners in a competition did

not lie in the promotion of honesty and

the defeat of favoritism, though these

achievements were certainly significant

in themselves. Rather, the greater accomplishment lay in the circumstance

that the operation of boards tended to

free the selection of aircraft from the

caprice of command. Subjective selection is no more valid when ordered by

men with the full powers of high command than it is when ordered by illtrained underlings. The procedure for

objective evaluation evolved within the

air arm made it difficult for responsible

officers in the highest echelons to act

otherwise than objectively. To be sure,

they could overrule a board's decision,

but to do so without ample reasons in

support was to invite criticism and even

congressional investigation—an outcome

many officers regarded as the ultimate

in disaster.

71

 For an account of evaluation procedures, see

Mat Div Bull No. 31, 29 Aug 36, AF Doc Reference

and Research Br doc file, Doc 13/US/13.
112 BUYING AIRCRAFT

To appreciate fully the significance of

a system that went far toward freeing

the air arm from decisions made on the

whim of individual commanders, one

has only to turn to the record of those

who have operated without such a system. In this connection the records of

McCook Field, the old engineering center of the Air Service before 1926, are

both amusing and meaningful.72 Selection of airplanes seems to have been colored if not dominated by what might be

called the joy stick approach of General

Mitchell. Still flying in the romantic

tradition of World War I or, as oldtimers would proudly say, by the seat of

his pants, the ever-enthusiastic General

Mitchell would leap out of an experimental aircraft, pronounce it a "hot

ship" and urge its immediate procurement.

Perhaps an even more telling example

of the catastrophe that might follow

when the selection of weapons depends

upon the will of individuals in high

command is the notorious example of

the Nazi state during World War II.

When Hitler relied upon bare intuition, in reaching vitally important engineering decisions, as he did, for example,

in the production of jet fighter planes,

disaster followed. Interference of this

sort became, as General Henry H. Arnold

later declared, a secret weapon highly

advantageous to the enemies of Germany.73

Without question, the procedures

evolved by the air arm to ensure an impartial selection of aircraft played a most

important part in assuring the all-around

superiority of the weapons chosen.74

But these and the many other techniques worked out by Air Corps officers

were not achieved without heartbreaks

and trial and error extending over many

years.

72

 The old McCook Field records of the engineering center are now filed in a body along with the

retired section of the Wright Field Central Files

cited herein as WFCF.

73

 Henry H. Arnold, Global Mission (New York: Harper & Brothers, 1949), pp. 496, 516. See also,

F. D. Graham and J. J. Scanlon, Economic Preparation and Conduct of War under the Nazi Regime,

Div WDSS, 10 Apr 46, as well as Military Intelligence Division (MID) reports of 8 and 14 Jun 45 by

Captured Personnel and Materiel Branch, OCMH. 74

 For a rather full account of the steps in negotiating a contract, see testimony of General Pratt,

House Hearings on War Department appropriation

for 1935, February 4, 1934, pages 482-89.
CHAPTER V

Procurement Under the Air Corps Act

Procurement: 1926-34

The Air Corps Act of 1926 contemplated three normal methods of procurement. First, there was the design competition leading to the purchase of one

or more aircraft constructed according

to the winning design as prescribed in

Sections 10a to 10g of the act. Second,

there was the provision for experimental

contracts in Section 10k, which permitted the Secretary of War to buy any

experimental aircraft at his discretion

without competition. Finally, Section

10t required competition where aircraft

were to be procured on grounds other

than those mentioned above, but allowed the Secretary to exercise discretion

in determining "the lowest responsible

bidder." Still another section, 10q, authorized procurement without competition, but the stipulations of this section

were assumed to be of a temporary character applying only to aircraft already

reduced to practice from designs presented before the Air Corps Act was

passed in 1926.

The normal procedure for procurement contemplated by Representative

McSwain and others who helped formulate Section 10 of the Air Corps Act

called for the use of the design competition. When the Army needed aircraft

it would send out circular proposals asking for the submission of designs. When

the designs had been evaluated and a

winner selected, a contract could be

awarded for the production of a single

unit to test its adequacy in practice. If

subsequent service tests of a small number of units proved the aircraft satisfactory in the field, a large production order

might follow. Occasionally, a manufacturer might present an idea that air

arm officials considered to be of sufficient interest to justify immediate procurement, without holding a design

competition. For such situations, Section 10k, authorizing purchases to be

made at a negotiated price without competition, provided a legal basis for action.

Whenever air arm officers found that

neither the design competition nor the

experimental contract clauses suited the

problem at hand, they could resort to

Section 10t.

Unfortunately for the air arm, procurement operations conducted "by the

numbers," following the apparent intent

of the law as expressed by its framers,

did not attain the results desired. In

practice the idea of design competition

proved unworkable, for it yielded nothing more tangible than a paper promise

to perform. When circular proposals

went out inviting bids on a certain type

of aircraft, a whole flood of replies returned to Wright Field. Inexperienced
114 BUYING AIRCRAFT

designers were more than willing to

dream up aircraft alleged to possess the

most superlative flying qualities and performance capabilities—as yet unattained.

Until a physical sample or experimental

airplane could be built around the winning design there was no telling whether

the evaluating board had picked a leader

or a lemon. If they chanced to choose

a lemon, a great deal of money and time

had to be spent before the error could

be confirmed.1

There were other flaws in the concept

of a design competition. The time allowed for replies to a circular proposal,

a few months at best, prevented manufacturers from working up realistic plans

to accompany their bids. The winning

design generally had to be worked out

in detail after the original bids had been

returned. Actual costs usually outstripped the estimates initially submitted,

since the bidders had little or no detailed data on which to base exact price

figures. As a consequence, manufacturers usually lost money on airplanes

evolved from design competitions.

Since the design competition was unworkable, there was only one thing to

do: abandon the use of Section 10a to

10g in favor of the authorizations contained in 10k or 10t, even though this

had not been the intent of those who

framed the Air Corps Act. Procurement

officers began to purchase experimental

airplanes under the authority of Section

10k, which is to say, the Air Corps

simply contracted for a finished experimental airplane at a negotiated price.2

But here lay a new source of trouble.

While the negotiated contract resulted

in the purchase of a successful airplane

more often than did the design competition, manufacturers still lost money. In

their zeal to get the air arm to contract

for an experimental item they deliberately bid below cost in the hopes of putting such a desirable product in the

hands of Air Corps officers that a quantity order would soon be forthcoming.

But unlike the provisions of the law

that authorized the award of contracts

for airplanes in quantity to the winner

of a design competition without further

advertisement, Section 10k only authorized the purchase of experimental airplanes. The section made no mention

of quantity procurement. Whenever the

Air Corps wished to procure airplanes

in quantity, the language of Section 10t

clearly called for competition by means

of a new circular proposal and a new

evaluation. In following this procedure

there would be a strong possibility that

a manufacturer other than the designer

would submit the low bid and win the

contract.

The use of Section 10k to authorize

procurement of experimental airplanes

followed by the use of Section 10t to authorize procurement in quantity would

thus threaten to return the whole question of air matériel procurement to the

chaotic and undesirable situation of the

period before 1926. If designers were

to lose money on experimental aircraft

and then be denied an assured oppor1

 Maj Leslie MacDill to Chief, Mat Div, 13 Dec 29,

WFCF 008 Proc.

2

 ESMR 50-12, 17 Feb 32, Present Air Corps Policy

Concerning Procurement of Experimental Articles,

WFCF 008 Proc.
PROCUREMENT UNDER THE AIR CORPS ACT 115

tunity of recouping their losses with a

production order because of the possibility that a rival firm might underbid

them, would they be any better off after

the passage of the Air Corps Act than

they had been before? Manufacturers

foresaw the threat and protested.3

Judge Advocate General officers in

both th did not sanctio e Armyn an the awar d Nav d of con y agree - d that 10 

tracts for airplanes in quantity without

competition.4 On the other hand, they

were inclined to believe that the prohibition on the use of 10k to authorize

quantity procurement need not result in

such disasters as the manufacturers predicted. After all, they contended, Section 10t granted discretion to the Secretaries of War and Navy. One advisor

felt that the very intent of 10t was to

dwarf price as a factor in making the

award.5 Another was equally explicit in

pointing out that the Secretaries were

empowered to consider such factors as

quality and the need for an adequate industrial preparedness in addition to low

bids.6 By taking advantage of factors

other than price, the military lawyers

felt, awards under 10t could be made to

the designer even when his bid was not

the lowest submitted. No doubt this

was sound law, but it turned out to be

faulty practice; as one manufacturer put

the matter, a Secretary would have to

display "an extraordinary amount of

courage" if he were to exercise his discretion and award a contract to other

than the low bidder.7

Manufacturers were not the only ones

to protest the possible use of the narrow

interpretation of 10t, which emphasized

price.8 Administrative officers within

the departments also deplored the tendency. One naval officer bluntly charged

that the Secretaries studiously avoided

the use of 10t for quantity procurement

of aircraft because the "political consequences" made the exercise of discretion

required by 10t "intensely distasteful on

personal grounds."

 9

In short, regardless of what the law

said, administrators did not award quantity contracts on grounds other than low

bid because they feared political criticism. With good reason, manufacturers

protested that they were heading back

toward evil days such as those before

1926. Fearing that they might not win

production contracts to amortize their

losses from experimental work, prudent

firms began to doubt the wisdom of accepting any military contracts for experimental projects.10

 Without willing

3

 See, for example, C. M. Keys to Representative

Carl Vinson, 31 Jan 27, cited in Pickens Neagle to

Vinson, 5 Feb 27, photostat copy in JAG (Army) Gen

Rcds Sec, 400.12, 11 Nov 35. 4

 See Memo, Col J. I. McMullen, JAGD, 8 Nov 26, and Memo, Lt M. E. Gross for Maj Gen J. A. Hull,

JAG, 10 Nov 26, both in JAG (Army) Gen Rcds Sec 400.12 Proc, 17 Nov 26; JAG (Navy) to SN, 12 Feb 27,

JAG (Army) Gen Rcds Sec 400.12 Proc file, 11 Nov 35. 5

 Neagle to Vinson, 5 Feb 27, cited n. 3. 6

 Memo, JAG for ASW, 20 Oct 30, JAG (Army) Gen Rcds Sec 400.12 Proc.

7

 Keys to Vinson, 31 Jan 27, cited n. 3. 8

 Memo, JAG (Maj Gen E. A. Kreger) for Lt Col

J. I. McMullen, 15 Sep 30, JAG (Army) Gen Rcds Sec

400.12 Proc. 9

 Memo, Comdr S. M. Kraus, 1 May 31, cited in

W. O. Shanahan, Procurement of Naval Aircraft:

1907-1937, Naval Aviation History Unit, vol. XVII, p. 355. 10

 Chief, Mat Div, to CofAC, 3 Sep 30, WF Proc 032

Gen Legislation. For evidence on losses sustained

by manufacturers doing experimental work, see President, ACC, to McSwain, 22 Nov 33, app. C in Recommendations on National Aviation Policy prepared

for Howell Comm by ACC, 12 Sep 34, AIA file 19.
116 BUYING AIRCRAFT

manufacturers, progress in the quest for

superior aerial weapons would be

doomed. From this fate there appeared

to be no escape unless some loophole

could be found to circumvent the difficulty.

Since the procurement provisions of

the Air Corps Act seemed to offer no

practicable means of securing aircraft in

quantity without resorting to competition after an initial experimental order

under Section 10k had produced a superior model, there was an obvious solution: amend the law. The chief of the

Procurement Section at Wright Field

urged that "all possible pressure" be

brought to secure an amendment from

Congress. The desired result could be

obtained very simply by inserting the

phrase "with or without competition"

in the language of Section 10k where it

alluded to quantity procurement.11 A

pair of bills to this effect were drafted,12

but the chief of the Air Corps refused to

support them, confessing quite candidly

his fear that any extended discussion of

the Air Corps Act in Congress might

lead to new legislation restricting the

exercise of discretion by the Secretaries

even further than was already the case

under the statute as it stood.13 The official Air Corps policy was thus to leave

well enough alone—to preserve the existing advantages of the Air Corps Act

rather than risk losing all in an attempt

to rectify its obvious deficiencies.

An Artful Evasion

The reluctance of the War Department to sponsor amendment of the Air

Corps Act meant that some other means

had to be found. Actually, there was an

out, hitherto unrecognized as such within

the provisions of the act, one subsequently labeled an "artful evasion" by

critics of the policy. If the Air Corps

Act of 1926 failed to contain adequate

authority, then procurement officers

could turn elsewhere, in particular to

the voluminous Army Regulations governing procurement.14

Among other provisions, Army Regulation 5-240 prescribed that competition

might be avoided in certain special circumstances in which competition was

impractical—for example, when the item

sought was patented or when the manufacturer of the article was the sole source

and no similar or suitable item could

be procured elsewhere. By construing

Army Regulation 5-240 to define the

11

 Chief, Procurement Sec to Exec, Mat Div, 11

Sep 30, and to Chief, Mat Div, 8 Dec 30, WF Proc

032 Gen Legislation. 12

 H.R. 11569 and S. 4531, 72d Cong, 1st sess, April

1932. Both bills died in committee. H.R. 9359,

70th Cong, 1st sess, was an earlier effort to amend

10k, apparently sponsored by the Navy. This bill

also died in committee. For a brief note on the

content of these bills, see Notes on the Chronology

of Section 10 . . . (Air Corps Act). AF Documentary

Reference and Research Br, Doc 13/US/9. 13

 2d Ind, OCAC to TAG, 9 May 32, basic, McSwain

to SW 29 Apr 32, WF Proc 032 Gen Legislation.

For an example of air arm fears that new legislation

would "open the door" detrimentally, see 1st Ind,

Exec OCAC to Chief, Mat Div, 11 Jan 30, basic Chief,

Mat Div, to CofAC, 3 Jan 30, WFCF 032 Legislation

1939. Interestingly enough, about the same time

Rear Adm. W. A. Moffett, Chief of the Bureau of

Aeronautics, was urging the Secretary of Navy to

"leave well enough alone" in the Air Corps Act of

1926. Shanahan, Procurement of Naval Aircraft:

1907-1939, p. 359. 14

 10th Ind, OASW to CofAC, 24 Aug 27, basic unknown, quoted in "Notes on the Chronology of Section 10 . . ." (Air Corps Act). See also, 6th Ind,

OASW to TAG, 29 Jul 27, JAG (Army) Gen Rcds

Sec 452 Aircraft, 12 Jul 27 file.
PROCUREMENT UNDER THE AIR CORPS ACT 117

manufacturer of an experimental aircraft

purchased under Section 10k with a

negotiated contract as a sole source, procurement officers found a means of authorizing the award of production contracts without resorting to competition.

The history of a single well-known

aircraft design in the early thirties illustrates this policy.15

 Glenn L. Martin

designed and built the Martin XB-10,

a twin-engine bomber, for the Air Corps.

The Martin experimental contract came

under the authorization of Section 10k

of the Air Corps Act. The price was

negotiated. Since the first or experimental item showed promise, air arm

officials purchased 10 more items, designated YB-10, to conduct service tests.

These, too, were procured at a negotiated price under the authorization of

Section 10k, since the quantity was limited and the item was still experimental

in many respects. Each successive item

coming off the assembly line in this service test order was modified in one way

or another as Martin engineers and designers corrected minor deficiencies and

introduced novel features improving on

the original design. By the end of the

service test phase, the B-10 represented

an advanced design reflecting the accumulated experience of the manufacturer with that particular type of aircraft.

Clearly, Martin had become a sole

source. No other manufacturer could

take the original design purchased under

Section 10k and reproduce the same airplane exactly. Much of the art wrapped

up in the B-10 lay in the experience of

Martin engineers and could not be committed to drawings. Procurement officers might then readily certify that there

was no counterpart in the commercial

world and that no other suitable similar

article was obtainable. Whereupon they

would be free to authorize a production

contract under the provisions of Army

Regulations 5-240 referring to procurement without competition.16

In terms of dollars expended, the record of purchases made during the years

from 1926 to 1934 clearly reflects the extent to which the air arm procurement

officers managed to conduct their operations without resorting to the destructive

competition so detrimental before 1926.

After spending well over $16,000,000 in

experimental contracts under 10k, procurement officers negotiated contracts involving more than $22,000,000 under the

terms of Army Regulation 5-240, which

permitted noncompetitive purchases

from a sole source. But what of the

alternative, Section 10t, which imposed

the necessity of competition? Between

1926 and 1934 the air arm procured

scarcely more than $750,000 worth of

matériel under the terms of this clause.17

A year-by-year analysis of the types of

legal authorization employed in air arm

contracts after 1926 points up even more

vividly the extent to which procurement

officers used negotiated contracts rather

than competitive contracts. During 1927

virtually all contracts used the authorization contained in 10q. Of the 389 aircraft on contract in 1928, all but one used

the "sole source" authorization for negotiated contracts. Virtually the same pat15

 Aircraft Yearbook, 1934, pp. 125-26.

16

 Memo, Chief, Proc Sec for Chief, Mat Liaison

Sec, with Incls, 1 Jun 34, WFCF 334.8 Hearing, 1935. 17

 "Notes on the Chronology of Section 10 . . ."

(Air Corps Act).
118 BUYING AIRCRAFT

MARTIN B-10

tern recurred from 1929 through 1931.

Of 413 aircraft put on contract in 1932,

not one was advertised competitively.18

Procurement officers obviously had perfected means of circumventing the insufficiencies or the inadequacies of the

Air Corps Act. But in finding legal

justification to avoid competition in placing contracts, the officers were in no way

guilty of any clandestine evasion of the

law. Each year the annual report issued

by the Assistant Secretary of War received

wide public distribution. Contained in

every such report was a tabular listing

of all contracts awarded for air matériel.

Each contract showed the legal basis for

the award. Moreover, every contract

signed by procurement officers was duly

reported to Congress. Less they could

not do, for Section 10m of the Air Corps

Act specifically required full and itemized reports to Congress on every contract signed. From 1926 to 1934, year

after year, the air arm made each contract for air matériel a matter of public

record in the annual report on procurement sent to Congress.

An impartial observer could scarcely

help but conclude that the forms of law

had been duly observed. Nonetheless,

in January 1934 the Washington Post

published a report that grave charges of

irregularities in air arm procurement

were about to be laid before the House.

The Post report was a signed feature

article, but it gave no source for its accusations, which can be summarized in a

single quotation from the whole text:

"Over the protests of Comptroller General McCarl with Congress ignorant of

what was going on, the War Department

for seven years has been procuring aircraft for the Army Air Corps in contravention of the intent of the sponsors of

the act of 2 July 1926. . . ."

 19

The accusation of wrongdoing in the

Air Corps implied that the law had been

evaded and procurement officers had indulged in the "crime" of negotiated contracts. The charge that air arm officers

had hoodwinked Congress was patently 18

 Unsigned Memo on JAG letterhead, sub: Procurement Under the Air Corps Act, 11 Apr 34, JAG

(Army) Gen Rcds Sec 452.1 Aircraft. 19

 Washington Post, January 27, 1934.
PROCUREMENT UNDER THE AIR CORPS ACT 119

false; each of the contracts negotiated

was legal, but, accurate or not, the damning allegations were sufficiently serious

to suggest the need for careful investigation. When Congress did turn attention

to the indictment of wrongdoing, charges

and countercharges, investigations and

recriminations rained down with the fury

of a cloudburst.

Congressional Cloudburst

The wave of congressional criticism

that seemed about to inundate the air

arm began in January 1934 when the

House Military Affairs Committee started

routine hearings to weigh the respective

merits of the various bills placed in the

legislative hopper at the opening of the

session.20 It became evident to War Department observers that Congress was in

an unusually aggressive mood. Hearings

that had been scheduled to consider

strengthening the Air Corps along the

lines proposed by the Drum Board soon

began to expand into problems far beyond the scope initially contemplated.21

The Merchants of Death

To reconstruct the atmosphere in

which Congress conducted the air arm

hearings of 1934 one need not go far

afield. Since the preceding fall Senator

H. D. Black of Alabama had been conducting an investigation of the federal

subsidies received by private airmail contractors. The senator pushed his attack

with the zeal of an ambitious district attorney, and soon the headlines were reporting accusations of scandalous profiteering by airline firms abusing government subsidies.22

 The public was left

with the impression that most if not

all of the big airlines were guilty of gross

plundering. Since many of the leading

aircraft manufacturers were linked by

corporate ties to the airlines, the brush

that tarred the airlines tarred the manufacturers as well. Rightly or wrongly, the

Black investigations brought the aircraft

manufacturers into generally low repute.

In similar fashion the so-called Pecora

hearings impaired the prestige of the aircraft industry. Justice Ferdinand Pecora

of New York, investigating stock exchange practices for a Senate committee,

struck a glancing blow at the industry

by uncovering what many felt to be

grave abuses practiced by financiers rigging the market in aviation stocks for

the advantage of insiders.23 The evidence uncovered was sparse and concerned only a few people, but the disclosures appeared at a crucial moment,

for this was precisely the time when the

press and the public were in hot pursuit

of war profiteers. Only a few months

earlier a War Policies Commission, at

the request of Congress, had studied the

20

 For example, H.R. 7413, H.R. 7601, and H.R.

7657, all introduced by Representative McSwain. See

also New York Times, January 7, 1934, p. 10, and

February 21, 1934, p. 10. 21

 SW to McSwain, 21 Feb 34, mimeo copy in National Archives, Rcd Group 94, AGO central files,

box 249, file 031-032.

22

 Hearings before Special Com on Investigation of

Air Mail and Ocean Mail Contracts, Senate, 73d

Cong, 2d sess, pts. 1-9. 23

 Banking and Currency Com, Senate, 72d Cong,

Hearings on Stock Exchange Practices. See especially, pts. 6 and 16, passim, March 1933 and March

1934.
120 BUYING AIRCRAFT

record of profit making in World War I.24

While the Pecora hearings were still

under way a sensational book entitled

Merchants of Death came off the press.25

It was but the best known of many works

charging the munitions makers with evil

intent. The munitions makers, according to the critics, would supply everything for a war "from cannons to a casus

belli" in their selfish pursuit of profits.26

Against the background of fear, mistrust, accusation of wrongdoing, outright

peculation and plundering of the public

treasury, alleged or proven, Congress

considered budgets for the military services. A more inopportune time could

scarcely have been found.

From the military view, the first real

misfortune arising from the suspicious

mood of Congress fell upon the Navy.

Testimony presented at the hearings on

the Navy's appropriation bill in January 1934 brought out evidence to show

that at least one manufacturer holding a

Navy contract for air matériel during

the boom years had reaped profits in excess of 43 percent on the sum of the

contract.27 The reaction was immediate.

Already aroused to the menace of profiteering, House members were quick to

take up the scent, and soon a committee

was busily investigating the Navy's procurement procedures. Subsequent findings by the committee revealed that the

enormous earnings were confined to an

isolated instance where one engine

manufacturer had indeed made excessive

profits but only for a short period.28 It

took time to bring out such clarifications,

and meanwhile the damaging charges of

profiteering continued to rankle in the

minds of congressmen as headlines played

the allegations for all they were worth.

When the Chief of the Air Corps followed his Navy opposite number to the

Hill to present his budget for the ensuing year, he found the congressmen

armed with questions suggested by the

recent disclosures and allegations. Maj.

Gen. Benjamin D. Foulois, the incumbent chief of the air arm was a vigorous

advocate of air power. He enjoyed a

record of many years of honorable service, but he was not noted for his tact.29

When the committee fired questions at

him, he responded to them bluntly and

without guile. In reply to a query he

asserted, "We generally negotiate contracts." This was literally true, but the

truth might have been explained in its

proper context if the general had wished

to continue the practice. He apparently

did not realize the extent to which the

"negotiated contract" had become anathema on the Hill in recent months. This

24

 See app. I in report of SW for fiscal year 1932,

and Proceedings of War Policies Comm, H Doc 163

and Misc H Doc 271, 72d Cong, 1st sess. 25

 H. C. Engelbrecht and F. C. Hanighen, Merchants of Death (New York: Dodd, Mead and Co.,

1934). 26

 The quip is from "Arms and the Men," Fortune, March 1934. 27

 House Hearings on Navy Dept appropriation

for 1935, January 2, 1934, pp. 421-22.

28

 Naval Affairs Com, House, Hearings, item 6,

Information as to the Method of Awarding Contracts

for Ships and Aircraft for the U.S. Navy, January 24-

February 2, 1934, in Sundry Naval Legislation 1933-

34.29

 For an example of the vigorous expression of the

Chief of the Air Corps, see Washington Post, April

1, 1933, report of his testimony before the House

Military Affairs Committee, and the reaction to this

report in Memo, Chief, Budget and Legislative Planning Branch, for General Drum, 1 Apr 33, in National Archives, Record Group 94, AGO central files,

box 211, file 011.
PROCUREMENT UNDER THE AIR CORPS ACT 121

GENERAL FOULOIS

in itself might not have stirred up much

trouble, but the general took the bait a

second time. In response to a leading

question he asserted that it was air arm

policy to procure from already established concerns.30

 The congressmen were

left to infer from this that the Air Corps

favored big business rather than small

business and dealt by preference with

the insiders. Such a remark dropped in

the context of recurrent charges of fraudulent stock market deals and illicit procurement practices was scarcely calculated

to calm congressional fears.

Still later, when discussion revealed

that procurement officers allowed a 15-

percent profit margin in negotiated contracts, the fat was fairly in the fire.31

For critics of air arm policies, here was

"evidence" to justify investigation.

If congressmen began to feel that

surely something must be wrong with

the system of procurement or the men

who ran it, their attitudes were perhaps

understandable within the context of

the times. General Foulois testified on

14 and 15 February 1934. Only three

or four days earlier the President had, as

a consequence of the disclosures of the

Black Committee, canceled the airmail

contracts held by the privately owned

airlines. Until some permanent solution appeared, he ordered the Air Corps

to carry the mails. Scarcely a week later

one of the Army pilots assigned to the

mails died in a crash. Shortly thereafter

there was another crash, and then another. Each successive death seemed to

reinforce the suspicions of the congressmen and to confirm the allegations of

the scandalmongers by linking the profiteering of the airlines to the inferior airplanes operated by the Army. For this

reason alone, the Air Corps could expect a thoroughgoing investigation, but

worse was yet to come.

The Delaney Committee

When the cry of profiteering on Navy

contracts first appeared, Representative

Carl Vinson, the experienced chairman

of the House Naval Affairs Committee,

launched an immediate investigation

with a subcommittee headed by Representative J. J. Delaney of New York.

After two months of listening to a

30

 House Hearings on WD appropriation for 1935,

February 14, 1934, pp. 478-79. 31

 Ibid., p. 551, February 15, 1934.
122 BUYING AIRCRAFT

parade of witnesses and accumulating

some 800 pages of recorded testimony,

the committee published a final report.32

Its findings were in sharp contrast to the

charges of profiteering and corruption

that had led to the investigation in the

first place. The profits made by contractors doing business with the Navy

on air matériel, the committee found,

were "moderate and reasonable." Aircraft manufacturers had garnered an

average of only 11.5 percent on their

costs before state and federal income

taxes. Navy procurement policies were

not only free from taint of collusion,

the committee reported, but were also

"prudent and practicable," inducing

keen competition even in a limited field.

In fine, the investigators learned, as had

the Lampert and Morrow groups before

them, aircraft "cannot be handled in exactly the same way as ... commodities

in an open market." Sometimes negotiated contracts were essential.33

Had the public at large and the members of Congress all read the report of

the Delaney Committee with its temperate findings, the furor over the procurement of air matériel might have abated

rapidly. This was not to be the case.

The headlines charging the Navy with

laxity and accusing manufacturers of

profiteering made more lurid reading

than did a sober recital of facts in statistical array. The charges made exciting

copy for nearly a month; the denials

issued by the committee exonerating the

Navy and the manufacturers made copy

for but a single day. While the New

York Times made a front page story of

Congressman Vinson's decision to investigate huge profits in Navy contracts,

the report of the committee over two

months later was buried far back on the

fifteenth page.34

The unfavorable cast of public opinion was still further distorted when a

single member of the Delaney Committee accused the majority of whitewashing the Navy and filed a minority report

contradicting the findings of the group.

The author of the minority report spread

his case in the Congressional Record,

while the report of the majority remained virtually buried in a hard-to-find

publication of miscellaneous hearings.

As so often before, the newspapers picked

up the sensational minority report and

gave it a play. The New York Times

quoted the author in declaring that "new

evidence" of illegal procurement had

been turned up, but refrained from analyzing the "new evidence."

 35

 Had they

wished to do so, the members of the committee majority might easily have demonstrated that the minority report was misleading because it rested upon dubious

premises and made flatly contradictory

recommendations.36 Nonetheless, they

remained silent. The sensational minority report stood uncontroverted, and the

public at large was left to believe what

it wished. As a consequence, the issues

at hand became thoroughly confused. 32

 Delaney Hearings and Delaney Report, items 18

and 37, respectively, in Sundry Legislation Affecting

the Naval Establishment 1933-34, cited n. 56, ch. II,

above. 33

 Delaney Rpt, pp. 1470-71. Delaney Hearings,

pages 1113-36, contains discussion of the committee

in framing the report.

34

 New York Times, January 30 and March 9, 1934. 35

 Ibid., March 19, 1934. 36

 Delaney Rpt. See also, Cong Rcd, May 30, 1934, pp. 10034ff.
PROCUREMENT UNDER THE AIR CORPS ACT 123

A Confusion of Issues

As soon as the Delaney Committee began to probe Navy procurement practices, there were demands for a similar

investigation of the Army. One congressman demanded to know if the Air

Corps allowed its contractors to reap immense profits such as those mentioned

in the Navy investigation.37 Another

complained that unbeknownst to Congress, air arm procurement officers were

violating the Air Corps Act of 1926.

"We had not the slightest idea that practically every bid is let without real competition."

 38

 Yet another asserted positively (and quite erroneously) that the

United States ranked eighth among the

nations of the world in the number of

aircraft engine factories. This "very

backward position" he attributed to the

"bankers' control of the American aviation industry." All this, the speaker felt,

demonstrated the existence of a giant

"air trust," a combination that set the

high prices government procurement officers were obliged to pay.39

Some of the charges aired in and out

of Congress were too vague to be denied.

Yet, taken all together, the various claims

of wrongdoing added up to a formidable

if somewhat confused accusation. There

were, of course, a few voices raised in

protest over the inaccurate and misleading character of statements repeatedly

made, but these attempts at rebuttal were

lost in the clamor.40 As usual, the blackest headlines went to those who shouted

scandal and promised spectacular revelations—to be produced in full somewhat

later.

Although proposals for reform were

numerous, everyone seemed to agree

upon at least one point. A thoroughgoing investigation of air arm procurement

methods should be held. Representative

McSwain, in his strategic position as

chairman of the Military Affairs Committee, took advantage of this unanimity

of feeling to secure passage of a resolution directing his committee to undertake an investigation of the air arm. The

committee, McSwain declared, would endeavor to find how abuses in the procurement of air matériel came about and

to frame legislation to prevent their recurrence.41

 The actual work of conducting hearings and gathering evidence fell to an eight-man subcommittee

headed by Representative W. N. Rogers

of New Hampshire, from whom the

group took its popular name.

The Rogers Committee

The committee began its investigation

of the air arm in a mood far less hostile

than might have been expected from

the prevailing temper of Congress. Representative McSwain promised that the

investigation would undertake no junketing, nor would it "besmirch any reputation upon hearsay evidence." More

significantly, while begging the House

to drop all partisan charges, he urged

the Congress not to prejudge the case.42

Amidst the numerous misrepresentations 37

 New York Times, February 8, 1934. 38

 Cong Rcd, March 2, 1934, p. 3617. 39

 Ibid., March 6, 1934, pp. 3863-67. 40

 See especially, remarks of Representative Collins

of Mississippi, in Cong Rcd, March 8, 1934, p. 4018.

41

 Cong Rcd, March 2, 1934, pp. 3613-14. 42

 Ibid.
124 BUYING AIRCRAFT

of the allegations of the day, this was

welcome objectivity. Moreover, the

members of the committee seemed generally to favor the concept of air power,

holding that the Air Corps would soon

become the first line in the nation's defense if it had not already reached that

stature.43 And, finally, at least two of

the committee members had served previously with congressional groups investigating the procurement problem in the

air arm.44 All the auguries indicated a

fair investigation would be forthcoming.

When the Rogers Committee opened

its hearings, the Chief of the Air Corps

requested that the testimony be heard

in executive session. The committee

obligingly complied. No doubt considerations of military security carried some

weight with the members—or the chairman may have recalled the unhappy

experience of the Lampert Committee,

which suffered from an unscrupulous use

of its published hearings as a sounding

board for disgruntled claimants against

the government. Whatever the motives,

the hearings were closed. This decision

could not have been easy, since to close

the hearings to the press meant to forego a great deal of publicity.

In haste and under pressure conjured

up by the temper of the times the Rogers

Committee's findings and recommendations were just what one might have expected Under the circumstances: a demand for competition on all contracts

for procurement in quantity and a return to aggressive design competitions

for experimental contracts as contemplated in the original McSwain measure

of 1926.45

The revisions in procurement policies

demanded by the Rogers Committee

were one response to the outcry against

profiteering, but they were by no means

the only response. The several hearings

in Congress—investigations by committees and subcommittees in both the

House and Senate—produced a number

of plans for rejuvenating air arm procurement. Every congressman seemed

to have his pet scheme for saving aviation.

Congressional Panaceas

Taken collectively, the numerous proposals suggested for reforming air matériel procurement fell into three or four

broad groups. Some felt that greater

economy and efficiency would result

from a system of joint Army and Navy

procurement, but proposals leading to

such a scheme soon became involved in

the highly controversial question of a

department of defense that blurred the

focus and tended to drop the procurement question from sight.46

 Some felt

that a solution to the problem of air

matériel procurement lay in turning the

43

 See, for example, the committee's final report in

House Rpt 2060, 73d Cong, 2d sess, June 18, 1934,

reprinted in Cong Rcd, 74th Cong, 1st sess, June 15,

1935, p. 9384. 44

 Representative Rogers served on the Lampert

Committee in 1925, and Representative James was a

member of the committee that considered Section 10

of the Air Corps Act in 1926.

45

 Cong Rcd, June 18, 1934, p. 12479, and House

Rpt 2060. 46

 This discussion of joint Army-Navy procurement may have induced the President to create by

Executive order a co-ordinating agency, the Aviation

Procurement Committee, under the Procurement

Division of the Treasury. The venture was short

lived. WFCF 334.8 Minutes of Aviation Proc Com,

1935.
PROCUREMENT UNDER THE AIR CORPS ACT 125

manufacture of all aircraft and aircraft

accessories over to the government.

Some merely favored curbs of excessive

profits. Still others were sure that only

a revision in the laws governing procurement would save the nation from abuses.

Each group of proposals deserves consideration in some detail.

Government manufacture of aircraft

as a way out of the difficulties over procurement attracted a good deal of attention. Considering the current talk about

munitions makers as merchants of death

and in view of the diminished prestige

of private enterprise near the bottom of

a depression, this faith in governmentowned factories was scarcely surprising.

Something of the bitterness toward "big

business" that motivated advocates of

government factories was expressed by

the congressman who felt that the aircraft manufacturers had made "something like a racket" of Air Corps contracts. Government manufacture, he believed, "would have a good deal to do in

preventing war."

 47

 Since the Navy already had such a facility—an aircraft factory at Philadelphia, which built planes

during World War I—attention turned to

the utilization of this plant.

There were only a few congressmen

who actually advocated production or

even the manufacture of any large percentage of military aircraft at the government plant; nevertheless, there were

many who seemed to feel that a vigorous

use of the Naval Aircraft Factory would

serve as an ideal weapon to drive down

excessive prices charged by privately

owned concerns. In addition, some also

saw in the government plant a useful

measuring stick by which procurement

officers could acquire firsthand information on the actual costs involved in aircraft fabrication.48

 The President himself seems to have toyed with this idea

at one time.49

For many reasons, however, costs determined in a government plant could

not readily be employed to measure private costs. For example, the use of civil

service employees imposed a number of

special conditions upon federal projects

that did not apply in private industry.

This consideration alone seriously obscured the cost figures of government

plants. In addition, government accounting and budgeting practices did not require federal facilities to carry all the

burdens of depreciation, capital costs,

maintenance, and overhead costs that are

inescapable in a private venture. One

Navy spokesman expressed the matter

bluntly: costs computed at the Naval

Aircraft Factory would be "quite useless"

as a check on private industry.50 Nevertheless, Congress went right ahead and,

to the distress of many military officials,

tacked a rider on an important naval authorization bill stipulating that at least

10 percent of the aircraft procured should

come from government-owned, government-operated plants.51

Those who favored profit curbs as a

means of preventing abuse in military

procurement found a ready audience.

47

 Testimony quoted in House Rpt 1506, 73d Cong,

2d sess, May 7, 1934, p. 15.

48

 Delaney Hearings, pp. 952-53. 49

 Actg SW Woodring to President, 29 Nov 35, SW

and OASW files, AC Gen Questions. 50

 Note on table prepared by Navy Dept showing

record of operations at Naval Aircraft Factory,

printed in Minority Rpt by a member of the Delaney

Subcom, Delaney Rpt, p. 1473. 51

 48 Stat 503; 34 USC 494, March 27, 1934.
126 BUYING AIRCRAFT

Had not the papers been filled with reports of fantastic profits in the aircraft

industry? Was not the government the

major market for aircraft in the United

States? Then surely it must follow that

the government's laxity in negotiating

contracts had served to line the pockets

of the manufacturers. Such was the line

of reasoning pursued by those who urged

a limitation on profits. Obviously, these

abuses must end, so, in addition to the

10-percent rider pertaining to the Naval

Aircraft Factory that encumbered the

naval expansion bill of 1934, Congress

put a limit of 10 percent on the profits

of all manufacturers with contracts for

naval matériel, including aircraft.

Congress accepted the limit on profits

in the belief that such a ceiling was necessary to prevent profiteering. But the

voices shouting profiteer were more

shrill than accurate. The facts revealed

a very different story. Over the years

from 1926 to 1933, the aircraft manufacturers had not made the fantastic

profits claimed for them. The major

airframe manufacturers took a profit of

0.2 percent (on cost) of their combined

Army, Navy, and commercial sales. Even

adding in the far more profitable business of the engine manufacturers, the

average profit (on cost) came to but 10

percent on the combined total business.52

Considering only Air Corps contracts for

the years 1926 through 1933, the profits

earned by airframe and engine manufacturers were even less, ranging around

9 percent on cost. Moreover, these firms

suffered an average loss of 50 percent on

cost in experimental contracts.53 Combining the experimental losses with the

production gains produces an average

profit of around 8 percent, hardly fantastic. Audits of Navy contracts revealed

only slightly higher profits, returning

11.5 percent on costs of combined experimental and production orders.54

Such figures clearly showed that neither

the Army nor the Navy had permitted

any wholesale profiteering. Net earnings ranging between 7 and 11.5 percent

of costs before taxes were by no stretch

of the imagination excessive for such a

high risk venture as aircraft manufacturing.55

While the 1934 law limiting profits

provided for the recapture of all earnings in excess of 10 percent, there was

no corresponding floor under losses. If

the limit were to be applied in good

years, preventing the accumulation of

surpluses, how would the manufacturers

carry their overhead charges in lean

years?

 56

 Questions such as this the advocates of profit ceilings left unanswered.

As a consequence, there were repeatedly

voiced proposals in Congress calling for

a radical revamping of the existing statutes governing procurement.57

The demand for revision of the law

was at least in part from responsible

sources and could not be ignored. If

the law were to be revised, it became

relevant to ask, what had been the ob52

 From tables prepared by Bureau of Supplies and

Accounts, Navy Dept, Delaney Hearings, p. 503.

53

 Ibid., pp. 502-03. 54

 Ibid., pp. 1040-41. 55

 Testimony of C. E. Orton, Chief Auditor for

AC, House Hearings on WD appropriation for 1935,

February 15, 1934, p. 533. 56

 The case against rigid profit curbs is presented

in Delaney Hearings, pp. 807, 815-16, 829-30, 1039,

1088. 57

 Ibid., pp. 556, 584-85.
PROCUREMENT UNDER THE AIR CORPS ACT 127

jective of the Air Corps Act? Those

who had framed the act asserted a threefold aim: they wished to procure aircraft

of maximum performance at a minimum

price while at the same time ensuring

a healthy aircraft industry as a national

resource of advantage in time of danger.

Those who advocated a return to

strict competition had a decided advantage—the idea of competition in the

award of public contracts was a tradition of long standing. "Competition"

was a good word implying equality of

treatment and opportunity for struggling

small business in the best American tradition. The converse of competition

was "monopoly" or "trust." As for "negotiated contracts," it was easy to conjure up pictures of insidious practices,

secret meetings, and generally devious

doings of a pernicious nature whenever

negotiation took place.

Actually, "competition" and "negotiation" tended to become rather careless

generalizations and catch phrases. An

undue emphasis upon competition could

defeat the main objectives that the proponents of the Air Corps Act sought to

achieve.58 Moreover, negotiated contracts were by no means entirely noncompetitive. Engines might be purchased by a negotiated contract on a

sole source basis, but they entered into

competition indirectly. Aircraft designers specified the engine to be used in

any given airframe, and where the aircraft was bought competitively, the engine shared in that competition.59

 Furthermore, even where the Air Corps

awarded a contract for an aircraft in

quantity at a negotiated price following

an earlier experimental order there was

competition, albeit indirect. Air arm

procurement officers required manufacturers to submit options for production

quantities when accepting an experimental order. Thus, even if the subsequent

production order was not thrown open

for bids there was competition, for the

manufacturer recognized that the prices

quoted in his production option could

have a determining effect upon the purchase of his original experimental aircraft.60

After a hasty study touching briefly

on most of the proposals discussed above,

the Rogers Committee reported out recommendations urging a drastic return

to competition. In addition, the committee found the Air Corps "inefficient"

and "expensive," while using "various

subterfuges" that added up to a "pernicious, unlawful" system of procurement.

On top of all this the committee charged

the Chief of the Air Corps with gross

misconduct, and held him guilty of "deliberate, willful and intentional violations of the law."

 61

Despite the intemperate language of

the Rogers Committee report and in the

face of the committee's vigorous recommendation for a return to competition

in procurement, Congress adjourned

58

 The case for negotiating production contracts

with the manufacturer of a successful aircraft developed on an experimental contract appears in virtually every important hearing. For the arguments

presented in 1934, see Delaney Hearings, pp. 473-75,

693, 724-26, 750-51, 911-12.

59

 Ibid., pp. 464-65; Memo, OASW for CofS, 17

Aug 36, SW and OASW files, AC Gen Questions,

item 363. 60

 Delaney Hearings, p. 849. 61

 House Rpt 2060, 73d Cong, 2d sess, June 18,

1934, reprinted in Cong Rcd, p. 9384, June 15, 1935,

74th Cong, 1st sess.
128 BUYING AIRCRAFT

without amending the Air Corps Act

of 1926. It may be that mere legislative accident played some part in the

decision not to amend the Air Corps Act

in 1934. On the other hand, at least

a partial explanation of why the congressmen were unwilling to amend the

law may be found in the new procurement policy promulgated by the Assistant Secretary of War within the terms

of the 1926 act.

New Procurement Policy

The new procurement policy contrived by Assistant Secretary of War

H. H. Woodring was, in essence, a return to competition. In his testimony

before Congress as well as in his reports

to the President and to the public, the

Assistant Secretary went out of his way

to publicize his decision to insist upon

competition. He assured Congress repeatedly that he personally favored competitive contracts with all their safeguards of sealed bids and attendant

publicity in preference to the prevailing

procedure of negotiated contracts. Indeed, the Assistant Secretary fairly cut

the ground from under all those congressmen who advocated radical changes

in the Air Corps Act of 1926. In achieving by administrative action what the

congressmen hoped to accomplish by

statutory mandate, Secretary Woodring

spiked their guns and probably forestalled amendment of the Air Corps Act.

The circumstances that induced Mr.

Woodring to take a firm stand in favor

of competitive procurement reflect one

of the dilemmas of air matériel procurement. Interestingly enough, Mr. Woodring's decision to insist upon competition in aircraft procurement antedated

the agitation in Congress.

To begin with, as a man of wide legislative experience the Assistant Secretary must have recognized the importance of leaving a complicated piece of

legislation undisturbed upon the statute

books, After eight years, Section 10 of

the Air Corps Act had become an integral part of the air arm. Much of the

administrative routine at Wright Field

stemmed from its provisions. And these

procedures or administrative routines

represented a wealth of experience painfully accumulated through mistakes

made in applying the Air Corps Act in

practice. Perhaps of even greater importance were the many rulings of the

Comptroller General, and the legal opinions of the Attorney General and the

Army's Judge Advocate General interpreting the Air Corps Act. Since neither

the General Accounting Office nor the

legal advisors would give rulings or opinions on hypothetical cases in advance, to

draft a new law would mean that opinions and rulings would have to wait until specific cases came up for interpretation. In short, since every new statute

passed by Congress carries with it the

threat of undoing years of work, Mr.

Woodring had good reason to seek a solution to his problem by means other

than amendment.

To purchase aircraft in production

quantities during fiscal 1933, Congress,

it will be recalled, appropriated somewhat

more than $10,000,000,62 but the President then impounded $7,000,000 of this

sum as an emergency economy measure.

Toward the end of the year the admin62

 See above, ch. III.
PROCUREMENT UNDER THE AIR CORPS ACT 129

istration's policy shifted, and the Public

Works Administration (PWA) agreed to

make available to the Air Corps $7,500,-

000 in relief funds. This sum was

slightly larger than that impounded by

the President several months earlier, but

because of rising costs during the interval it would now buy fewer aircraft.63

When the PWA money became available late in 1933, the Air Corps found

itself with a shortage of more than 700

aircraft; the planes on hand were not

even enough to equip the units already

activated.64 In addition, aircraft were

needed to replace equipment rapidly

approaching obsoletion. The situation

called for prompt action if the air arm

was to avoid virtual disarmament, but

the need for haste did not cancel the

necessity for procuring aircraft of superior performance. For this reason air

arm officials decided to follow the same

procurement method used during the

previous several years. They negotiated

production contracts with manufacturers

who built aircraft of the highest known

performance, justifying their action by

affirming that the manufacturer of a superior aircraft was a sole source as defined in Army Regulation 5-240. On

this basis the Chief of the Air Corps forwarded a number of contracts to the

Assistant Secretary of War for routine

approval before obligating the available

PWA funds.

To understand the Assistant Secretary's reaction to the Air Corps request

one must be aware of the particular circumstances of the period. From the

moment the new administration took

office in 1933, officials of the War Department were under an increasing pressure from various groups seeking a share

in the contracts at the disposal of the

government. Federal contracts, once

shunned, were now sought. Labor

unions and business leaders in dozens

of communities urged the Secretary of

War to pursue a spread-the-work policy.65

 Aircraft manufacturers were no

exception to the rule.66 As the depression's bite cut deeper, the pressure upon

the War Department reached the point

where it could no longer be ignored.

Just at this juncture the Air Corps sent

up the contracts that had been negotiated to obligate the PWA funds. On

the heels of the unsigned contracts came

two disgruntled manufacturers to complain at being left out when the War

Department had $7,500,000 to spend on

production model airplanes.67 The Assistant Secretary, fully aware of the potential danger of their complaints uttered in the prevailing "merchants of

death" milieu, refused to approve the

negotiated contracts. Instead, he decided to reconsider the whole question

of air matériel procurement and its underlying principles.

The dilemma confronting the Assistant Secretary was very real. On the one

hand he must be sure to obtain aircraft

63

 House Rpt 1506, 73d Cong, 2d sess, May 7, 34,

pp. 2-3, and House Hearings on WD appropriation

for 1935, February 15, 1934, p. 564. 64

 See above, p. 66.

65

 For examples of the pleas reaching the War

Dept, see Members of the Bristol, Pa., Exchange and

Rotary Club to Senator J. J. Davis, 15 Jul 32, and

Davis to SW, 17 Jun 32, as well as G. B. Cole, Secretary Local 18886 Aeronautical Workers National

Union, to SW, 21 Dec 34, WFCF 004.4 Manufacturing, 1939 file. 66

 Annual Rpt of SW, 1934, p. 27, and House Rpt

1506, 73d Cong, 2d sess, May 7, 1934, p. 9. 67

 House Hearings on WD appropriation for 1935,

February 15, 1934, pp. 487, 514-15, 519.
130 BUYING AIRCRAFT

capable of the maximum known performance, while on the other he must

somehow contrive to retain effective

competition as to price. Here was the

selfsame difficulty that had confronted

the Lampert and Morrow investigators.

How could the Assistant Secretary reconcile the mutually exclusive ends of

price and performance?

Furthermore, the Assistant Secretary

must maintain a large number of aircraft manufacturers in a financially

healthy condition as an essential national resource for future periods of

emergency. If he attempted to spread

the available funds more or less evenly

over the industry in an effort to ensure

economic health, how could he contract

for aircraft of maximum performance

at the minimum price? Airplanes purchased on the basis of price competition

might lower the cost to the government

but would afford no guarantee as to performance. Conversely, airplanes purchased solely on the basis of performance might well and often did cost more

than airplanes purchased with competition as to price. In either case the objective of a healthy industry would be

ignored, for whether there was competition as to price or performance, the

greatest volume of business tended to

cluster as a few efficient firms attracted

more business than they could handle

with dispatch while many other idle

firms rolled to the edge of bankruptcy.

What procurement procedure could the

Assistant Secretary devise to resolve all

the conflicting requirements that had

troubled air arm officers and congressmen for nearly a generation?

At first, Assistant Secretary Woodring

believed that the rules governing federal procurement in general should be

applied to air matériel. Further study

persuaded him, as it had so many other

ardent advocates of competition before,

that air matériel constituted a special

case. Which is not to say, however, that

he conceded his position on competition

entirely.

In reply to Mr. Woodring's queries,

Air Corps officials claimed that negotiated contracts were absolutely necessary.

If they were forced to buy superior airplanes competitively, to be sure of buying the best, they would have to write

up a specification that more or less defined the best known aircraft of any

given type. This, they protested, would

play directly into the hands of the manufacturer who had perfected a particular airplane. He and he alone could

bid effectively. Clearly, such a procedure would defeat the desire of the Assistant Secretary to ensure competition.

Fortunately for the future of the service,

under the Assistant Secretary's prodding,

several Air Corps officers managed to

work out a procedure for getting around

this difficulty. And they did so before

3 January 1934, when the second session

of the 73d Congress opened. The Assistant Secretary's new policy was thus

formed before the agitations in Congress

led to so much investigation of the Air

Corps.

The solution contrived by the air arm

officers was a relatively simple one. They

proposed to let each manufacturer bid

on his own specification, and to inject

the necessary element of competition

they included a. speed requirement. But

instead of specifying the maximum

known high speed or the high speed desired, they stipulated a minimum high
PROCUREMENT UNDER THE AIR CORPS ACT 131

speed. Manufacturers submitting entries offering top speeds lower than the

minimum established in the invitation

would be rejected. The advantage of

this arrangement is evident: it permitted

competition as to performance while at

the same time excluding all but those

within a narrow margin of the desired

performance.

Furthermore, by limiting competition

to those manufacturers who had previously submitted an aircraft (similar to

the one they placed in competition) for

test and approval by the staff at Wright

Field, the air arm could eliminate any

bidder whose aircraft was structurally

unsafe or failed to comply with the requirements of the Aircraft Designer's

Handbook regarding the incorporation

of standardized accessories and the like.

Finally, by requiring bidders to submit

a physical sample for test, those who

evaluated bids would no longer be troubled with paper promises that failed to

materialize. Henceforth, evaluation of

bids for production contracts was to be

based on actual performance of the sample airplane as tested in flight.

The Assistant Secretary of War thus

came to the Hill early in 1934 prepared

to report that he had a new policy already in effect. He would approve negotiated contracts under Section 10k of

the Air Corps Act only for the procurement of experimental aircraft. For production contracts he would insist upon

competition, using the provisions of Section 10t as legal authorization. Hereafter, he assured the congressmen, competition was to be the watchword.

Where there was a conflict between

price and quality, if the aircraft of highest performance was not the low bidder,

the Secretary could avail himself of that

provision in 10t authorizing him to

make an award on his own discretion

"to the best advantage of the Government." By insisting upon the submission of physical samples of aircraft the

Secretary could rest his decision upon

reports of performance actually demonstrated rather than solely upon a manufacturer's paper claims. Taken all together, the various elements of the new

procurement policy appeared to have

resolved the basic difficulties of air matériel procurement.

Perhaps the most important attribute

to the new policy had nothing to do

with its intrinsic characteristics but

rather with its timeliness. When the

Assistant Secretary appeared before a

committee of Congress, which was irate

over the alleged profiteering of the aircraft industry, he held an excellent tactical position. He could say that the

War Department was already complying

with the committee's wishes. Congress

need not legislate because the administration's policy provided virtually every

safeguard the critics in Congress demanded. In short, Assistant Secretary

Woodring managed to forestall amendment of the Air Corps Act because he

took the wind out of the congressional

sails.
CHAPTER VI

Aircraft Procurement on the Eve of

World War II

The New Policy Reconsidered

Broadly considered, the new procurement policy contrived in 1934 by War

Department officials under the goad of

congressional criticism had one main

characteristic: insistence upon competition. Competition was to apply in the

procurement of individual experimental aircraft no less than in the procurement of production quantities. In contracts for aircraft in production quantities the real novelty introduced by the

new policy was the requirement that all

bids be accompanied by a physical sample of the aircraft to be evaluated. Rigorous competition among sample airplanes was to be the watchword of the

day. With this in mind, Air Corps officers during 1934 sent out circular proposals to the industry, inviting the submission of bids and samples.1

While eager to secure the broadest

kind of competition, procurement officers had to make every effort to ensure

a high degree of standardization. Since

the bids were invited on the basis of

a performance specification only, each

manufacturer was entirely free in the

matter of design. Without some guidance by the Air Corps such a policy

could, over a period of years, result in

a heterogeneous collection of equipment. To impose a degree of uniformity and standardization, procurement

officers provided each bidder with substantial instructions in the form of the

Handbook for Aircraft Designers, the

Air Corps standards book, as well as an

index of all pertinent Army, Navy, and

federal specifications for materials and

subassemblies. Moreover, bidders were

required to use government-furnished

equipment (GFE) for many accessory installations. Thus instruments, armament,

oxygen, communications, and other items

could be standardized. The GFE, along

with engines and propeller installations

often amounted to half the cost of the

complete aircraft.2 By concentrating procurement of GFE in Air Corps hands, it

was possible to ensure a high degree of

uniformity and interchangeability and

to improve the quality of competition as

well. By reducing the number of variables in the various sample aircraft offered,

the area of competition was narrowed

and became commensurately fairer. 1

 Service Sec, Proc Div, ATSC, Prewar Procurement by the Air Corps, undated [c. 1946], ICAF Doc

file, pp. 12-13. See also, Mat Div Bull No. 30, 30 Aug

35, AF Doc R&R Br, Doc 13/US/11.

2

 House Hearings on WD appropriation for 1935,

p. 566.
AIRCRAFT PROCUREMENT ON THE EVE OF WORLD WAR II 133

Premature Boasts

The Secretary of War was enthusiastic

over the new policy for aircraft procurement. Although by his own admission

more than two years and a full cycle of

procurement would have to pass before

any judgment on the new policy would

be possible, scarcely twelve months after

issuing the first circular proposal for a

sample aircraft competition, the Secretary was ready to praise the new procedure. He reported to Congress that the

new policy brought out more rather than

fewer bidders as some critics had feared.

In addition, the samples submitted

showed remarkable advances in performance over the types currently standardized in the Air Corps. About ten months

later, in June 1936, he reiterated his contention that the policy was a success. In

the following year the Assistant Secretary

of War spoke out just as emphatically.

He stressed the "salutary effect" of the

sample aircraft competition and declared

the policy "fully justified."

 3

There were, no doubt, some appreciable gains attributable to the wave of congressional criticism and the new policy

formulated as a consequence. Probably

the most obvious gain appeared in the

improved procedures hammered out by

procurement officers at Wright Field.

Evaluation methods were standardized

and made more objective.4 Office routines were formalized and procurement

officers circularized the industry to inform all bidders of the new procedures.5

Another gain directly attributable to

the trials and tribulations of 1934, although somewhat less immediately a part

of the new policy, concerned legislation.

After 1934 Air Corps officers displayed

a keener appreciation of the need for

facing proposed legislation squarely.

Rather than depend upon off-the-cuff arguments mustered in the Washington

headquarters against bills threatening to

upset air arm procurement methods, Air

Corps officials learned to send such measures to Wright Field. There, specialists

familiar with the complexities of procurement could draft staff papers so well informed as to be overwhelmingly persuasive. When Representative McSwain

offered a bill early in 1935 that seemed

apt to alter the air arm's procurement

policy adversely, the success of the new

procedure was evident. A logical, informative staff paper in the form of a memorandum report drafted at Wright Field

provided the basis for a convincing reply

by the Secretary of War that helped

forestall passage of the measure.6

Though the new procurement policy

of 1934 and 1935 did improve procedures

and raise standards of objectivity in evaluation, avoiding some of the worst aspects of the aircraft procurement used

3

 SW G. H. Dern to McSwain, Chairman, Com on

Military Affairs, House, August 15, 1935, and January 13, 1936, Cong Rcd, January 15, 1936, pp. 452- 54; Annual Report of the Secretary of War, 1935,

p. 8, and "Annual Rpt of the Assistant Secretary of

War," in the Secretary's annual rpt for 1937, pp.

26-27. 4

 Mat Div Office Memo [draft] 233, 19 Sep 34,

WFCF 008 Proc; ESMR 50-74, 23 Apr 34, CADO WF,

Doc 13/107. For a glimpse of the confusion characterizing procurement earlier, see ESMR 50-12, 17

Feb 32, CADO WF, Doc 13/87. 5

 AC Policy 168, 17 Sep 35, Digest of AC Policies,

OCAC, AF Doc R&R Br, and 2d Ind JAG to ASW,

13 Nov 34, JAG (Army) Gen Rcds Sec 400.12. 6

 See ESMR 50-12, Addendum 3, 1 Apr 35, CADO

WF, Doc 13/87, for comments on McSwain's H.R.

6810, 74th Cong, 1st sess, and ASW to McSwain,

25 Apr 35, JAG (Army) Gen Rcds Sec 452.1 Aircraft.
134 BUYING AIRCRAFT

before 1934, a number of problems still

remained to be solved. One such centered around the relationship of performance and price. While the new procedures for evaluation improved the degree

of objectivity possible in determining the

merits of two or more samples as to performance, how could price be equated

with performance? To which bidder

should an award go when one brought

in a markedly superior aircraft at a price

considerably higher than the price quoted

by his rival with an admittedly inferior

aircraft? If performance alone was to determine the selection, the manufacturer

who knew his sample to be superior could

inflate his price and profit unreasonably.

When the Air Corps set out to procure

transport aircraft during 1934 just such

a problem as this came up, and in answering the questions raised, air arm officers

brought the procurement process a long

stride forward.

The Transport Case

During August 1935 the Air Corps issued a circular proposal on a transport

aircraft, calling for bids returnable in the

following year. Three manufacturers,

Douglas, Curtiss-Wright, and Fairchild

submitted fully acceptable bids and samples, which were evaluated under the new

procedures. Douglas, with 786 points,

won first place in the competition. Curtiss-Wright, with 692.5 points, and Fairchild, with 599.7 points, lagged far

behind, so an order for a production

quantity of transports went to Douglas.

The new procurement policy seemed to

be working smoothly until the time arrived to pay the contractor. When Douglas' contract was submitted for approval,

the Comptroller General held up payment on a complaint from Fairchild.

Upon investigation the Comptroller

found that while the Douglas sample had

indeed won the competition in terms of

performance, the Douglas bid of $49,500

was nearly twice as high as those of

Curtiss-Wright's $29,500 and Fairchild's

$29,150. In a competition for production quantities of aircraft, the Comptroller felt that there could be "no proper

evaluation" where price was disregarded.

Unless the practice of ignoring price were

curbed, the Comptroller held, it would

be possible for a manufacturer whose

sample exceeded those of his competitors

by a very few points or a narrow margin

of superior performance, to win a contract even though his bid was way out

of line on price.7

Here once again the Comptroller General was raising the question that had so

vexed the framers of the Air Corps Act

of 1926. Which was more important,

performance or price? If one bought on

price alone, then one could not command

superior weapons. If one bought on performance alone, then one could not be

certain of securing a low price. In raising this question anew, the Comptroller

appeared almost to be unaware of the

years of discussion already spent on this

very point. More significantly, in raising the question in the precise terms he

did, the Comptroller appeared to display

a lack of understanding of the importance

of superior performance in the aircraft

purchased for military use. In commenting on the competition between Douglas,

7

 Text of Compt Gen decision of February 19,

1936, given in 1936 U.S. Aviation Report 268. See

also, Compt Gen to SN, December 16, 1935, quoted

in Cong Rcd, March 23, 1936, p. 4201.
AIRCRAFT PROCUREMENT ON THE EVE OF WORLD WAR II 135

DC-2 TRANSPORTS IN PRODUCTION at Douglas Santa Monica plant, June 1934.

the high bidder, and Fairchild, the low

bidder, the Comptroller found fault because the contract went to Douglas even

though the performance of the Fairchild

sample was "far in excess of the minimum" performance required by the terms

of the circular proposal. That an aircraft merely "in excess of the minimum"

required was poor economy indeed when

matched against an enemy aircraft designed at the utmost limit of the art

seems to have escaped the Comptroller's

notice.

A further review of the facts raises additional doubts as to the Comptroller

General's appreciation of the problem at

hand. To begin with the initial circular

proposal had announced that the "figure

of merit," or performance rather than

price, would be the "primary consideration" in making the award. Thus the

bidders knew before they entered that

the competition would center around

performance and not price. Moreover,

much of the disparity in price between

the Douglas entry and those of the other

two companies was rendered irrelevant

by the fact that the Douglas entry was a

twin-engine transport whereas both the

other competitors offered single-engine

designs. Further, the Douglas sample at

the time of the competition was already
136 BUYING AIRCRAFT

in production as the DC-2 (Air Corps

C-32), the immediate lineal predecessor

of the famous DC-3, or C-47, the work

horse of World War II fame. In fact,

the sample evaluated was actually borrowed by Douglas for that purpose from

a commercial airline customer.

Even so, the Comptroller's protests

could not be ignored. To secure the

matériel essential to the air arm, officials

in each echelon of the procurement organization had to meet the challenge

represented by the Comptroller's opinion.

The differing reactions of officers in the

several organizations concerned with procurement not only provide a cross-section

appraisal of the many points of view regarding the nature of aircraft procurement but also spell out the complexities

of that process.

At Wright Field the officers who helped

evaluate the sample aircraft in the transport competition were men in close contact with tactical operations. They were

in many instances the men who would

themselves use the equipment purchased.

They had no doubt about what they

wanted. The Douglas aircraft was superior, so they selected it as the winner

even though it was more expensive. In

short, the pilots in the field wanted the

best available.

In Washington, the Chief of the Air

Corps viewed matters in a somewhat different perspective. As the individual responsible for the success or failure of air

arm operations, the Chief of the Air Corps

was understandably reluctant to buy the

more expensive Douglas aircraft when to

do so meant getting eighteen units rather

than the thirty-six originally contemplated when the budget was set up nearly

two years earlier. This in turn would

mean falling further than ever behind

the authorized strength established for

the air arm. While the Chief of the

Air Corps undoubtedly wanted the best

equipment he could get, he could not ignore the annual hearing on appropriations where he must face congressional

critics who would demand to know why

the arm failed to reach aircraft strength

authorized after Congress had so generously appropriated funds in the preceding year. Beside the general influences

that would work upon any Chief of the

Air Corps, there was a particular consideration operating upon the incumbent

officer during 1935. After the excoriation of General Foulois by the Rogers

Committee, the Chief of Air Corps, anxious to avoid the charge of "deliberate,

willful and intentional violations of the

law," was under great pressure to award

on the basis of price rather than performance. Understandably he did so recommend, but when the Secretary of War

overruled him in favor of the superior

Douglas aircraft8 he was free from attack and so approved the award to Douglas that the Comptroller subsequently

challenged.

The issue, then, was clearly drawn.

On the one hand the Comptroller General held that the air arm's competition

was illegal because it failed to provide

any means of establishing the exact relationship between performance and price,

thus leaving the award entirely to a competition on performance. The Secretary

of War, on the other hand, held that any

arbitrary formula that evaluated price

8

 For general résumé of this affair, see G. Brown,

Development of Transport Airplanes and Air Transport Equipment, WFHO, 1946, pp. 70-73.
AIRCRAFT PROCUREMENT ON THE EVE OF WORLD WAR II 137

along with performance would deprive

the Secretary of the discretion legally

vested in him by Section 10t of the Air

Corps Act of 1926. While the Secretary

might, if he so desired, give price a greater

or lesser weight in evaluating bids, he

maintained that the discretion entrusted

to him by Congress in 10t was specifically

intended to permit flexibility in making

awards in order to serve the best interests

of the air arm.9

The conflict of views between the Secretary and the Comptroller posed an interesting constitutional problem. The

Comptroller General was the agent of

Congress; the Secretary of War was the

agent of the President. If either had

chosen to take his case to his superior, a

difficult question of legislative and executive relationship might have arisen. Fortunately, Congress has provided a somewhat simpler solution for more routine

questions by authorizing appeals from

such conflicts to the Attorney General.

The Secretary of War therefore presented

his case to the Attorney General for a

ruling. In addition to the relevant facts,

he described the chaos that would result

from a reversal and concluded, "Should

you be forced to decide the question presented adversely to the views of the War

Department, I hesitate to predict the effect upon National Defense. . . ."

 10

 Four

months later the Attorney General ruled

substantially in favor of the Secretary of

War.11 Douglas, which had long since

completed deliveries of the transports, at

last received its money.12 Thus a procurement project begun in August 1934

finally reached completion sometime after April 1937. Much of this delay seems

attributable to the failure of the Comptroller General to appreciate the latitude

given to the Secretary of War under the

terms of the Air Corps Act of 1926.

In another case of interest to the Air

Corps, the Comptroller also apparently

ruled without fully grasping the problem

in hand. Toward the end of 1934 the

Comptroller held up payment on an aircraft contract on the grounds that it had

been improperly awarded. He ruled

that there had been ample time since the

passage of the Air Corps Act in 1926 for

the air arm to determine specifications

for the airplanes it required. In eight

years, the Comptroller implied, the Air

Corps should have had more than enough

time to prepare specifications and blueprints "down to the last wire . . . or the

last bolt. . . ." Such specifications would

permit all qualified manufacturers to

compete on price, declared the Comptroller, and there would be no need for

evaluations permitting charges of "favoritism and fraud" in the award.13

 This

opinion clearly assumed that aircraft designs were static rather than dynamic,

that once one achieved an acceptable design it could be frozen for procurement

purposes. But in aircraft design the

preparation of detailed specifications and

drawings down to the last bolt is impossible. Procurement officers knew that no

War Department personnel could prepare 9

 The Secretary's position was ably formulated in

5th Ind, JAGO to SW, 27 Oct 36, JAG (Army) Gen

Rcds Sec 400.12. 10

 SW to Atty Gen, 28 Dec 36, JAG (Army) Gen

Rcds Sec 400.12. 11

 39 Op Atty Gen 23, April 9, 1937.

12

 Memo, Capt Park Holland, OASW, for Maj

F. P. Shaw, JAGO, 9 Feb 37, JAG (Army) Gen Rcds

Sec 400.12. 13

 Compt Gen to SW, 12 Dec 34, JAG (Army) Gen

Rcds Sec 163 Bids.
138 BUYING AIRCRAFT

such drawings. If such drawings were

possible, the Secretary of War noted, they

would actually restrict rather than encourage competition since it would be

necessary to specify a particular airplane

previously proven to meet the needs of

the air arm. A particular airplane

would, of course, be the design of one

manufacturer who would thus gain an

enormous advantage in any competition.14

Since all disbursements are ultimately

subject to the approval of the Comptroller General, it is obviously imperative

for those who wish their procurement

projects to move along without delay to

learn to live with the Comptroller General and the General Accounting Office.

Awareness of this may have motivated

Air Corps officials to reach an agreement

while the Douglas case was still pending.

The Comptroller had insisted that price

should be formally evaluated in the competition; the Secretary of War had contended that he had an express grant of

discretion to weigh price as he saw fit.

Although the Attorney General ultimately ruled on the Douglas case in favor

of the War Department, procurement officers recognized that the problem of price

would continue to be a point of criticism

in the Accounting Office. They arranged

with the Comptroller, therefore, to include price as a factor for evaluation in

all future competitions.

The formula contrived to satisfy the

Comptroller was simple but ingenious.

After determining a figure of merit on

the basis of performance, the figure was

to be divided by the dollar cost bid by

the manufacturer. The resulting price

factor would favor the bidder with the

lowest price and the highest performance.15

 In conceding this point, however, War Department officials insisted

that discretion still rested with the Secretary—there would be no determination

of the winner "by a purely mathematical

formula." The figure of merit and the

price factor together would serve as a

guide to the Secretary, who nevertheless

remained free to make an award to other

than the winning bid combination of

price and performance provided there

were substantial reasons for so doing.

If the new arrangement helped allay

congressional criticism and if it led aircraft manufacturers to feel they were getting fair play, it was probably a success.

But the relationship of price and performance was an aspect of Assistant Secretary Woodring's new procurement policy that raised other significant difficulties

when put into practice.

Drawbacks of the New Policy

Although the top political officials of

the War Department boasted of the success of the new procurement policy that

substituted competition for negotiation

in the award of aircraft contracts, the

14

 SW to Compt Gen, undated draft by OCAC, revised by JAGO, JAG (Army) Gen Rcds Sec 163 Bids.

15

 Memo, Exec, OASW, for CofS, 17 Aug 36, SW

and OASW files, AC Gen Questions, item 363. For

description of price-performance formula, see CofAC

to OSW, 4 Feb 37, JAG (Army) Gen Rcds Sec 400.12,

11 Nov 35 file. See also, Mat Div Bull No. 31, 29 Aug

36, AF Doc R&R Br, Doc 13/US/13, and Bull No.

30A, 1 Jul 39, entitled Proc Policy and Procedure . . . , AFCF in AC Project Rcds (Lyon Papers),

Book 56. The Navy had concocted a price-performance formula at least four years earlier, but there

is no evidence that Navy experience was studied by

Air Corps officials. See Mat Div BuAer, to Asst

Chief, BuAer, 7 Mar 32, in Delaney Hearings.
AIRCRAFT PROCUREMENT ON THE EVE OF WORLD WAR II 139

Chief of the Air Corps was more cautious.

He preferred to withhold judgment until

extended experience decided the issue.16

As events were to prove, his caution was

fully justified.

Under the new policy, with its emphasis on competition, experimental contracts involved a return to the use of design competitions as authorized by Section

10a et seq. of the Air Corps Act in preference to negotiated contracts under 10k.

Procurement officers, from their unhappy experience immediately following

the passage of the Air Corps Act in 1926,

knew that the design competition was a

virtually unworkable system for purchasing experimental aircraft. Nonetheless,

they were driven to return to the design

competition at the insistence of the Military Affairs Committee and its chairman,

Representative McSwain.17

Early in 1935 the Air Corps sent out

circular proposals on a design competition for a pursuit aircraft. In May sixteen bids were opened. During the next

five months the several evaluating boards

did their work, and in September the

Secretary of War announced the awarding of a contract to the Wedell-Williams

Air Service Corporation, which had presented the winning design. In the meantime another manufacturer had presented

not only a design but a sample aircraft at

Wright Field with actual flight performance superior even to the paper promises

of the Wedell-Williams design. The superiority of the airplane was in large

measure attributable to a new and more

powerful engine that appeared on the

market after the Wedell-Williams bid

had been received.

To proceed with a contract for constructing an experimental aircraft according to the winning design was obviously

futile. When Wedell-Williams began to

redesign its aircraft to utilize the newly

developed engine, the Judge Advocate

General raised objections. An award

could not legally be made for such a

modified design without obvious detriment to the other competitors. Whereupon, procurement officers determined

to cancel the design competition award

entirely and negotiate for the modified

Wedell-Williams design, using the powers conferred by Section 10k. However,

Wedell-Williams, convinced that the airplane had no future, subcontracted the

job, thus defeating a major purpose of

the Air Corps Act—to encourage firms

with design staffs rather than "production only" shops.

Here was the ultimate absurdity. If

the design competition, Section 10a et

seq., was to be used to avoid the favoritism alleged to color the use of negotiated experimental contracts (Section 10k),

but 10k had to be used to bail out the

shortcomings of the design competition,

then surely the design competition, was

unworkable. After three failures in 1926

and 1927, procurement officers had

avoided the use of design competitions

until driven to try four more during 1935.

Two others in a modified form were tried

16

 Testimony of Gen Foulois at House Hearings on

WD appropriation for FY 1936, January 29, 1935,

pp. 558-60. 17

 For influence of Military Affairs Com on WD

policy, see Gen Pratt to E. P. Warner, 10 May 34,

WFCF 008 Proc. See H.R. 6810, 74th Cong, 1st

sess, March 18, 1935, and McSwain to SW, 19 Mar 35,

JAG (Army) Gen Rcds Sec 452.1 Aircraft. See there

also, ASW to McSwain, 25 Apr 35, and SW to President, undated draft by JAGO, indicating the measure proposed by McSwain was sufficiently dangerous

to justify seeking Presidential aid in defeating it.
140 BUYING AIRCRAFT

during 1938. Significantly, none of the

aircraft used in World War II had its inception in a design competition.18

 In

1935 Air Corps procurement officers once

again reached the conclusion of 1927:

paper promises to perform were meaningless. The design competition was unworkable.

The clear failure of the design competition in the matter of experimental

contracts served only to emphasize the

importance of the sample aircraft competition in determining the success or

failure of the new procurement policy of

the War Department with regard to production contracts. Yet here, too, departmental officials found complications and

obstacles. The sample aircraft competition proved difficult to administer. The

procedure, it will be recalled, involved

the mailing of a circular proposal containing type specifications in terms of the

minimum performance acceptable. This

left the maximum performance to the

skill of the designer, who was required to

demonstrate the attainments of his design

by actual flight performance with a sample aircraft.

To ensure absolute fairness to all competitors, procurement officers ruled that

after a manufacturer entered a competition he was to receive no help whatsoever

from officers at Wright Field. On the

surface this appeared to be a sensible

safeguard, but in practice it led to a whole

train of adverse consequences. The ruling prevented Wright Field engineers

from making suggestions that would improve designs. Worse yet, by requiring

Air Corps officers to ignore the manufacturer entirely until the sample was actually flown to Wright Field for evaluation,

the air arm was denied an opportunity of

studying the aircraft in the mock-up stage,

where numerous flaws in design might

have been remedied easily.19 Modifications introduced after the plane reached

Wright Field for evaluation could be effected only through change orders—tedious and expensive amendments of the

contract.

A further drawback inherent in the

sample competition was the necessity of

drafting the invitation or circular proposal comprehensively enough to allow

the widest possible freedom to the designer yet explicit enough to bring in bids

suited to the requirements of the air arm.

If the invitation was insufficiently explicit the bidders would have no way of

knowing just what was desired; if the

invitation was too explicit, it would stultify innovations in design.

Yet another difficulty cropped up in

the sample competition. Samples were

to be used only for production or quantity contracts. Since the needs of the

service required that the winner be put

into production as soon as possible, it

was assumed that the samples submitted

would be fully developed airplanes ready

for production. But to win the competition, manufacturers were under pressure to submit aircraft embodying new

design features that by their very novelty

were not proven by long use in service.

Thus competitions intended to attract

production models brought in what

18

 This whole account of the design competition

story is taken from Prewar Procurement by the Air

Corps, by Service Section, Procurement Division,

Air Technical Service Command, pages 8-11.

19

 A mock-up is a dummy aircraft of full scale

erected before fabrication of the first flying model.

It is used to assist in planning the location of parts

and accessories.
AIRCRAFT PROCUREMENT ON THE EVE OF WORLD WAR II 141

amounted to experimental models instead, which is to say that using the sample competition for production contracts

virtually converted production contracts

into experimental ones.20

A major criticism leveled against the

new procurement policy by air arm officers was the high cost involved in its

administration. The Chief of the Air

Corps, preferring the negotiated contract,

was undoubtedly more than ready to muster arguments showing the excessive cost

of managing competitions. Yet even if

these defensive arguments are discounted,

it was indeed expensive to hold competitions. At times the mere list of bidders

circularized ran to eighty mimeographed

pages. It mattered little that 95 percent

of these firms never responded with bids.

To satisfy Congress that competition prevailed, all must be circularized. Sending

out proposals and evaluating bids necessitated an annual payroll of more than

sixty thousand dollars, not to mention the

diversion of engineers from research and

development projects to work at evaluating competitions.21

The high costs of the new procurement

policy were not confined to administrative charges. Manufacturers found the

sample aircraft a costly proposition to

build, especially when a contract failed

to materialize and the entire investment

had to be absorbed from company funds.

During the decade of the thirties airframe

costs increased between threefold and

fourfold.22 In addition to the impact of

social legislation and rising labor costs,

the advancing complexity of aircraft

structures drove costs upward. As the

average number of items on contract increased, unit costs fell, but tooling costs

rose rapidly, thus requiring a heavier

initial outlay by manufacturers. As airframes grew heavier and more complicated, the time for fabrication stretched

out from a few months to more than two

years in some cases. The step from twinengine bombers to four-engine bombers

marked the most spectacular rise in costs.

(Table 6] As the decade of the thirties

advanced, manufacturers who undertook

to build sample aircraft on the chance of

recouping their losses with the award of

a government contract risked larger and

larger sums of money.

Almost everyone concerned with the

building of military aircraft began to

issue dire predictions about the future

of the aircraft industry if the War Department persisted in its sample aircraft

policy. Brokers interested in raising

capital for the industry warned their clients that manufacturers were becoming

"increasingly reluctant" to risk entrance

into competitions. If unsuccessful, a

manufacturer might lose his entire investment since the possibility of finding

a purchaser other than the government

for a highly specialized military aircraft

was limited at best. On the other hand,

manufacturers were virtually driven to

20

 The difficulties mentioned here as well as many

others are discussed in memo for files by Maj J. P.

Dinsmore, JAGD, 2 Nov 34, JAG (Army) Gen Rcds

Sec 400.12. See also, JAG (Army) Gen Rcds Sec 156

Claims, 23 Jun 36, passim. Some Wright Field views

are contained in ESMR 50-74, Addendum 3, 14 Jun

34, and ESMR AG-51-20, 18 Jun 34, both in WFCF

008 Proc. 21

 Engr Sec Office Memo 182, 12 May 34; Maj A. J.

Lyon to Maj C. W. Howard, 7 Sep 34; Chief, Mat Div,

to CofAC, 1 Nov 34. All thru in WFCF 008 Proc

Policy.

22

 Mat Div Budget Officer to CofAC, 12 Jun 34,

AHO Plans Div 145.93-260.
142 BUYING AIRCRAFT

TABLE 6—COMPARATIVE COST OF TWO-ENGINE AND FOUR-ENGINE BOMBERS

Source: Exhibit A, 2d Ind, Chief, Info Div, OCAC, to Chief, Mat Div, 29 Apr 36, WFCF 121.6 Cost of Airplanes. The price jump

between the twin-engine B-18 and the four-engine B-17 would be reduced somewhat if like quantities were considered, but the spread

between the two would still remain great.

enter competitions, for failure to do so

might leave a firm far behind its competitors in technical development.23

The complaints leveled by brokers,

manufacturers, and others against the use

of sample aircraft competitions were, of

course, special pleading by partisans. On

the other hand, air arm officers who were

partisans only for superior equipment

raised similar objections to the system.

In the Navy, where the Bureau of Aeronautics procured aircraft under a sample

competition not unlike that of the Air

Corps, there were like complaints. The

bureau chief was apprehensive over the

declining number of bidders who cared

to risk capital on a sample aircraft. With

good reason, manufacturers shied from

such risks. In one competition for a relatively light aircraft, a dive bomber, two

firms bid with prices around $80,000

whereas one actually spent $125,000 and

the other actually spent $200,000 developing the samples.24

 Such heavy outlays

could and did on occasion drive firms

toward bankruptcy when they failed to

win production contracts.25

The sample competition had hardly

been fairly tried before the Chief of the

Air Corps suggested the danger lurking

in the policy. Of ninety-odd circular

proposals sent out inviting the submission of a sample bomber for competition,

only one firm replied.26 By the end of

fiscal year 1936 the Chief of the Air Corps

was anxious to try possible expedients for

shoring up the faltering policy. He questioned whether manufacturers could afford to lose more than two competitions

in a row, if that many, and recommended

changes in the procurement system to alleviate the difficulty.27

 A year later manufacturers were displaying a decided

lack of interest in government busi23

 Harding, Aviation Industry, pp. 6-8; Callery,

"Review of American Aircraft Finance," Air Affairs

(Summer 1947), p. 484; Aviation Industry in the U.S.,

pp. 98-162; Manual of Magazine of Wall Street

(March 6, 1937), p. 43.

24

 Testimony of Rear Adm E. J. King in House

Hearings on Navy Dept appropriation for 1936,

March 13, 1935, pp. 543, 547. 25

 Remarks of Senator R. S. Copeland, Cong Rcd,

March 18, 1936, p. 3934. 26

 Testimony of Gen Foulois, House Hearings on

WD appropriation for 1936, January 1935, p. 560. 27

 Annual Rpt of CofAC, 1936, AFCF 319.1.
AIRCRAFT PROCUREMENT ON THE EVE OF WORLD WAR II 143

ness. Improved conditions in the business

world and growing sales to commercial

airlines no doubt contributed to this situation but, the Chief of the Air Corps felt,

so did the procurement methods of the

air arm.28 During 1938 and 1939 procurement officers continued to urge changes

in the sample competition. Now, however, their requests had become demands. Changes in procurement procedures "must" be adopted, they claimed,

for it was becoming impossible to get

competition. The sample aircraft represented "an insuperable barrier" to manufacturers, whose capital resources were

too slender to permit "an undertaking

frought with such risk of financial loss."

 29

The War Department Seeks

a Solution

Since air arm officers and industry

spokesmen continued their barrage of

objections to the costly sample competition, War Department officials were compelled to give the question some attention. If the policy was really unworkable

and changes proved necessary, the War

Department would be thrust into an embarrassing position. The civilian Secretaries, it will be recalled, had gone way

out on a limb in declaring the new policy

a success. Perhaps their declarations were

politically necessary at the time, but having praised the policy loudly, they were

in a poor position to ask for its revision.30

Whether for political or other reasons,

the faults in the administration of sample

aircraft competitions continued to be a

cause of agitation well into the crisis period before the outbreak of World War

II in 1939, and repeated attempts were

made to meet the difficulties.

The Air Corps made the first attempt.

Procurement officers proposed to conduct

the sample competition as usual and

award a contract to the winner under

Section 10t. Then, if the second and

third ranking samples in the competition

proved to be designs of exceptional value

only slightly less desirable than the winning aircraft, these could be purchased as

experimental aircraft under the authority of Section 10k at negotiated prices.31

The prices paid for the second and third

ranking aircraft would necessarily be less

than the sum paid the winner and might

not even cover the full cost of constructing the samples, but the mere possibility

that there would be some reward to

others beside the winner was expected to

lure in more bidders on each competition.

Thus, purchasing the best of the losers

would serve not only to sharpen rivalry

and create superior weapons for the air

arm but at the same time would strengthen the industry financially and provide

the nation with a greater productive capacity in time of war.

Though the Air Corps plan had advantages insofar as the competitors were concerned, the advantages were offset by

defects from a budgetary standpoint.

Funds for production contracts (10t)

28

 Lecture at Army War College by Brig Gen

O. Westover, Materiel Division Developments of Fiscal Year 1937, WFCF 350.001 Lectures. 29

 Chief, Legal Br, to Chief, Proc Sec, 10 Feb 38,

AFCF 032, 1926, and R&R, Comment 2, Chief, Supply Div, OCAC, to Exec, 17 Mar 39 same file. See

also, Memo, Budget Officer (Mat Div) for ASW, Feb

39, WFCF 111.3 Expansion Program.

30

 6th Ind, JAG to SW, 1 Jun 37, JAG (Army) Gen Rcds Sec 400.12. 31

 CofAC to G-4, 19 Mar 37, AFCF 112.4A.
144 BUYING AIRCRAFT

came from one budget while funds for

development contracts (10k) came from

another. Thus the purchase of the sample competition winner in quantity

would be on the production budget while

any money paid out for the second and

third place samples in the same contest

would have to come from the research

and development budget.32

With Congress anxious to build up the

air arm to authorized strength, appropriations for production contracts were easier

to secure than those for research. Air

arm officers would have preferred to buy

the second and third ranking items from

the easier-to-get funds, but legal considerations blocked the way. Appropriations

for production contracts carried a mandatory clause ordering that "not less

than" a given figure be spent. If the second or third ranking samples failed to

materialize or contained no features

worth buying, the War Department

could find itself with earmarked funds

unspent at the end of the fiscal year. This

would be damaging if the Air Corps

sought larger appropriations the following year since many congressmen tended

to regard unspent funds as a presumption

of padded estimates rather than as evidence of economical spending.

If, on the other hand, procurement

officers used research and development

funds to buy the runners-up in a sample

competition, they encountered other vexations. To divert research funds to the

sample aircraft contest was to rob research in order to provide what amounted

to a subsidy for the industry. Since the

second and third ranking samples were

avowedly production models, their value

for experimental use was highly specialized at best and often not at all in the

area of research most needing money.

Thus, the Air Corps plan for making

sample competitions workable turned out

to be of dubious merit. While the remedy could be applied to advantage, the

administrative drawbacks accompanying

it suggested that some other expedient

must be devised.

Several aircraft manufacturers, feeling

themselves to be relentlessly driven to

the wall by the excessive costs of sample

aircraft, came forward during 1938 with

suggestions of their own. Probably the

most elaborate plan was that of Reuben

H. Fleet, president of the Consolidated

Aircraft Corporation. Once a procurement officer in the Air Service, Fleet had

for many years taken an active interest

in procurement problems and the general question of legislation dealing with

the air arm.

Although Fleet presented several proposals, they all boiled down to one central idea: legislation should be enacted

to authorize the War Department to procure aircraft in production quantities by

negotiated contracts rather than by sample competitions. Since to have favored

Fleet's proposals would have put the Air

Corps in the position of favoring the

practice of negotiation so stigmatized by

Congress, the War Department recommended against the proposal.33

 The language of the War Department rejection

was obviously calculated to allay any sus32

 TAG to CofAC, 11 Apr 38, and 1st Ind, OCAC to

TAG, 22 Apr 38, AFCF 321.9A.

33

 Memo, Capt Holland, OASW, for Gen Arnold,

12 Feb 38; Chief, Legal Br, Proc Sec, to Chief, Proc

Sec, Mat Div, 10 Feb 38; SW to A. J. May, 21 Feb 38,

draft by Plans Div, OCAC. All in AFCF 032 1926.
AIRCRAFT PROCUREMENT ON THE EVE OF WORLD WAR II 145

picion in Congress that the department

might still harbor a desire for negotiated

contracts in preference to competition.

This solicitude for congressional opinion

may well have been necessary, nevertheless it may be significant that Congressman McSwain had died, and a new incumbent with a somewhat different attitude toward public contracts presided

over the House Military Affairs Committee.

Though the officials of the various

echelons concerned with aircraft purchases believed it expedient to reject

Fleet's proposed amendment, they could

not drop the matter there. Other proposals to amend would surely follow, and

Congress might take unfavorable action.

There had to be some solution and soon,

for the sample competition policy seemed

on the verge of breakdown. In at least

one instance, a medium bomber project,

plans for a competition were canceled

when procurement officers found that not

one manufacturer was willing to bid.34

Confronted with a knotty problem of

policy, leaders in the War Department

resorted to a traditional Army expedient,

appointing a formal board of officers to

study the question and report a solution.35

The board met and gathered evidence.

Air Corps officials and numerous individual aircraft manufacturers presented testimony on their respective points of view.

For the industry as a whole the Aeronautical Chamber of Commerce offered a

series of recommendations—an example

of the useful collaboration between an

industry lobby and the War Department,

which was to prove most fruitful in the

war crisis soon to arrive. The revised

procurement procedure ultimately recommended by the board was an amalgam

of the various suggestions and proposals

made on every hand.

Essentially, the board recommended

what amounted to a compromise between

the advantages of the sample aircraft competition and those of the design contest.

It recommended that before issuing circular proposals for aircraft in quantity,

the Air Corps should invite manufacturers to submit designs for evaluation. One

or more designs would then be awarded

experimental contracts (10k) for the construction of one or more aircraft. Similarly, the authority of 10k could be used

to purchase the design data of the losers

where warranted by the nature of the

design. While all bidders could not be

assured compensation for the engineering data submitted with their bids, the

mere idea that some return was possible

to firms other than the winner of first

place was expected to encourage manufacturers to enter competitions that they

might otherwise have avoided.

Increasing the number of bidders in

military aircraft competition was, of

course, one of the major objectives sought

by the board, but there were other advantages anticipated from the proposed

scheme. Detailed type specifications

would not be prepared for quantity procurement until after the design winner

or winners passed the final mock-up

stage. This would permit air arm officers to exchange ideas freely with the

manufacturers and to suggest changes

during the period of construction without risk of showing favoritism to any one

34

 Memo, Exec, OASW, for ASW, 6 Jul 38, OASW

files, AC Proc Board, 1938. 35

 Proceedings of the board, 8 Jul 38, et seq., OASW

files, AC Proc Board, 1938.
146 BUYING AIRCRAFT

competitor. Finally, after garnering all

the best design ideas of the design competition, the Air Corps could issue a circular proposal for a sample aircraft to be

offered in competition by manufacturers

seeking to supply aircraft in production

quantities. The manufacturer offering

a sample aircraft with superior performance could normally expect to win a production contract. Competitors were not

confined to winners of the design competition. Any manufacturer who could

afford to build a sample aircraft meeting

the required specifications could submit

a bid.

The board expected other advantages

to accrue from the revised procedure. By

subsidizing at least one and sometimes

several experimental airplanes in the first

phase of the new routine, the War Department would provide an assured supply of bidders for production proposals.

At the same time, by leaving the sample

aircraft contest open to all bidders, no

one could protest that full free competition had been denied. In retaining the

requirement of a sample aircraft in production competitions, the board preserved the best feature of this system of

procurement: objective evaluation based

on actual performance.

Although the purchase of design data

and subsidizing of the construction of

winning designs would involve a considerable increase in initial costs, the plan

was expected to make great savings by

reducing the number of change orders

authorized after the contract had been

signed. This was one of the persuasive

arguments offered in support of the

board's proposed scheme. Air arm officers would get more nearly the design

they wished, and get it cheaper, while

manufacturers would get into production with fewer delays.36

During October 1938 the Chief of Staff

approved the board's proposal for a revised procurement procedure and urged

a like course upon the Assistant Secretary.37

 If given time, the War Department might have gone ahead to perfect

a highly workable system of procurement

that was both fair to the industry and

acceptable to those critics in Congress

who insisted upon the fullest competition. But the War Department was not

to be given time. The revised procedure

had scarcely been drafted when the crisis

that was to end in war shattered all hope

of an orderly evolution in aircraft procurement methods.

Peacetime Procurement: A

Retrospect

What general observations appear to

stand out from a twenty-odd year survey

of procurement methods? What conclusions appear to be so obvious as to lie

virtually beyond dispute? To begin

with, it is highly significant that the Air

Corps was still seeking to improve its

procurement procedures when the crisis

came. Even the briefest of surveys over

twenty years of aircraft procurement

shows that the process was essentially a

matter of resolving conflicting objectives

and mutually exclusive ends. To such

a fundamental question as whether or not

contracts should have been let by negotiation or by competition, experience over

the years showed that there could be no

36

 See G-4 Memo for CofS with G-3 and WPD

concurring, 10 Oct 38, AFCF 452.1. 37

 Ibid.
AIRCRAFT PROCUREMENT ON THE EVE OF WORLD WAR II 147

clear-cut answer. Each method had its

advantages, each had its shortcomings.

While low price was of importance, so

too was superior quality. Equally impossible to decide was the conflict between

strategic necessity on the one hand and

the economic health of the aircraft industry on the other. Clearly, there were no

black and white formulas or right and

wrong means to employ. Resolving mutually exclusive ends involved compromises.

Yet, conceding the existence of diverging ends or goals, there still remained the

question of means, the matter of administering the search for those ends. Experience demonstrated again and again

the importance of well-informed administrators. Time after time breakdowns

in the procurement process might have

been avoided had those who administered the law been familiar with the precise text of the statutes. The War Department and its subordinate echelons

were of necessity in constant flux. Officers seldom remained for long at any one

post. Therefore, the formulation of

standing operating procedures was even

more essential in the Military Establishment than would be the case in many

civilian organizations. But organization

by itself is never enough. The best of

procedures will not operate efficiently

without well-informed, assertive officials

willing to accept political responsibility.

They must select legal advisors who are

resourceful and imaginative, advisors who

will find legal ways in which desirable

ends may be secured rather than proliferate arguments to show why a given

course may not be followed.

The need for well-informed and able

administrators was not confined to the

higher echelons of the War Department.

The need for assertive, imaginative officials extended clear down through all

those echelons at Wright Field, where

procurement took place. Effective procurement called for imaginative officers

who could devise procedures above criticism by the Comptroller General, the

General Accounting Office, and a host

of disgruntled competitors. In sum,

the ideal in procurement administration

called for officials who could get what

the necessities of defense required and

still stay within the law.

All of which leads to yet another question. What was the law concerning procurement? Early in 1939 an attorney-atlaw wrote to the War Department asking

for information on the rules and regulations governing aircraft procurement.

An Air Corps officer detailed to prepare

a reply simply referred the attorney to

the Superintendent of Documents for a

copy of the Air Corps Act of 1926. The

officer who sent this amazing answer may

have been naive, ignorant, or merely

lazy—clearly "the law" of procurement

was only the beginning. Every statute

upon the books was encrusted with an

intricate overlay of judicial decisions,

Judge Advocate General and Attorney

General opinions, and Comptroller General rulings as vital to the procurement

process as the statute itself.

In short, statutes were only the visible

portion of a most intricate process whose

very complexity made tampering essentially dangerous. To change a statute is

to upset an elaborate and delicate mechanism. After a statute has remained

upon the books for any considerable period it accumulates not only rulings,

opinions, and decisions, but in addition
148 BUYING AIRCRAFT

it becomes the core for a number of administrative procedures that only extended experience can perfect. A congressman may be entirely sincere in proffering a bill to end some abuse, real or

alleged, in the procurement system, but,

if passed, his bill may actually do more

harm than good. If the record of aircraft procurement between the wars

shows anything at all, it reveals the immense difficulties attending every effort

to change the laws. If air arm officials

had been able to make this circumstance

clear to all legislators, the cause of national defense might have been greatly

enhanced.

Clearly "the law" is a most subtle concept. The same statute may remain on

the books over a period of many years

and yet be a very different matter one

year from another. The organic statute

of the air arm, the Air Corps Act of 1926,

was just such a law. A great deal depends

upon who is to administer it. A change

in administration, even without conscious decision by the President, may

mean a drastic alteration in the spirit in

which an act is interpreted. Changes

other than political also work subtle differences in the law. The Air Corps Act

was drafted before the technical revolution of the late twenties had altered the

whole structure and scale of the aircraft

industry. After this revolution wrought

profound changes in the industry, the

Act of 1926 no longer meant the same

thing that it had when first written. An

act conceived for a large number of

relatively small firms now operated upon

a very different type of industry led by a

handful of major producers.

Perhaps the most important conclusion to be drawn from the history of

twenty years of aircraft procurement is

that no conclusions can be drawn; there

are no formulas, no cut and dried rules

to follow in every case. Procurement

methods that work in one era may be utterly unworkable in another. The corporate character of the industry changes,

the mood of the Congress changes, and

a new President enters the White House.

Conclusions drawn on the situation of

1938 might well be no longer valid in

1968. The same congressmen who insisted upon stringent economy and competitive procurement in 1934 may well

have voted billions for defense while

joining the clamor for negotiated contracts to speed the placement of contracts

in 1941.

The record further suggests the critical

importance of studying the whole procurement process rather than isolated

segments. As late as March in 1940,

when the threat of war was hovering over

the nation, the Secretary of War boasted

that his system of procurement had resulted in aircraft "superior to any in the

world."

 38

 Japanese Zeroes and German

Messerschmitts were soon to raise some

doubt regarding the Secretary's view. In

defense, the rejoinder might be offered

that the triumphant B-17 was a product

of the Secretary's "sample" competition

and should on its record vindicate his

methods. The war record of the B-17,

the Boeing Flying Fortress, cannot be denied, but the success of the B-17 does not

prove the utility of the "sample" procurement policy. The B-17 was indeed a

38

 Hearings of Senate Military Affairs Com on S

Res 244, 76th Cong, 3d sess, March 28, 1940, p. 3.
AIRCRAFT PROCUREMENT ON THE EVE OF WORLD WAR II 149

COMPARATIVE SIZE OF B-17 (upper) AND XB-15 (lower).

private venture submitted by the manufacturer as a bid in a sample competition,

but a further probing after facts reveals

that before the B-17 came the XB-15,

also a four-engine bomber, an experimental project sponsored and paid for

by the Air Corps. The design experience derived from the XB-15 made the

B-17 possible.39 To weigh the sample

competition apart from its context is to

distort the record and draw conclusions

from half truths. In short, there is no

ideal formula for aircraft procurement.

39

 Draft of annual report for Mat Div, p. 9, 27 Aug

38, AFCF 321.9 Annual Rpt.
CHAPTER VII

Planning for Industrial Mobilization

The Problem

Probably no aspect of the nation's experience in World War I seems less successful than the record of War Department procurement. The Army, trained

for little more than garrison duty, suddenly found itself expanded to a force of

several million men. To equip this

force for the exigencies of modern warfare called for the purchase of nearly

three-quarters of a million different types

of items. The War Department was unprepared for such a program.

Within the Army alone, half a dozen

agencies began to compete with each

other for the services of manufacturers

who could provide the items needed.

Taking all the government procurement

agencies together, by the war's end there

were literally hundreds of different contract forms in use. Each had its peculiarities involving special interpretations.

As a consequence, war contracts filled the

federal courts with costly litigation for

decades after the armistice. And the

price of unpreparedness cannot be reckoned in dollars alone. Delays in production cost lives.

Because the War Department had to

formulate its requirements after the outbreak of World War I, many leading contractors were barely able to reach production before the war ended. The sudden

rush of orders that belatedly hit the nation's manufacturers led to a wild scramble for the limited available supply of

raw materials. Acute shortages developed in several key materials and prices

rose alarmingly. Marked fluctuation of

price levels reflected the impact of war

on the national economy. Manufacturers fortunate enough to receive munitions

contracts absorbed all available materials

or labor and profited. Others, less fortunate, were driven out of business. Even

the firms with war contracts found it difficult to attain capacity production. As

soon as one shortage seemed solved, others

appeared to upset hoped-for schedules.

Bottlenecks in transport, in power, and

in machine tools all rose to delay the total

mobilization effort. In the scramble, the

Army bid against the Navy for the nation's productive capacity, war contractors competed with one another for the

nation's resources, and the nation as a

whole paid heavily for its unpreparedness.

Out of the chaotic experience of utilizing the nation's potential in World War I

came the realization that the preparations

for war must be carefully thought out in

advance. There had to be a mobilization plan if the mistakes of the past were

to be avoided. And beyond the plan,

all agreed, administrative machinery had

to be created to regulate the flow of the
PLANNING FOR INDUSTRIAL MOBILIZATION 151

nation's economy under the abnormal

stress of war.

The War Department and

Industrial Mobilization

The National Defense Act of 1920

gave legal recognition to the need for industrial mobilization planning. Section

5a placed the task squarely on the shoulders of the Assistant Secretary of War.1

Although the job of procurement planning for wartime posed enormous difficulties, by the middle thirties the Office

of the Assistant Secretary of War had

carried the task a long step forward.2

The objectives to be achieved were recognized; the problems to be solved were

defined. All that remained was the actual business of filling in the details that

would give substance to a mobilization

plan.

The work of filling in the details fell

to organizations for the most part within

the Office of the Assistant Secretary of

War. The Assistant Secretary delegated

his statutory obligation for industrial mobilization planning to a Planning Branch

in his office staffed by civilian employees

and Army officers. To ensure a supply

of trained officers for this assignment, the

Assistant Secretary sponsored a special

training school, the Army Industrial College. But Army activity in economic

planning, no matter how intelligently

executed, could not alone solve the problems raised. Soon after the Planning

Branch began to function, it became evident that, to be realistic, all planning

must include the Navy despite the silence

of the 1920 Defense Act on this point.

To offset this statutory deficiency, the

Secretaries of War and Navy by administrative action created the joint Army

and Navy Munitions Board (ANMB),

which became the authoritative source

of joint mobilization plans. The bulk

of the detailed spadework continued to

be performed by the Planning Branch

of OASW and its naval counterpart.

By 1931, with the publication of the

Industrial Mobilization Plan prepared

the year before, the phase of trial and

error was over, and detailed planning began in earnest. As more information

accumulated, new problems and complications emerged. Modifications in concept and procedure were necessary. Subsequent revisions of the plan, appearing

in 1933, 1936, and 1939, sought to obviate the shortcomings of earlier versions.

The planners learned much from their

study of World War I, but as they began

to fill in the details of their initial plans

they gradually came to realize that they

had set up impossible goals. Subsequent

revisions—for example, the so-called Protective Mobilization Plan—scaled down

the size of the force to be put into uniform immediately following the outbreak

of war, after staff studies revealed that

the nation's facilities simply could not

get the desired items of equipment in the

1

 41 Stat 764, June 4, 1920. For an extended discussion of the various plans contrived by the War

Department to erect a civilian superagency on the

skeletal planning staff of OASW, see Harold W.

Thatcher, Planning for Industrial Mobilization:

1920-1940, QMC Historical Studies, 4 (Washington,

1943, reprinted 1948). See also R. Elberton Smith,

The Army and Economic Mobilization, UNITED

STATES ARMY IN WORLD WAR II (Washington,

1959), ch. II. 2

 The following resume of OASW planning is

based on the several mobilization plans and on

Harry B. Yoshpe, Study of Experience in Industrial

Mobilization in World War II, Army Industrial College, 1945.
152 BUYING AIRCRAFT

desired quantities within the time initially believed possible. Perforce, the

planners revised their conception of mobilization to fit the facts.3

 This alone

may have justified the entire planning

effort, but its usefulness certainly extended beyond the matter of changing

perspectives. Probably of equal importance was the opportunity to perfect operating procedures.

Over the years of the "Long Armistice," the mobilization planners worked

out a number of fundamental procedures

to provide for an orderly economic mobilization in time of war. Among other

things, this involved taking steps to prevent the scramble of purchasers that occurred in World War I, overloading some

districts or regions of the country and

ignoring others. The planners sought to

apportion the load as evenly as possible

across the various regions of the nation

so all could share the benefits and the

burdens.

"Apportioning the load" involved having some means of measuring the productive capacity of any given facility.

This led the planners to perfect their

administrative tools and define their

terms still further. After some experimenting they hit upon the scheme of assuming the output of a plant in a normal

eight-hour day to be 100 percent. Then,

assuming a war situation, the plant

would work three shifts around the clock.

Allowing a margin for tool changing,

cleaning time, and so forth, the planners

reasoned that any given facility had a total capacity in wartime of 250 percent of

its normal output. By arbitrarily reserving 50 percent of any facility's normal

production for civilian use, this left some

200 percent of normal productive capacity to be assigned to military production.

Equipped with this measuring stick,

procurement planning officers of the

various arms and services surveyed individual facilities by the thousands and

returned their findings to the Planning

Branch in OASW. Where their reports

showed that more than one service was

bidding for the productive capacity of

any facility, the Planning Branch formally "allocated" that plant, earmarking

its production for one or another of the

services. Where conflicts with the Navy

appeared, the joint Army and Navy Munitions Board reconciled the rival claims

by assigning the disputed facility to a "reserved" status in which the board doled

out capacity on an ad hoc basis. By the

eve of World War II the Directory of

Allocated and Reserved Facilities published by OASW contained over 10,000

separate facility listings. Each listing

represented a means of safeguarding

against the concentration of orders that

so impeded production in World War I.

Concentration of contracts was only

one of many evils. Another was the

manufacturers' all too frequent lack of

familiarity with the military items they

were expected to produce. Ideally, an

educational order was the best way to

familiarize manufacturers with unusual

military items; however, in the absence

of funds to finance more than a very few

such orders, the mobilization planners

did the next best thing. They co-operated with manufacturers in drawing up

3

 Compare the conception of mobilization presented by Woodring, in "Report of the Assistant Secretary of War," Annual Report of the Secretary of

War, 1936, page 20, with that of Louis B. Johnson,

"Report of Assistant Secretary of War, 1938," ibid.,

page 20.
PLANNING FOR INDUSTRIAL MOBILIZATION 153

an "accepted schedule." This was not a

contract but a statement of the quantities and rates at which a specific item

would be required. To explore the possibilities of actually meeting this schedule, the planners further co-operated

with the manufacturers in drawing up

"factory plans" that attempted to outline

the steps necessary to convert to military

production and to formulate a statement

of the labor, materials, and so forth required in the event of war.

Although the Defense Act of 1920

charged the Assistant Secretary of War

with responsibility for mobilization planning, much of the work was actually

delegated and redelegated in the twentyodd years between the wars. However,

one major division of labor is evident.

The Assistant Secretary and his immediate staff assumed responsibility for providing the conceptual framework of mobilization and undertook to establish

rules and procedures to co-ordinate procurement and control the national economy in time of need. On the other

hand, most of the detail of surveying,

planning, and scheduling was left to the

individual arms and services. Only in

this context is it possible to appraise the

role of the Air Corps in the field of mobilization planning.

The Air Corps Organization

for Mobilization Planning

Just as the Assistant Secretary of War

delegated his statutory obligation for mobilization planning, so too did the Chief

of the Air Corps. Since air arm mobilization was largely concerned with matériel, the problem inevitably fell into the

sphere of the Materiel Division, which

unlike the other units of the Office, Chief

of Air Corps, was physically located at

Wright Field near Dayton, Ohio. Thus,

an Industrial Planning Section (IPS) at

Wright Field shouldered the special tasks

of industrial mobilization planning imposed by the Assistant Secretary's directives.4

Standing instructions charged the officers of IPS with "continuous study" to

familiarize themselves with the nation's

industrial resources, new processes, and

developments that might affect the pattern of mobilization.5

 In actual practice,

the officers assigned to the Industrial

Planning Section found themselves

swamped by the sheer volume of routine

administration without taking on added

burdens of "continuous study." In the

main, their work involved the task of

keeping the details of the mobilization

plan current, utilizing the reports sent in

by the Procurement Planning District

representatives who operated in six geographical regions centered around New

York, Buffalo, Cleveland, Detroit, Chicago, and Los Angeles.

The fundamental work of procurement

planning was really done by the district

officers. It was they who met the individual manufacturers face to face. It was

they who surveyed a facility and filled out

Form 100, the standard information sheet

that went forward through IPS at Wright

Field to the Planning Branch in OASW,

where the over-all mobilization plan was

constructed. Aside from such obvious

information as the location of the facil4

 For a representative view of the Materiel Division

agency for mobilization planning, which evolved

slowly over the years after 1920, see Mat Div Industrial Planning Cir No. 203-1, 25 May 37. 5

 Ibid., p. 4.
154 BUYING AIRCRAFT

ity being surveyed, a roster of its key officials, its organization, its financial status,

its production record, and the like, the

reports returned from the districts went

into considerable detail where manufacturers agreed to accept a schedule of production in an emergency. Such reports

gave descriptions of the manufacturing

methods to be used, compiled a bill of materials, and listed subcontractors whose

services would be required.6

Although the district representatives

surveyed literally thousands of facilities,

not every survey resulted in a factory plan

or an accepted schedule. There were so

many items to be handled that only the

most critical, those most intricate or those

most difficult to manufacture, were carried all the way through the detailed planning and scheduling stage. For many

items only an informal plan and schedule

seemed necessary. This was especially

true of commercial items that offered no

manufacturing difficulties. Even items

for which a detailed plan might have

been useful or helpful did not always get

formal schedules. The Industrial Planning Section was more than fully occupied in keeping plans up to date upon

only the most critical items.7

Though the staff officers in IPS failed

to complete a number of their plans and

schedules, it is easy to find mitigating

circumstances in their favor. They were

perpetually understaffed. Air Corps authorities felt no urgency about mobilization plans, which they considered rather

theoretical. Confronted with a chronic

shortage of officers, the Air Corps gave

first priority on manpower to tasks regarded as more pressing and more important. Even had more officers been available, they could not have been assigned

to mobilization planning work because

the appropriation acts passed during the

decade before the war generally employed

restrictive language that limited the planning staff to its strength in previous years.8

Another consideration militating

against effective mobilization planning

was the difficulty encountered in establishing a working harmony with the representatives of industry. Officers engaged in survey work found themselves

at a disadvantage when dealing with industrialists because of the wide differences in their salaries. Since most of the

officers conducting the surveys were in

the lower pay brackets, it was not always

easy for them to negotiate on equal terms

with high-ranking officials of the nation's

largest industrial firms. In addition, the

planners were initially handicapped by

standing instructions warning them

against antagonizing manufacturers with

too frequent requests for information,

questionnaires, and so forth. All their

relations with the manufacturers rested

upon good will or the patriotic desire of

individual businessmen to be co-opera6

 The operations of the district representatives are

briefly described in Review of Methods Employed

by the AAF in Estimating Productive Capacity and

in Placing Production Schedules: 1922-1945, 15 May

46, prepared by ATSC's Logistics Planning Div, Plans

(T-5), ICAF. 7

 Keeping the plans current seems to have swamped

others besides the planners in the Air Corps. In

1936 the Assistant Secretary reported the task "Herculean" and noted that three years after the appearance of the 1933 Mobilization Plan, the job of working out the details on requirements had at last been

completed. "Report of the Assistant Secretary of

War," 1936, p. 21.

8

 See, for example, Lt Col F. J. Riley to ASW,

29 Mar 37, WFCF 381 Mobilization, 1939.
PLANNING FOR INDUSTRIAL MOBILIZATION 155

tive. Businessmen were under no legal

obligation to provide information, nor

were they under any compulsion to permit surveys or to agree to "accepted schedules." Some manufacturers refused to

sign schedules, although they might otherwise be co-operative, because they feared

a recurrence of their mistakes in World

War I. They recalled having accepted

production goals they could not meet

because they had failed to appreciate the

rigid standards imposed by government

specifications. Others may have refused

to sign accepted schedules for fear of being branded warmongers or merchants

of death. Some manufacturers flatly refused to supply information on the

ground that to do so would weaken their

position vis-a-vis their competitors. At

the other extreme there were manufacturers who were quite willing to sign

schedules that were hopelessly unrealistic.

Since accepted schedules were not contracts and not legally binding, they could

be signed with breezy irresponsibility.

As a consequence, accepted schedules,

duly signed and placed on file, often

meant little or nothing.9

Under such circumstances, one can

readily appreciate how difficult was the

task confronting the officers working on

the problem of industrial mobilization

for the Air Corps. Nonetheless, in spite

of many handicaps, the accomplishments

of the Air Corps planners seemed substantial. Over the years between the

wars, the Industrial Planning Section at

Wright Field accumulated vast files of

information concerning the aircraft industry in the United States. Hundreds

of factory plans were on tap ready for

use in converting the industry from a

peace to a war footing.

Thus, at least on the surface, the Air

Corps appeared ready for M-day. There

existed an organization, a staff, plans, and

carefully recorded procedures for mobilization of the nation's aircraft industry.

Yet when war finally did come, virtually

the entire planning effort evaporated:

most of the planning and much of the

accumulated data were either scrapped

or ignored. If the past has any meaning

at all for the present, surely one might

inquire as to what mistakes were made

that thought, foresight, and vision might

have avoided.

Air Corps Mobilization Planning

Was the mobilization planning effort

of the Air Corps a success or a failure?

In the final analysis, the air arm was not

prepared when the war came; the plans

for mobilization were faulty and inadequate. But before appraising the Air

Corps' effort in procurement planning,

it might be well to restate the problem.

Leaving aside for the moment the matter of creating economic controls for the

nation's economy as a task to be performed by the Army and Navy Munitions

Board and some civilian superagency to

be set up for the purpose, the essentials

of mobilization planning fall into two

separate phases: first, the determination

of requirements, both qualitative and

quantitative, and, second, the location

of adequate productive capacity to meet

these requirements. While the Air Corps

did contribute information leading to the

9

 For an excellent summary of the problems besetting the planners, see AAF Hist Study 40, The

Expansion of Industrial Facilities Under Army Air

Force Auspices: 1940-1945, ATSC Hist Office, 1945,

p. 16.
156 BUYING AIRCRAFT

promulgation of requirements, final determination lay in the hands of the General Staff and thus beyond air arm decision. This in itself complicated the task

of planning, but even more detrimental

was the highly volatile nature of the variables that entered into the computation

of requirements.

Take, for example, the matter of design as a qualitative factor of requirements. In the field of aviation the speed

of technical change was, as the Secretary

of War once remarked, "downright astonishing."

 10

 Each change in design involved some sort of recomputation of

requirements. Since design change was

continual, the computation of requirements was forever unsettled; approved

programs were always "about to be revised." Propeller blades offer a case in

point. The mobilization plan of 1933

listed blades as a critical contributory

item, but the blades in discussion were

made of wood. Shortly thereafter steel

blades replaced wooden ones. Then hollow steel forgings came into use. Finally

variable-pitch designs began to elbow out

fixed-pitch models. During this evolutionary sequence, imaginative and resourceful manufacturers with aggressive

research staffs pushed ahead of less progressive firms.11

 Each change in design,

each new technique of production, and

each newly formed company upset the

calculations on requirements.

Sometimes design change involved the

introduction of an entirely new item

rather than development of an existing

item. Fractional horsepower electric motors are an example. They were virtually

unheard of as aircraft appliances during

the 1930's, yet during World War II each

B-29 used over a hundred such units.

Planners would have had to have been

blessed with great prescience to have

scheduled in advance such yet unknown

requirements.

The variables introduced by design

changes alone, it would appear, were

enough to make of requirements computation a well-nigh impossible task.

Added to this difficulty were the further

complications introduced by changes in

doctrine. The between-war years were

characterized by sharp disagreements as

to the proper strategy and tactics of air

power. Even amongst those most avid

in their faith in aircraft there was disagreement as to the most effective form

of weapon. The fighter school of thought

vied with the bomber school, and advocates of heavily armed bombers argued

with the advocates of fast, lightly armed

bombers. As one or another of these

groups gained dominance, requirements

changed colorations. On the eve of

World War II, for example, strategic

plans called for 37 percent of the available productive capacity to be reserved

for observation aircraft.12 When the war

finally arrived, this whole class of aircraft

proved unusable and was abandoned as

a separate type.13

Design and doctrine were not the only

fluid variables that troubled the calcula10

 Report of Secretary of War, 1935, p. 7. See also,

comments of Maj Gen. O. Westover, CofAC, before

industry representatives, 6 Sep 38, WFCF 381 Emergency Proc. 11

 See, for example, the rivalry described in ESMR,

M-51-394, 13 Sep 37, WFCF 004.4 Manufacturing,

1939.

12

 Lt Col Farthing to Lt Col H. V. Hopkins, 7 Mar

38, AHO Plans Div 145.93-183. 13

 Evolution of the Liaison-Type Airplane, 1917-

1944, ATSC, 1945.
PLANNING FOR INDUSTRIAL MOBILIZATION 157

tion of requirements. There were differences of opinion within the Army as

to the proper method by which such calculations should be made. General Staff

directives for the earliest mobilization

plan laid down a standardized rate of

manpower induction, to which munitions production was to be geared. Air

Corps efforts to work out the details soon

revealed the flaw in this approach. The

proposed rate of induction far exceeded

the most optimistic rate of aircraft deliveries to be expected from the existing

industry. Since the dynamic state of aircraft design made it unfeasible to maintain a large, ready reserve of aircraft to

make up the difference between the rate

of induction of manpower and the rate

of production of equipment, some change

in plan was essential.

General Staff officers recognized the

validity of the Air Corps criticism but

protested that the proposed solution of

delaying inductions until equipment was

ready was "in conflict with the fundamental concept of the War Department

General Mobilization Plan," which was

"based on personnel and not upon supply and equipment." The Air Corps

was ordered to comply with the War Department plan, "not through making the

availability of equipment the determining factor before new units are directed

to commence their mobilization, but by

reducing the requirements of Air Corps

units in any period to a reasonable number based on expectation of production."

 14

Here was a major dispute over a fundamental premise. General Staff officers

used the traditional troop basis for calculating requirements. Yet the troop

basis was an entirely inadequate formula

upon which to determine aircraft requirements, with the possible exception of certain types of close-support equipment.

Strategic and tactical necessity for air

power, not the number of men mobilized,

constituted the only effective basis for

determining the major aircraft requirements of the Air Corps. If the General

Staff officers who established requirements for the first mobilization plans

based their calculations on strategic and

tactical considerations at all, they emphasized tactical or close-support aspects to

the detriment of strategic functions.

They insisted, for example, that the Air

Corps should give "absolute" priority to

observation aircraft for assignment to

armies and corps.15

To be sure, the example cited above

represents only a single episode in the

early thirties. General Staff officers were

not always so intransigent in their directives on air power. Nonetheless, the illustration has a point—it shows the absence of agreement upon the techniques

to be employed in computing requirements. And in the absence of such agreement another variable was introduced

that worked to upset and confuse the

orderly process of Air Corps mobilization planning.

Thus, from the very outset, the Industrial Planning Section of the Air Corps

was beset with virtually insurmountable

difficulties. So many variables entered

14 into the calculation of requirements that TAG to CofAC, 12 Jun 30, quoted in 1st Ind,

OCAC to ACTS, 10 Feb 33, basic ACTS to OCAC, 24

Jan 33, AHO Plans Div 145.93-165. 15

 Ibid.
158 BUYING AIRCRAFT

any planning rested upon foundations of

sand. Planners were repeatedly forced

to rely upon "educated guesses."

The story of Air Corps planning for

aluminum well illustrates the difficulties

of working from uncertain assumptions.

In 1932 after more than a decade of preparation for mobilization, the Air Corps

still had no plan for this vital commodity.

A civilian employed at Wright Field

finally offered to work up a plan during

his two weeks of active duty as a reserve

officer.16 In 1936 Air Corps officers were

still computing the aluminum requirements for the 1933 mobilization plan, but

an entirely new plan, the revision of 1936,

was soon to appear, invalidating much

if not all of the calculations already made.

In 1937 the requirement was still unsettled, and air arm officers continued to

make "educated guesses" rather than exact computations of the need for aluminum. The dubious nature of this sort

of data for planning purposes is even

more obvious when one notes that even

the "educated guess" disregarded such

conditioning factors as the availability of

skilled labor, raw materials, and machine

tools, not to mention possible shortages

in accessory equipment and delays arising from the introduction of design

changes during production.17

Despite the unknowns and the variables with which they had to work, Air

Corps planners had to go ahead and plan

anyhow. They knew they were working

with imponderables in search of solutions to a hypothetical question. Moreover, they knew full well that if war

should break out they would be criticized

for failing to come up with a smoothly

operating plan. Staff officers in the Industrial Planning Section at Wright Field

were like the one-eyed hunter who is

standing in a fog and is asked to shoot

with a broken gun at ducks he cannot see.

Air Corps officers put into their planning for wartime procurement much

effort but not enough thought. They

worked conscientiously and hard but

tended to busy themselves largely with

the routines of filling in details upon an

existing conceptual framework. Rarely

did they define their assumptions and

even more rarely did they question those

assumptions. On occasions when they

did recognize the premises underlying

their plans, they not infrequently failed

to think them through to their ultimate

implications. A review and appraisal of

the major assumptions that underlay the

Air Corps planning effort may help reveal some of the planning officers' difficulties.

A Healthy Industry: Key to Defense

With air power, as with other forms

of military might, preparedness may take

one of two forms. A nation may choose

to maintain an aerial fleet-in-being or, as

an alternative, it may choose to rely upon

its capacity to build an air fleet in time

of emergency. The fleet-in-being or "Big

Stick" form of preparedness has certain

advantages. It can be used as a diplomatic weapon to terrorize an opponent

into surrender without a fight, as Hitler

found. But at the same time, the fleetin-being has serious limitations. Obso16

 Chief, Materials Br, Mat Div, to S. N. Colby

(Alcoa), 13 Jul 32, WFCF 381 Mobilization, 1939. 17

 Dir, Planning Br, OASW, to CofAC, 1 Nov 37,

and 1st Wrapper Ind, OCAC to Chief, Mat Div, with

Incls, 9 Nov 37, as well as 2d Wrapper Ind, Mat Div

to CofAC, 3 Dec 37, AHO Plans Div 145.93-182.
PLANNING FOR INDUSTRIAL MOBILIZATION 159

lescence in aviation is so great that large

numbers of old aircraft rapidly become

relatively vulnerable to fewer aircraft of

newer design and superior performance,

as France found to her sorrow after the

outbreak of World War II. In the

United States, officers of the War Department in general and the Air Corps in particular were firmly committed to a policy

that emphasized the importance of capacity to build, the importance of industrial potential, the power to create and

replenish an air force, rather than a fleetin-being. This idea was repeatedly promulgated formally as official doctrine on

many occasions.18 Nevertheless, the implications of the policy were not thought

out to their further limits.

Educational orders constituted but one

of the several means by which the Air

Corps could have helped assure the existence of a strong and healthy industry

ready to climb to peak output soon after

receiving orders for items in mass-production quantities. An educational order is an order designed to familiarize a

manufacturer with the item he will be

expected to produce in an emergency.

In its simplest form, an educational order

might involve little more than acquainting the contractor with the item he is to

make. In its most complex form it might

even include the construction of jigs and

fixtures as well as tools and dies to be

held on a stand-by basis.

The Defense Act of 1920 authorized

the use of educational orders, but the actual execution of contracts depended

upon the willingness of Congress to appropriate funds.19

 Beginning in 1927

the War Department asked for funds to

launch an educational order program.

Similar measures were introduced repeatedly thereafter, but Congress showed

little enthusiasm to provide funds for

"if and when" purposes.20 Not until the

mounting threat of the dictatorships in

Europe and Asia was dangerously far

advanced did the legislators relent. In

June of 1938 Congress authorized funds

for educational orders, but the sum allowed was only $2,000,000, to be spread

amongst all the arms and services. As

the international crisis became more

acute the War Department returned to

Congress to present plans for a larger

educational order program. In 1939,

with the menace of war too obvious to

ignore, Congress responded generously,

but by then it was too late.21 The careful preparations that might have been

secured at slight expense in the years of

peace were at that late date to be had, if

at all, only at tremendous cost.

Thus, in the matter of educational orders as in so many other instances, military leaders could retire behind congressional skirts. Since Congress provided no

funds, let Congress shoulder the blame.

War Department officers could rightly

18

 Baker Board Rpt, p. 64. Since the Baker findings were declared official policy by the President,

the Baker report takes on more importance than a

mere recommendation. See also annual report of the

Assistant Secretary of War, 1936, p. 25, in the Secretary's Report, and testimony of ASW Woodring at

Senate Hearings on WD appropriation, March 3,

1936, p. 30.

19

 41 Stat 764, sec. 123. 20

 For an example of congressional attitude on educational orders in the mid-thirties, see remarks of

Representative C. C. Bolton of Ohio, Cong Rcd,

February 19, 1935, p. 2224. 21

 See summary of WD interest in educational

orders in the report of the Assistant Secretary of

War, 1939, pp. 16-17.
160 BUYING AIRCRAFT

claim to have recognized the need for

educational orders to broaden the base

of the aircraft industry for an emergency.

But was this enough? There is a good

deal of evidence in the record to suggest

that the officers of the Industrial Planning Section at Wright Field did not

think through the whole problem and see

its many ramifications.

Perhaps the decided limitations in the

imagination of planning officers in the

Air Corps were spelled out most clearly

when the Office of the Assistant Secretary

asked for recommendations on educational orders from the Air Corps. When

Congress seemed about to authorize

funds, the War Department asked for

a report as to what jigs, dies, and gauges

the Air Corps would wish to procure with

its share of the money. The Air Corps

replied at length explaining that aircraft

design was in continual flux, and as a consequence, prewar investment in production tools was "neither practical nor economical."

 22

 This was certainly true—

but it begged the question.

In refusing to spend money on production tools for airframes as such, the air

arm was probably pursuing sound policy.

But this view of the problem utterly

failed to consider the matter of standardized components and accessories. Oleo

struts afford an example. The oleo strut

is a piston and cylinder assembly used to

cushion the shock of landing by forcing

hydraulic fluid through a restricted orifice. The machining of oleo struts calls

for skilled craftsmanship, work done to

close tolerances, and a considerable

amount of production experience. In

the rush to rearm for World War II an

acute bottleneck developed in the production of these struts. While not an

entirely standard item, the oleo strut

did lend itself to the educational order

program. A little money spent during

1937 and 1938 on training if not on tooling up for production might have gone

far to eliminate the bottleneck that endangered the air rearmament program

after the crisis arrived.

The objection of Air Corps planners

to the use of educational funds was not

limited to the idea of prewar production

tooling alone. They rejected the whole

concept of educational orders for air arm

items. One of the officers most actively

engaged in the work of preparedness

planning on the eve of World War II

flatly asserted that the use of educational

orders was not "practicable" for air arm

matériel. He argued that the "proprietory nature" of so many individual items

of Air Corps equipment that might lend

themselves to the application of educational orders would preclude the use of

such orders. Manufacturers, he claimed,

would be unwilling in time of peace to

turn over drawings, specifications, and

tools to "outside interests" or potential

competitors.23 This may have been true,

but there is no indication that the Air

Corps ever undertook an extensive program to persuade the manufacturers of

critical items to consider the substantial

advantage they would enjoy if they selected and "educated" their own secondary sources in peacetime rather than

waiting for war when arbitrary assign22

 R&R, Plans Div to Exec, OCAC, 1 Nov 37, with

inclosed draft Memo for OASW, AHO Plans Div

145.91-182.

23

 Exec, Mat Div, to Chief, Mat Div, and CofAC

in turn, 18 May 37, WFCF 032 Legislation, 1939.
PLANNING FOR INDUSTRIAL MOBILIZATION 161

ments of proprietary rights to alternative

sources might prove necessary.

Clearly then, while Air Corps officers

admitted the assumption that a healthy

aircraft industry was vital to national

defense, they failed to explore even the

immediate environs of their premise, let

alone its outer orbits. Unfortunately,

this myopia was not confined to the single premise concerning the need for

maintaining a healthy industry. A similar shortsightedness seems to have been

prevalent elsewhere too, notably in connection with the fundamentally important policy of whether or not wartime

production expansion should be achieved

by expanding the small extant aircraft

industry or by converting existing facilities of others, such as the automotive industry.

Conversion Versus Expansion

On one point, at least, there was substantial agreement by all concerned with

mobilization planning. If war should

come, the existing aircraft industry would

prove entirely inadequate to provide the

many thousands of aircraft required.

Additional sources would be necessary,

whether they were found by expanding

the existing industry after the arrival of

an emergency or by converting the productive capacity of manufacturers normally outside the aircraft industry. The

selection of one or the other of these alternatives necessarily depended in some

measure upon the definition or conception of the problem framed by the staff

officers responsible for a solution to it.

There seems to have been a good deal

of confusion as to the exact nature of the

job to be done. The plans of the War

Department for an emergency were for

the most part conceived in terms of an

M-day. In his report for 1938 the Secretary of War specifically warned the nation against the danger of assuming that

there would be a cushion of time for

eleventh-hour preparedness as there had

been in the years 1914-17.24 Yet, at the

same time, air arm officers went on assuming that the Navy was still the first line

of defense and the Air Corps would not

be called upon to provide a substantial

force for immediate action. Officers of

the Industrial Planning Section at Wright

Field, on whom the Assistant Secretary

placed the burden of decision, saw their

task primarily as one of speeding the production of aircraft after M-day.25

As a consequence of this confusion and

uncertainty in defining the exact nature

of the job to be done, the planners had

a rather hazy base upon which to decide

whether to convert or to expand. The

record of experience in World War I,

which might have been helpful, was not

readily available. An elaborate history

of the aircraft production effort in World

War I never reached publication. One

copy of the manuscript was destroyed in

a fire and another was, to all practical

purposes, lost in the files where it was

"discovered" during World War II, too

late to be of real use. For want of specific evidence, even the most fundamental questions remained unanswered. As

a result, decisions had to be made on the

basis of opinions, not facts.

24

 Report of the Secretary of War, 1938, p. 2. 25

 AAF Hist Study 40, p. 5. For delegation of responsibility for decision on conversion or expansion,

see OASW, Planning Br Cir No. 2, 20 Jul 33, AHO

Plans Div 145.93-187.
162 BUYING AIRCRAFT

Between 1920 and the beginning of

World War II, opinion in the Air Corps

moved to and fro on the question of conversion versus expansion. In the twenties most officers favored conversion.

Later there was a tendency to favor production by the aircraft industry, leaving

to outsiders the roles of parts suppliers

and subcontractors. Finally, in the middle thirties responsible officers in the Air

Corps again swung back to the idea of

conversion.26 However, having made

this decision, the planners promptly ignored the alternative of expansion.27

They made no exploratory studies of the

problems that might be encountered in

an expansion of the aircraft industry, apparently assuming that the decision to

rely upon conversion would never be

reversed.

Once they had decided upon conversion instead of expansion, the officers of

the Industrial Planning Section selected

the automobile industry as the logical

source of industrial capacity for aircraft

production in wartime. But their choice

was valid only insofar as staff officers could

sell the idea of conversion to the aircraft

manufacturers as well as the automobile

firms. Unfortunately, the parties concerned were not always enthusiastic. One

of the major automobile manufacturers

on whom the wartime burden would of

necessity be thrust was reported to be

opposed to making even so much as a

study of the subject until war came.28

On the other hand, aircraft builders were

understandably reluctant to encourage

any genuine interest in aircraft construction in automotive circles, where such

interest might ripen into competition.

A wide gap separated the thinking of the

car builders and the aircraft manufacturers.29

If conversion of the automotive industry in wartime was to become a reality,

Air Corps officers somehow had to bring

together the men who produced aircraft

and those who turned out automobiles.

There was much ground to be covered

in getting the two industries to the point

where they could exchange ideas, talk

the same language, and in general appreciate each other's problems so as to be

ready for a high order of co-operation

when war came.30 Nonetheless, Air

Corps officers responsible for procurement planning appear to have taken relatively few steps in this direction in the

between-war years.

In April 1938, when war in Europe

seemed more than ever imminent, they

finally took the initiative. The Chief of

the Air Corps himself asked the Secretary

of War to approve a plan to use Air Corps

transportation to fly a number of engineers from Detroit to the west coast to

study production problems in the aircraft industry. Apart from the cost of

the flights themselves, the expedition

would be at the manufacturers' expense.

26

 AAF Hist Study 40, pp. 10-11. 27

 Ibid., p. 13. 28

 Glenn L. Martin to Capt C. H. Welsh, Proc

Planning Representative, New York City, 12 May 36,

AHO Plans Div 145.93-182.

29

 For evidence on this gap, see, for example,

Eugene Edward Wilson, Slipstream: The Autobiography of an Aircraftsman (New York: Whittlesey

House [1950]), page 265, mentioning the "feud" between the mass production industry and "the carriage trade." 30

 Apart from getting aircraft and automobile

makers to understand each other, the Air Corps faced

the problem of training its own officers to understand each of them. See, for example, Lecture,

CofAC, Current Proc and Allied Problems, AIC.
PLANNING FOR INDUSTRIAL MOBILIZATION 163

In the weeks immediately ahead during

the spring of 1938 the automobile engineers faced a slack period and could afford to be away from their regular jobs.

Unfortunately, for reasons unstated, the

Secretary rejected the request and suggested that the matter be raised again "in

the fall."

 31

 "In the fall" was too late.

By then the slack season had passed and

before another fall rolled around, the aircraft manufacturers were far too busy

with foreign orders to entertain visitors

from Detroit. The lost opportunity

could not be recaptured. Once the war

actually broke in Europe, trained aircraft

engineers became an even scarcer commodity, and the War Department had to

pay dearly for their services.

Much of the record of Air Corps' planning to convert the automobile industry

tells of lost opportunities, though the account is not entirely one of frustration.

There were some substantial efforts made

by industrial planning officers in the Air

Corps to work out the detailed steps for

converting the car industry to aircraft

production. In some instances the planners actually drew up formal "factory

plans" that helped to bring the problems

of conversion into clearer focus. A representative factory plan completed in

June 1938 illustrates the limits that circumscribed the thinking of officers engaged in the work of the Industrial Planning Section at Wright Field.

District officers, using the procedures

and instructions drafted by IPS, prepared

a factory plan for the Packard, GrahamPaige, and Hudson facilities in Detroit.32

The three firms were to be converted to

production of a twin-engine bomber.

Although the bomber actually used for

planning purposes was the Glenn L. Martin production model B-10, which was

already approaching obsoletion in 1938,

the planners were less concerned with the

B-10 as such than with the general problem: Can a twin-engine bomber of 12,000

to 14,000 pounds gross weight be successfully manufactured in the facilities available for conversion?

The Air Corps planners had to break

the aircraft into its components to determine whether or not the available labor

skills, engineering talent, machine tools,

floor space, and the like were available

in the facilities selected for conversion.

At this point the planning officers were

plunged into difficulties. They found

the Detroit manufacturers utterly inexperienced in appraising the problems to

be encountered in aircraft production

through a study of drawings and samples.

This was scarcely surprising, in view of

the differences in the items produced by

the two industries, but instead of training the manufacturers by thrusting upon

them the task of making a production

analysis, thus helping them to learn by

experience, Air Corps officers used a study

prepared by Glenn L. Martin. The Air

Corps lacked funds and the automobile

manufacturers were unwilling to spend

their own for a fresh approach, so the

planners did the next best thing and borrowed a production study. This was ex31

 CofAC to SW, 26 Apr 38, copy with marginal

notes on reply by Gen Westover, AHO Plans Div

145.93-182.

32

 The following paragraphs are based upon the

factory plan of 25 June 1938, copy in AMC Historical Office files.
164 BUYING AIRCRAFT

pedient, but it missed the whole point

of the exercise.

By imposing upon the automobile

manufacturers a production analysis

based on Martin's shop practices, the

planners tended to force the patterns and

techniques of the job-shop aircraft industry upon the mass-production automotive

industry. And at the same time, the Detroit manufacturers did not get the value

of the experience they would have acquired had they actually come to grips

with the problem of making a production

analysis of a twin-engine bomber. The

stock response industrial planning officers

subsequently gave to this criticism was

that there were no funds available and

planners had to rely entirely upon the

willing co-operation of the manufacturers. This was certainly true, but since

it was and the results were unsatisfactory,

the officers of the Industrial Planning

Section were under a clear obligation to

push aggressively for educational funds.

Instead, they rejected invitations from

the Assistant Secretary of War to lay plans

for spending educational order money

when it became available.33

If one accepts the limits imposed upon

procurement planning and advance training by lack of funds as unavoidable, there

still remain grounds for criticizing the

vision of those who drew up the factory

plans. The B-10 bomber plan, for example, reflects a touching faith in the

ability of the automobile manufacturers

because of their "enormous capacity."

 34

While it was true that the facilities being

surveyed did have "enormous capacity,"

the phrase was meaningless. The factory

plan itself failed to provide a detailed list

of the machine tools available, nor did it

indicate whether the available tools could

work to the tolerances required in aircraft construction. In short, the plan

retired into vague generalities at exactly

the point where precise information

would be most useful in an emergency.

In at least one respect the B-10 factory

plan probably justified itself. Procurement planning officers discovered that

despite the "enormous capacity" of Packard, Graham-Paige, and Hudson with a

combined total of over 7,750,000 square

feet of floor space, an additional 500,000

square feet of new construction would

be necessary. Assembly areas would have

to be provided near the fly-away point

with bay areas of sufficient dimension to

accommodate the wings of a bomber.

Even in the case of the B-10 with its modest wing span of 70 feet 6 inches, the

available bay areas were inadequate. The

B-18, a production model twin-engine

bomber in 1938, had a wing span of 89

feet, 6 inches, and the trend in bombers

was toward even greater spans.

Thus, in practice, the Air Corps' policy

of conversion could not be taken at face

value. Conversion might of necessity also

involve a certain amount of expansion,

as the B-10 factory plan clearly revealed.

But the IPS officers failed to act upon

this consideration. What is more, the

record suggests that they were not very

resourceful in making use of the experience on expansion already available from

British precedents.

In the mid-thirties the British Government launched an extensive preparedness

33

 R&R, Plans Div to Exec, OCAC, 1 Nov 37, with

enclosed draft Memo for OASW, AHO Plans Div

145.91-182. See also, Interview with Detroit Dist

Hist Office, 1945, same file. 34

 Factory Plan of 25 Jun 38, copy in AMC Hist

Office files.
PLANNING FOR INDUSTRIAL MOBILIZATION 165

program of which one feature was the socalled shadow factory plan. Among these

shadow factories were airframe and engine assembly plants erected at government expense to be operated by managerial and labor skills outside the regular

aircraft industry. One such was the airframe assembly plant erected near the

famous Austin factory near Birmingham.

The aircraft to be produced was designed

by the Fairey aircraft firm, but the labor

and management in an emergency were

to be recruited from the Austin force

while the nearby Austin plant itself

would manufacture parts to supply the

shadow assembly plant.35

The military attaches of the United

States stationed in London reported on

the shadow factory program of the Air

Ministry at great length.36 The program

as a whole embraced six major and twelve

minor facilities. By the end of 1937 it

involved an investment of some £7,500,-

000 ($37,500,000).37 Out of this expenditure came a wealth of experience concerning facility expansion, contract forms,

techniques of compensation, techniques

for perfecting liaison between designers

and producers, as well as much other information.

Officers of the Planning Branch in the

Office of the Assistant Secretary of War

were aware of the opportunities offered

by British activity in the field of procurement planning. They sought and received permission for representatives of

the War Department to visit some of the

British shadow establishments. Moreover, they invited the Industrial Planning Section at Wright Field, amongst

others, to submit a list of questions to

guide the representatives in their dealings with the British Air Ministry.38

 This

was in December 1936. The officer who

was then Chief of the Industrial Planning

Section responded with unusual enthusiasm.39

 Not content merely to compile

questions for others, he asked for authority to send some representatives from his

organization at Wright Field.40 Unfortunately, the request was still shunting

to and fro in the Air Corps paper mill

in the summer of 1938.41 Once again a

potentially fruitful idea lost its point by

being delayed and deferred until too late.

Officers of the Industrial Planning Section could have profited from British experience with shadow factories, even without sending observers abroad. Military

attaches recorded much of value about

the shadow factory program. Some of

their reports gave references to published

articles on the program. Both the attache

reports and the published matter were

available in the Technical Data Library

at Wright Field. Once again, however,

the officers of the Industrial Planning

Section appear to have discovered them

35

 Military Attache, London, Rpt 39281, 4 Mar 38,

AMC CADO F35/332. 36

 See, for example, Military Attache, London, Rpt

38310, 19 Oct 36, a 55-page survey of the whole

British rearmament program, and subsequent reports, passim, in CADO C21/4/6 et al. 37

 Military Attaché Rpt 39047, 5 Nov 37, AHO

Plans Div 145.93-182.

38

 Memo, Dir Planning Br, OASW, for CofAC, 11

Dec 36, AFCF 360.02A Foreign Aviation. 39

 See reply to questionnaire by Mat Div, 24 Dec

36, AFCF 360.02A Foreign Aviation. 40

 Chief, Industrial Planning Sec, to CofAC, 4 Jan

38, AHO Plans Div 145.93-182. Note the time lag

between the questionnaire and the request. 41

 1st Ind, Mat Div to CofAC, 28 Jun 38, basic

unknown, WFCF 381.4 Shadow Factories 1940; Chief,

Plans Div, to CofAC, 10 Jun 38, AHO Plans Div

145.93-182.
166 BUYING AIRCRAFT

too late. When inspected after the war,

the library charge-out cards indicate that

they had been used only once. The only

name on virtually all of the cards was

that of the officer in charge of mobilization planning. The date on each was

November 1938, a date after the President had touched off the program to expand the air arm. In sum, then, although

Air Corps officers expected to rely upon

conversion of automotive facilities to produce aircraft in adequate quantity during

an emergency, their exploratory studies

of conversion were limited both in scope

and in imagination.

The Chief of the Air Corps was by no

means unaware of the many weaknesses

in air arm mobilization planning. In

1938, on the eve of the expansion program that ultimately was to transform the

Air Corps into a mighty force, he called

a conference of representative aircraft

manufacturers. He hoped to secure

their co-operation in the mobilization

that loomed ahead. In his introductory

remarks he suggested some of the questions that would have to be asked and

answered if the coming mobilization was

to be rapid, orderly, and economical.

Would aircraft builders allow manufacturers outside the industry to reproduce

their designs? On what basis? Should

converted automobile manufacturers

draw parts and components from their

own regular suppliers or should the air

arm undertake a vast program to provide government-furnished equipment?

Should the government provide assembly facilities? If so, should the government operate the plants? Should the automobile manufacturers or the old-line

aircraft builders assume responsibility?

Should the government immediately erect

shadow plants or should industry take the

initiative?

 42

 These were all intelligent

questions. They were the right questions to pose because they reflected problems yet unanswered. They had to be

answered before the Air Corps could expect production to the limit. But the

formulation of such questions in September 1938 was decidedly late in the game.

If mobilization planning is to be truly

helpful it has to be done in the years of

peace to prevent the chaos of last-minute

improvisation.

Air Corps Planning in Perspective

A Signal Corps officer once remarked

that prewar mobilization plans were

"in-the-safe-mirages," an apt description

when applied to Air Corps planning efforts. The annual report of the Materiel

Division at Wright Field stated in August

1938 that air arm mobilization planning

had become more "practical" in recent

months, yet at that very time much of

the effort expended by IPS officers still

went into the task of converting the 1933

mobilization plan into the Protective

Mobilization Plan.43

To say the very least, many features

of the air arm mobilization plan were

unrealistic. The officers who worked out

the details often seemed to have lost touch

with the realities of war during the long

years of peace. Some, for example, believed that the way to achieve increased

production was to freeze design.44 Such

42

 Comments by Gen Westover, cited n. 10, above. 43

 Draft of annual rpt, Mat Div, 27 Aug 38, WFCF

321.9 Annual Rpt. 44

 Ltr, Plans Sec to IPS, 7 Mar 38, AHO Plans Div

145.93-182. This entire letter reflects the lack of

realism that colored much procurement planning

work.
PLANNING FOR INDUSTRIAL MOBILIZATION 167

views ignored the bitter experience of

World War I: to gear mobilization plans

to a concept of rigidly frozen designs was

to invite disaster and to ignore the alternative. The alternative, of course, was

to establish a system that would introduce modifications into the production

line without retarding output. Such inline modifications are at best difficult to

administer, but planning officers certainly did nothing to improve the situation by ignoring the matter entirely during the prewar years.

What the planners needed most, it

would appear, was the stimulus to selfcriticism. They needed some means by

which they could subject their plans,

their work, even their thinking, to objective, disinterested criticism or evaluation. Most military organizations are

probably deficient in this respect in peacetime, but the theoretical character of their

work probably made the mobilization

planners exceptionally vulnerable. Some

officers had recognized this deficiency,

for from time to time those in charge

conducted command post exercises and

war games to test the efficacy of the planning being done.45

 This was a move in

the right direction, no doubt, but the

war games were largely routine. They

gave an opportunity to check the adequacy of procedures and practices already

established but did little to question the

soundness of underlying assumptions.

Only a few war games were conducted.

At best they seem to have been of limited

use. Perhaps the best indication of their

unimportance and occasional character is

to be seen from the manner in which

many of the records of these exercises

were filed: Material on "War games" was

placed under "Games," along with "Athletics" and "Physical training" in the

central files.

In general, few attempts were made at

self-criticism although on occasion, of

course, there were individual officers who

did question the premises underlying mobilization planning. After one meeting

of procurement planners at Air Corps

headquarters, an officer representing one

of the procurement districts wrote a scathing criticism of the whole conference and

the ideas presented there. With more

courage than tact he contrasted the subject of the conference as advertised in

the agenda with the subjects actually discussed. Then with unusual prescience

he launched into a number of specific

criticisms of Air Corps planning that

events in the following months were to

prove only too valid. He scored particularly the absence of adequate planning

data and the failure to use current procurement as a point of departure.46

 Unfortunately, the criticism was not welcomed and was not weighed for what it

might be worth. Somewhat later a complaint to headquarters from Wright Field

described this particular critic as "overzealous" in "trying to make a worthwhile

showing" and as one "impatient" with

45

 See Memo, Chief, Allocations Div, OASW, for

Plans Div, OCAC, 21 Jul 38, AHO Plans Div 145.93-

182. See also, AFCF 353.6 passim.

46

 Mimeograph MS, Comments on New York District on Resume of Procurement Planning Conference Held in OCAC, 6 Sep 38; and Proc Planning

Representative, New York City, to CofAC, 25 Oct

38. Both in AHO 145.92-182. For an interesting

postwar opinion tending to confirm these criticisms,

see transcript of testimony by Maj Gen O. P. Echols,

29 Sep 47, before President's Air Policy Comm, National Archives, Rcds Group 220, box 6, file 37-1d.
168 BUYING AIRCRAFT

the overworked IPS staff.47 Officers engaged in the work of industrial planning

evinced little desire to submit their presuppositions and their work to criticism,

even to the criticism of officers within the

organization.

From the perspective of the postwar

era, it is possible to see the problem of

Air Corps industrial mobilization planning with some clarity. By and large the

central difficulty seems to have been the

tendency of the planners to emphasize

organization rather than operations, form

rather than function. The planners concocted highly complex mobilization plans

but failed to come to grips with the heart

of the matter, the assumptions underlying their plans. They put more emphasis upon the office than upon the idea.

Yet, for all the stress upon the details of

planning to the neglect of principle, in

actual point of fact the Industrial Planning Section at Wright Field did not even

do a very good job of housekeeping.48

47

 Exec, Mat Div, to Col A. H. Hobley, 28 Jan 39,

AFCF 004.4 Firms and Factories.

48

 Perhaps the most dramatic evidence of the air

arm's ineffective planning for war is to be seen in

the memo drafted by the Planning Branch, OASW,

for the Assistant Secretary to send to the President

in reply to his rearmament proposals, 10 November

1938. The productive capacity of the nation's aircraft industry was, he confessed, "unknown." (AHO

Plans Div 145.93-182) If the judgments rendered

in this critique seem harsh on the planners, they are

no harsher than the criticisms rendered after World

War II by the industrial planning officers who sought

to profit from their earlier mistakes. See, for example, Pre-World War II Industrial Preparedness,

Air Coordinating Com Project 5, prepared by Industrial Mobilization Planning Div, AMC, 10 Mar

48, especially secs. E, F, and G, WFHO.
CHAPTER VIII

The Tide Turns

The President Proposes;

Congress Disposes

During the summer of 1938 President

Roosevelt reached the conclusion that

drastic steps would have to be taken to

rearm the nation in the face of menacing

dictatorships in Europe and Asia. A

number of people contributed to the formulation of this crucial decision. No

doubt Hitler's speech at Nuremberg,

which the President heard on the radio

a scant fortnight before the betrayal of

Czechoslovakia in 1938, helped to precipitate the decision to rearm.1

 But there

were others, too, who helped to condition the President's mind and to prepare

him for a new tack his administration was

about to follow. Ambassador Hugh R.

Wilson sent frightening reports to the

President from Berlin. Businessmen returning from visits to German factories

communicated their alarm indirectly

through officials in the War Department.2

When at last Ambassador William C.

Bullitt returned from France with evidence confirming these reports, the President made up his mind.3

 There was no

alternative: the United States must rearm, whatever the cost, and air power

must play a leading role in national defense.

White House Meeting

On 14 November 1938 the President

summoned a number of his political and

military advisors to the White House.

He did not ask for advice, he laid his policies on the line. The Army air arm, he

declared, must be built into a heavy striking force. After noting the sorry position to which the United States had fallen

in contrast to recent advances in German

air power, the President asserted that the

Air Corps alone required a strength of

20,000 aircraft backed by an annual productive capacity of 24,000 units. Unfor1

 Robert E. Sherwood, Roosevelt and Hopkins:

An Intimate History (New York: Harper and

Brothers, 1950) pp. 99-100. 2

 Memo, Exec, OASW, for ASW, 23 Jun 38, SW

files, item 568. See also, Wilson to President, 11 Jul

38, SW files, item 608. The Ambassador was influenced not alone by the reports of attachés and

other such officials but also by conversations with at

least two aircraft manufacturers from the United

States who, as trained observers, grasped the implications of what they saw in the German factories they

visited. In addition to reports of Glenn L. Martin

and James H. Kindelberger mentioned by Wilson,

see Memo, E. E. Aldrin for CofAC, 17 Oct 38, item

710. An earlier report, by Mr. T. P. Wright of

Curtiss-Wright, indicated that by 1936 German aircraft production was already three times that of the

United States and Britain combined. See Wright

to Brig Gen William H. Harris, Chief of Military

History, 13 Oct 61, OCMH. 3

 Mark Skinner Watson, Chief of Staff: Prewar

Plans and Preparations, UNITED STATES ARMY

IN WORLD WAR II (Washington, 1950), pp. 131-

32.
170 BUYING AIRCRAFT

tunately, the President went on to point

out, if he were to ask for any such number, Congress would vote him half as

much. Far better, he felt, to ask for

10,000 to begin with and have some assurance of congressional support. The

10,000 aircraft, the President explained,

could be procured over a two-year period.

One-fourth of the total could be training

craft; the remainder, all tactical or combat types, would be divided equally; half

in active use, half in reserve.4

The White House meeting marked a

turning point in the history of national

defense. Military advisors who had been

urging increases in strength upon the

President for months, if not for years,

now found themselves directed to plan

an expansion of air power considerably

larger than any for which they had ever

dreamed of asking. Where, then, did the

President get his figures?

Why 20,000? Did the President suggest this number initially to the generals

or had the generals previously suggested

the figure to the President? War Department officials had made numerous proposals during the summer of 1938 to increase Air Corps strength above the 2,320-

unit limit then prevailing. Many programs were discussed, but none of those

seriously considered seems to have exceeded a ceiling of 7,000 aircraft before

the President set 10,000 as a goal.5 The

Chief of the Air Corps, Maj. Gen. Henry

H. Arnold, undoubtedly did give the

President some figures through Harry

Hopkins, as he states in his memoirs, but

his own subsequent testimony before a

congressional committee indicates that it

was the President rather than the generals who exerted the initiative.6

 Moreover, none of the programs mentioned

in the War Department even remotely

touched the figures initially considered

by the President. As it now appears, the

President privately decided that 30,000

not 20,000 aircraft were needed to face

the German menace, but the cost of

30,000 aircraft induced him to set his

"requirement" in the White House conference at 20,000. And even this figure

he felt compelled to halve on grounds of

political necessity.7

The President's Message to Congress

When the President sent a special message on national defense to Congress on

12 January 1939, he was fulfilling a political role as well as observing a constitutional and ceremonial rite. The

President felt that a larger air force was

necessary, but he also knew what such a

force would cost. Rumors that the President intended to ask for 10,000 airplanes

when Congress assembled were not denied

at the White House. For six weeks before the opening of Congress newspaper

writers speculated on the number of aircraft the President would seek. Instead

of 10,000 or 8,000, or any of the other 4

 Ibid., ch. V. 5

 General Arnold mentioned the 7,000 figure; Secretary Woodring said he had never heard of any

figure above 10,000 mentioned in the War Department before the President's conference. See House

Hearings on WD supplementary appropriation for

1940, May 19, 1939, p. 54, and June 5, 1939, pp. 275-

79.

6

 Arnold, Global Mission, pp. 177-79; Arnold's

testimony, House Hearings on WD appropriation

for 1940, January 30, 1939, p. 296. 7

 The President's original aim of 30,000 aircraft is

mentioned in Watson notes on interview with Maj

Gen J. H. Burns (Ret), 7 Feb 47, OCMH.
THE TIDE TURNS 171

figures guessed in the press, the Chief

Executive suggested that funds should be

provided for an increase of not less than

3,000 aircraft.8 Congress gave an almost

audible sigh as most congressmen admitted a "feeling of relief" that the President had been so "moderate" in his demands.9

 It was the essence of the Chief

Executive's political skill to agree that

half a loaf was better than none. Clearly,

the President had trimmed his request

to make it politically acceptable. Were

his generals doing any differently when

they in their turn went to Congress for

funds?

The Air Corps Budget:

Fiscal Year 1940

By time-honored custom, appropriation committeemen opened hearings on

the executive budget in the first month

of the new year. Representatives of the

War Department, including the Chief of

Staff and the Chief of the Air Corps, were

summoned to the Hill to defend the estimates they had prepared long since for

approval by the Bureau of the Budget.

Toward the end of January 1939, when

General Arnold took his turn before the

committee, his requests were something

of an anticlimax. If the President had

surprised Congress by asking for approximately 3,000 rather than the rumored

10,000 aircraft, General Arnold produced

yet another surprise. He asked less money

for new equipment than had been sought

in the previous year, a figure sufficient to

procure not more than 219 new aircraft.

This minute request, he implied, was necessitated by the approach toward the

authorized ceiling of 2,320.10

Thus the Air Corps was placed in the

absurd position of curbing its request to

stay within the legal limit even though

the President had already informed the

War Department of his desire for 20,000

aircraft and Congress had received his

message asking for funds to provide at

least 3,000. The congressmen might

have been willing to accept this absurdity, knowing as they did that the budget

was formulated nearly a year before, but

there was an obvious discrepancy in the

testimony given before them. While the

Chief of the Air Corps solemnly declared

that the Air Corps could not ask for more

aircraft because of the 2,320 ceiling on

authorized strength, a few days earlier

the Chief of Staff, General Malin Craig,

had informed the committee that the authorized ceiling was not 2,320 but 4,120.11

When the Chief of Staff had approved

the War Department's estimates several

months earlier, he had certainly seemed

to believe 2,320 was the authorized ceiling on air strength. Moreover, his annual

report, which by coincidence reached the

newspapers on 14 November, the day of

the White House meeting, had warned

against the dangers of favoring one arm,

such as the Air Corps, at the expense of

the others.12 Yet barely a month later he

was claiming that 4,120 rather than 2,320

8

 Cong Rcd, January 12, 1939, p. 218ff. 9

 Aviation (February, 1939), p. 80. See also, comments in New York Times quoted in CWO Merton

England and Dr. Chauncey Sanders, Legislation Relating to the Army Air Forces Training Program,

1939-1945, AAF Hist Studies, 7, revised 1946, copy in

OCMH, p. 4.

10

 House Hearings on WD appropriation for 1940,

January 30, 1939, pp. 11, 283. The 219 aircraft included 178 for the Regular Army and 41 for the

Organized Reserves and National Guard. 11

 Ibid., pp. 11, 294. 12

 New York Times, November 14, 1938.
172 BUYING AIRCRAFT

was the legal ceiling on air power. His

explanation was simple. The Air Corps

Act of 1926 authorized 1,800 aircraft.

The Act of 24 June 1936 authorized

2,320. If one construed the measures as

supplementary, then the number of aircraft authorized amounted to the sum of

the two, or 4,120.

The discrepancy between the testimony of the Chief of Staff and that of

the Chief of the Air Corps led to an obvious question in Congress.13

 If 4,120

was the authorized ceiling, why then did

the Air Corps come to the Hill asking

for only enough new aircraft to reach

2,320, even though the President had

urged Congress to provide for far more?

Air Corps officers had not mistaken the

meaning of statutes all along. On the

contrary, there is ample evidence to show

that they had tried to construe 4,120 as

the ceiling but had met with resistance

from within the War Department.14

There it had been held that such an increase in air strength was "in excess of requirements" and would require a "huge

annual increase" in the estimates presented to Congress in future years merely

to maintain the enlarged air arm.15

Thus, when the Chief of the Air Corps

testified in behalf of estimates based on

a 2,320 ceiling, he was defending a figure

that he had been constrained to accept

by higher authority. When the Chief of

Staff, who had long been unwilling to

give the air arm an abnormal share of

the War Department budget, testified in

January 1939 that the legal ceiling on aircraft was 4,120, he spoke as a very recent

convert. In fact, his conversion to a belief in air power seems to have dated from

the White House meeting in November.16

In sum, the Air Corps estimate for fiscal year 1940 suggests that budgetary

considerations determined the official

statement of requirements presented to

Congress by General Arnold far more

than did tactical or strategic considerations. Which is to say, the generals

seemed to be doing the very thing the

President was condemned for doing: defining defense requirements not in terms

of strategic necessity but upon a basis of

what was politically feasible.

Executive Leadership

Bewildered congressmen might well

have wondered what to believe when

asked to vote on vital questions of national defense. The Air Corps asked for

funds to reach a ceiling of 2,320 airplanes,

and then in the very midst of the congressional hearings on this estimate the

Chief of Staff declared that the legal ceiling was really 4,120, or nearly twice as

many aircraft. On the other hand, the

President let his intimate associates talk

for nearly a month about 8,000 or 10,000

airplanes then, when Congress opened,

asked for only 3,000.

Seen in retrospect, the President's tend13

 See exchange in Senate between Senator Sheppard and Senator Alben W. Barkley, Cong Rcd,

February 27, 1939, pp. 1915-16. 14

 Copy, Memo, G-4 for CofS, 17 Jun 38, JAG

(Army) Gen Rcds Sec 452.1 Aircraft; Memo, OASW

for G-4, 29 Jul 38, SW files, AC, item 963; Memo,

OCAC Fiscal Officer to Gen Arnold, 29 Nov 38, AFCF

360.01A. 15

 Unsigned Memo, undated but sometime following 16 October 1938, staff study offering arguments

against 4,120 as a ceiling figure, WPD-OPD 3807-

28A. 16 Watson, notes on interv with Gen Burns.
THE TIDE TURNS 173

ency to blow first hot and then cold, now

10,000, now 3,000, was perhaps deliberate and not haphazard planning. The

President's 10,000-airplane goal may have

served as a most useful trial balloon.

Carefully "leaked" to the press, it gave

the President an opportunity to provoke

discussion on the point, an opportunity

to accustom the public in general and

congressmen in particular to the immense

increases in air power that he sought.17

Once the critics had fired all their ammunition at this trial balloon, the President

could then ask for somewhat less and appear moderate in so doing. But there

appears to have been a second purpose

in the President's strategy. Besides convincing the public of the need for more

air power, the President may have been

working to convert individuals within

the War Department as well. The long

feud between the air and ground components had conditioned air arm officers to

minimize their requests for funds and aircraft.18

 Rather than stir up the old fight

annually, they seemed inclined to ask for

less, to accept 2,320 as a ceiling rather

than fight for 4,120. Thus the President's bold suggestion of 10,000 served

as a dramatic catalyst that jarred Air

Corps officers into thinking and planning

in large numbers.

In the light of these developments, the

requests of the Chief Executive appear to

have been purposeful elements of political tactics. On the other hand, the Air

Corps' request for funds to reach a ceiling of 2,320 rather than the 4,120 permitted by law was equally understandable. Neither folly nor blindness, this

request merely reflected the obvious consequences of inflexibility in the legally

prescribed system for budgetary planning. As any experienced congressman

would know, the estimates presented by

the Air Corps stemmed from plans initiated anywhere from eighteen months to

two years earlier. If the Air Corps was

to be held responsible for a blunder in

asking for 2,320 when the real ceiling was

4,120, the responsible officers might with

justice point out that the estimates presented were those approved by the Bureau of the Budget and the President

himself. Moreover, the terms of the 1921

Budget and Accounting Act required the

officers who presented an estimate to defend it loyally and take no initiative in

asking for more.19

Between the time when the Bureau of

the Budget originally approved the War

Department estimates for fiscal year 1940

and the time when General Arnold went

to the Hill to defend the air arm estimate,

the diplomatic and strategic setting had

changed most drastically. The President

had changed his mind regarding expenditures for defense. So had the Chief of

Staff. But the Budget and Accounting

Act of 1921 made no provision for such

changes. Designed to provide for or17

 The strategy of the President's leaks to the press

may be followed clearly in the New York Times, viz.,

October 14, 1938, p. 13; October 15, p. 1; November 6, p. 1; November 13, sec. X, p. 8; November 19,

p. 4; November 24, p. 22; December 5, p. 16; December 27, p. 3. 18

 Long after the President indicated his intention,

in October 1938, of encouraging big increases in national defense, the War Department continued to

inspire stories calling for increases in air strength

up to 3,000 or 4,000. Even the Chief of the Air

Corps hinted to reporters that an increase of 2,000

more aircraft would be the limit; see New York

Times, October 16, p. 31; October 23, p. 8; October

23, sec. X, p. 5. 19 42 Stat 20, sec. 206. See above, pp. 60-61.
174 BUYING AIRCRAFT

derly treatment in fiscal matters, the act

proved too rigid in a dynamic political

situation. The Chief of the Air Corps

was thrust into the uncomfortable position of defending an estimate based upon

a 2,320-aircraft ceiling in January 1939

even though the President, in November

1938, had already told him to work for

10,000.

The Congress Disposes

Early in February 1939 the chairman

of the House Military Affairs Committee

introduced a bill calling for an increase

in air power to an authorized ceiling of

6,000 aircraft. The 6,000 figure was

neither the 10,000 suggested by the President in November, the 3,000 he asked

for in January, nor a plausible compromise suggested in Congress to adjust the

two extremes. As a matter of fact, the

proposed measure was a departmental

bill. It was more or less drafted by officials in the War Department and presented to Congress as a desired objective.20

The transitions from 10,000 to 3,000

to 6,000 airplanes were the essence of the

President's political art. His original intention in November had been to secure

10,000 aircraft for the Air Corps in two

years, with three-quarters of the force to

be combat types. During the latter half

of November and throughout December

the President read the omens as they appeared. He encountered considerable

opposition from within the Army in

favor of a balanced force rather than abnormal expenditures on air power alone.

At the same time, when the President

learned the probable cost of 10,000 airplanes as estimated by air arm officers,

he began to doubt whether it would be

possible to secure the necessary funds

from a reluctant Congress. Once again

he trimmed sail to meet the prevailing

winds and agreed to accept a program of

5,500 aircraft with provision for a ceiling

at 6,000, which allowed a margin for

units on order.21 Since there were on

hand at the end of 1938 some 1,797 aircraft, of which 351 would soon be obsolete, the net available strength was 1,446.

By adding to this the aircraft on order

or about to be ordered from current appropriations there was a total of 2,464,

which subtracted from 5,500 left 3,032.22

So the President had asked Congress for

about 3,000 airplanes.

The President's maneuver was exceedingly adroit, as events proved. His request for 3,000 won him support from

the very people who had been most

alarmed by the rumors of 10,000 or more

aircraft emanating from "usually reliable

sources" and undenied at the White

House.23 Yet even as his request for

3,000 was made, Air Corps officers were

readying a bill asking for a ceiling of

6,000. This, of course, would not bear

the White House label and in any event

by the time it appeared the President

would already have garnered the dividend of his apparent moderation.

20

 Cong Rcd, February 14, 1939, p. 1389.

21

 Watson, Chief of Staff: Prewar Plans and Preparations, pp. 139-43. 22

 Figures presented by ACofAC in committee

Hearings quoted in Cong Rcd, February 14, 1939,

p. 1377. 23

 See, for example, editorial in Aviation that

praised the President's message as "very reasonable"

and promised to back the administration to the hilt

even though previously dubious about the big programs mentioned in the press. Aviation (February, 1939), p. 81.
THE TIDE TURNS 175

From Bill to Statute

Seen in contrast to the rising might

of the Luftwaffe, the President's request

for 3,000 aircraft came as a surprise. It

tended to disarm the opposition. To ask

for less would clearly be criminal negligence. As soon as the debate on the new

aircraft ceiling began on the floor, the

Republicans announced that an opposition caucus had agreed to support the

administration measure in the interests

of national defense.24 But even with

victory for the measure assured in principle, it was not carried without a fight.

Isolationists and members of the economy

bloc made a determined effort to scuttle

the bill with amendments that would

have spread the procurement program

over a greater number of years.25 Despite the determination of the bill's opponents, both Houses passed the measure.

Adjustments in conference consumed the

inevitable number of weeks, so it was not

until April 1939 that the 6,000 ceiling

became law and the Air Corps could actually proceed with the 5,500 program.26

The First Expansion Program

The White House meeting of 14 November 1938 touched off a furor of planning activity unlike anything seen in the

War Department since the days of World

War I. And in the midst of this furious

bustle was the Assistant Secretary of War,

Louis A. Johnson.

The Role of Louis Johnson

On the day following the White House

meeting, Louis Johnson, as Acting Secretary of War, sent a directive to the Chief

of Staff mapping out the steps to be followed in carrying out the President's orders. Taking his cue from the President,

he asked for detailed plans to provide for

an Air Corps of 10,000 aircraft in two

years, half of which were to be in a reserve status without operating personnel

and base facilities. To provide the productive capacity asked by the President,

the Assistant Secretary directed the Chief

of Staff to draw up budgetary plans for

the construction of seven governmentowned aircraft factories, each with an

average capacity of 1,200 units per year.

This capacity, in conjunction with the

anticipated expansion of the existing industry would, he hoped, be capable of

meeting the total production potential

desired at the White House.27

Louis Johnson, with restless drive and

tireless energy, built fires on every hand

to break through the administrative routines with which the War Department

had become encumbered during the long

years of peace. Though Congress was

slow in appropriating the funds necessary to start the aircraft program on its

way, Johnson would not permit this to

become an excuse for delay. He ordered

all the necessary aircraft contracts to be

prepared and ready for formal approval

the moment the President signed the appropriation bill.28

 Again and again when

opportunity offered, the Assistant Secre- 24

 Cong Rcd, February 14, 1939, pp. 1375-76, debate on H.R. 3791. 25

 Ibid., pp. 1378-87. See also, House Rpt 32, February 8, 1939; Senate Rpt, February 22, 1939; and

Doc 38, March 16, 1939. 26

 53 Stat 555, April 3, 1939.

27

 Memo, Actg SW for CofS, 15 Nov 38, SW files,

AC.

28

 CofAC to Chief, Mat Div, 1 Mar 39, AFCF 452.1

Proc of Aircraft.
176 BUYING AIRCRAFT

WAR DEPARTMENT SUBCOMMITTEE OF THE HOUSE APPROPRIATIONS COMMITTEE at

the White House, February 1939. Left to right: Edward T. Taylor, Chairman J. Buell

Snyder, Joe Starnes, David T. Terry, John H. Kerr, and John C. Pugh.

tary seized the initiative to drive the air

rearmament program ahead with vigor.29

The aggressive leadership of Johnson

brought results. A scant ten days after

the White House meeting, the Chief of

Staff approved the formal staff plan for

the two-year, 10,000-aircraft program.

Some staff officers were ordered to draft

the special legislation required by the

program, while others were directed to

study possible means of speeding procurement under existing statutes. For a start,

plans were laid to build at least 2,000 of

the 10,000 aircraft in government-owned

29

 Examples of Johnson's vigorous leadership are

many, e.g., ASW to CofS, 28 Nov 38, WPD-OPD

3807-28A; Actg SW to Atty Gen, 10 Nov 38, JAG

(Army) Gen Ref Br 700.12, 29 Oct 38; ASW to Lockheed et al., 30 Jul 38, SW files; Aerodigest (June

1939), p. 26. For a considered appraisal by an officer

who worked closely with Johnson during his term as

Assistant Secretary of War, see Gen Burns to TAG,

7 Feb 47, filed in OCMH with Gen Burns Interv.
THE TIDE TURNS 177

LOUIS JOHNSON

stand-by facilities, air arsenals, as they

were called, to be built at Ogden, Utah;

Denver, Colorado; Dayton, Ohio; Harrisburg, Pennsylvania; and at three other

sites to be selected upon the basis of available land, strategic vulnerability, labor

market, postwar utility to the Air Corps,

and the like. Production was to be by

private management using privately developed designs. Only the facility would

be government-owned.30 Louis Johnson's

energy soon made itself felt in every

echelon.

The 10,000 aircraft program had

scarcely been defined before the Chief

of the Air Corps directed his Plans Staff

to do some "deep thinking" on the longrange problems involved. The expansion program posed many problems but

none more vexing than the one the Chief

of the Air Corps himself posed for his

plans staff. How, he wished to know,

would it be possible to develop enough

productive capacity to meet the requirements of the mobilization program on

time and still maintain a volume of business large enough to keep the industry

healthy after the program strength had

been reached at the end of two years. If

the Air Corps used up every bit of available capacity and urged the construction

of additional facilities to meet the desired objectives of the expansion program on time, then would not the industry find itself at the close of the two-year

program with virtually no orders on

hand? "Somehow," said General Arnold,

"we must find a way to lick that problem."

 31

General Arnold was right. If the Air

Corps expected the full co-operation of

the industry, somehow a plan had to be

worked out to provide assurances that the

aircraft manufacturers would not be left

high and dry—and out of business—once

the Air Corps reached full strength.

Without the enthusiastic co-operation of

the industry the whole program was obviously doomed. With or without government-owned air arsenals, the aircraft

designers and the managerial skills of the

industry would be indispensable.

The Industry's Reaction

As General Arnold clearly saw, the

long-term interests of national defense

30

 AAF Hist Study, 22, Legislation Relating to the

AAF Materiel Program, 1939-1945, USAF Hist Div

Aug 49, p. 5; Memo, ASW for President, 19 Nov 38,

AFCF 319.1A Rpts; AC Project Rcds (Lyon Papers)

2-C, Data for Defense of 5500 Program; Memo CofAC

for CofS, 28 Nov 38, WPD-OPD 3807-28A.

31

 Memo, CofAC to Col Carl Spaatz, 18 Nov 38,

AFCF 360.01A.
178 BUYING AIRCRAFT

were best served by adding productive

capacity in the aircraft industry. If the

nation did not become embroiled in war

there would be no rush of orders, and the

expanded industry would atrophy. An

enlarged capacity and an economically

sound industry were both sound assets

for national defense. From the military

point of view both had to be considered.

On the other hand, it is hardly surprising

that the aircraft industry as a whole

tended to be more concerned with the

immediate problem of orders than with

the ultimate possibility of a wartime demand too great for the existing industry

to handle. After the long, lean years of

depression the industry preferred, quite

understandably, to work around the clock

and even expand if necessary rather than

see the government set up a series of air

arsenals that might absorb enough government orders, after the program was

completed, to drive some of the privately

owned aircraft manufacturers out of business.

The president of the Aeronautical

Chamber of Commerce, who could speak

for the industry if anyone could, was certain that the existing industry could meet

the Army's requirements "without straining." Other industry spokesmen joined

the chorus to this effect, especially after

the rumored target of 10,000 had been

cut down to the realities of the 5,500 units

in the expansion program.32 No doubt

the industry actually could have met the

demands of the program in hand. But

this was no guarantee that adequate capacity existed to meet the vastly greater

requirements of mobilization should war

come. Responsible officers in the Air

Corps were well aware of this. Their

staff studies indicated that productive capacity was "far below" mobilization requirements.33

 Nevertheless, more and

more they came to accept the manufacturers' point of view.

Between the time of the White House

meeting in November 1938 and the passage of the expansion program bill the

following April, Air Corps' policy

changed markedly. The original plan,

which emphasized building up productive capacity, gave way to a plan that

stressed the need for keeping existing capacity loaded with a sufficient volume

to save manufacturers from bankruptcy.

Unfriendly critics of the industry were

inclined to suggest that "profits" won out

over "preparedness." It would be fairer,

perhaps, to put the contention another

way: of the twin objectives sought by

the air arm in the name of defense, that

concerned with fostering a healthy industry won out over that concerned with

building up productive capacity for war.

Both objectives were valid. Neither

could safely be ignored.

When Air Corps leaders took the shortterm rather than the long-term view their

action was entirely understandable. The

possibility of being swamped with war

orders too numerous for the industry to

supply was a contingency of the remote

future, but the complaints of the manufacturers were decidedly immediate. It

was all very well to talk in grandiose

terms about preparedness and air arse- 32

 Aviation (February 1939), p. 81; Aerodigest

(February 1939), p. 42; E. N. Gott to W. W. Barbour,

1 Mar 38, quoted in Cong Rcd, March 1, 1939, p.

2073.

33

 CofAC to Chief, Mat Div, 25 Mar 39, WFCF

452.1 Adaptability of Aircraft to Production.
THE TIDE TURNS 179

nals and stand-by capacity, but while

Congress debated there were no funds

and without funds there could be no

contracts.

Between the reluctance of Congress to

appropriate vast sums for preparedness

and the frequently voiced demands of

manufacturers seeking more business, Air

Corps policy makers began to stress the

immediate rather than the remote. As

late as April 1939, the Chief of the Materiel Division seriously proposed stretching out current Air Corps contracts over

a longer period of time to save manufacturers from having to discharge their

trained employees at the end of the current program.34

 Similarly, the Chief of

the Air Corps suggested a plan to stretch

the available appropriations by purchasing airframes without armament, signal

equipment, and other accessories.35 Both

these proposals were rejected, but the

mere fact that they were made suggests

the extent to which Air Corps officials

were preoccupied during the first half of

1939 with the task of assuring the industry enough business to keep it alive.

Until special or emergency appropriations were forthcoming there could be

no contracts placed for aircraft in quantity over and above the few provided for

in the regular annual appropriation.

Without such contracts, manufacturers

continued to worry about filling up the

acres of idle capacity in their plants. The

more they worried, the more they were

inclined to report that they had plenty

of capacity available to meet military requirements. The more often these assurances were voiced, the more remote

became the air arsenal program.

Even before Congress assembled, officials in the War Department had begun

to cast about for alternatives. A hasty

survey by air arm officers indicated that

a comparatively small investment of private capital could increase aircraft output by as much as 50 percent.36

 On the

other hand, the air arsenal program would

require millions in appropriations from

Congress. Since private financing was

more expedient than public, the President's plan for preparedness in the form

of stand-by capacity simply faded away.

By April the aviation press was reporting that the administration's proposal

for "nationalized" facilities had been

shelved.37

The month of April 1939 marked a

conscious turning point in the attitude

of the industry toward the rearmament

program. Down to the passage of the

bill authorizing a 6,000 aircraft ceiling,

most manufacturers were worried about

filling their plants. Thereafter, more

and more manufacturers began to worry

about finding enough floor space to meet

their production requirements. Money,

of course, made the difference. Toward

the end of April Congress appropriated

nearly $27,000,000 for immediate expenditure on new equipment, more than

$31,000,000 more for expenditure during

the fiscal year, and over $18,000,000 to

cover previous authorizations. In all,

Congress provided some $57,000,000 for

new equipment. The golden rain had

34

 Chief, Mat Div, to CofAC, 15 Apr 39, AFCF

004.4. 35

 G-4 to DCofS, 3 Feb 39, WPD-OPD 3807-32-40.

36

 Memo, ASW for CofAC, 22 Dec 38; and Memo,

CofAC for ASW, 5 Jan 39. Both in AFCF 452.1

Proc of Aircraft. 37

 Sayre and Stubblefield, "Measures for Defense,"

Aviation (April 1939), p. 21.
180 BUYING AIRCRAFT

begun. Passage of a supplementary military appropriation in July in response to

an appeal from the President brought the

Air Corps another $89,000,000 for immediate expenditure plus contract authorization of $44,000,000 more.38

 The day

after the regular fiscal year 1940 appropriation bill passed, Air Corps officials announced the signing of contracts for 571

airplanes worth some $19,000,000. When

the supplementary funds became available in July, an even greater torrent of

orders went out to the industry. On 10

August the Air Corps contracted for

nearly $86,000,000 worth of aircraft, the

largest single day of business in the history

of the industry up to that time. In fact,

this one day's orders amounted to more

business than the industry had known

in any full year in peacetime down to

1937.39

Inevitably, however, all this good fortune was to be compounded with difficulties. Even before the torrent of funds

could be transmuted into contracts, there

were warning cries of shortages from the

industry. While most preparedness discussion had been centered around airframe capacity, the equally menacing

question of capacity in accessory plants

and material suppliers had been virtually ignored.

Aluminum offers a case in point. The

average airframe was almost 70 percent

by weight aluminum and 29 percent

steel. Aluminum producers were sure

they could meet the demand. At an

average of 7,000 pounds of aluminum

per airframe, the total weight required

for the expansion program fell well within the aluminum industry's annual capacity. Unfortunately, airframe manufacturers' orders and indeed their needs

could not be spread evenly over the entire year. They required most of the

necessary weight in aluminum toward

the beginning of their production runs

and virtually all began producing at

about the same time, since the Air Corps

placed the bulk of its contracts all within

a few hours of one another. This concentration of orders, which threatened to

swamp the aluminum industry, was bad

enough in itself, but there was a further

complication. The aluminum industry

was fully capable of meeting the total

demand of aircraft manufacturers in aluminum sheet of standard gauges, but

forgings, castings, and extrusions raised

an entirely different problem. Throughout the decade of the thirties these items

had been coming into greater use. With

the arrival of big orders, longer production runs—real mass production—their

use, especially extrusions, might be expected, to increase.40

Aluminum was only one item for concern. Elsewhere other shortages threatened. Production delays on the part of

a wheel manufacturer brought shortages

in the Curtiss plant that held up production of the P-36 for five days. A shortage

of gun-synchronizers delayed production

for twenty days. Hard-to-manufacture

hydraulic pumps for use in retraction

38

 53 Stat 606, Military Appropriations Act, 1940,

April 26, 1939, and 53 Stat 995, Supplementary Appropriation, July 1, 1939. 39

 Aerodigest (May 1939), p. 28 and Aviation (September 1939), p. 52.

40

 Intercompany Memo, J. E. Schaefer, Stearman

Division of Boeing, to J. P. Murray, 13 Apr 39, AHO

Plans Div 145.93-182. Breakdown of average airframe

by weight in aluminum and steel is based on Brig

Gen G. H. Brett, "Procurement for Defense," Aviation (August 1940), p. 42.
THE TIDE TURNS 181

gear and other similar applications soon

became critical as the two or three firms

skilled in making this item found themselves flooded with orders.41

 When manufacturers, hard pressed for highly skilled

labor, began to raid each other's shops to

lure away men, it became evident that

some sort of action on the part of the government would be necessary to ensure a

smooth and efficient flow of resources to

the industry.42 The War Department

had mobilization plans setting up agencies to control the flow of resources in

case of war, but the United States was not

yet at war. The problems had arrived

before the war; the mobilization plans

were inadequate.43 Improvisation would

be necessary. At the end of June 1939 the

Chief of the Air Corps sent invitations

to a large number of leaders throughout

the aircraft industry, inviting them to a

conference to be held in his office during

July to consider their common problems.

OCAC Conference, July 1939

The call that went out to industry

leaders offers something of an index of

the progress in air arm planning since

the inception of the expansion program

during the previous November. Then

a peacetime atmosphere prevailed. Economy was the watchword. Manufacturers

attending a conference in Washington in

the summer of 1938 were merely instructed to come with data on the productive capacity of their plants.44

 But

by July 1939 a new vitality was evident.

Invitations to the industry specified the

agenda in detail. Moreover, individual

manufacturers were instructed to bring

not opinions on the capacity of their

plants but facts, explicit information concerning floor space, employees, facility

costs, and the like.45

Just as the invitations to the July conference reflected something of the growing awareness of the real problems that

beset the expansion program, so too the

welcoming remarks of the presiding officials gave a revealing insight on War Department leadership. Assistant Secretary

of War Johnson spoke of preparedness.

With singleness of purpose he saw the

ultimate objective: adequate productive

capacity to provide the nation's air power

requirements in time of war. For Johnson there seemed to be no doubt that war

was inevitable, and he bent every effort

to meet that war prepared. In contrast

to the views of the Assistant Secretary

were those of General Arnold. He saw

two problems before the conference.

First there was the immediate problem,

the Air Corps' expansion program, which

was actually in hand. Second, there was

41

 Shortage complaints are scattered throughout

the files for this period. See, for example, CurtissWright to Chief, Mat Div, 18 Jan 39, SW files, Aircraft, item 1110a; and Memo, CofAC for SW, 25 Jul

39, AHO Plans Div 145,93-182. 42

 Memo, CofAC to ASW, 21 Feb 39, AHO Plans

Div 145.93-182. 43

 R&R, Plans Sec to CofAC, 17 Apr 39, AHO Plans

Div 145.93-182.

44

 Actg CofAC to Glenn L. Martin et al., 16 Aug

38, SW files, AC Gen Questions, item 550a, 16 Aug

38. The request for estimates of productive capacity

in terms of dollar values suggests the crudity of the

measurements involved. For an example of the acute

emphasis on economy that dominated at the time,

see, Dir, Planning Br, OASW, 145.93-182. West

coast procurement planning officers were not invited

to the Washington conference in order to save travel

expenses. 45

 ASW to leading aircraft industry manufacturers,

30 Jun 39, AFCF 004.4.
182 BUYING AIRCRAFT

a possible future problem, an emergency

program, if war should come.46

Once again General Arnold saw clearly

the essential dilemma of the Air Corps.

A solution to one problem did not of

necessity mean a solution to the other.

Rather than impose orders from above,

he moved hesitantly and cautiously. He

made no effort to force the manufacturers

into any pattern or plan predetermined

by the Air Corps. "You are going to

write your own ticket," General Arnold

told his audience. In short, the manufacturers learned that leadership by cooperation would substitute, for mandates

from above, the "Government regulation," which so many of them resented.

This method could be called an abdication of leadership to the business interests. Before judging, however, one should

see the whole problem. The Chief of

the Air Corps was responsible for the

aerial defense of the nation. When General Arnold assumed command in September 1938 he found the nation virtually without air defense against the growing might of the dictatorships. He knew

he must depend upon the manufacturers

to provide the requisite airplanes. No

hastily contrived government-owned facilities could supply the need without the

fullest co-operation of the existing industry in providing the necessary designs

and engineering talent. General Arnold's

most significant contribution to the cause

of national defense may have been his

early recognition that the Air Corps could

no more order production from the aircraft industry than it could order appropriations from Congress. As the subsequent war years were to reveal, a skillful

and timely use of the carrot with only an

occasional use of the club won the best

results in both cases.

The problem before the conference,

regardless of who formulated the answer,

was one of increasing productive capacity

to meet first the requirements of the expansion program and then the needs of

a possible future emergency. After raising the first obvious solution of using

multiple-shift operations, General Arnold opened the conference for discussion.

One means suggested for increasing

production was the extensive use of subcontracting. Some of the manufacturers

present opposed the idea. For the most

part the objections came from the larger

firms with heavy investments in floor

space and tools. They wanted to keep

their plants working at capacity even

when the expansion program came to an

end. They were obviously anxious not

to encourage a whole host of small parts

manufacturers, each with a low overhead,

to become competitors. On the other

hand, some of the smaller firms were quite

enthusiastic about subcontracting. Some

of them had already discovered they

could make more money in supplying

specialty items to the larger firms than

they could hope to make in the high-risk

business of entering competitions to build

complete military aircraft. Some manufacturers with but limited capacity and

inadequate capital favored subcontracting because it permitted them to accept

production contracts beyond their immediate capacity in the hope of earning

profits to plow back into expansion. To

46

 Proceedings of Air Corps Procurement Conference (hereafter cited July Conference Proceedings),

10 Jul 39, AFCF 337.1 Conference. Unless otherwise

stated, the following discussion of the conference is

based on this source.
THE TIDE TURNS 183

this a representative of OASW, long concerned with the problems of wartime

mobilization, added a warning note: it

would be well to learn to make use of

subcontractors in peacetime because various shortages in wartime might make

plant expansion impossible.

The conference reached no simple solution to the matter of subcontracting.

All agreed that some subcontracting

would be necessary, but a wide difference of opinion persisted as to the degree

desirable. In any event, whether extensive or limited, subcontractors would

have to be trained. This in turn gave

rise to a discussion of educational orders.

In 1939 Congress provided first $2,000,-

000 and then later an additional $14,500,-

000 to support an educational order program for Army items.47

 At last substantial

sums were available to educate new

sources. But instead of educating a large

number of inexperienced producers, the

Air Corps devoted its share of the first

grant to the purchase of a training aircraft from two aircraft manufacturers.

The industrial planners of the air arm

felt that airframes rather than accessories

would constitute the most serious chokepoint in production. Airframes, engines,

and propellers, they argued, were the basic items upon which available educational funds should be spent.48

 Since the

ground rules of OASW stipulated that

only items that would long remain standard should be considered for educational

orders, this led air arm officials to select

cargo and training airplanes as most suitable for educational orders.49

As the expansion program gathered

headway it became increasingly clear that

accessories and components were to be

the really serious bottlenecks. Early in

the summer of 1939 it was apparent that

collector rings (exhaust manifolds for aircooled engines) and oleo struts were going to be critical items for which it would

be well to educate new sources.50 By the

following summer the fundamental mistakes in Air Corps policy regarding educational orders became evident. Not

airframes but dozens of components were

the real candidates for education. Magnetos, carburetors, starters, prop hubs,

camera lenses, gyro-pilots, and a flock of

other items were critically short. Any or

all of these accessories would have responded favorably to educational orders.51

 Unfortunately, by the time this

was recognized the Air Corps had lost its

opportunity; the Assistant Secretary had

long since precluded the use of any further educational order funds on air arm

projects inasmuch as the aviation expansion program was itself a gigantic educational order.52

Industry and Army representatives at 47

 52 Stat 707, June 16, 1938, authorized educational orders, and 52 Stat 1153, June 25, 1938, appropriated $2,000,000 for the purposes. 53 Stat 560,

April 3, 1938, authorized $34,500,000 for educational

orders, but the regular appropriation act for 1940,

53 Stat 595, April 26, 1939, actually appropriated

only $2,000,000. A supplementary act, however, 53

Stat 995, July 1, 1939, subsequently appropriated

$14,500,000 for educational orders in fiscal 1940. 48

 Chief, Industrial Planning Sec, to Chief, Mat

Div, 1 Mar 39, AFCF 032k; Exec, OCAC, to ASW,

2 Mar 39, AFCF 030 President and Congress.

49

 Memo, Lt Col R. L. Walsh for Gen Arnold,

23 Aug 39, AHO Plans Div 145.93-182. 50

 Ibid.

51

 Unsigned Memo for Chief, Mat Div, 10 Jul 40,

AC Project Rcds (Lyon Papers), folder 11, Educational Orders and Industrial Planning, AFCF. 52

 Notes prepared for Gen Arnold on Education

Orders, 1 Nov 39, AC Project Rcds (Lyon Papers),

folder 11, Educational Orders and Industrial Planning, AFCF.
184 BUYING AIRCRAFT

the July 1939 conference realized that

even extensive subcontracting would not

provide all the necessary additional production capacity for an emergency or

wartime program. Even if educational

order funds were plentiful and wisely

expended, it would be impossible to push

up the level of airframe production indefinitely by this method. There were,

as everyone present realized, only two

alternatives left. The government could

erect shadow factories, stand-by facilities,

or the individual manufacturers could

expand their own plants.

Where possible, subcontracting was to

be preferred to building new facilities.

This was the official War Department

policy. As to the choice between government-built plants and privately financed

expansions, the industry in July 1939

wanted neither but preferred the latter

alternative. Col. H. K. Rutherford, representing the mobilization planners of

OASW, probably reflected industry opinion fairly when he labeled shadow factories "unsatisfactory, expensive" and a

"last resort." 53 Privately financed expansion, then, was to be favored. But

the aircraft manufacturers were still not

anxious to expand.

Ever since the President had suggested

a 10,000-aircraft program, aircraft builders had been warning one another not to

get caught with productive capacity too

great to be profitably employed when the

current program concluded. The memory of the long depression was too vivid

to forget. "Having faced the cold shadows of a vacant factory," said an official

of United Aircraft, "we had no appetite

for more of the same."

 54

 "Don't let's

get stampeded" into building needless

capacity, editorialized Aviation magazine

with a worried look at the long-term future and its bleak prospects.55

 When

Glenn L. Martin told all those present

at the conference that the industry had

sufficient capacity to do the job on hand,

he was only voicing an opinion widely

accepted by the trade. Why expand

when existing facilities would be more

than ample?

 56

The industry was unanimous in its

opposition to expansion—or so it would

seem. When speaking for the group or

to the public at large each individual

manufacturer opposed expansion. But

in practice, the manufacturers behaved

quite differently. When confronted with

tempting offers for long production runs

beyond their existing capabilities, individual firms seemed to have no qualms

about expanding when necessary. Airframe manufacturers had already built a

million square feet of floor space in the

first six months of 1939, an increase of

17 percent. Moreover, productive capacity of the engine manufacturers had

been increased 20 percent in the same

period.57

In short, the aircraft manufacturers

were like large-scale commodity farmers.

They agreed in conclave that increased

production would threaten a market glut,

then hurried home to consider means for

53

 July Conference Proceedings, p. 18. For a long

detailed opinion from the industry on this point,

see C. A. VanDusen, Consolidated Aircraft Corp.,

to Procurement Planning Representative in Los

Angeles, 12 Jun 39, AFCF 004.4.

54

 Wilson, Slipstream, p. 220. 55

 Aviation (December 1938), p. 19. 56

 July Conference Proceedings, pp. 12-13. 57

 ACC news release, November 13, 1939.
THE TIDE TURNS 185

expanding their plants. Glenn L. Martin

offers a case in point. He was sure the

existing industry could do the job, yet

even as he spoke, workmen were putting

the final touches upon a magnificent new

plant with nearly a half-million feet of

floor space that he had just constructed

to handle a big order from the French

Government.58

The phenomenon was quite simple.

Those who received orders and needed

to expand went right ahead and did so.

But the industry as a whole protested in

unison that plenty of capacity was available. Even after war broke out in Europe, the aviation press still carried warnings against foolish plant expansions, and

those with orders went right ahead and

ignored the warnings.59 Behind these

contradictions lay an obvious explanation. Throughout the industry there was

an underlying fear of the administration's

air arsenal plan. Individually and collectively, manufacturers felt impelled to insist that plenty of idle capacity was available, partly in the hope of attracting new

orders to themselves and partly to forestall the threat of government-financed

stand-by plants that might be but a first

step toward nationalization of the industry.60

Not surprisingly, then, the manufacturers who attended the Air Corps procurement conference in July 1939 displayed no enthusiasm for further expansion and were quite willing to assert that

plenty of capacity existed to meet the requirements of the expansion program.

Their contentions were, however, merely

opinions and not facts. Moreover, those

who attended the conference could give

no assurances, not even opinions, on

whether or not the extant industry could

meet the requirements of mobilization

if war should come. The truth was that

nobody knew what sort of production the

industry might achieve under wartime

conditions. Never having enjoyed really

large orders, most manufacturers had

little idea of the maximum level of output they might achieve if fully tooled for

mass production.

Would the industry have to expand to

meet the demands of war? Without some

means of determining productive capacity no one could tell. Manufacturers'

opinions were far too subject to coloration by the hope of further business and

the fear of competition from governmentowned plants. Objective criteria were

needed to measure productive capacity

impartially. General Arnold asked for

constructive proposals. He wanted a

yardstick that would measure productive

capacity accurately and fairly. Although

a number of the industry representatives

present made helpful suggestions for such

a yardstick, they preferred to leave the

details to a military board. In a highly

competitive industry, each manufacturer

was willing to co-operate with air arm

officials but reluctant to divulge production data to a rival.61

 The close co-opera58

 Fortune (December 1939), pp. 12, 73. 59

 Marcus Nadler, "Economic Study of Fighting

Nations Indicates No War-Order Windfall," Printers

Ink (October 6, 1939), p. 11; Aviation (October 1939),

p. 53. 60

 See, for example, ACC Info Bull No. 16, 28 Nov

39, with facsimile article, S. B. Altick, "Across the

Skyways," New York Sun, November 18, 1939, article

captioned, "Nationalization of Entire Aviation Industry Threatened by Left Wingers in Washington." 61

 July Conference Proceedings, pp. 4-9.
186 BUYING AIRCRAFT

tion among manufacturers that marked

the war years was still a long way off.

So the conference ended. Army officers and manufacturers alike realized that

no long-term planning was possible until

the necessary facts could be obtained. It

must have been evident to all that what

the Assistant Secretary of War said in

November 1938 was still true: the productive capacity of the aircraft industry

was unknown. But now only two months

remained before World War II would

break out in Europe.

The Search for a Yardstick

When the industry and air arm leaders

finished their deliberations at the Office

of the Chief of Air Corps in July 1939,

at least one conclusion was evident: no

further mobilization planning was possible without "facts." Yet even upon this

seemingly obvious word there was no

real agreement.

Long before the OCAC conference in

July, Air Corps officers had recognized

the acute need for accurate information

on the capacity of the nation's industry

to turn out aircraft. The matter had

been discussed at a similar meeting with

industry representatives almost a year

earlier.62 Everyone present seemed to

agree that the existing factory plans

drawn up by officers of the Industrial

Planning Section at Wright Field were

unreliable. Even the manufacturers

whose plants were surveyed and scheduled admitted this. On the other hand,

these were the very men who protested

that the preparation of really accurate

surveys to measure potential productive

capacity would require a great deal of

time and money.63 Such surveys demanded the services of highly paid

and highly skilled production engineers

whom few aircraft manufacturers would

or could afford to divert from their normal duties. The Air Corps response to

this reluctance was the so-called data

contract.

Data Contracts

After some preliminary delays between

October 1938 and April 1939 while funds

were secured and specifications drawn up,

procurement officers negotiated a number

of data contracts with aircraft and engine

firms. Subsequently, the effort to purchase "information" was broadened considerably by including a data clause in

all regular contracts for supplies. By

this means manufacturers were led to

deliver reports on future productive capabilities along with the items they

turned off their assembly lines.

The effort of air arm officers to secure

facts on which to base decisions concerning mobilization was undoubtedly sound.

Unfortunately, the plan was a partial failure in execution. Insofar as the data

contract program induced manufacturers

to think and plan in terms of large-scale

mass production even before they received large orders, the program was a

62

 This and the following several paragraphs are

largely based upon Critical Analysis and Evaluation

of AAF Pre-World War II Purchased Procurement

Planning Data Program, 1 Jul 47, prepared by Industrial Planning Sec, Proc Div, AMC, pp. 8ff.

63

 Ibid., pp. 10-11. See also Wilson, Slipstream,

pp. 213-16, attributing to one leading aircraft builder

the opinion that the work of the air arm mobilization planners amounted to "twenty years of hogwash."
THE TIDE TURNS 187

success.64 But the data actually purchased (at a cost of something over

$100,000 for the initial phase of the program alone) was never effectively utilized.65

A fundamental flaw in conception

virtually wrecked the whole program.

Instead of purchasing surveys of each

manufacturer's facilities as a whole, the

studies bought were posited upon an assumed production of a single aircraft,

engine, or accessory. When that item

became obsolete or when the manufacturer in question took on additional orders—from the French, the British, or the

Navy for example—the purchased data

lost much if not all of its meaning. Similarly, the data lost much of its value since

it failed to consider the possibility of redesigning items to facilitate mass production.66

In the last analysis, of course, estimated

production schedules prepared by individual contractors themselves were not

to be relied upon. The manufacturers

tended to reason from assumptions that

were too optimistic. In promising a

given level of bomber production for

some future date such as M-day plus

twelve months, for example, a manufacturer assumed rather too readily that design would be frozen, labor would be

available in sufficient quantities, all items

of government-furnished equipment

would be on hand when required, additional machine tools could be procured

when needed, and so on.67 Such idealized assumptions made for unrealistic

scheduling. At best, the average manufacturer was caught in a crossfire of conflicting interests. He was anxious to sell

air arm officers on the idea that he had

plenty of available capacity in the hope

of landing a big production order. Yet

at the very same time he may well have

been anxious to secure government assistance in financing a plant expansion.

In short, the manufacturer with a data

contract was a special pleader rather than

an objective reporter. A contract that

asked him to estimate his productive capacity for some future date asked for an

opinion, an opinion based as much upon

aspiration as upon fact. Thus, manufacturers were asked to provide the very information they were least able to give

objectively. And, ironically, they were

not asked—until almost too late—to provide the data they were entirely capable

of delivering: full, factual data concerning their facilities and operations—the

available floor area in their plants, employees in each shift, and so on.

Data contracts were not the only source

of information available on the nation's

aircraft productive capacity. The Aeronautical Chamber of Commerce, representing 90 percent of the industry, offered

a possible alternative means of determin64

 Wilson, Slipstream, page 234, indicates that

United Aircraft was inspired by the discussions

alone, without waiting for a data contract, to undertake rather elaborate advance war planning. Other

leading firms followed suit. 65

 Critical Analysis and Evaluation of AAF PreWorld War II Purchased Procurement Planning

Data Program, which concludes bluntly: "The purchased studies were of little use. . . ." 66

 Ibid., p. 3. See list of "major deficiencies of the

Purchased Planning Data Program."

67

 Chief, Mat Div, to CofAC, 25 Jul 39, AHO Plans

Div 145.93-182. Some manufacturers were fully

aware of the falseness of these assumptions and as a

consequence were reluctant to take data contracts.

See Chief, Mat Div, to CofAC, 4 May 39, AHO Plans

Div 145.93-182.
188 BUYING AIRCRAFT

ing capacity. British experience with a

counterpart organization, The Society of

British Aircraft Constructors, suggested

that this industry trade association and

clearinghouse could provide a very useful liaison between individual aircraft

manufacturers and the air arm procurement organizations.68

 Self-interest would

ensure the enthusiastic co-operation of

the Aeronautical Chamber of Commerce.

Moreover, in the role of confidential

agent, the ACC might be able to secure

information from the various manufacturers that each would be reluctant to

report to government officials for fear of

impairing his bargaining position in subsequent contract negotiations. Finally,

and perhaps of most importance, the

ACC could command from the ranks of

its members the very best in technical

skills.

A committee sponsored by the ACC to

measure the nation's productive capacity

could be depended upon to have the services of some of the best aircraft production engineers in the country. Such a

survey actually compiled by the ACC

during the summer of 1939 reflected this

competence the more pointedly by the

contrast it presented to similar surveys

made by the officers of the Industrial

Planning Section at Wright Field.69

On the other hand, if there were advantages in relying upon the Aeronautical Chamber of Commerce, there were

also decided disadvantages. If Air Corps

officers depended upon this trade association for the basic data upon which to

make vital decisions concerning national

defense, they would lay themselves open

to the politically dangerous charge of

having surrendered to the business interests. General Arnold probably selected

the wisest course when he ordered Materiel Division officers to make their own

estimates of available productive capacity. But at the same time, he held the

door open for the ACC by authorizing

it access to the classified military contracts

of its members. By this means the ACC

was retained as an important supplementary source of information and a medium

for bringing suggestions and criticisms

from the industry to Air Corps headquarters.70

While General Arnold's decision no

doubt retained full responsibility for the

mobilization effort where it properly

should have rested, there was, nevertheless, some loss of effectiveness. Officers

who were admittedly not production specialists had to grope and fumble for

solutions to highly technical questions.

Inevitably they made mistakes while

learning anew what the production engineers already understood. This was essentially the position of those officers who

were ordered to serve on a special board

directed to contrive some sort of yardstick for measuring the aircraft productive capacity of the United States.

68

 Military Attaché, London, Annual Rpt, 13 Sep

38, AMC CADO, C 21/38 Great Britain. 69

 For an example of the kind of detailed survey

made by ACC, see Curtiss-Wright, St. Louis Div to

ACC, 17 Jul 39, AFCF, 004.4 Mfrs.

70

 Memo, CofAC for Col Echols, 21 Aug 39, WFCF

381. For a discussion of the problems encountered

when a government agency hands over some of its

functions to private hands, see the account of Frederic C. Lane (Ships for Victory: A History of Shipbuilding Under the U.S. Maritime Commission in

World War II (Baltimore: The Johns Hopkins Press,

1951, pp. 97ff.) on the relations of the Maritime

Commission with the firm of Gibbs and Cox.
THE TIDE TURNS 189

The Yardstick Board

Less than a week after the July 1939

conference in OCAC, the chief of the

Materiel Division appointed a special

board of officers to study aircraft production.71

 This group, known informally at

Wright Field as the Yardstick Board, was

to devise a method or formula with which

it would be possible to measure the capacity of any given facility in the industry. Despite the years of study devoted

to the general problem by the Industrial

Planning Section, the facts and figures

necessary for the board's deliberations

were not at hand. A new questionnaire

had to be sent out to the industry. Not

until the end of July 1939 could the board

begin its work; its final report appeared

during the middle of September, after

the outbreak of war in Europe.72

The board had at its disposal a number of tools or techniques for estimating

productive capacity if its members would

but seek far enough. For a very crude

index, there was the industry's production record in two previous periods of

mass production. During World War I,

aircraft yearly output rose from 400 units

in 1916 to 2,000 units in 1917, and finally

to 14,000-odd units in 1918. Had the

officers of the yardstick board actually

used these figures they would have obtained a false impression of the acceleration in production to be expected in

World War II. Over a comparable period of years, from 1938 to 1941, aircraft

output was never much more than double

that of the previous year. Interestingly

enough, the more recent experience of

the boom years 1926-29 provided a far

more accurate picture of what to expect.

The rate of increase in the boom was

almost exactly that achieved during the

years 1938-41. At best, to be sure, the

record of accelerating output in previous

periods of mass production was suggestive

only. The validity of this earlier experience as a basis for comparison was, to

say the least, made questionable by the

intervening technical revolution in aircraft structures.

Dollar value of output offered another

crude yardstick to measure capacity in

the aircraft industry. Since statistics on

total dollar output, average unit costs,

total unit production, and the like were

readily available, it was a relatively simple matter to make some rough correlations between expenditures and output.

Dollar volume as a yardstick had the advantage of providing a convenient basis

of comparison between manufacturers of

widely different types and models. Moreover, this yardstick had been used before

by the Air Corps and was a familiar one

in the industry.73 On the other hand,

dollar volume as a measurement of production suffered from several intrinsic

weaknesses. To begin with, factors such

as the different levels of wages in various

parts of the country and the generally

rising level of wages and material costs

injected variables that upset the formula.

More significantly, just as in the case of

World War I or the boom years, rapid

changes in technology threatened to nul71

 Memo, ACofAC for ESW, 26 Jul 39, AFCF 004.4

Mfrs. 72

 TWX, Contract Sec, WF, to Plans Sec, OCAC, 1

Aug 39, and extract, Proceedings (of Yardstick Board)

15 Sep 39, AFCF, AC Project Rcds (Lyon Papers), bk.

22, Capacity of the Aircraft Industry.

73

 Actg CofAC to Glenn L. Martin, 16 Aug 38,

SW files, AC Gen Questions, item 550a.
190 BUYING AIRCRAFT

lify the validity of much past experience.

As manufacturers received larger orders,

they installed more and more production

tooling. As mass-production techniques

replaced job-shop methods, output increased surprisingly. Estimates of potential production based on assumptions

framed in terms of job-shop conditions

had to be scrapped to make way for the

new situation. Clearly, the commonly

used dollar volume yardstick was no

longer accurate.74

When General Arnold asked the manufacturers attending the OCAC conference for help in contriving a yardstick,

he roused a lively discussion and turned

up some useful ideas. Everyone present

seemed to agree that the old dollar volume yardstick was inadequate. The real

problem was to devise a common denominator, a measurement valid whether applied to giant bombers or puddle jumpers, the Army's tiny liaison airplanes.

James H. Kindelberger of North American suggested airframe pounds as such a

common denominator. General Arnold

preferred airframe pounds per square

foot. Then Mr. Kindelberger suggested

that man-hours of productive labor per

square foot of plant in relation to airframe pounds produced was a formula

already employed by the Germans. Mr.

L. L. Bell, of Bell Aircraft felt this formula might be improved if some consideration could be given to whether or not

the aircraft in question had ever been in

production before.75

These and a number of other ideas put

forth by the representatives of the aircraft industry at the conference provided

a useful starting point for the Yardstick

Board. Fortunately at least one engineer,

Mr. T. P. Wright, who at the time was

director of engineering for the CurtissWright Corporation, had gone beyond

this starting point and had published a

thoughtful paper on this very question

of estimating capacity.76 The problem

Mr. Wright posed was virtually identical

to that facing air arm planners: can the

existing industry handle the expansion

program proposed by the President? To

answer this question he worked out in

detail a series of formulas using airframe

pounds, productive floor space, manhours, and the like. Then, having derived his formulas as tools, he proceeded

to apply them to the specific situation in

hand. As an interested party, an aircraft builder, looking for military orders,

Wright's conclusions might be subject to

challenge. But this in no way minimized

his brilliant contribution in suggesting

methods for analyzing capacity.

The available evidence does not make

clear the extent to which the Yardstick

Board relied upon Wright's study.77 The

degree of the board's obligation is probably unimportant since the real significance of Wright's work was that it for74

 For a rather harsh judgment on the failure of

Air Corps officers to foresee the importance of production tooling, see Review of Methods Employed

by the AAF . . ., cited ch. VII, n. 6. 75

 July Conference Proceedings, pp. 4-9.

76

 T. P. Wright, "America's Answer: Gearing Our

Aviation Industry to the National Defense," Aviation

(June 1939), pp. 26ff. 77

 Although the board's report does not mention

Wright's study, it must have been available to the

members of the board. The Chief of the Materiel

Division actually went out of his way to urge that

the Chief of the Air Corps read the study. See TWX,

Brett to Arnold, 6 Sept 39, WFCF 008 Policy file,

Pay-as-you-go. Plans officers, OCAC, were familiar

with Wright's article also. See Maj M. R. Wood

to Col Spaatz, 14 Aug 39, AHO Plans Div 145.93-182.
THE TIDE TURNS 191

malized some of the ideas used by various

leading production engineers and helped

make the techniques commonplace.

After extended deliberations the Yardstick Board concluded that the simplest

and most expressive measure of productive capacity was airframe pounds per

square foot per month. A carefully

drawn questionnaire brought in the necessary data from virtually every producing unit in the industry. By combining

the arithmetic average and a modified

median of these returns, the board found

that the average figure of production was

1.20 pounds per square foot per month.

By similar means the board found that

the area per productive laborer at maximum concentration was 145 square feet,

that only 81 percent of total area was actually productive, that the number of

pounds per month per man averaged 80,

that the maximum amount of subcontracting was 20 percent, and, finally, that

second-shift operations were only 74 percent and third shift only 57 percent as

efficient as first-shift operations.78

To work the formula of the Yardstick

Board, air arm planners had only to apply the facts of a given case to these

known industrial indicators. Thus, for

example, a manufacturer with 100,000

square feet of floor and 250 productive

workers would give the following projection or estimate:

a. 250 employees × 80 lbs./man/mo. =

20,000 lbs./mo. current output.

b. 100,000 sq. ft. × .81 (% of area productive) = 81,000 sq. ft. productive.

c. 81,000 sq. ft. productive × 1.20 lbs./

sq. ft./mo. = 97,200 lbs./mo. maximum

production.

d. 97,200 lbs./mo. production × .20 (%

subcontracted) = 19,400 lbs. farmed out to

subcontractor.

e. 81,000 sq. ft. productive ÷ 145 sq. ft./

man = 558 first-shift employees at maxi- mum.

f. 558 first shift × .74 (second-shift effi- ciency) = 413 employees on second shift at

maximum.

g. 558 first shift × .57 (third-shift effi- ciency) = 318 employees on third shift at

maximum.79

Though subsequent experience and

the passage of time demonstrated that

the board's coefficients were not infallible,80

 the yardstick evolved by the board,

with the help of the industry, gave air

arm officers a reasonable basis on which

to premise plans for subsequent steps in

the expansion program. In short, the

Yardstick Board accomplished in a matter of weeks what the Industrial Planning

Section failed to do over a period of years.

Tools for Planning

The formula derived by the Yardstick

Board marked an important milestone

along the route if not the beginning of

the use of effective statistical techniques

as a basis for reaching authoritative policy decisions on mobilization planning

in the aircraft field. After this rather

78

 Extract, Proceedings of Yardstick Board, 15 Sep

39, AFCF AC Project Rcds (Lyon Papers), bk. 22,

Capacity of the Aircraft Industry.

79 Ibid.

80

 Where, for example, the board found productive

area at 81 percent of total area, subsequent studies

changed this figure to 85 percent. See K. Perkins

and M. A. Tracy, Airplane Manufacturing Capacity

Based on Factory Areas, OPA Aircraft Rpt 13-A,

31 Oct 41, AFCF, Outsize, 452.1 Aircraft Manufacturing Capacity.
192 BUYING AIRCRAFT

THEODORE P. WRIGHT

hesitant start, a whole series of statistical

tools were developed for measuring productive capacity, costs, labor requirements, and the like. These were almost

entirely the work of Mr. Wright and his

associates serving as aircraft specialists

with the Advisory Commission to the

Council of National Defense (NDAC)

and its successor agencies, Office of Production Management (OPM) and War

Production Board (WPB). There is no

need to expound these formulas in full.

The detailed reports are readily available for those interested in them. Here

it should be sufficient to suggest something of the complex range of subjects

for which statistical tools were developed.

In addition to those devised for production planning, similar formulas made it

possible to estimate probable costs for

budgetary planning. Others, which estimated unit costs in advance, gave contract negotiators tools for use in close

pricing.81

Unfortunately, there is evidence to

show that at least some highly placed air

arm officers were inclined to ignore the

formulas. Although the various formulas were made available to officers of the

Materiel Division, then urged upon them,

it seems safe to conclude that it was the

staff of consultants within NDAC and its

successors who made best use of these

tools.82 If Air Corps officers failed to

utilize all the statistical tools available to

them, in some instances it may be attributable to sheer blindness on the part of

individuals. But far more significant

was the breach that separated the regular

air arm procurement organization from

the temporary civilian agencies such as

NDAC. Hastily built, of necessity, the

civilian production and planning agencies paid a heavy price in terms of inadequate liaison with corresponding elements of the military organization.

The Realities of September 1939

There were unavoidable delays in getting together the information from which

the Yardstick Board reached its conclu81

 Aircraft Br, WPB, Aircraft Manufacturing Capacity Based on Factory Area, Aircraft Rpt 13-X,

15 Mar 42. AFCF 004.4 Bulky. See, for example,

T. P. Wright and A. E. Lombard, Report on Prices

of Military Airplanes, Airplane Div NDAC, Rpt 5,

10 Jul 40, AFCF 452.1-191. 82

 T. P. Wright to Chief, Mat Div, 10 Jul 40,

AFCF 452.1 Aircraft Gen; R&R, CofAC to Chief,

Mat Div, 25 Jul 40, "Does this mean anything or is

it just another report?" Comment 2, Chief, Mat

Div, to CofAC, "A good rule of thumb . . . if one

wants to take the trouble to figure it out," "My

people use it in connection with estimates." Comment 3, CofAC to E. H. Beebe, and No. 4, Beebe

to CofAC, 27 Jul 40, "It should be useful for planning future purchases . . . ," AFCF 452.1-91.
THE TIDE TURNS 193

sions. Until the board reported, no detailed planning could be undertaken;

almost every major decision regarding

the expansion of capacity remained suspended.83

 No one could be sure just

how much it would be necessary to enlarge the existing industry. Assistant

Secretary Johnson felt that it must be

expanded "several times" above current

capacity. The Chief of the Materiel Division directed his staff officers at Wright

Field to commence plans for a possible

fivefold expansion84—and this only a

matter of weeks after many of the industry's most distinguished leaders had assured the President that no expansion

would be needed.85

Since the Yardstick Board did not report formally until mid-September 1939,

the vital decisions regarding expansion

were delayed until after war broke out

in Europe. Precious months were lost

to the mobilization effort largely because

of a failure to contrive adequate administrative tools for realistic planning during the years of peace.

If the hour was late and the war very

real indeed—in Poland if not in France

—air arm officers in September 1939

could at least take some comfort from

the progress of the past nine months of

gestation. The Air Corps had a program, Congress had provided the funds,

the aircraft industry was growing rapidly

on its own initiative, and at last there

were administrative tools to assist in making the vital decisions necessary to plan

for an efficient mobilization of the nation's productive capacity. When the

President took note of the war in Europe

and declared a state of limited national

emergency, some air arm officers felt that

the last necessary ingredient for success

had been added; the impetus of war and

a national emergency, they hoped, would

banish most of the obstacles that impeded the effort to mobilize the air arm

while it was still at a peace.

83

 For evidence of delays imposed by failure to

have information in hand from the industry, see

Actg Chief, IPS, to Asst Tech Exec, Mat Div, 9 Sep

39, WFCF 400.12. 84

 AAF Hist Study 40, pp. 19-20. 85

 Down to the actual outbreak of war in Europe,

the Aeronautical Chamber of Commerce continued

to issue assurances that the industry had capacity

"sufficient for quick deliveries on all future orders

both at home and abroad." See news release from

the ACC, August 28, 1939.
CHAPTER IX

Foreign Policy, Politics, and Defense

When the President declared a state

of limited emergency soon after the outbreak of war in Europe in September

1939, he apparently hoped to secure the

legal advantages and psychological impetus of a crisis to speed rearmament in

the United States. The realities of the

blitzkrieg in Poland, terrifyingly heralded in lurid headlines and newsreels,

seemed to justify his declaration. Each

new Wehrmacht thrust was an argument

of the need for stronger national defense.

Military intelligence reports indicated

that the German Air Force had something

over 8,000 combat aircraft on hand; in

the United States the Air Corps could

muster only some 2,400, at best.1 Congress had authorized the expansion program of 5,500 aircraft, yet more than half

this number remained on paper. There

were 1,178 aircraft on order but undelivered, 1,291 on contracts currently under

consideration, 1,143 in competitions still

being evaluated, and 186 on options that

could be exercised.2 Even if every one

of these aircraft were to be made immediately available to the Air Corps, the

total strength on hand would fall far below that of the German air arm. The

5,500 program, which held such promise

in the spring of 1939 seemed inadequate

during the fall. In contrast to the Luftwaffe, the Air Corps seemed woefully

underarmed.

Only if Congress authorized a larger

force and granted still larger appropriations did it appear possible for the air

arm and the nation's industry to close the

gap. Unfortunately for the cause of national security, the political moon was in

an awkward phase during most of the period of limited emergency—1940 would

be an election year.

Politics and Armament

The first session of the Seventy-sixth

Congress ended 5 August 1939. Thus it

turned out that Congress was not in session when war broke out in Europe on

1 September. The President hastily

called a second session to convene on 21

September. Meanwhile, the German

forces had overrun Poland, and its downfall was only ten days away. Had the

blitzkrieg continued, Congress might well

have authorized impressive increases in

the Air Corps without further delay, but

the blitz did not continue. Even before

1

 Aircraft Strength and Production Capacity of

European Air Powers, Chart as of Jul 39, 15 Jan 40,

AHO Plans Div 145.91-135 QQ. Postwar data

showed this estimate actually understated German

strength. See United States Strategic Bombing Survey, Aircraft Division Industry Report, 2d ed., Jan

47, copy in OCMH, exhibit III A and figure IV-1. 2

 Draft Memo, Plans, OCAC, for ASW, 30 Aug 39,

AHO Plans Div 145.93-183. Cf. notes on staff meetings of division chiefs 1939-40, entry for 23 Oct 39,

AFCF 337 Special.
FOREIGN POLICY, POLITICS, AND DEFENSE 195

Congress adjourned on 3 November,

Poland had capitulated and the powers

were settling down to an apparent stalemate behind the West Wall and the Maginot Line.

When the third session of the Seventysixth Congress opened in January 1940,

insofar as the major powers were concerned blitzkrieg had turned into "sitzkrieg." The menace of Axis might to

the democracies was as great as before,

but the sense of urgency had passed. The

headlines no longer provided daily reminders of the destructive potential of

air power.

Shortly after the beginning of the new

session, the President presented his

budget. He asked something over $1,750,-

000,000 for defense.3 This extraordinary request raised the level of planned

expenditures far beyond expected income. Next, the President asked an election year Congress to pass a tax bill to

make up the anticipated deficit. "To

Congressional realists," Time magazine

remarked, this proposal was "sheer romance."

 4 Congress was clearly in a mood

for economy—perhaps not so defiantly as

during the previous winter when one representative had declared that a force of

15,000 or 20,000 aircraft would "bankrupt" the nation,5

 but certainly the legislators as a group had little enthusiasm

for passing tax bills in an election year.

Four months later, in April 1940, when

the Appropriations Committee reported

out a measure to provide funds for the

War Department during the following

fiscal year, the committee chairman

boasted of having cut, with the approval

of the Bureau of the Budget and the

President, more than a hundred million

dollars from the estimates requested by

the Department.

Subsequent events were to prove these

economies ill-advised, to say the least.

Yet they were not made without reason. The Appropriations Committee

contended that foreign orders placed in

the United States were stepping up the

nation's capacity to produce aircraft at

no expense to the government. Increased

productive capacity seemed to obviate the

need for a stand-by reserve to cover the

lag between production and mobilization

requirements in an emergency, so why

burden the taxpayers?

 6 Without foreign

orders, the committee recognized, the

proposed cuts would be fatal,7 but the

bill as presented assumed that the French

and British were mobilizing the aircraft

industry in the United States. If export

orders could take the place of educational orders, so much the better.8

The proposal to make French and

British aircraft orders vital cogs in the

nation's mobilization effort was not the

first occasion when foreign orders played

such a central role in the defense of the

United States. In the months leading up

to this nation's entry into World War I,

the situation was remarkably similar in

many ways. In 1917, as in 1940, procurement officers found the marketplace

swarming with French and British purchasing missions. They learned in 1917

the important lesson that mobilization is

not an isolated activity of the War De3

 H Doc 529, 76th Cong, 3d sess, January 4, 1940. 4

 Time, January 15, 1940, p. 14. 5

 Cong Rcd, March 3, 1939, p. 2223.

6

 House Rpt 1912, 75th Cong, 3d sess, April 2,

1940, pp. 19-20. 7

 Ibid., pp. 2-3. 8

 Ibid., pp. 10-11.
196 BUYING AIRCRAFT

partment alone but part of a complex

whole, a pattern in which export orders

as well as Navy orders must be taken into

consideration.

Aircraft Exports and National

Defense

When Italy had threatened Ethiopia

in 1935, the furor over arms manufacturers as warmongers and merchants of

death once again claimed the attention

of Congress. The congressmen passed a

neutrality measure that held out to the

public the promise that neutrality in a

warring world could be had by legislation. The terms of the measure made it

unlawful for citizens of the United States

to sell or transport arms to belligerents

who had been labeled as such by the

President. Sales of arms to nonbelligerents could be consummated only under

license from a Munitions Control Board

in the State Department, with an accompaniment of full publicity. In 1936

Congress widened the neutrality law to

prohibit loans to belligerents. In 1937

these measures were replaced with an entirely new act. While reaffirming the

previous curbs on the sale of arms to belligerents, the new law permitted the sale

of arms to nonbelligerents only if they

agreed to pay cash and to take delivery

in the United States.9

The official policy of President Roosevelt's administration was, therefore, to

discourage traffic in arms. Diplomatic

and consular officials received instructions to deny their good offices and the

use of official channels of communication

to armament dealers.10 Similarly, the

Export-Import Bank adopted a policy of

refusing loans to foreign nations wishing

to purchase arms in the United States.11

Occasionally the President found a way

around the law. This was the case, for

example, in 1937 when the Japanese invaded China. A strict application of the

neutrality statutes would have required

him to cut off the flow of arms from the

United States to both nations, since the

law made no distinction between aggressors and their victims. By refusing to

declare the "China Incident" a war, admittedly a technicality, the President was

able to avoid the automatic imposition

of an embargo on the flow of arms so

essential to the victim of Japanese aggression.

The various neutrality laws passed by

Congress were by no means dead letters, forgotten statutes moldering on the

books. Each of the successive acts had

teeth and could be enforced. At least

one group of leading aircraft manufacturers was tried early in 1939 under the

provisions of a neutrality statute and

subsequently fined more than a quarter

of a million dollars for selling airplanes

and machine guns to warring states in

Latin America.12

The effect of the national neutrality

policy was to inhibit sales in the very area

where they would do the most good in

9

 Jt Res 51, which became Public Res 27, May 1,

1937 (50 Stat 121).

10

 R. W. Moore, Dept of State, to U.S. diplomatic

and consular offices, 21 Nov 35, AFCF 360.01 B. 11

 Memo, Maj W. R. Carter for Gen Arnold, 19

Apr 39, AFCF 452.1-3295. 12

 Fifth Report of the National Munitions Control

Board, H Doc 876, 76th Cong, 3d sess, July 3, 1940,

ch. VII. The case mentioned here, involving several

affiliates of Curtiss-Wright, concerned violations of

Public Resolution 28, May 28, 1934 (48 Statutes 811)

applying exclusively to the Chaco war.
FOREIGN POLICY, POLITICS, AND DEFENSE 197

building up facilities for national defense. Faith in the use of neutrality

legislation to keep the nation clear of war

seemed to obscure the need for maintaining a healthy armament industry as

an essential to national defense. But

curbs on the export of arms were not all

chargeable to Congress and to the prevailing spirit of isolationism in the nation at large. Some restrictions on exports were imposed by the military

leaders.

To protect military secrets during

World War I, Congress had passed the

Espionage Act of June 15, 1917, which

provided heavy penalties for those guilty

of revealing such secrets to an enemy.

Inevitably, these grew up an elaborate

body of administrative practices and policies as military men sought to apply the

law. Amongst these rules and regulations were those providing a means for

releasing items of equipment from their

classification as military secrets when

their increasing obsolescence no longer

required such a status.

Common sense clearly urged the release of items from a classified status as

soon as possible. If items of equipment

classified as secret during peacetime were

not released until they were so utterly

obsolete as to be virtually worthless, manufacturers could not hope to find secondary markets. As the sole purchaser, the

government would have to amortize the

full cost of the item in question. On the

other hand, if the government released

an item from its secret status promptly

and permitted export sales, the manufacturer might be able to enlarge his volume

of production substantially. With lower

unit costs and larger margins of profit,

he would be in a position to bid lower

on subsequent government contracts.

This was especially true with regard to

aeronautical equipment, where the rate

of change in design was particularly

rapid.

The procedures governing the release

of aircraft and aircraft equipment were

minutely specified, but the principles involved can be stated simply: military aircraft purchased by the United States or

designed according to specifications of

the military services were not to be released for export until after the lapse of

time, running up to as much as one year

following the start of production.13 In

practice, this meant that no aircraft was

released until several years after it left

the design stage and had already long

since been compromised by public disclosure. Although the details of the policy changed from time to time in the between-war years, the principles involved

remained constant into 1939.

Curbs on the release of military aircraft until they were "approaching obsolescence"

 14

 virtually destroyed all hope

of large-scale export sales. The best potential customers are nations at war, and

no warring nation willingly buys inferior arms. Thus, since the military services in the United States were anxious to

build up the nation's capacity to produce

aircraft in an emergency, they were under pressure to liberalize their release

policy by authorizing the earliest possible

sale and export of aircraft initially designed for the United States.

13

 See, for example, Release Policy for Aircraft

and Aircraft Equipment, prepared by the Aeronautical Board (Washington, 1938). 14

 General Arnold used the phrase in describing

the existing release policy on the eve of the war.

July Conference Proceedings, p. 26.
198 BUYING AIRCRAFT

Since the release of military equipment

from security classification had a definite

influence on the volume of export sales

and hence on the development of productive capacity in the United States,

the prevailing definition of "military secrets" assumes no little significance. Some

items of equipment are clearly identifiable as military secrets. So long as the

mechanism of the Norden bombsight was

kept from the enemy, it gave the United

States a decided advantage. With other

items, airframes for example, the concept

of military secrecy is less obvious. New

principles are infrequent and advances

are more in the nature of variant applications, differences in engineering rather

than in fundamentals. While "gadgets"

may often constitute military secrets,

most airframes lose this status almost as

soon as they come out the factory door.15

On the other hand, by encouraging the

export of military aircraft (lacking obviously secret appliances) it was possible to

strengthen the nation's productive capacity without added expense to the taxpayers. Moreover, by controlling the supply

of spare parts the producing nation could

even minimize the tactical importance of

aircraft already sold. As one aircraft

manufacturer suggested, the ability to

supply means more than the available

supply.16 Thus, insistence upon a policy

that tended to delay the date for releasing military aircraft for export well beyond their first public appearance may

have been highly detrimental to the national interest since it undeniably cut

export sales at a time when aircraft manufacturers desperately needed them.17

For years air arm officers had followed

the easy course of classifying all recent

and current aircraft as military secrets.

Then, in 1939, they found themselves

caught in a most awkward position when

they began urging the utility of exporting current models. Congressmen quite

understandably asked, "Won't we be giving away military secrets?" In the lexicon of politics "military secrets" are

sacrosanct no matter how expedient the

justification for disclosure.

On two counts, then—faith in the efficacy of neutrality legislation and the safeguarding of military secrets, real or alleged—national policy frowned upon the

export of arms. Yet, despite these considerations and even while the official

administration line remained one of adherence to strict neutrality, the President

was whittling away at the letter of the

law wherever executive discretion allowed. When, for example, French military representatives asked during 1938

for permission to fly the Air Corps' P-36

with an eye to possible purchase, the

President readily gave his consent.18

Later in the same year he saw to it that

the Export-Import Bank arranged a

$25,000,000 military loan to China. The

standing policy against credits for military purchases was easily evaded on the

pretext that the loan would be spent on

"essential" supplies other than arms and

ammunition—a distinction that harked

15

 See comments of Gen Arnold before Senate,

Hearings on WD appropriation for 1941, May 2,

1940, p. 96. 16

 See comments of Brig Gen George H. Brett and

Glenn L. Martin, July Conference Proceedings, p. 26.

17

 See comments of Martin, pp. 19-26, and J. T.

Hartson, p. 21, as well as Jouett, p. 27, in July Conference Proceedings. 18

 Memo, Exec, OASW, for SGS, 21 Jun 38, SW

files.
FOREIGN POLICY, POLITICS, AND DEFENSE 199

back to the classic struggles of international jurists to define contraband.19

Although the President boldly seized

the initiative in undermining the spirit

of the neutrality statutes and in liberalizing the War Department's release policies whenever he felt he could safely do

so, Air Corps officers did not at once follow his lead. General Westover, Chief

of the Air Corps in July 1938, obeyed the

regulations to the letter even though doing so meant forbidding the undeniably

friendly Canadians so much as a peep at

the XFM-1 Bell fighter, which they had

asked to see, presumably with the President's encouragement.20

 Then abruptly

there occurred one of those turns of fate,

at once tragic and comic, that thrust the

whole question before the public.

In January 1939 a group of French

officers on a purchasing mission visited

the Douglas aircraft plant in California.

There, with Air Corps permission, one

of their number flew in a Douglas experimental bomber with a company pilot.

While demonstrating acrobatic maneuvers at low altitude the bomber crashed.

The French observer, Capt. Paul Chemidlin, survived the accident. As he was

rushed to a hospital, company officials,

well aware of the possible ramifications

in any disclosure of the mission's intentions, attempted to disguise the observer's

real identity by describing him to newsmen as a company mechanic named

Smithins.21 The truth was soon out, and

President Roosevelt found himself in the

very midst of a political tempest.

Isolationist Senator Bennett Champ

Clark of Missouri regarded the President's release to the French of a bomber

designed for the United States as downright "shocking." Senator Gerald Prentice Nye of North Dakota went even further. He felt that the permission granted

to the French was nothing less than a

"military alliance." In short order a

Senate Committee was baying down the

trail after detailed evidence on the President's role in the whole affair. Although

the Chief of Staff, General Craig, testified

that military men had granted permission

for the French flight only reluctantly and

under pressure from the White House, it

soon became apparent that no laws had

been violated.22 The release policies

guiding the President were, in the final

analysis, executive promulgations quite

within the power of the President to disregard if he so desired.

L'affaire Chemidlin may have been a

blessing after all. It brought the President's policy out into the open and revealed a stronger sentiment in favor of

his policies than he himself apparently

had expected. Press reaction to the incident, apart from rabidly isolationist

journals, was generally favorable.23 Aid

for the British and French against the

dictatorships was clearly regarded as a

most expedient form of national self-interest.

19

 Edward R. Stettinius, Jr., Lend-Lease: Weapon

for Victory (New York: The Macmillan Company,

1944), p. 16. 20

 Memo, CofAC for CofS, 27 Jul 38, SW files. 21

 K. P. Wolfe to Gen Arnold, 28 Jan 39, AFCF 161

French and Swedish Contracts. This file contains

several items dealing with the affair.

22

 New York Times, January 29, 1939, 1:8. Craig's

testimony was in executive session, thus in fairness it

should be stated that his testimony is reported only

as leaked by senators present. 23

 For specific comment to this effect, see Nation,

February 11, 1939, p. 168. See also New York Times

editorial, January 30, 1939, 12:1, and Arthur Krock's

column, January 31, 1939, 20:5.
200 BUYING AIRCRAFT

The net effect of the Chemidlin episode was to establish a precedent permitting a more liberal release of equipment

designed to Army and Navy specifications.

Where previous foreign orders had been

largely confined to training aircraft, export sales now included bombers and

fighters as well. In a matter of weeks

after the Douglas crash, the trickle of

orders from foreign purchasing missions

turned into a torrent. During February

1939 a British purchasing mission increased earlier orders to a total of 650

aircraft, committing something over

$25,000,000 for aircraft and facilities with

North American and Lockheed. Several

days later a French mission placed orders

totaling 615 aircraft with Douglas, Curtiss, Martin, and North American, involving more than $60,000,000. Corresponding orders for engines went to Pratt and

Whitney and to Wright Aeronautical.

In the months that followed French and

British orders increased, and other nations followed suit, pressing aircraft

builders for early deliveries. Canada,

Australia, Belgium, Norway, Sweden,

and Iraq, to mention but a few, all placed

contracts for varying numbers of military

aircraft. Moreover, during the year no

less than a million dollars' worth of aircraft went from the United States to the

USSR.24

The importance of the rising volume

of export orders to national defense would

be hard to overestimate. In some cases

orders began to arrive just in time to

save manufacturers from dismissing their

trained cadres of production workers for

want of business.25 Coming as they did

before Congress provided funds for the

5,500 Air Corps expansion program, the

big foreign orders helped make manufacturers in the United States think in

terms of large-scale production. When

export orders continued to pile up on

top of the volume of business created by

the 5,500 program, crowding facilities

and burdening the existing labor force,

the double load encouraged expansion

and forced manufacturers to train large

numbers of additional employees. The

need for meeting delivery deadlines while

absorbing unskilled production workers

led aircraft builders to undertake production tooling to an extent undreamed of

in the past.

Perhaps the greatest contribution of

the foreign orders lay in their psychological value to the aircraft industry. The

prospects of a sharply rising curve of export sales seem to have put manufacturers in a mood to take bigger risks, to sink

more capital in plant expansions and in

costly tooling for mass-production assembly operations. Had the export orders

contributed nothing more than the psychological preparation of the nation's

aircraft builders, they would have been

fully justified.

Only one cloud hovered on the export

horizon. By the terms of the 1937 neutrality legislation, arms could not be

shipped to nations officially declared belligerents on the outbreak of war. What

if Hitler turned one of the recurring in24

 For a good summary of the early French and

British orders, see Memo, Exec, OCAC, for SW,

16 Jun 39, AFCF 161. See there also, R&R Proc Sec

(Supply Div OCAC) to Gen Arnold, 4 Apr 39 and,

Memo, Maj D. G. Lingle for Gen Arnold, 2 Sep 39,

as well as New York Times, February 5, 37:4; February 15, 1:7; November 11, 3:8; December 2, 1939,

3:1. 25

 Wilson, Slipstream, pp. 218-19.
FOREIGN POLICY, POLITICS, AND DEFENSE 201

cidents into a casus belli and the foreign

purchasers became forbidden belligerents? Editorial writers warned that the

hundreds of aircraft on order might become undeliverable. Who, then, would

pay for them?

 26

 This ominous threat,

while not dissuading manufacturers from

accepting orders from abroad, did induce

them to drive hard bargains with foreign

purchasers.

The two major producers of engines

for military aircraft, Pratt and Whitney

and Wright Aeronautical, were reluctant

in 1939 to undertake vast additions to

plants that might become liabilities if the

neutrality legislation abruptly terminated

foreign purchases. They agreed to accept the staggeringly large engine orders

proffered by the French and British on

condition that the foreign purchasers

agree to underwrite the cost of necessary

plant expansion. Only the French agreed

to accept these terms. They had little

choice in the matter. Production in the

nationalized aircraft plants of France had

fallen disastrously far behind German

output. Virtually the only alternative

was to make up the deficit with purchases

in the United States. After the fall of

France the British took over all such commitments, and by the final accounting

the two nations had invested more than

$84,000,000 in the United States on engine plants alone.27

 Export orders clearly

played an important role in gearing the

manufacturers of military aircraft engines

for the task of war.

Despite the precautions taken by individual manufacturers to save themselves

from sudden loss of markets on the outbreak of war, the neutrality act did affect

aircraft production seriously. During

September and October 1939, while Congress debated whether or not to revoke

the neutrality statutes, aircraft deliveries

slumped. After reaching a production

peak of 238 military aircraft per month

during the summer, in September only

51 units left the assembly lines.28 Quite

apart from the merits of the case on diplomatic or legal grounds, the prosperity

stemming from big production contracts

offered convincing arguments for amending the neutrality statutes.29

 Early in

November 1939, Congress gave way and

relaxed its earlier prohibitions sufficiently

to permit the sale of arms to belligerents

on a cash-and-carry basis.

With the neutrality barriers out of the

way, war orders from abroad increased

rapidly. Where contracts for aircraft

previously had stipulated hundreds, they

now called for thousands. The experience of a single manufacturer serves to

illustrate the impact on the whole industry. Douglas Aircraft reported just

after Congress approved the cash-andcarry measure that there were 2,500 men

standing in line outside the company

office seeking employment. Already the

Douglas labor force totaled 11,000, and

26

 See, for example, S. Stubblefield, "Washington

Windsock," Aviation (October 1939), p. 53. 27

 Wilson, Slipstream, pp. 221-22; New York

Times, November 4, 1939, 1:2; Stettinius, LendLease, p. 22.

28

 Senate Hearings on WD appropriation for 1941,

May 2, 1940, pp. 90-91. The production figures

given here do not square with those in House Hearings on WD appropriation for 1941, March 7, 1940,

p. 479. 29

 The threat of U.S. aircraft builders to erect

plants in Canada outside the neutrality curbs may

have helped persuade Congress to revoke the neutrality measures. See Aviation (October 1939), p. 52,

and New York Times, September 12, 1939, 7:5.
202 BUYING AIRCRAFT

the firm had a backlog of $78,000,000 in

unfilled orders — half of which were for

export.30

In light of the fact that the Air

Corps appropriation for new aircraft in

fiscal year 1939 was only some $32,000,-

000, the tremendous significance of foreign orders as a stimulus to rearmament

becomes apparent. From a backlog of aircraft industry orders totaling $630,000,-

000, at the end of 1939, some $400,000,000

was attributable to foreign purchasers.31

So long as these orders served as a goad

to production, who could complain? But

such sales posed problems for the Air

Corps' own rearmament program.

The rising volume of aircraft exports

spelled success if by success one means

fulfillment of the policy pursued by

Congress—letting foreign orders build up

aircraft production capacity in the United

States at no expense to the nation's taxpayers. But success in this respect was

tinctured with many complications and

considerations quite apart from cost.

Early in 1940 War Department spokesmen trooped to the Hill to present their

presidentially approved estimates for fiscal year 1941. The formal estimate called

for no more than 496 aircraft, just enough

to meet the normal attrition rate and to

sustain the 5,500 program at its planned

strength. Although the number of aircraft asked for in this estimate was no

more than Congress had authorized in

1939 and no more than had been anticipated from the beginning of the expansion program, the appropriation hearings

gave ample evidence that the congressmen were more than willing to find ways

of reducing the cost of rearmament.32

The officers who defended the estimate

for the War Department were fully

aware of this situation and recognized

the necessity of contriving tactics to

meet it.33

Shortly before presenting their estimates, the War Department officials had

agreed, with some urging from the President, to permit manufacturers with government contracts for military aircraft to

defer deliveries to the Air Corps in favor

of export sales.34 A number of factors

lay behind this decision. To begin with,

the President had favored the release of

current models of military aircraft as a

matter of foreign policy, insuring survival of the French and British, which

in turn would, he hoped, keep the war

from the New World. But as soon as aircraft manufacturers were allowed to export current military models a new dilemma appeared. Which customer should

take priority in delivery?

Manufacturers were in a position to favor deliveries to foreign countries rather

than to the Air Corps. Since the foreign

30 purchasers were desperate, they were will- New York Times, November 3, 1:6, and November 9, 1939, 9:1-4. 31

 Congressional Record, November 1, 1939, page

1267, gives a table of expenditures for new aircraft

for 1920-40. See also Review of Methods Employed

by the AAF . . . , Logistics Planning Div, Plans,

ATSC, p. 94. The $400,000,000 in export orders involved more than 4,500 aircraft ordered from twelve

of the approximately twenty major manufacturers.

See Chief, Mat Div, to Aeronautical Board, 18 Jan

40, AFCF 452.1 Sales Abroad.

32

 House Hearings on WD appropriation for 1941,

February-March 1940, passim. 33

 See, for example, General Marshall's fear of an

economy wave, Hearings of Senate Military Affairs

Com on S Res 244, 76th Cong, 3d sess, March 28,

1940, p. 15. 34

 House Hearings on WD appropriation for 1941,

February-March 1940, passim.
FOREIGN POLICY, POLITICS, AND DEFENSE 203

ing to pay premium prices. With premium payments from foreign sales, manufacturers could afford to channel all

their output to the export market and

use a small part of the ample profit margin thus derived to pay the penalty for

delayed deliveries to the Air Corps as

specified in the government's liquidated

damage clauses. Air Corps officers came

to the realization that whether they liked

it or not they might find themselves in

competition with foreign purchasers.35

On the other hand, there were some

decided advantages to be gained from the

situation.36 With the coming of war the

pace of technical development and design

changes in the field of aviation accelerated sharply throughout Europe. Each

nation sought feverishly to turn out aircraft of superior performance. As a consequence the rate of change became so

rapid that in the United States aircraft

ordered by the government at the beginning of the expansion program threatened to be obsolete by the time they were

delivered months later. To insist upon

delivery on schedule of all aircraft due

the Air Corps might turn out to be a guarantee of acquiring obsolete equipment.

By deferring deliveries and allowing foreign purchasers to buy directly off the

end of the production line, the Air Corps

could take later delivery of improved

models.

By granting belligerent nations the

output of current production, the Air

Corps could secure realistic tests for its

equipment under actual combat conditions without the loss of a single man.

And, as experience revealed, the latest

Air Corps equipment proved deficient in

armor, armament, and a number of other

details such as self-sealing fuel tanks. By

taking delivery at a later date, the Air

Corps would not only secure improved

equipment but also lower prices since

sales abroad would tend to absorb some

of the cost of the modifications found

necessary.

Undoubtedly there was a very real

danger in buying obsolete equipment for

the air arm. And upon this ground War

Department spokesmen could present

valid arguments justifying the delayed

deliveries to the Air Corps.37 They apparently felt, however, that the argument

of obsolescence would be insufficient to

persuade the economy-minded congressman with an eye to the on-coming elections. To meet this difficulty the War

Department representatives offered further bait.

Foreign sales of military aircraft, the

Chief of Staff told Congress, built up the

productive capacity of the industry. The

original 5,500 program called for 3,300

active and 2,200 reserve aircraft. But the

ratio of reserve to active units—2,200 to

3,300—was premised upon the estimated

35

 Ibid., 42, pp. 476-78. 36

 For an extended survey of the pros and cons of

export sales, see Rpt of Meeting in OCS, 19 Mar 40,

AFCF 452.1 Sales Abroad. See also, Gen George C.

Marshall and Gen Arnold, Statement of Policy, for

President, 21 Mar 40, AC Project Rcds (Lyon

Papers), 59-108F, and testimony of SW Woodring

before Senate Military Affairs Com, Hearings on

S Res 244, March 18, 1940.

37

 General Marshall noted later that the War Department "could not afford to do anything else" but

defer deliveries to export channels, so serious was

the problem of obsolescence. Senate Hearings on

WD appropriation for 1941, May 1, 1940, p. 64.

General Arnold, when prodded by Senator Henry

Cabot Lodge, Jr., also admitted that obsolescence

had become a serious problem since the outbreak of

war in Europe. Ibid., pp. 73, 105.
204 BUYING AIRCRAFT

productive capacity of the industry when

the expansion program was first formulated. Export sales, by stimulating plant

expansion, increased productive capacity

and reduced the need for a large reserve.

On this basis, both General Marshall and

General Arnold offered to cut the original estimate of 496 new aircraft for fiscal

year 1941 to a total of 166 items.38 This

reduction, volunteered by the War Department, appealed to the congressmen;

it represented a possible saving of some

$27,000,000 in the budget.39 Unfortunately, in suggesting this economy, the

military leaders opened Pandora's box.

Why, reasoned the Appropriations

Committee, should they stop at 166 aircraft? If the entire 496 aircraft in the

estimate were to fill the reserve and if export sales obviated the need for a reserve,

why buy any of the 496 aircraft? Following this line of reasoning, the committee

reported out a bill providing only 57 new

aircraft for fiscal year 1941 and the House

promptly passed the measure.40 While

rushing to the Hill to beg the Senate to

restore this cut, the Chief of Staff may

have reflected somewhat ruefully on the

impropriety of letting the camel get his

nose under the tent.

Undoubtedly there was a good deal of

dismay, if not irritation, in the War Department when responsible officers there

saw how the congressmen had seized the

initiative, using the Department's own

arguments.41 This rather unexpected

reversal must have been disconcerting in

itself; worse yet, it did not mark the end

of the difficulty. The tactic of tying export sales to a reduced appropriation in

an effort to woo Congress with an economy package held other dangers.

No matter how justifiable the export

of current models of military aircraft

might be as foreign policy, such sales

posed serious problems to those responsible for national defense. Insofar as diversions of equipment to foreign countries delayed delivery to the Air Corps,

they threatened to delay the expansion

program. Ostensibly, the units deferred

were destined for a reserve status, but

any acceleration in the training program

would immediately create a need for

some of the reserves.42 True, by not deferring deliveries the Air Corps would

get obsolescent aircraft, but for training

purposes even obsolete aircraft would be

better than none at all. Furthermore,

export orders tended to drive up costs

since in their desperation the foreign purchasers were willing to negotiate contracts

with wider profit margins to ensure speed

in production. Manufacturers receiving

38

 Ibid., p. 21. See also, Senate Military Affairs

Com Hearings on S Res 244, March 28, 1940, p. 12. 39

 Hearings on S Res 244, March 28, 1940, p. 10. 40

 H.R. 9209, WD appropriation for 1941, 76th

Cong, 3d sess. See H Rpt 1912, April 3, 1940. See

also, remarks of Representative Snyder in Cong Rcd,

April 3, 1940, 3932ff.

41

 Both General Marshall and General Arnold described the 496 aircraft in the estimate as "replacements," items falling in the reserve portion of the

5,500 program, thus providing a handle for the committeemen to eliminate most of the aircraft as they

did. House Hearings on WD appropriation for 1941,

February 23, 1940, p. 21, and March 8, 1940, p. 519. 42

 Actually, as Generals Marshall and Arnold subsequently admitted, the reserve was not a reserve

after all. It did not provide any reserve in heavy

bombers, and some units were designated reserve

"only because at the time the appropriation was

made they were not yet out of the experimental stage

and air arm officers did not wish to buy 'paper' aircraft." Senate Hearings on WD appropriation for

1941, April 30, 1940, p. 38, and May 2, 1940, pp.

115-22.
FOREIGN POLICY, POLITICS, AND DEFENSE 205

these foreign contracts were then in a position to bid lavishly for the output of

vendors and suppliers, and this in turn

tended to drive prices higher for the Air

Corps.43

The President did not make the policy

of favoring exports easy to take. He continued to exert pressure in favor of foreign purchasers until the Air Corps found

itself hard put to carry out the successive

phases of the expansion program. By the

summer of 1940, about 70 percent of the

military engines delivered by the two

leading engine manufacturers went to

foreign purchasers.44 Worse yet, export

sales actually threatened to wreck the air

arms' all-important heavy bomber program.45

The discomfiture of Air Corps leaders was acute. They were caught in a

crossfire of executive will and military

necessity. The Chief of the Air Corps

repeatedly protested, within the Department, that an excessive release of aircraft

for export could cripple the air arm seriously, although in public he continued

to accept the President's leadership without qualification. When rumors of his

private protests reached the newspapers

he disavowed them—quite properly—as

inaccurate.46 Yet, ironically enough,

when some junior officers, reflecting his

own irritation, berated the President's

policy of favoring aid to the Allies over

rearming the Air Corps, General Arnold

slapped them down pointedly. Criticism

of the President's policy, he declared, was

a "flagrant breach of discipline."

 47

To use a phrase more nautical than

aeronautical, the Air Corps was caught

in a bight. The whole matter of exploiting the export trade in aircraft as an element of national defense clearly had not

been thought out to its hither limits before the crisis arrived. In a sense this

was a serious shortcoming in the vital

field of mobilization planning.

Aircraft Exports and

Mobilization Planning

During August 1939, on the eve of

World War II, General Arnold began to

have serious doubts concerning the value

of the existing Air Corps mobilization

plans. Only a few days before the German invasion of Poland he ordered a restudy of the whole problem—clearly in

anticipation of a sweeping revision.48

The organization for mobilization

planning that ultimately would have to

comply with General Arnold's request

was at best a blunt instrument.49 Moreover, just as the planners entered upon

the most difficult tasks of the limited

emergency, the already inadequate organization received a crippling blow.

43

 Testimony of Admiral J. H. Towers, House

Hearings on Navy Dept appropriation for 1941,

January 8, 1940, p. 488. 44 Mat Planning Sec, Mat Div, Chart: Proportion

of Accepted Deliveries of Aircraft Engines by Customer . . . , Jan-Aug 40, 26 Sep 40, AC Project Rcds

(Lyon Papers), 59-10 F. 45

 CofAC to ASW thru CofS, 14 Jun 40, and Memo,

CofAC for CofS, 17 Sep 40, AFCF 452.1 Sales Abroad. 46

 CofAC to Senator Sheppard, 4 Apr 40, AHO

Plans Div 145.93-263.

47

 CofAC to CGGHQAF, 1 Oct 40, AHO Plans Div

145.91-246. 48

 Unsigned Memo for Brig Gen B. K. Yount, 18

Aug 39, AFCF 381A War Plans; Notes, Div Chiefs'

Staff Meetings, 1939-40, AFCF 337 Special, as well

as Memo, Col Echols for Gen Arnold, 23 Aug 39,

AFCF 452.1 Aircraft, Gen. See also, 1st Ind CofAC

to ASW, Apr 39, on basic, Planning Br (OASW) to

CofAC, 27 Mar 39, WFCF 381 Mobilization. 49

 See above, ch. VII.
206 BUYING AIRCRAFT

Foreign orders and the outbreak of war

in Europe forced the Chief of the Air

Corps to give more attention to mobilization planning at the headquarters in

Washington. Congressional queries and

the need for detailed information on the

part of all the various agencies of the

War Department led to a decision to

transfer a part of the Industrial Planning

Section at Wright Field to Washington,

where it was to serve in a liaison capacity.

This transfer of officers in September 1939

reduced the already undermanned planning staff at Wright Field by one-third.

What is more, the cut came at the very

moment when the workload at Wright

Field began to increase enormously. To

make matters worse, the officers sent to

Washington were soon afterwards lured

off into other duties. The planning function lost ground on both fronts.50

The whole industrial planning operation began to fall behind the rapidly

changing pace of events. One rather

glaring example of this should suffice to

illustrate the tendency. Among other

duties, the mobilization planners were

responsible for working out the details

for lining up the aircraft industry to meet

the requirements of the Protective Mobilization Plan (PMP) of 1939.51

 Since

the Air Corps possessed no currently approved Tables of Organization and Basic

Allowance, all the detailed work on PMP

had either to wait or to be evolved from

obsolete data. Even if the necessary tables had been available, however, they

would not have solved all problems. The

air component of PMP was geared to the

authorization of 1936 totaling 2,320 aircraft. By mid-1939 this ceiling had been

raised to 6,000 and procurement of 5,500

units was under way. Air arm officers

suggested to the General Staff that further work on a PMP premised upon 2,320

aircraft was, to say the very least, "open

to question."

 52

The hint had very little effect. During May 1940, a General Staff query

blandly asked for further information on

PMP, including the desirability of additional observation balloons. General

Arnold pointed out that this sort of planning had no real value since, in terms of

PMP, the Air Corps was already beyond

the 2,320 limit—was in fact already mobilized.53

 But the mobilization planners

at Wright Field lagged far behind General Arnold in their conception of the

problem; they continued to plod along

with the details of PMP and its augmentations. As late as August 1940, after the

fall of France had entirely altered the situation, a furious officer was still trying to

shut off the "asinine" work of the mobilization planners at Wright Field who

lumbered along, several laps behind reality, working out PMP.54

In blunt truth, the industrial planners

at Wright Field went on shoeing dead

horses from September 1939 until well

50

 AAF Hist Study 10, p. 58. Unsigned Memo, 24

Apr 40, sub: Major Time Consuming Projects of

Industrial Planning Sec, and Memo, Maj A. W. Marriner, Asst Tech Exec for Chief, Mat Div, 4 May 40,

WFCF 381. 51

 For air arm aspects of PMP 1939, see AHO Plans

Div 145.93-249.

52

 Dir, Planning Br, OASW, to CofAC, 27 Mar 39,

and draft by Plans Div, OCAC, to TAG, 9 Jun 39,

AHO Plans Div 145.93-182. 53

 TAG to CofAC, 8 May 40, and 1st Ind, CofAC

to TAG, 6 Aug 40, AHO Plans 145.93-250. 54

 IOM, Maj B. E. Meyers to Tech Exec, Mat Div,

24 Aug 40, Air AC Project Rcds (Lyon Papers),

59-11.
FOREIGN POLICY, POLITICS, AND DEFENSE 207

into the summer of 1940. Their fundamental shortcoming, it appears, was a

failure in conception; they did not seem

to realize that the air arm's expansion

program of 1939 was really phase one of

the mobilization for war. Their thinking was far too rigid to fit actualities that

did not mesh perfectly with their preconceived notions of how war would come;

the M-day for which they were planning

had already passed.

Even more serious than the inability

of the Wright Field planners to anticipate a creeping M-day was their failure

to foresee the contingencies that might

arise from foreign orders for aircraft in

wartime. Here again they ignored the

experience of World War I with unfortunate consequence. When the President and the Congress decided to utilize

French and British orders for aircraft as

an integral aspect of the nation's defense,

the mobilization planners at Wright Field

had no clear path to follow. Perforce,

they had to grope and blunder in solving

the problems raised by the policy.

The contingencies stemming from the

precipitous rise in export orders for military aircraft took any number of forms.

For example, air arm contracts in force

when the crisis arrived contained no

provisions preventing foreign purchasers

from securing priority on deliveries by

paying the liquidated damage penalties

imposed by the Air Corps for delays.

Had air arm officers anticipated the situation their contracts might have been

better drawn.

Similarly, the record of the first few

months of war makes it quite clear that

Air Corps officers were taken off guard

by the extremely high rate of design

change in military aircraft. As Generals

Arnold and Marshall both admitted, the

release of military aircraft from the

United States to Europe was not only

desirable but essential if this nation was

to avoid being left with obsolete equipment. Realistic experience with military equipment (without loss of lives to

the Air Corps) was a useful and necessary quid pro quo for the release of recent production models to foreign users.

Clearly the relationship between the "release policy" or regulations as to military

secrets on the one hand and deferred delivery to foreign purchasers on the other

had not been thoroughly thought out

before the war came.

The whole point and purpose of peacetime planning is to avoid hasty improvisation in time of crisis. The mobilization

planning of the air arm was not only

faulty in conception but inadequate in

execution. The failure was not alone

that of the mobilization planners at

Wright Field who did the detail work.

It was a failure of higher command as

well. The congressional decision to accept export orders as a vital aspect of national defense required of the Air Corps

a whole series of corollary responses and

adjustments that only the upper echelons

of leadership could make. Since these

decisions were not made in advance, improvisation in the crisis was unavoidable.

The cost—in confusion and delay—is a

matter of record.

During the dreadful days of May and

June 1940 when so many illusions were

shattered, air arm officers woke up to the

realization that the policy of letting foreign orders mobilize the aircraft industry,

the policy they had been led to accept

and approve, was now turning out badly.

On 10 May the Germans invaded neutral
208 BUYING AIRCRAFT

Holland and Belgium. Twenty days

later British troops faced disaster at Dunkerque. On 10 June Mussolini declared

war on France. A week later the French

were begging an armistice. And in this

crisis the Air Corps was inadequately

armed. Once again air arm officers were

learning from painful experience, as an

earlier generation had learned in the

months leading up to April 1917, that

politics, foreign policy, and mobilization

planning cannot be separated.
CHAPTER X

Requirements

When President Roosevelt went before

Congress on 16 May 1940 with his dramatic appeal for arms, he asked among

other things for 50,000 airplanes. How

did he arrive at the number 50,000? One

version is that the President was disappointed at the lack of imagination displayed by military leaders when asked to

state their maximum needs, so he plucked

a number—25,000—from the air, possibly

with an eye to World War I experience.

But when he asked the British production chief, Lord Beaverbrook, for an

opinion, that worthy is alleged to have

replied, "Why be a piker; 100,000 makes

better headlines." So the President split

the difference and asked for 50,000 aircraft.1

On the other hand, in his memoirs,

Secretary of State Cordell Hull recalls a

conversation with the President during

May 1940, as the French Republic was

about to collapse, when the President

spoke of merely doubling the existing

military appropriation. Hull urged him

to go far beyond that and "aim for a production of 50,000 planes a year." The

President, Mr. Hull tells us, was speechless at the size of this figure, an eightfold

increase over existing programs.2

Conceding the accuracy of Mr. Hull's

memory, his account of the origin of the

50,000 figure is no more bizarre than the

Beaverbrook anecdote. Here, too, the

figure is a round number plucked from

the air, casually and quite unscientifically. How then, one may well ask again,

was the 50,000 figure actually derived?

Before seeking an explicit answer to this

question it may be useful to digress and

explore the general question of requirements as well as the several factors conditioning the computation of requirements.

An Essay on Requirements

The computation of requirements is a

central problem in any study of military

procurement. The procurement process

cannot begin until at least three essentials are determined: how much of what

and when—quantity, quality, and schedule. This applies not only to aircraft,

but to all related items as well, for maintenance tools, field servicing equipment,

and special facilities for ground crews are

just as vital as the aircraft themselves.

When there is no aqua system, no highspeed pump, and no tank truck for refueling, ground crews must resort to

bucket brigades. Under such circumstances refueling a heavy bomber takes

hours rather than minutes, and the aircraft on hand are "tactically available"

1

 Wilson, Slipstream, p. 233. 2

 Cordell Hull, The Memoirs of Cordell Hull, 2

vols. (New York: The Macmillan Company, 1948),

p. 766.
210 BUYING AIRCRAFT

fewer hours per day. Bitter experience in

the early months of World War II made

the truth of this only too evident; accessories proved to be every bit as important

as airframes and engines. An aircraft

without guns or without an oxygen system was hardly better than no aircraft at

all. When landing gear production—

wheel, strut, or tire—lagged, so did air

power. The discussion that follows is

cast largely in terms of airframes or engines in order to simplify the analysis,

not to minimize the importance of spares,

maintenance equipment, and accessories.

Within the framework of this arbitrary

limitation, it should be possible to review

the parameters—the several variable factors—that enter into the formulation of

requirements for the nation's air power;

and surely no single factor is more important to the computation of requirements for air power than a clear definition of the meaning of air power itself:

the doctrine or agreed-upon mission of

the air weapon.

Mission Unknown

Although it is patently impossible to

formulate an accurate statement of requirements without first defining the

mission of the weapons to be procured,

the fact remains that as late as 1939 the

doctrine or accepted mission of the

Army's air arm remained in uncertain

flux. In the early 1930's the Chief of

Air Corps flatly asserted that the air arm

had no officially defined wartime role.3

Such neglect of doctrine suited the era

when hopeful statesmen sought a formula

for world peace at Geneva. All their attempts failed but not from want of cooperation by the War Department. In

1933 the President and the Secretary of

War had even been willing to abolish

bombardment aviation as a contribution

to disarmament.4 Little wonder that air

power enthusiasts in the Air Corps mistrusted the War Department. The long

struggle of the air arm to win General

Staff approval of its heavy bomber doctrine of strategic air power is well known.

There is no need to retrace those steps

here save to observe that by 1938 a number of studies were made within Air

Corps circles spelling out the strategic

role of air power in considerable detail,

though the studies by no means represented official doctrine approved by the

General Staff.5 Thus down to the outbreak of war in 1939 there was no real

agreement between the Air Corps and

the General Staff on the mission of the

aerial weapon.6

When the Air Corps rearmament program began to take shape after the

crucial White House conference in November 1938, the lack of an approved

3

 Testimony of Gen Foulois, House Hearings on

WD appropriation for 1933, January 5, 1932, p. 1014.

4

 Secretary of War Annual Report, 1933, pp. 48-49. 5

 See, for example, AC Board Study 44, Air Corps

Mission Under the Monroe Doctrine, 17 Oct 38,

AHO files; and student com rpt, ACTS, A Study of

the Air Defense of the Western Hemisphere, 12 May

39, AHO Plans Div 145.93-141. 6

 TAG to CofAC, 23 Mar 39, AFCF 381.A War

Plans. For examples of conflicting views of General

Staff and Air Corps, see Memo, G-4 for Gen Marshall, 5 Apr 39, AGO Rcds, G-4 27277-19; Memo,

OASW for Gen Marshall, 2 Mar 39, AGO Rcds,

WPD-OPD 3807-32-40. Of particular interest is

the Air Corps effort to obtain more freedom in

defining military characteristics for aircraft to be

procured. See CofAC to TAG, 10 Jun 39, WFCF

452.1 Military Characteristics; AC Policy 181, 10

Jul 39, Digest of AC Policies, AF Doc Br.
REQUIREMENTS 211

statement of mission for the air arm led

to trouble. Congress, following the proposals of the administration, launched a

program calling for 5,500 aircraft, but

was this expansion actually geared to the

needs of the Air Corps? Procurement

had scarcely begun when the Secretary of

the General Staff suggested that the number of aircraft authorized by Congress had

been "arrived at hurriedly" and "without a sufficiently thorough estimate of the

situation. . . ."

 7

The outbreak of war in Europe served

only to emphasize the need for an improved foundation of doctrine in formulating aircraft requirements. The blitzkrieg in Poland must have led to some

sobering second thoughts about air

power, for by the end of October 1939,

a new harmony seemed to mark the relations of air and ground staff officers. "For

the first time," one air arm officer reported after a conference with representatives of the War Plans Division, "we

are approaching the problem of air requirements in a logical way. We are

analyzing the problem first in order to

determine the character of the tools

needed."

 8 In short, on the testimony of

participants on both sides of the issue,

their inability to reach decisions on doctrine had left the formulation of requirements unsettled until the crisis of war

itself. The War Department had been

forced to begin buying its weapons before deciding what weapons it wanted.9

The failure of officers within the War

Department to resolve their differing

views on air power was not the only way

in which doctrine affected the calculation

of requirements. Between the Army and

Navy the role of air power was subject

to still sharper dispute—and this too was

unresolved when war broke out.

The Army and the Navy

Agree To Disagree

Early in the nineteen thirties Chief of

Staff Douglas MacArthur told some congressmen that the Army-Navy dispute

over air power and coastal defense was

"completely and absolutely settled."

 10

He was, it would seem, a bit optimistic,

for not long afterward the Aeronautical

Board, the appropriate agency for resolving such joint conflicts between the Army

and Navy, reported that its members were

unable to reconcile their conflicting views

and arrive at a mutually acceptable statement on the proper mission of Army air

power.11

The dispute of the Army and Navy

over air power was by no means academic.

It was often expressed in seemingly trivial terms—for example, minor overlaps in

functions such as the operation of patrol

planes—but behind the façade of details

lay a fundamental struggle for power.

Navy spokesmen held that "sea operations" were "inherently a function of the

7

 Memo, SGS for WPD, 20 Oct 39, AGO Rcds,

WPD-OPD 3807-41. 8

 Memo, Capt H. S. Hansell for Col I. C. Eaker,

31 Oct 39, AFCF 337.1 Conference. The co-operative attitude expressed here appears to have been

developed while working out the details of the

Army's new strategic plan based on the joint RAINBOW 1 plan approved in August 1939.

9

 See complaints of ASW Johnson on this point,

Aerodigest (January 1939), p. 51. 10

 Testimony on H.R. 9920, May 25, 1932, quoted in

Craven and Cate, eds., Plans and Early Operations,

p. 62. 11

 Aeronautical Board Case 59, 27 Apr 34, AGO

Rcds, WPD-OPD 888-90-91.
212 BUYING AIRCRAFT

Navy . . . whether . . . carried out by surface ships, subsurface ships, or aircraft."

Army representatives with little confidence in the future of strategic bombers

might be willing to concede this much,

but how could they accept the Navy contention that "money spent on our Army

could, with more profit toward guarding

our continental coastline, be spent in

augmenting our naval strength. . . ."?

 12

With so much in the way of pay, promotion, the hope of command, and the whole

question of career tied up in the matter,

it was difficult for either Army or Navy

officers to take an utterly detached view.

Unable to reach any fundamental

agreement on doctrine, Army and Navy

officials resorted to an old formula: they

would agree to disagree. All controversial discussions of Army-Navy operations,

warned a General Staff officer, should be

studiously avoided.13 This was the essence of the "solution": solve the problem by virtually ignoring it. High-ranking officers contrived an accord only by

defining the respective missions of the

services in very general terms that

avoided exploring the areas of overlap

too closely,14 and once this "agreement"

was drawn, they fended off every effort

to reopen the question.15 Air power advocates within the Army who urged reconsideration in light of the rapidly increasing potential of long-range bombers

were repeatedly silenced with the argument that the precarious Army-Navy accord must not be upset. The admittedly

faulty definitions of respective missions,

"arrived at after years of acrimonious and

injurious controversy" had best be left

undisturbed.16

The consequences of the Army-Navy

failure to work out a solution as to their

respective overwater missions were obvious. With one whole potential area of

air arm activity left in uncertainty, it was

next to impossible to compute quantitative and qualitative requirements. Highly suggestive evidence of the gap separating Army and Navy thinking and hence

requirements is to be found in a dispatch

of the War Department's Hawaiian commander written soon after the outbreak

of war in Europe. He reported, in secret

and with evident surprise, that his recent

conversations with naval officers in the

islands revealed "an apparent acceptance

of the idea that the Navy might sometime

call upon the Army Air Corps in this area

for assistance." If the Air Corps hoped

to co-operate effectively, the Army commander pointed out, no time should be

lost in establishing flight strips on the

islands within bomber range of Hawaii.

Thus, when Hitler was rolling through

Poland, the Army was just beginning to

12

 Rear Adm J. K. Taussig to Clark Howell, 6 Dec

34, AGO Rcds, WPD-OPD 888-92. 13

 Memo, G-1 for WPD, 9 Apr 35, AGO Rcds,

WPD-OPD 3774-13. 14

 WPD draft, Employment of Army Aviation in

Coast Defense, 16 Aug 34, AGO Rcds, WPD-OPD

3774-13. Something of the precarious character of

the accord is suggested by the following buckslip

from Kilbourne to Drum covering the draft ". . . we'll

never silence the junior officers without some very

drastic discipline." See also Memo, WPD for CofS,

13 Jan 40, which mentions the Army-Navy joint

action accord, saying this "admittedly does not meet

the main issue." WPD 888-103.

15

 See, for example, Memo, DCofS for WPD, 13

Oct 37, and related papers, AGO Rcds WPD-OPD

888-100-102; Memo, WPD for CofS, 22 Dec 38, in

WPD 888-03. 16

 Memo, WPD for CofS, 22 Dec 38, AGO Rcds,

WPD-OPD 888-103. See also, Memo, Chief, Plans,

OCAC, for CofAC, 5 Mar 38, AFCF 321.94 Organization; Arnold, Global Mission, pp. 176-77.
REQUIREMENTS 213

think in terms of such far-flung bases as

Christmas Island, Midway, and the like,17

which had to be considered in any plan

of aerial defense for the Hawaiian Islands.

On two counts then—uncertainty as to

its role within the Army and uncertainty

vis a vis the Navy—the air arm faced imponderables when attempting to tally its

needs. Unfortunately, these were not the

only variables involved. There were also

political factors that had to be taken into

account.

The Political Factor in

Requirements

On the first of July 1939 President

Roosevelt issued a military order. In his

capacity as Commander in Chief, he

placed the Joint Army and Navy Board,

the Aeronautical Board, the Joint Economy Board, and the Munitions Board directly under his leadership in the Executive Office.18

 The shift involved some

adroit political maneuvering that need

not concern us here, but it is of significance insofar as it clearly indicated the

President's intention to rule the military

arm as well as reign.

Since the services would naturally follow the President's lead, military officials

accepted an obligation to back up his

leadership with adequate steps in support. The evolution of the nation's foreign policy offers a case in point. Here

the President was a leader; he inched

along cautiously, making one change at

a time, seeking always to be sure the public substantially supported him. Thus,

over the months and years before the war,

the nation's foreign policy was modified

decidedly, albeit gradually, and as a consequence the nation's military obligations altered too. Each new Presidential

promulgation and pronunciamento in the

field of foreign relations brought with it

a corresponding need for at least a review

and in some cases a revision of national

military strength.

During 1937 planning officers in the

War Department regarded the Army's

mission as the defense of the United

States and its territories. Then, early in

1938, President Roosevelt warned Congress that increases in armament were

necessary to keep "any potential enemy

many hundred miles" from the coasts.19

Clearly the concept of continental defense

was expanding. Six months later, speaking at Kingston, Ontario, the President

assured his listeners that the United

States would not stand idle if Canada

were threatened. Here, by implication

at least, was a further extension of military obligation. In November 1938, at

the time of the White House conference

at which the initial target of 10,000 aircraft was suggested, the President directed his military chiefs to prepare plans

to meet any attack on the Western Hemisphere, from pole to pole. When Congress convened soon thereafter in January

1939, he announced this pattern of hemisphere defense publicly.20

Each step in the evolution of foreign

policy implied a response in military

terms—a revision of strategic thinking,

17

 Maj Gen C. D. Herron to TAG, 5 Oct 39, and 2d

Ind, OCAC to TAG, AFCF 381 War Plans. 18

 Military Order 129, by FDR, July 1, 1939, Federal Register, vol. IV (July 7, 1939), p. 2786.

19

 Cong Rcd, January 28, 1938, p. 1216. 20

 Stetson Conn and Byron Fairchild, The Framework of Hemisphere Defense, UNITED STATES

ARMY IN WORLD WAR II (Washington, 1960),

ch. I. See also Cong Rcd, January 4, 1939, p. 74.
214 BUYING AIRCRAFT

new areas to defend, new bases to plan

or prepare, a revision in the capabilities

and number of the weapons required.

A few words from the President and the

existing heavy bomber might no longer

be adequate. New specifications, new

statements of military characteristics, and

so on would then have to be devised to

suit the new situation.21

The influence of Executive discretion

on military requirements was by no means

limited to the extension or contraction

of defense spheres. The President's leadership in extending aid in the form of

aircraft to friendly powers was another

aspect of his ability to shape military requirements. Each time the President or

his agents agreed to deliver military aircraft to British, Soviet, Chinese, or other

forces, the sum of military requirements

in the United States varied accordingly.22

War Department staff officers who tried

to compute aircraft requirements thus

faced a dismaying number of variables.

Their plight was not unlike that confronting the manager of a ball team who

discovers, when he sets about his business, that his team cannot decide which

players will play what positions. For that

matter, the team is not sure of the rules

of play, and the dimensions of the playing field are subject to continual change.

Finally, there is some question whether

the home team will receive the available

equipment or whether it will be distributed elsewhere.

Unfortunately for the staff officers concerned, the inherent complexity of their

task did not absolve them from responsibility. Difficult, even impossible though

the job may have been, they had to try

to compute the needs of the service.

Moreover, there were still other conditioning factors that had to be taken into

account, although happily not all of these

were as erratic as those already mentioned. Some factors, such as the matter

of spare parts and the problem of attrition, lent themselves, in theory at least,

to almost finite calculation.

Computing Requirements

for Spare Parts

Perhaps the first requisite to understanding the computation of spares required is an appreciation of the size and

importance of the job. Experience during World War II showed, for example,

that a single bombardment group flying

approximately 31 Boeing B-17's on 15

sorties per month burned up in that period some 19,000 spark plugs—about

three tons of them.23 Surely no one

would dispute the magnitude or the importance of the whole problem of spares.

German Air Force leaders minimized the

significance of spare parts before World

War II only to discover, when facing the

supposedly inferior Soviet Air Force, that

they had committed a critical mistake

that helped bring on disaster.24 Common

sense alone would suggest that it is false

21 economy to ground a $ 100,000 aircraft Memo, Lt Col G. S. Warren, Fiscal Officer,

OCAC, for Col Loughry, 27 Jul 39, AFCF 030 President and Cong. See also, Aide-mémoires for Use in

. . . Army Air Corps Program, 6 May 39, AGO

Rcds, WPD-OPD 3807-30-31. 22

 See AFCF 381.3A Lend-Lease Aid, passim;

WFCF 032 Lend-Lease, passim.

23

 Data from WFHO. 24

 Rpt to SN, Unification of the War and Navy

Departments and Postwar Organization for National Security (Eberstadt Rpt), October 22, 1945,

print of Senate Com on Naval Affairs, p. 231.
REQUIREMENTS 215

for want of an $8,000 engine or a $1.00

spark plug.25

The term spares involves several different categories. There are spare engines purchased along with new aircraft,

since engines wear out faster than airframes and require more frequent overhaul. But engines, both spares and those

in use, require stocks of spare parts, individual components, especially items

subject to heavy wear and breakage such

as piston rings and spark plugs. Although

spare airframes are designated as reserves

or depot reserves rather than spares, there

is a category of airframe spares—parts such

as wing tips, wheel assemblies, control

surfaces, and so forth, all subject to replacement. Spares, then, unless defined,

might embrace any one of several different groups of items. But whether taken

individually or collectively, spares posed

a great many difficult problems for the

staff officers responsible for computing

the number required.

Throughout the years of peacetime

planning, officers accumulated "experience factors" on spares, yet to the very eve

of World War II the debate over the

question of replacement parts remained

unsettled. It was difficult to obtain agreement on exactly what percentage of

spares should accompany the procurement of new equipment,26

 and even

where there was agreement, funds were

not always available to procure the spares

desired.27

Consider, for example, the case of spare

engines. In the fiscal year 1936 Congress

provided funds for 100 percent spare engines but authorized only 50 percent in

the following fiscal year. In 1938 the

Air Corps begged for more than 100 percent spare engines; the Bureau of the

Budget favored 75 percent, while Congress allowed 50 percent. Then abruptly

in 1939 the vast new air rearmament program brought novel factors into play.28

If policy on spare engines fluctuated

widely in the three years before the rearmament program began, the introduction of other variables during the period

of rapid expansion did little to simplify

matters. Under normal peacetime conditions, newly procured aircraft were delivered over a period of many months

and sometimes over one or two years,

since manufacturers assembled units a

few at a time on a job-shop basis. As a

result, few engines reached the point

where they required overhaul (after two

or three hundred hours of operation) at

any given time. The introduction of

mass production in the hurried rearmament of 1939-41 changed all this. With

large numbers of aircraft being delivered

at approximately the same time, great

numbers of engines reached the overhaul

stage almost simultaneously. Because of

this, even 100 percent spare engines

proved inadequate since the overhaul

load arrived at the repair depots all at

once. With engine overhaul consuming

anywhere from 150 to 200 man-hours

per engine—nearly a month of working

days—the only alternatives were to pro- 25

 Draft Memo, Plans, OCAC, for ASW, 3 Sep 37,

AHO Plans Div 145.93-269. 26

 For a classic statement on the problem of spares

centering around the feasibility of procuring 9,000-

pound B-17 wing butts as spares, see Col F. M. Kennedy to Gen Brett, 13 May 40, AFCF 452.1-H Parts. 27

 See above, ch. IV.

28

 CofAC to TAG, 12 Mar 37, AFCF 112.4-A, and

ASW to Senator Copeland, 31 Mar 38, reprinted in

Senate Hearings on WD appropriation for 1939,

April 1, 1938, pp. 1-5.
216 BUYING AIRCRAFT

cure more spare engines or to improve

the facilities of the repair depots to provide for engine overhaul on a large-scale

or mass-production basis.29

Engine overhaul on a mass-production

or assembly-line basis became possible for

the first time during the expansion program and promised savings in both time

and money. However, only extended experience could show how much these

savings would be. Meanwhile, to be absolutely certain that the air arm would

be capable of sustained action after

M-day, Air Corps staff officers had to

compute requirements for engines in

terms of the peak load anticipated even

if doing so subsequently meant having

a number of usable engines left over

long after the aircraft for which they

were procured had been written off.30

There were other complications stemming from the expansion program that

tended to vex the computation of the

spares required. Many new air bases,

located at ever more distant points, forced

Air Corps planners to give increasing attention to the question of distribution.

As the pipeline grew bigger and longer

it swallowed spares in what must have

seemed to be a geometric progression.

Even in peacetime the nation's fifty-odd

air bases had to stock parts for a dismaying array of engines. Just before the war

there were about a hundred different

engine models in use.31 The rearmament

program multiplied the number many

times.

Staff planners in peacetime were fully

aware of the "distribution" or "pipeline"

factor in computing requirements, but

throughout the decade of the thirties they

expressed it entirely in terms of time

rather than quantity. They visualized

the pipeline factor as a delay in delivery

rather than as an absolute increase in

quantity. In their calculations they

thereupon proposed to absorb this delay

by moving up the dispatch of spares 15,

30, 60, or 90 days to ensure delivery at

the point desired at the time desired.32

Unfortunately, as the expansion program

got under way experience was to prove

that there were other factors involved.

Newly created air bases in the field, and

even old, long-established stations when

rapidly expanded, tended to lose control,

at least temporarily, over spares. Unmarked boxes of spares without identifying shipping tickets were to all practical purposes unavailable even if physically present, and operating units made

duplicate requisitions, thus absorbing

more spares than peacetime experience

factors might justify statistically.33

Clearly, then, the problem of computing requirements in spares was inherently

complex though by no means impossible

when undertaken by imaginative staff

officers capable of using statistical tools

or experience factors once they had

29

 Maj Meyers to CofAC, 20 Feb 39, AFCF 452.1

Proc of Aircraft; Memo, CofAC for ASW, 10 Sep 37,

AHO Plans Div 145.93-269. 30

 For a tragic example of the disasters stemming

from the want of a minor part, see account by R. L.

Watson in Craven and Cate, eds., Plans and Early

Operations, p. 227. 31

 Memo, CofAC for ASW, 10 Sep 37, AHO Plans

Div 145.93-269.

32

 See Industrial Planning Sec, WF, Computation

of AC Requirements Based on Gen Mobilization

Plan, 1933, AHO Plans Div 145.93-189, and draft

(by Plans Div) CofAC to TAG, 18 Apr 39, AHO

Plans Div 145.91-391. 33

 See, for example, R&R, CofAS, to OCAC, 7 Oct

41, AFCF 452.1-H Parts, and Memo, ACofAS, A-4,

for Dir, Military Requirements, 20 Jul 42, AFCF

360.01-C.
REQUIREMENTS 217

been accumulated. While not impossible,

however, the task, which proved difficult

enough during peacetime, was to become

enormously more involved in war.34

Here the problem has been arbitrarily

confined to spares—spare engines, spare

parts for engines, and the like. When

the problem is projected to embrace such

replacement items as fuels, lubricants,

and ammunition, the intricate ramifications to requirements calculations become evident. Unfortunately for the

planner, estimating requirements, the calculation of spares and distribution factors, brings no end to his labors. Yet to

be considered is the attrition or wastage

factor of actual operations.

The Attrition Factor in

Requirements

Attrition or wastage by definition includes all losses of operating aircraft,

those destroyed in accidents as well as

those lost to enemy action. Since operational losses bear a direct relationship to

the number of missions, strikes or sorties

made, it becomes a matter of considerable moment in computing replacement

needs to know the number of sorties per

month a given type of aircraft is expected

to make. This in turn depends upon

the concept of the mission or doctrine

officially established for the air arm in

general and each type of aircraft in particular. Because the official doctrine of

air power was, at best, in a state of flux

during the years leading up to the war,

it was difficult if not impossible to determine probable replacement requirements

with any degree of precision.

Staff officers at various echelons in the

War Department gave a good deal of

thought to the question of wartime attrition in the years before World War II.

The Air Corps Board set the loss rate at

1 percent per day, or 30 percent per

month, in 1938, but officers in G-4 considered this too low, citing British sources

favoring 50 percent per month as probably more realistic.35

The derivation of an accurate attrition

formula was vital. If set too low, replacements would not be available when

needed in combat. If set too high, it

would impose a needless strain upon the

national economy and upset the delicate

balance of resources and facilities involved in the nation's industrial mobilization.

Vital as the attrition formula was, staff

officers seeking to derive it were groping

largely in the dark. They had very little

definite information to confirm or deny

the attrition figure suggested by the Air

Corps Board. Not until the very eve of

the rearmament program did the War

Plans Division belatedly ask G-2 for

hasty reports on the attrition experience

of the forces fighting in China and in

Spain.36 This information, although far

from ideal, was better than none at all;

however, the Chief of Staff himself

warned against accepting any formula

based upon it. Shortly after the outbreak of war in Europe in 1939 he suggested that it would be advisable to wait

until events there provided a broader

basis for computing attrition rates.37

34

 See below, ch. XX.

35

 Plans Div, OCAC to AC Board, 30 Mar 38, AHO

Plans Div 145.91-528. 36

 WPD to G-2, 31 Oct 38, AGO Rcds, WPD-OPD

3807-27. 37

 Memo, CofS for ASW, 17 Nov 39, AFCF AC

Project Rcds (Lyon Papers), bk. 22.
218 BUYING AIRCRAFT

This is what the staff had to do. The

inevitable penalty was paid in months of

delay.

British operational experience, helpful

as it was, proved to be no panacea for determining attrition rates. Objective observations at firsthand were hard to secure. The British were co-operative, but

different observers sent conflicting information to the United States. Moreover,

actual wartime operations uncovered a

number of hitherto neglected variables

and upset some preconceived notions.

For example, while Air Corps planners

believed crew exhaustion rather than

the availability of equipment would

be the limiting factor in deciding the

number of missions per month, British

experience suggested that matériel rather

than physical limitations was the critical

factor.38 Weather, too, played a far more

limiting role than prewar studies had anticipated. Experience in the RAF showed

that there was a decided difference in

the mission rate—and hence in the attrition rate—between winter and summer,

a difference that could have profound

consequences upon the over-all replacement rate.39

The attrition formula officially promulgated early in 1941, after an extended

study of British experience, was substantially different from the official estimate

of 1938. The revised formula anticipated a wastage of 20 percent per month

as a combined average for all types of aircraft in a theater of operations. In the

zone of interior and in the possessions

not active as theaters, the rate was set at

3 percent per month.40

Seen in perspective, it is difficult to believe that this or any other formula for

attrition could be much more than very

rough yardsticks. Utterly different conditions in many different theaters ranging from the arctic to the tropics against

two entirely different enemies produced

wastage figures that fluctuated so erratically as to defy most generalizations

drawn upon them. Yet elusive as they

undoubtedly were, such factors as attrition, distribution, and spares were at

least tangible. A far more subtle factor

in the computation of requirements was

the tendency of staff officers to carry habits of thinking and the long-established

administrative practices of peacetime

over into the period of crisis. As George

Orwell might have put it: staff officers

on the eve of war were inhibited by

peacethink.

Peacetime Thinking and

Wartime Requirements

Peacetime thinking was budgetary

thinking; this was not a peculiar form of

military narrowness but an acute awareness for the facts of life—the political and

statutory realities. The inevitable result

of this phenomenon was that peacetime

38

 AC Board Study No. 6A, 28 Mar 38, revised to

3 May 41, AHO. See also, Dir, AC Board, to CofAC,

27 Jan 41, and R&R, Chief, Intelligence Div, OCAC,

to Plans, 15 Feb 41, AFCF 452.1 Aircraft Gen. 39

 Unsigned Memo for Gen Brett, 12 Feb 41, with

Incls (see especially 2, 3, and 4), AFCF 452.1 Aircraft

Gen.

40

 TAG to CofAC, 21 Jan 41, AFCF 452.1 Aircraft

Gen. This formula was not again revised until long

after Pearl Harbor. See Dir, Military Requirements,

to CGSOS, 30 Apr 42, AFCF 400.12 Proc. For shrewd

estimates of attrition by a civilian observer, see T. P.

Wright, "Winged Victory . . . ," Aviation 

1940), and "The Truth About Our National Defense

Program," Aviation (January 1941).
REQUIREMENTS 219

thinking tended to continue until the

actual outbreak of war even though the

real crisis developed many months before the shooting began. As a consequence, budgetary thinking continued

even when the time was ripe for a shift

to a "needs basis" from a "cost basis."

 41

The tendency to think in budgetary

terms even as war approached had its consequent influence upon the computation

of requirements. Take, for example, the

matter of planning replacements. The

normal peacetime practice in providing

replacements for aircraft on hand was to

write them off as obsolete after a predetermined number of years. This obsoletion policy obviously constituted a

bookkeeping device. It provided an orderly and systematic means for estimating

fiscal requirements for the years ahead

while at the same time ensuring automatic disposition of aircraft after several

years of service.

Unfortunately, automatic obsoletion at

the end of five or six years, though good

bookkeeping, had little or no bearing

upon aircraft performance and no relationship whatever to enemy capabilities.

Some Air Corps officers were fully aware

of this difference between peacetime fiscal obsoletion and wartime performance

obsoletion. Wartime obsoletion, they

saw, would be determined by the enemy.42

Superior output by the enemy could, and

in the event did, make some of this nation's aircraft obsolete even before they

rolled off the production line.43 Nevertheless, the habit of thinking in peacetime and fiscal terms tended to persist.

Long after the start of the expansion

program, the imagination of those computing requirements continued to be colored by the question: "What can we afford?" rather than the question: "What

do we need"?

 44

 And what better evidence of persistence in peacetime thinking could there be than the report from

Wright Field that an effort was under

way to rid all combat aircraft of such

peacetime accretions as built-in drinking

water containers and baggage compartments! This, be it noted, did not occur

until the summer of 1940, after the fall

of France and more than a year beyond

the start of the rearmament program.45

The computation of requirements, it

would appear, required far more than

mere addition.

Requirements Computation:

A Summary

The computation of requirements

posed a seemingly insurmountable task.

Each variable was only a beginning; each

in turn suggested countless ramifications,

permutations, and multiple variations.

One conclusion is inescapable: the formulation of requirements was a search

in which absolute answers were unobtainable. This, however, was no solution.

Military necessity compels staff officers to

41

 Sherwood, Roosevelt and Hopkins, pp. 280-81;

Troyer Anderson, MS study of OASW-OUSW in

World War II, 1948, OCMH, ch. VI, pp. 124-28. 42

 Chief, Mat Div, to CofAC, 6 Mar 39, AC Project

Rcds (Lyon Papers), bk. 2; CofAC to TAG, 14 Apr

39, AFCF 452.1-A Proc of Aircraft.

43

 Memo, CGAAF for Lovett, 23 Feb 43, AFCF

452.01-A Production. 44

 For an excellent illustration of the need for

breaking away from budgetary inhibitions in computing requirements, see Sherwood, Roosevelt and

Hopkins, pp. 162-63. 45

 R&R, Chief, Mat Div, to Arnold, 16 Jul 40,

AFCF 452.1-H Parts.
220 BUYING AIRCRAFT

come up with answers of some sort. If

the only possible answers had to be approximations, then it would seem beyond

argument that the approximations should

have been as accurate and as comprehensive as intensive study of available data

would permit. Nevertheless, in the opinion of responsible staff officers in the War

Plans Division of the General Staff, down

almost to the very eve of war in Europe,

no really comprehensive study of air

power needs had ever been drawn up by

the Army. Actually, the turning point

came in March 1939 when the lack of a

carefully defined statement of mission for

Army aviation finally led the Chief of

Staff to appoint a special Air Board to

make a thorough investigation of the

subject. The board's report proved to

be an epochal document. On 1 September 1939, the very day war broke out, the

Chief of Staff, General George C. Marshall, informed the Secretary of War that

the Air Board report established for the

first time a specific mission for the Air

Corps. Two weeks later the approved

report was circulated through the Army

as official policy and for months thereafter the War Plans Division computed

aircraft requirements on the basis of the

board's findings.46

The appearance of the Air Board report did indeed mark a turning point,

for until its publication no computation

of aircraft requirements had been based

upon a sound, thoroughgoing analysis of

all the factors involved. The available

record suggests that the few requirement

studies undertaken earlier at various staff

levels within the air arm were neither

comprehensive nor informed. More often

than not they tackled only a portion of

the total problem. While ignoring some

factors entirely, they accepted others without sufficiently questioning the assumptions and premises upon which they

rested.47

Though responsible military officials

fell short in the matter of calculating requirements until the war was nearly upon

them, there were a number of contributing causes behind their failures. Not

least among these were the inherent complexity of the problem and the prevailing organizational or administrative structure that let the task of computation fall

between two organizations, the General

Staff and the Air Corps.48 But the major

46

 Watson, Chief of Staff: Prewar Plans and Preparations, pp. 100-101; WPD for CofS, 21 Dec 39,

AGO Rcds, WPD-OPD 3807-41.

47

 For an example of the piecemeal approach, see

Chief, Plans, OCAC, to CofAC, AFCF 381-B War

Plans. See also, Ray S. Cline, Washington Command

Post: The Operations Division, UNITED STATES

ARMY IN WORLD WAR II (Washington, 1951),

pp. 34-37. The best evidence in support of this

generalization is to be found by comparing the prewar concept of "requirements" with postwar thinking. See, for example, the treatment contained in

Special Text No. 97 on mobilization, issued by the

Army Industrial College before World War II, in

contrast with postwar studies such as Industrial College of the Armed Forces study L 48-29, Problems

Inherent in the Determination of Requirements.

For background of requirements problems in World

War I, see Holley, Ideas and Weapons. For WPD

condemnation of earlier studies, see Memo, WPD

for CofS, 21 Dec 39, AGO Rcds, WPD-OPD 3807-41. 48

 For a revealing example of this conflict in responsibility, see unsigned staff study, OCAC, entitled

Discussion of the Memo to Chief of Staff, subject:

Air Force Requirements . . . , 30 May 41, in 

General Staff officers are alleged to have left out

"certain vital considerations." AFCF 321.9-E. The

adverse effect of organizational inadequacy upon

requirements computation was nowhere more obvious than in the sphere of intelligence. See Arnold,

Global Mission, pp. 533-35; Memo, CofAC for G-2,

20 Feb 37, AFCF 360.02A Foreign Aviation. See

also, AAF Hist Study 10, p. 92.
REQUIREMENTS 221

difficulty lay elsewhere: the whole question of requirements was never adequately studied by air arm officers as it

should have been, broadly and philosophically, until after the publication of

the Air Board study in the spring of 1939.

Before then, all too often when staff officers worried about requirements, it was

in connection with some particular and

pressing problem for which an answer

was required yesterday, if not sooner.49

There were no wide-ranging studies made

of requirements in the abstract. There

were no staff manuals to which harried

officers could turn and find suggestive

discussions of the elements to be considered.50

 Instead, lessons on the art of formulating requirements had to be found

amongst the obiter dicta of previous

studies, themselves wrought in haste and

under pressure. Under such circumstances one should hardly be surprised if

even the ablest of staff officers failed to

make adequately comprehensive studies

of requirements. The first major staff

paper on aviation requirements to appear after the outbreak of war in Europe

gives evidence of solid accomplishment

in the face of obstacles. Without a doubt

it marked a decided advance over any

previous study of the topic.

Within the context of the foregoing

digression, it may prove useful to return

to the original topic of this chapter and

consider something of the background of

the President's call for 50,000 airplanes

and the military role in shaping that

figure.

Origin of the 50,000 Figure

Looking back after the event, Air

Corps officials felt free to report that they

had determined the Army's requirements

for aircraft "efficiently and effectively," at

the outbreak of war in September 1939.51

Perhaps they had, considering the many

imponderables involved, but easy complacency and self-serving compliments

hardly seem warranted by the facts. War

Department spokesmen believed that the

officially promulgated statement of requirements was, when war came in Europe, inadequate. To begin with, as a

G-4 officer observed, despite the President's earlier directives both in public

and in private, the Army's aircraft requirements as stated in September were

still premised upon the funds appropriated by Congress rather than a sound

study of the needs of national defense.52

Moreover, beyond this faulty premise,

even the mechanics of computation were

in error. The officially approved statement of aircraft requirements that had

been drawn up by the General Staff to

accompany the Protective Mobilization

Plan was not in accord with the existing

realities. Although the plan assumed

that 9,745 aircraft would be on hand at

the beginning of this phase of the mobilization, Congress had authorized only

6,000 and had actually provided appropriations for less than 5,500.53

 Clearly

the PMP figures bore no relation to the

facts. Far from being content with previous computations, planning officers on 49

 For a characteristic instance of the do-it-yesterday type of directive, see Memo, CofAC for WPD,

1 Nov 38, AFCF 381.A War Plans. 50

 Watson, Chief of Staff: Prewar Plans and Preparations, pp. 100-101; Memo, WPD for CofS, 21 Dec

39, AGO Rcds, WPD-OPD 3807-41.

51

 Memo, ACofAC for Gen Marshall, 19 Dec 40,

AFCF 452.18 Proc of Aircraft. 52

 Memo, G-4 for CofS, 7 Sep 39, AFCF 452.1 Airplanes, Gen. 53

 Memo, G-4 for WPD, 2 Sep 39, AGO Rcds, G-4

27277-19.
222 BUYING AIRCRAFT

the General Staff undertook a new survey of aircraft needs soon after the invasion of Poland in September 1939.

Hemisphere Defense Reconsidered

No one recognized the deficiencies of

previous requirements computations

more than the officers who studied the

question anew. The flaws of all previous

staff studies on the subject were only too

evident. Not one of the studies, the planners reported in December 1939, had

been based upon an adequate appraisal

of the need for hemisphere defense.

Worse yet, most of the previous studies

seemed to have been "aimed at justification of a predetermined number of planes

rather than at a reasoned derivation of

the number required." Here again was

an old and only too familiar practice:

earlier planners had cut the pattern to

suit the cloth on hand.54

The horrors of the German blitzkrieg

in Poland seem to have induced a higher

caliber of staff work and a more careful

weighing of existing assumptions.55 The

result was a staff paper undoubtedly superior to any that had preceded it. In

the new paper the General Staff planners

conscientiously sought to encompass the

many variables involved. They considered a wide range of factors such as probable or possible theaters of action, composition of the forces required, attrition

rates, and so on. Each variable they subjected to a searching analysis in terms of

the evidence available. If the evidence

was inadequate, as it indubitably was in

a number of respects, they nonetheless

pressed their study as far as they could.

In estimating the number of missions

per month, for example, they had few

experience factors on which to rely. British bomber operations in World War I

offered a precedent rather too remote to

be meaningful; alternatively, they could

lean on the recent report from the Air

Corps Board, which explored the question with imagination and ingenuity.

Using the Department of Commerce safe

limit of 100 hours per month for airline

pilots as a maximum for endurance, the

board had applied the maximum cruising radius and known speed of the several aircraft types on hand to arrive at

an estimate of the probable mission rate

per month.56

The results achieved were still only

estimates, but they were informed estimates—in contrast to the guesswork that

had characterized so many of the previous

staff studies on requirements. On the

other hand, the survey was by no means

exhaustive. The planners still virtually

ignored political considerations such as

foreign aid and made no mention of the

distribution or pipeline factor. Nevertheless, the resulting statement was probably the most logical and comprehensive

yet contrived. It laid down a requirement for 2,726 tactical aircraft for active

operations, 1,960 for reserve, and 6,831

for training purposes.57

In all, the General Staff study called

for 11,517 aircraft to provide for hemisphere defense. More than three months 54

 Memo, WPD for CofS, 21 Dec 39, sub: Estimate

of Number of Aircraft Required in Hemisphere Defense, AGO Rcds, WPD-OPD 3807-41. See above,

ch. V. 55

 See memo cited in preceding note.

56

 Ibid., tab G. 57

 Ibid. Original date of this portion of report is

21 December 1939. Figures vary in subsequent revisions.
REQUIREMENTS 223

were consumed in arriving at this conclusion; the problem was inherently difficult, and staff studies on requirements

are by their very nature slow in production. Yet even after this statement of

needs had been formulated, there remained a whole series of co-ordinations

and approvals before the paper could

become the official aircraft requirement

of the War Department for planning

purposes. Begun in October 1939, the

study was still in the headquarters paper

mill the following spring.58 In April

1940 G-2 initialed the paper but suggested that it was by then out of date.59

Events had overtaken the planners. When

the Air Corps finally sent a formal directive to Wright Field authorizing procurement planning on the basis of the much

revised and amended General Staff statement of aircraft requirements, it was too

late;60 "sitzkrieg" had once again become

blitzkrieg with the invasion of the Low

Countries, and the Western Allies seemed

about to flounder.

Aircraft Requirements in the

Crisis of May 1940

Sometime on 10 May 1940, the President's military aide, Brig. Gen. Edwin

M. Watson, sent him a sheaf of pages

from the War Department. On the attached buck slip General Watson wrote,

"Louis Johnson gives this as the most

important summary of our needs yet presented by him." Among other items of

equipment, the "summary of needs" included aircraft. Congress, the Assistant

Secretary noted, had authorized 6,000

aircraft but had appropriated funds for

somewhat fewer than 5,500. The legislators should be asked to provide $300,-

000,000 to close the gap.61 Only that

morning the New York Times had carried a column headlined "Mighty Air

Forces Demanded by Army" and "Plea for

500 Flying Fortresses Will Be Put Before

Congress Now."

 62

 This inspired story,

so obviously leaked from an "informed

source" in the War Department, coupled

with the Assistant Secretary's memorandum to the President, clearly defined the

immediate upper limit of aircraft requirements contemplated by responsible

military officials.63 On 8 May, two days

before he became Prime Minister, Win58

 The sequence of co-ordination and approval is

indicated in the following: Memo, CofAC for WPD,

6 Jan 40, urged approval even if inadequate, since

data were needed as point of departure for industrial planning. See also, G-3 to WPD, 24 Jan 40;

Memo, WPD for CofS, 18 Apr 40; Memo, WPD for

CofS, 10 and 27 May 40. All in AGO Rcds, WPDOPD 3807-41. 59

 G-2 to CofS, 22 Apr 40, AGO Rcds, WPD-OPD

3807-41. 60

 CTI-46, 10 May, AFCF AC Project Rcds (Lyon

Papers), bk. 24.

61

 Memo, E. M. W. (Watson) for President, Memo,

ASW for President, both 10 May 40. Johnson's

memo was based on a detailed study prepared by

the Executive, OASW, Col. J. H. Burns, 10 May

1940, which appears to have been sent along to the

White House as a supporting document. Franklin

Delano Roosevelt Library, Speech File, 16 May 40. 62

 New York Times, May 10, 1940, p. 8. See also,

Memo, Chief, Mat Div, for ASW, 10 May 40, justifying the need for 400 heavy bombers, and Memo,

Louis Johnson for President, 10 May 1940, asking

for permission to ask the Congress to provide funds

to begin procurement of these additional bombers.

Roosevelt Library, Speech File, 16 May 40. 63

 According to the New York Times, May 10,

1940, page 8, some military officials estimated that

the combined Army, Navy, and foreign or export

requirements for aircraft from U.S. manufacturers

would amount to 16,000 units over the following 16

months. Since they expected export orders to reach

8,000, the size of the force anticipated for the Army

and Navy is evident.
224 BUYING AIRCRAFT

ston S. Churchill had admitted in the

House of Commons—in public—that the

failure of British troops in Norway was

largely attributable to lack of air power.64

This, from the doughty First Lord of the

Admiralty, had not left War Department

officials unmoved. Indeed, as the New

York Times reported, they demanded a

"mighty" air force, but their conception

of such a force seemed to revolve around

400 or 500 additional airplanes and at

the outside lingered within the authorized ceiling of 6,000 units.

The rush of events in Europe soon

made such official thinking on requirements obsolete. German troops had invaded Belgium, Luxembourg, and the

Netherlands on the 10th. By the 14th

the Dutch Government was in flight to

Britain and every hour signaled new disasters along the Allied front. To responsible officials in the United States, the

menace of German might loomed more

terrifying than ever before. The time

had come for courageous action and imaginative thinking. If the nation's defenses were to be erected in time, someone had to cut through the existing

restrictions, so necessary in peace and so

frustrating in a crisis.

There was no lack of boldness among

the President's political advisors. The

Secretary of the Treasury, Henry Morgenthau, Jr., urged the President to ask

Congress for a discretionary fund of

$100,000,000 to be used to expand productive capacity for defense.65

 The Secretary of the Navy, Charles Edison, went

still further. He wanted the President

to ask Congress to provide a five, or even

ten, billion dollar blank check for the

President to spend on defense at will.

Secretary Edison recognized full well that

such a blank check was a radical idea, but

he was equally certain that the nation

faced a real crisis: "The totalitarian

mob," he wrote, "must be shown that

democracies can act in emergencies—can

cut through the delays and ineffectiveness

of legislative processes when the need

comes."

 66

This kind of thinking, at once bold

and dramatic, must have appealed to the

President. He directed Assistant Secretary of War Johnson to make a study of

the additional productive capacity required to raise the nation's total aircraft

output to a level of 50,000 units a year.67

Johnson responded to this request with

an estimate. Meanwhile, however, the

sequence of disasters in Europe seems to

have led him to reconsider the statement

of requirements he had sent to the President on 10 May. To this end he directed

his able executive, Col. James H. Burns,

to work out a revised statement of aircraft requirements.

Colonel Burns's reply was disturbing.

The Army, he reported, had formal plans

for expanding manpower beyond existing strength, but no decision on such

matters had been made for aircraft.

64

 Parliamentary Debates, Commons, vol. 360, pp.

1348-62, May 8, 1940. The New York Times, May 9,

1940, page 4, carried the speech in full and spread

its message in a page 1 headline. 65

 Memo, Morgenthau for President, 14 May 40,

Roosevelt Library, Speech File, 16 May 40. The Secretary's vision did not exclude his own interests:

his memo suggested that he himself be appointed

chairman of a committee with "ultimate authority,"

under the President, to use the money. 66

 Memo, Edison for President, 14 May 40, Roosevelt Library, Speech File, 16 May 40. 67

 Memo, ASW for President, 14 May 40, Roosevelt Library, Speech File, 16 May 40.
REQUIREMENTS 225

Rather than continue floundering

amongst imponderables any longer, Colonel Burns suggested an entirely arbitrary

statement of aircraft requirements for

planning purposes. He projected the

requirement for tactical aircraft on the

existing troop basis, approved by the

General Staff:

Using this table and an assumed attrition rate of 15 percent per month, Colonel Burns estimated that support of the

third phase would require some 28,800

replacements a year for tactical aircraft

alone—by his estimate a threefold increase over the nation's existing airframe

production capacity.68

Colonel Burns's computations were admittedly not based upon any logical and

systematic analysis of strategic needs;

they were nothing more than expedient

makeshifts, extrapolations, to establish a

target for planning purposes. The approach was imaginative; the figures, if

inaccurate, were at least bold.69 Assistant Secretary Johnson may have felt that

Colonel Burns's figures were too bold or

perhaps politically unfeasible. At any

rate, the next day, 15 May 1940, when

he sent a revised statement of aircraft requirements to the White House for the

President to use in an emergency message before Congress, he pared Colonel

Burns's 28,800 down to 19,000. This cut

he justified by saying that pilot training

was limited to 19,000 per year and the

production of pilots governed the production of airplanes70

—an assumption

that time was to prove grossly mistaken.71

Insofar as the written record goes, the

19,000 figure was the War Department's

last word on aircraft requirements before the President's special appeal to

Congress in behalf of national defense.72

On the question of military preparedness the President kept an open mind.

Fully aware of the speed with which the

surge of military operations in Europe

was altering so many assumptions and

plans, he was reluctant to set any targets

for defense production. On 12 May he

resolved to ask Congress for more money,

but as late as the 13th he had not decided

upon the precise number of aircraft he

68

 Memo, Exec, OASW, for ASW, 14 May 40,

Roosevelt Library, Speech File, 16 May 40. In his

computation, Colonel Burns assumed that the attrition rate would apply only to the aircraft in active

status, or approximately two-thirds of the totals

shown. The remaining one-third was carried as an

operating reserve. 69

 The Air Corps mobilization plan extant at the

outbreak of war in September 1939 visualized the

requirement for tactical aircraft in PMP augmented

to H plus 11⁄2 years at just over 20,000 units. See

Photostat of Chart by Proc Plans Div of Planning

Br, OASW, 3 Aug 39, AFCF 452.1 Aircraft Requirements Program.

70

 Memo, Louis Johnson for President, 15 May 40,

AGO Rcds, SW file. The communication is a masterpiece of political composition. It flatters the

President, paints a horror picture of current need,

absolves the War Department from blame for the

situation, and ends with a statement of needs neatly

tied up with a budget-oriented price tag. 71

 By 1944, pilot training reached an annual total

of 57,590, airframe production, 95,272 units. AAF

Statistical Digest (Washington, 1945), pp. 64, 112. 72

 Supporting the apparent lack of evidence to the

contrary is an item in the New York Times, May 14,

1940, p. 13. In the midst of lively speculation on

the number of aircraft the President would ask

Congress to provide, the Army and the Navy each

proposed increases of about 2,000 units.
226 BUYING AIRCRAFT

THE PRESIDENT ASKS CONGRESS FOR AT LEAST 50,000 AIRCRAFT, May 1940.

would demand.73 His military advisors

were providing him with staff papers on

aircraft requirements, but the President's

vision ranged far beyond the Army, or

even beyond the Army and the Navy together. He looked past the mere addition of figures from Army and Navy staff

studies and calculated the requirements

of all the enemies of fascism everywhere.

On 15 May he received cables from Ambassador Bullitt in France and Ambassador Kennedy in England. Both relayed

requests for shipments of aircraft.74 With

the French and British requests before

him, the President could see the aircraft

requirements of the Army and Navy in

fuller perspective, and from this vantage

point he went to Congress with his famous call for a program of no less than

50,000 "military and naval" aircraft a

year for the nation's defense.75

The President's request for 50,000 aircraft showed him capable of breaking

73

 New York Times, May 14, 1940. See remarks of

Press Secretary Stephen Early.

74

 Cordell Hull, Memoirs, pp. 765-66. 75

 Cong Rcd, May 16, 1940, p. 6244, and H Doc

751.

228 BUYING AIRCRAFT

loose from the restraints and inhibitions

that of necessity conditioned the calculations of so many military officials. Easily

forgotten in the wake of subsequent

events is the hesitant pace that characterized so much military activity before the

President's sweeping request. For example, sometime earlier, Canadian officials had generously lent the Air Corps

a Spitfire for tests; in return they requested a P-40 Warhawk. But no, such

a step seemed undesirable—at least in

some staff circles. On the very day that

the President went to Congress for 50,000

airplanes, an Air Corps legal officer advised against the P-40 loan; this would

be a technical violation of the obligations

of a neutral. Rather than "risk adverse

criticism," any such decision should be

referred to "high Government officials"

willing to take the initiative.76 The

President was willing to do just this, and

accepted the responsibility.

In the crisis of May 1940 the War Department did indeed supply the President

with a statement of aircraft requirements.

But the 50,000 figure finally used was

neither an Army nor a Navy figure—it

was a Presidential figure concocted by

the President and his political associates.77

 The President's big round number was a psychological target to lift sights

and accustom planners in military and

industrial circles alike to thinking big.

The 50,000 figure was not a logical summation of strategic and tactical requirements; in view of this circumstance, Secretary Hull's claim that he thought up

the 50,000 figure and even the Beaverbrook anecdote on its origin may contain

more than a grain of truth. In any event,

the implication is clear: in the crisis it

was the politicians acting more or less

intuitively rather than the generals with

their staff studies who set the 50,000-aircraft goal; when the War Department

was unready to state its air power needs

adequately, the job fell to the President.

76

 Chief, Patents Sec, to ACofAC, 16 May 40, AHO

Plans Div 145.93-23. 77

 Judge Samuel I. Rosenman is somewhat ambiguous on this point. He says (Working With

Roosevelt (New York: Harper and Brothers, 1952),

page 94), the Army and Navy "furnished us with the

materials and statistics on military requirements."

While it is true that some figures were supplied, as

the Roosevelt papers cited above clearly show, the

final 50,000 figure does not appear in the papers

sent to the White House from the War Department.

On the "glacial pace" of those bound by peacetime

conventions, see Sherwood, Roosevelt and Hopkins,

page 159. He also quotes Donald M. Nelson on the

President's vision, "his foresight was superior . . . and

this foresight saved us all," (page 160). See also,

MS study of OASW-OUSW by Troyer Anderson,

Ch. V, p. 4: and Bruce Catton, The War Lords of

Washington (1st ed.; New York: Harcourt, Brace

and Co. [1948]), page 21, who claims some Air Corps

officers felt the 50,000 figure was "pretty wild," and

William L. Langer and S. Everett Gleason, The Challenge to Isolation, 1937-1940, (New York; Harper

and Brothers, 1952), pages 473-75, especially 474,

suggesting that the President's figures should not

always be taken too literally.
CHAPTER XI

50,000 Aircraft

From Slogan to Program

No doubt the President's appeal for

more aircraft expressed in round numbers served as a stimulating psychological

target to raise the sights and fire the imagination of the nation—taxpayers, voters,

and aircraft builders—as well as congressmen. The big round number could

serve equally well as a political symbol.

It gave newsmen a convenient handle

with which to persuade the people that

the administration stood for all-out defense. But to staff officers fell the task

of converting this political slogan into

meaningful programs.

Matching Ends With Means

There is a great difference indeed between a target such as 50,000 aircraft—

either as an air force in being, or as an

annual productive capacity for that number such as the President demanded—on

the one hand, and a procurement program for 50,000 aircraft worked out in

detail and down to the last penny on the

other.1 A procurement program involves

prior agreement on how many of what

and when—quantity, quality, and schedule — but these fundamentals are not

enough. In addition, plans for any given

number of items conforming to any

given specification, to be delivered at

any given date, must be based upon funds

against which contracts can be written.

On this last point the Constitution is explicit. Clearly then, the process of translating the President's 50,000 slogan into

a detailed program involved first of all

matching ends with means—getting the

necessary appropriations and authorizations.

On the surface the task of wresting

adequate appropriations from Congress

would appear to have been a simple one

since the disasters in Europe had won so

many converts to the cause of adequate

defense. The mood of Congress had

shifted, and congressmen were asking

"How soon can we get it?" rather than

"How much will it cost?"

 2 Under such

circumstances why not simply ask for the

money and order the airplanes—all of

them—without further ado? Unfortunately, the mechanics of government by

consent are never quite so direct. The

Air Corps was not operating in a legislative vacuum; it was not free to start

from scratch with a clean slate and draw

up a logical, orderly, comprehensive, procurement program that would cover its

share of the 50,000 airplanes and distribute the load evenly across the available

1

 President's Message to Congress, Cong Rcd, May

16, 1940, p. 6244.

2

 Watson, Chief of Staff: Prewar Plans and Preparations, p. 166.
230 BUYING AIRCRAFT

productive facilities of the industry. Instead, air arm planners had to carry on

from where they stood, in the midst of

the game so to speak, changing course to

the new bearings indicated by the President as Commander in Chief. The plans

they drew up had to be fitted into the

living present, the contracts in process of

execution, appropriations under consideration, and so on, whether this proved

orderly and logical or not.

When air arm officers sat down to consider the President's new target figure in

May 1940, the "living present" in which

they found themselves took something of

the following shape: the 50,000 target

figure was a goal for the Army and Navy

combined. Thus, after conferences with

the Navy and an entirely arbitrary slicing

of the pie, the Air Corps' share was some

36,500 aircraft, a figure derived by deducting the Navy's existing program of

13,500 from the Presidential 50,000 and

assigning the remainder to the Air Corps.3

Clearly, it was the President and not the

military who dictated the character of the

subsequent program.

Dividing the President's 50,000 target

between the Army and the Navy simplified the task in some ways so far as the

Air Corps was concerned, but complicated it in others. Where the President

spoke in sweeping terms, in actual practice the detailed fulfillment of his goal

would have to be divided between two

separate agencies with consequent confusion arising from different methods of

doing business (often with the same manufacturer) and the increased need for coordination.

Even within the Air Corps, the target

of 36,500 airplanes was by no means devoid of complications. Aircraft already

on hand had to be taken into account.

Allowing for obsoletion and attrition

from accidents, available strength by the

end of fiscal 1940 was estimated at 2,760

aircraft. Moreover, there were yet undelivered on current contracts some

2,936 aircraft ordered on the 5,500 program of fiscal years 1939 and 1940.4

Finally, when the President made his

dramatic appeal in May 1940, Congress

was considering the appropriation for the

regular military budget of fiscal 1941.

The aircraft asked for by the War Department in this budget numbered only

166, and the House had moved to cut the

figure to 57.5 But the crisis broke as the

debate proceeded, and Congress hurriedly approved the full 166 sought and

added a supplemental measure providing

1,900 more or a total of 2,066 aircraft in

the Army appropriation. Thus, even

before Air Corps planners began to consider the 36,500 program in detail, there

were 7,700-odd aircraft on programs of

one sort or another.6

Subtracting the 7,700-odd aircraft already on program from the 36,500 that

constituted the Air Corps' share of the

50,000 total left some 28,000 airplanes

yet to be ordered if the President's objec3

 Unsigned, undated note in AC Project Rcds (A. J.

Lyon Papers), bk. 29, 36,000 Program, AFCF; Watson, Chief of Staff: Prewar Plans and Preparations,

p. 175. See also, photostat Memo, CofAC for CofS,

5 Jun 40, marked "Tentatively O K, GCM," AFCF

321.9-C.

4

 Copy, Memo, CofAC for ASW, 9 Jul 40, AC

Project Rcds (Lyon Papers), bk. 24, AFCF. 5

 See ch. IX, above. 6

 Mat Planning Sec, Mat Div, OCAC, Summary of

Air Corps Programs, 28 Jun 40, AC Project Rcds

(Lyon Papers), bk. 30, AFCF; and Mat Div, OCAC,

CTI-80, 19 Jul 40, WFCF 111.3 Munitions Program

1-31 Jul 40. See also H.R. 9209, 76th Cong, 3d sess.
50,000 AIRCRAFT 231

tive was to be seriously pursued. Air

Corps officers set about drafting plans to

place orders that would secure not only

the 28,000 aircraft (17,000 tactical types

and 11,000 trainers) but would also look

to the provision of a proportionate share

of the productive capacity amounting to

50,000 units a year as demanded by the

President before Congress.7

Air Corps plans, however, were not

evolving in complete isolation. In the

office of the Assistant Secretary of War,

staff officers were also trying to convert

the President's remarks into military programs. In the absence of an official schedule, Colonel Burns, an imaginative officer, proposed the following timetable:

 8

By 1 October 1941, an Army of

1 million men

By 1 January 1942, an Army of

2 million men

By 1 April 1942, an Army of

4 million men

This, of course, was entirely arbitrary

timing, but for want of anything else, it

provided a troop basis and a series of

target dates against which to project a

comprehensive munitions program.

Understandably enough, the planners

in the Office of the Assistant Secretary

wanted to include aircraft in this general munitions program. In doing so,

however, they applied an old Army formula uncritically, tying the aircraft program to the troop basis even though observant officers had pointed out on a

number of occasions from 1918 onward

that the two could not be meaningfully

correlated.9

There may indeed have been ample

justification behind the use of a troop

basis in planning a munitions program

for the ground forces, but harnessing the

aircraft program to the timetable thus

derived resulted in a schedule bearing

little or no relation to the needs of the

air arm or the President's target. The

proposed ground and air arm mobilization schedule appeared as follows:

By 1 October 1941, 1 million men

and 9,000 aircraft

By 1 January 1942, 2 million men

and 18,000 aircraft

By 1 April 1942, 4 million men

and 36,000 aircraft

Having established the doubling and redoubling of the troop basis, the planners

simply equated the air with the ground

figures by taking the Air Corps' share of

the President's target and then spreading

it back over the schedule in the same

doubled and redoubled pattern.10

When the combined air and ground

program received approval from the Chief

of Staff and the President, the fate of the

air arm production schedule was sealed.

Soon afterwards, when hasty surveys revealed that the capacity expansions necessary to meet the ultimate program

7

 Notes for General Brett on 50,000 aircraft by

JFP:JAL (Lt Col J. F. Powell?), 18 May 40, bk. 22;

Conference in OCAC, Army Requirements, 36,500

Aircraft, 19 Jun 40, bk. 29; TWX E733, Lyon to

Brett, 31 May 40, bk. 24A. All in AC Project Rcds

(Lyon Papers), AFCF. 8

 Watson, Chief of Staff: Prewar Plans and Preparations, pp. 174-75. Obviously Colonel Burns was

applying the same line of reasoning followed in his

memo to Louis Johnson of 14 May 1940. See above,

pp. 224-25.

9

 See above, pp. 44-45, 48, and Holley, Ideas and

Weapons, ch. III. 10

 Watson, Chief of Staff: Prewar Plans and Preparations, p. 175. That this is what actually happened

is further supported by evidence that Colonel Burns

used the same formula only a few days before. See

Memo, Burns for ASW, 14 May 40, Roosevelt Library, Speech File, 16 May 40.
232 BUYING AIRCRAFT

threatened to delay attainment of the

more immediate objectives, the Chief of

Staff and the President agreed to concentrate on the intermediate goal, two million men and 18,000 aircraft, leaving the

ultimate goals to some remoter date. The

recent catastrophe in Europe made 18,000

aircraft in hand seem definitely preferable to some 36,000 in the industrial

bush.11 The consequences of this decision were crucial. Where air arm planners had been aiming at the fulfillment

of the dual Air Corps goal of 36,500 aircraft on hand plus an annual productive

capacity for that number, they were now

told to lower their sights. They were to

work toward a goal of 18,000 not only

in the matter of strength but even with

respect to the expansion of productive

capacity. For the ground arms, however, while the immediate objective for

strength on hand was cut back, the goals

for the expansion of productive capacity

were left at the original "ultimate" figure.12

There is no evidence to suggest that it

was ground arm opposition to air arm

aspirations that motivated the disproportionate cutbacks. Economic feasibility

rather than doctrinal differences virtually compelled a reduction in the program.13

 The President's fears that the

cost of the aircraft program would prove

embarrassing may have been misplaced,

for the Luftwaffe's furious assault on

Britain seems to have shattered most lingering doubts in Congress as to the wisdom of pouring astronomic sums into

defense. But the fact that national defense policy was inseparable from political considerations should not be overlooked. Thus, even after the air arm

target had been cut back to 18,000 aircraft, Air Corps planners were unable to

present a request to Congress for appropriations to procure this number because

the price tag threatened to be too high.

The Bureau of the Budget took one

look at the $1,500,000,000 required to

procure 18,000 aircraft and immediately

began cutting. Using methods acquired

over the peacetime years the bureau staff

trimmed some 1,400 aircraft from the

18,000 total. More important than these

few aircraft, however, was the continuing pressure exerted to cut down all along

the line on the current budget. As a

consequence, the Air Corps came to Congress for funds not to finance 18,000 airplanes, or 18,000 minus the 1,400-odd

trimmed off by the Bureau of the Budget

for the President, but for a mere 3,000,

the "first increment" of the 18,000 program. The original 50,000 target, or the

Air Corps share of 36,500, was virtually

lost to sight as air arm planners shelved

it until the "military situation" in the

future seemed to justify reconsideration.14

 Even the 3,000 aircraft of the

11

 Watson, Chief of Staff: Prewar Plans and Preparations, pp. 176-79. 12

 Memo, CofS for Actg SW, 1 Jul 40, cited in ibid.,

p. 179. For an informed opinion favoring a reduced

goal for the immediate future, see T. P. Wright,

"50,000 Planes a Year: How Much? How Long?" in

Aviation (July 1940), and Wright, "The Truth About

Our National Defense Program," Aviation (June

1941). 13

 Watson, Chief of Staff: Prewar Plans and Preparations, p. 179, especially the remarks attributed

to the President.

14

 Draft Memo, OCAC for G-4, 20 Jul 40, AFCF

452.1-13F Proc of Aircraft; Mat Planning Sec, Mat

Div, OCAC, Summary of Air Corps Programs, 28

Jun 40, AC Project Rcds (Lyon Papers), bk. 30,

AFCF; Mat Div, OCAC, CTI-80, 19 Jul 40, WFCF

111.3 Munitions Program 1-31 Jul 40. Though the
50,000 AIRCRAFT 233

"first increment" became 2,181 aircraft

when rapidly rising costs subsequently

made it impossible to procure the full

number with the appropriation secured.15

Gearing procurement programs to appropriations was clearly an intricate task.

Delicate political decisions joined with

the procedures of congressional government to make the end product something

far removed from the initial Presidential

proposal. But the drafting of procurement programs was not confined to

matching ends with means, complex as

this task was. Also involved was the necessity of deciding exactly which from a

number of possible models and types of

aircraft should be procured and put into

production.

How Many of What Kind?

In the years leading up to World War

II, air arm officers had emphasized the

role of strategic air power. If many of

them tended to attach undue importance

to the doctrine of heavy bomber employment, it must be recalled that they did

so as crusaders selling an idea in the face

of considerable opposition. In consequence, when the Battle of Britain in

the summer of 1940 abruptly demonstrated the critical importance of a defensive fighter force, there were some at

least among the air power advocates who

found their mental breastworks facing

the wrong way. While not intending to

neglect fighters, their preoccupation with

bombers and strategic doctrine may have

resulted in a neglect of defense. The result appeared in a decided doubt as to

the proper composition of the air arm to

be procured under the President's appeal

in the crisis.

The few to whom, as Churchill said,

so many owed so much in Britain left a

deep impression in Air Corps circles as

to the use to which the immediately

available funds should be put. Although

unwilling to abandon ultimate faith in

the bomber, Air Corps officers began in

haste to reconsider the role of the fighter.

Their uncertainty is reflected in the wide

disparities in plans and rapid fluctuations

in strength proposed by Air Corps officers

planning the budget to be set before

Congress.16

As long as doctrine remained unsettled,

requirements could never be clearly defined. And so long as requirements remained in doubt, those who drafted procurement programs worked in the dark.

Those who sought to translate the President's 50,000 aircraft objective into orderly procurement programs had perforce to resort to guesses, makeshifts, and

temporary expedients, always subject to

change.

President and the Bureau of the Budget continued

to use peacetime habits of thought even after the

crisis justified a change, they were following a welldefined pattern. For example, Louis Johnson, an

official of wide political experience, usually sent

statements of military requirements to the White

House expressed in terms of dollar costs. For one

example among several in this period, see Memo,

Johnson for President, 10 May 40, Roosevelt Library,

Speech File, 16 May 40. William S. Knudsen in an

interview with H. F. Pringle, 15 December 1945,

asserted that the President's reluctance to ask Congress for money because of the political campaign

definitely was a difficulty in the effort to rearm during the summer of 1940. See Pringle Papers, Knudsen, OCMH. 15

 AAF Hist Study 22, n. 120.

16

 Compare the differences in composition of force

in the following, both of 31 May 1940: TWX, E733,

Lyon to Brett, and TWX, E739, Lyon to Brett, AC

Project Rcds (Lyon Papers), bk. 24A, AFCF.
234 BUYING AIRCRAFT

The need for matching ends with

means and the necessity of planning with

imponderables in the form of uncertain

requirements as to both the number and

the composition of the force to be procured, serious as they were, did not exhaust the roster of obstacles to effective

planning and programming. The relationship between productive capacity

and the size of the air arm desired had

to be taken into consideration as well.

Productive Capacity Versus

Aircraft on Hand

The President's call for 50,000 aircraft

provided the stimulus that set in motion

the wave of orders already mentioned.

Though budgetary exigencies delayed

procurement by spreading appropriations over a period of time rather than

providing for the full number all at once,

the cumulative effect was still great. As

the summer of 1940 wore away and as

the backlog of orders began to swamp

one manufacturer after another, the planners paused to reflect upon the consequence of the mounting productivity.

By the middle of August 1940, there

were somewhere between 26,000 and

30,000 military aircraft on order in the

United States on Army, Navy, and British contracts.17

 Sometime between June

1941 and June 1942 these orders would

reach a peak of deliveries and then taper

off rapidly. But the menace of foreign

dictators might not taper off so conveniently. What then? To base the nation's

continued defense upon the aircraft already produced would be to rest upon

a progressively more obsolescent force.

And to do this would involve demobilizing the productive capacity of the aircraft

industry, for without adequate orders

manufacturers would be forced to cut

back on their production shifts.

To impair the newly developed productive capacity of the aircraft industry

would be to invite disaster akin to the

fate of France, where aircraft output had

never reached an adequate level. But to

go on producing at full speed would

mean piling up aircraft in undreamed of

quantities. The dilemma was real indeed and not unlike that vexing Alice:

How can one run at top speed and still

remain in the same place? General Arnold never doubted for a moment which

policy the air arm should pursue: "It

makes no difference what disposition is

made of these surplus planes," he said,

"so long as industry is kept working at

full speed. . . ."

 18

 He even went s

as to consider a plan attributed to the

Germans whereby obsolescent aircraft

were melted down for scrap in order to

keep industry at full blast on more recent models.19

The problem, in fine, was this: Might

not the President's goal become a grave?

Was the real weapon of national defense

any fixed number of aircraft or was it.

rather productive capacity maintained at

full blast? In retrospect the problem appears academic. War came before aircraft production reached its peak, so the

decision never had to be made. Looking

back upon the event it is easy to ignore

the very real debate on the question that

17

 Memo, CofAC for ASW, 12 Aug 40, AFCF 452.1-

13F Proc of Aircraft.

18

 Ibid.

19

 Memo, CofAC for ASW, 15 Aug 40, SW file,

Aircraft.
50,000 AIRCRAFT 235

persisted for weeks in staff circles.20 Even

though Pearl Harbor made a choice unnecessary, to a generation engaged in the

prolonged agony of a cold war, the road

not taken here is well worth study by

those who would understand the complexities of translating political slogans

into procurement programs.

Planner's Lament

Reduced to practice, the simple clarity

of the President's 50,000 goal became a

hodgepodge of piecemeal appropriations,

overlapping procurements, compromises

in timing, and uncertainties in composition. And to top it off, the achievement

or fulfillment of the goal by a triumph

of mass production would, paradoxically,

bring the danger of defeat by obsolescence—unless war arrived soon enough

to absorb the full output of the clattering

assembly lines.

Ideally, staff officers would pursue an

orderly, logical, all-embracing, and comprehensive program in which orders to

the aircraft industry could be assigned all

at once and facilities as well as production

tools, material orders, and subcontracts

for the ultimate program could be

planned from the start. But the world of

reality is never like this. In practice, air

arm staff officers found themselves driven

to makeshifts—they had to contrive not

a program but a patchwork of programs,

each an expedient compromise, each an

ad hoc solution of a current difficulty.21

Each such momentary solution, each such

temporary adjustment, was destined to

give place to some new version as new

circumstances appeared. The ink was

scarcely dry on each "ultimate" program

before revisions had to be considered.22

As a consequence of this piecemeal

approach, the whole intricate manipulation of national resources, called industrial mobilization, was of necessity disordered, makeshift, and jerry-built. But,

as these pages have suggested, this was

not so much for want of planning or

want of vision as it was the result of having to do the job within the framework

of the forms of law and a government of

discussion and consent.

Just how confusing the many variables

could make the procurement process

must be evident to any reader who has

tried to follow the mutations and permutations of the 50,000 program already

described. The proliferation of programs and their various alterations were

confusing even to the planners who lived

in the midst of them during the rush to

rearm in the summer of 1940. One can

readily sympathize with the harassed officer who explained one phase of the program to a colleague in words to this effect:

The 1,900 program is really the 2,066 pro- gram and the 3,000 program is really the

20

 See, for example, Chief, Mat Div, to CofAC,

ESMR, SM, Ex-18, 25 Oct 40, AFCF 452.1-13F Proc

of Aircraft; Memo, Exec, OASW, for DCofS, 1 Oct

40, SW files, Aircraft, item 1783; Exec, OASW, to

CofS, 15 Oct 40, same file, item 1839, cross reference

from SW classified file, item 1096.

21

 For evidence on the piecemeal character of the

program and the long delay between conception and

approval, which contributed to the chaos of production, see CofAC to TAG, 5 Jul 40, and CofAC to

ASW, 12 Sep 40, with ASW approval 19 Sep 40, AFCF

452.1 Aircraft Gen. 22

 T. P. Wright et al., Report on Army and Navy

Program for Procurement of Airplanes on Engines,

Fiscal Years 1941-2, Airplane Division Report 3-A,

NDAC, 1 Jul 40, rev 8 Jul 40. See also, CTI-80,

19 Jul 40, WFCF 111.3 Munitions Program 1-30

Jul 40.
236 BUYING AIRCRAFT

2,181 program which is the first increment

of the 36,500 program, but these two to- gether are actually called program A. The

2,181 were not formerly included in the so- called 18,000 program but are now, and the

18,000 has been reduced to 16,575 [by the

budget cut of 1,425]. Thus, the 15,819 ob- tained by subtracting 2,181 from 18,000 is

now 14,394. Therefore the grand total of

20,066 has become 18,641. Cheerio!

 23

If the programs for procurement were,

of necessity, confusing, overlapping, and

piecemeal, it is not surprising to find that

the arming and equipping of tactical

units followed suit. The First Aviation

Objective established during June 1940

as the initial allocation of tactical aircraft

anticipated a total of 54 combat groups.24

Since delays in production made it impossible to procure the aircraft for the

full strength of 54 groups all at once, even

the First Objective had to be broken into

phases known as the First Aviation

Strength and Second Aviation Strength.

The former called for the activation of

all 54 groups on a cadre basis as aircraft

became available. The latter activated

no additional groups but simply provided for full strength in all the units

under the 54-group objective.25

The first and second strengths of the

First Aviation Objective should not be

confused with the Second Aviation Objective, which called for 84 groups. The

Second Objective was derived by computing the size of force necessary to provide a demand for replacements sufficient

to sustain on one-shift operation an

aircraft industry capable of producing

36,500 aircraft a year on full-shift operations.26

 Capacity to produce rather than

immediate tactical requirements thus dictated the Second Aviation Objective.

In short, what had started off so grandly

as the President's 50,000 goal became in

practice something far more complicated

and something considerably smaller. The

50,000 had become some 33,000 and this

was not just an Army-Navy figure but a

total reflecting Army, Navy, and British

orders combined. Moreover, the Air

Corps "ultimate" goal of 36,500 was no

longer scheduled for 1 April 1942. Instead, it was put off to a remote and indefinite future with the more obtainable

goal of 18,641 aircraft by 1 July 1942

placed in its stead.27

The President's target, 50,000 aircraft,

was undoubtedly useful. But there is no

profit in being deceived by one's own

propaganda: a psychological incentive is

not a procurement program. The journey from slogan to program not only

watered down the target, but may also

have transformed it significantly. The

objective sought turned out to be not just

numbers but a whole host of considerations of time and composition, of model

and type, of financing and productive

capacity all wrought as variables in not

one but a series of interrelated programs. 23

 Summary of Air Corps Programs, undated, initialed "K," AC Project Rcds (Lyon Papers), bk. 29. 24

 Memo, Asst CofAC for CofS, 6 Aug 40, AFCF

321.9 C; CTI-80, 19 Jul 40, WFCF 111.3 Munitions

Program 1-31 Jul 40. The number of aircraft in

each group varied, of course, depending upon the

tactical function performed by the group. 25

 Gen Arnold to Brig Gen H. W. Harms, 9 Aug

41, AFCF 321.9F.

26

 Memo, G-3 for CofAC thru SGS, 26 Apr 41,

AFCF 321.9E. It will be observed that the military

planners apparently did not include capacity for

exports in their calculations. 27

 Draft of lecture, Gen Arnold, AIC, 5 Oct 40,

WFCF 350.001 Lectures, 1941.
50,000 AIRCRAFT 237

In short, by the time the President's big

round number had been converted into

detailed programs it became something

altogether different from the catch phrase

or slogan it had been originally.

There is no need to spell out here all

the numerous variations that subsequently stemmed from the President's

50,000 figure. It should be sufficient to

shed some light upon the implications

of planning within the context of the

Presidential target, which remained the

official aircraft production goal until after

June 1941.28 Clearly, this kind of target

had its utility, even if modified and compromised in use. It is possible, however,

to be seduced by such target figures.

There's Danger in Numbers:

The President's "Must Program"

Programs in Evolution

To show how even the admittedly useful psychological target may prove dangerous or even disastrous at times will

require a digression. By abandoning the

chronological thread of narrative for the

moment to look ahead and consider

events over the three or four years following the fall of France some of the

dangers inherent in big round number

political slogans may become evident.

For more than a year after the President's request to Congress in May 1940,

50,000 remained the pole star of the aircraft program. Variations and modifications were introduced and British orders

raised the over-all total greatly, but

50,000, with 36,500 as the air arm's share,

for months remained as the outside target figure. To be sure, the content or

composition of this figure changed considerably. Air Corps officers won increasing political support for the production

of heavy bombers for long-range strategic missions.29

 During May 1941, for

example, the President formally directed

the Secretary of War to increase the production of heavy bombers to 500 per

month.30 After years of dispute the heavy

bomber had at last acquired a partisan

in the White House. Bomber production was to be increased "even at the expense of closing down . . . pursuit fac

ries if necessary to obtain material, labor

and tools."

 31

By the fall of 1941 it had become evident that the air arm had moved well

beyond the point where the momentum

of the President's 50,000 target of May

1940 had any further significance. Bolstered by successive instances of White

House support, the newly established

Air War Plans Division (AWPD) in September 1941 drew up an "ultimate" production target for the Army air arm. This

plan called for an interim goal of 59,727

and an ultimate total goal of 63,467 air28

 NDAC Official Bull, Defense, 20 Dec 40, p. 3.

See also, WPD 3807-83, passim.

29

 ASW R. A. Lovett to President, 23 Apr 41, and

Memo, Lovett for Arnold, 7 May 41, both in AFCF

452.1, 1856 Bomber Program. See also William Frye,

Marshall: Citizen Soldier (Indianapolis: Bobbs-Merrill, 1947), p. 285. 30

 FDR to SW, 4 May 41, SW files, Aircraft, item

2004. Three months later air arm officers were proposing from 750 to over 1,000 heavy bombers per

month as suitable objectives. See Memo, CofAC for

CofAAF, 28 Aug 41, AFCF 452.1, 1856 Bomber Program; Memo, Secy Air Staff for CofAC, 30 Aug 41,

AFCF 452.1 Aircraft, Gen. 31

 Memo, Exec, OCAC, for Gen Brett, 8 May 41,

AFCF 452.1 1856 Bomber Program. See also, TAG

to CofAC, 9 Jun 41, AFCF 321.9E.
238 BUYING AIRCRAFT

craft, including tactical and training

types.32 These figures were still under

consideration when the disaster at Pearl

Harbor swept the nation into the war

and precipitated anew the question of

production targets.

Confronted with an urgent request to

prepare a statement of requirements for

an all-out war or a Victory Program, Air

Corps officers simply turned to the extant

AWPD study and lifted out the figures

calling for an ultimate production in the

neighborhood of 60,000 aircraft for the

Army's air arm by 1 January 1944. Yet

even in providing General Arnold with

this target figure for an all-out effort, the

Acting Chief of the Air Corps noted that

it was really not an ultimate figure since

AWPD studies were even then considering a 35-percent increase.33

 One can

only conclude that "final" and "ultimate"

in the military vocabulary are something

akin to the term "supercolossal" in Hollywood. Ultimate or not, these figures

represented the scale of military planning for air power at the time of the

Roosevelt-Churchill ARCADIA Conference

in Washington at the end of 1941.

The President's New Targets

The traditional state of the union address to both Houses, falling as it did so

soon after Pearl Harbor, gave the President an excellent opportunity to present

Congress with a new set of production

targets suited to the new situation of actual war. The President laid down a

whole string of production objectives to

guide the nation's armament program.

And at the head of the list came aircraft.

For 1942, the President asked a total of

60,000 aircraft, of which some 45,000

were to be tactical types and the remainder trainers. For 1943, the goals were

higher: a total of 125,000 aircraft, of

which 100,000 were to be tactical types.34

The President's target figures were precise—so precise, in fact, as to raise questions as to their origin. The figures could

have been just another set of psychological targets, sufficiently higher than the

last, of course, to goad on both aircraft

producers and military planners. On the

other hand, they could have been supplied to the President from military or

industry sources. The record does indeed show that the staff planners within

the War Department supplied the President with figures before he returned his

procurement directive asking in substance for fulfillment of the goals enumerated before Congress. It was common practice for officers within the Department to write their own tickets,

which is to say, frame directives to themselves for the President's signature.35

This may well have occurred in this particular case. Significantly, however, the

goals ordered by the President, 60,000

and 125,000 aircraft in 1942 and 1943,

were not the figures sent to the White

House from the military planners.

The President, it seems, took the figures supplied as a maximum by military

officials and arbitrarily raised them.

When Harry Hopkins protested at this

cavalier disregard for the facts of produc32

 Craven and Cate, eds., Plans and Early Operations, pp. 131-32. 33

 Memo, Actg CofAC for Gen Arnold, 21 Dec 41,

AFCF 452.1 Aircraft, Gen.

34

 Cong Rcd, January 6, 1942, p. 34. 35

 FDR to SW, 4 May 41, and Lovett, ASW (Air),

to President, 23 Apr 41, AFCF 452.1, 1856 Bomber

Program.
50,000 AIRCRAFT 239

tion, Mr. Roosevelt is said to have replied "Oh, the production people can do

it if they really try."

 36

 This certainly

suggests that the President regarded the

figures both as rational goals and as psychological targets. Other evidence helps

confirm this view. In sending the targets to the military men for compliance,

the President suggested that the Secretaries of War and Navy might wish to

confer in working out the precise distribution of the totals.37

 Had they compiled the figures in the first place from

a study of their joint requirements presumably no such after-the-fact conference

would be necessary. And finally, the

President himself hinted that the new

production targets were propaganda for

internal as well as external consumption

when in his address before Congress he

pointedly called the attention of the nation's enemies to the big new production

goals they had inspired by the attack on

Pearl Harbor.38

For better or for worse, 60,000 and

125,000 became the aircraft production

targets for 1942 and 1943. Almost immediately critics denounced the President's figures as impossible.39

 It might

well prove entirely possible to manufacture 125,000 aircraft by 1943, but what

kind of aircraft: the types needed, models

suitable for combat, or mere numbers?

To reach the prescribed targets in the

allotted time might signal a triumph of

production, but would it ensure victory

in the air; would the aircraft turned out

be superior to those of the enemy? Some

air arm officers in grim jest branded

this emphasis on quantity "the numbers

racket."

"The Numbers Racket"

Evidence of the adverse effect of the

President's apparent preoccupation with

numbers without corresponding concern

for performance began to accrue almost

immediately. Before the President's appeal to Congress, the air arm budget for

the coming fiscal year called for procurement of some 33,000 aircraft. After the

President's address calling for 60,000 and

125,000 aircraft over the next two years,

the Chief of the Materiel Division, who

was responsible for procurement, sent up

a hurriedly revised program asking for

39,000 rather than 33,000 aircraft without increase in the covering appropriation. This remarkable stretching of

funds, it seems, was to be accomplished

by removing some 700 expensive heavy

bombers from the procurement program

and substituting a greater number of

fighters, dive bombers, and trainers. The

heavy bombers were to be deferred to a

36

 Rosenman, Working With Roosevelt, p. 325.

Robert Sherwood vouches for the story as one who

was actually present at the time. Roosevelt, adds

Sherwood, "was never afraid of big round numbers."

Roosevelt and Hopkins, pp. 473-74. Donald Nelson

credits Roosevelt with saying that he reached the

program figures by "my usual rule of thumb

method." Donald M. Nelson, Arsenal of Democracy

(New York: Harcourt, Brace and Company, 1946),

pp. 185-86. 37

 FDR to SW, 3 Jan 42, AFCF 452.1 Aircraft, Gen.

Craven and Cate, eds, Plans and Early Operations,

page 247, citing a secondary source, indicates that

the President's directive to the Secretary of War, 3

January 1942, called for 131,000 aircraft in 1943

rather than 125,000. The different figures suggest

that the President was juggling the target figures

considerably between 3 and 6 January 1942. 38

 Rosenman, Working With Roosevelt, p. 325;

Cong Rcd, January 6, 1942, p. 34. 39

 Rosenman, Working With Roosevelt, p. 325.
240 BUYING AIRCRAFT

subsequent program.40 Such evidence is,

of course, inconclusive when standing

alone, but it certainly suggests a tendency

on the part of some air arm officers to

take their cue from the President and

stress numbers at the expense of tactical

need. In trying to provide the number

of aircraft set up in the target without

due consideration for all the other factors involved, some of the planners may

have been pursuing the form while losing

the substance.

By the fall of 1942 there were increasingly serious doubts expressed in the

upper echelons of production planners

as to whether or not it would be possible

to attain the goals established by the

President. Even after cutting down on

the number of spare parts to be procured

along with the aircraft on program in

order to turn out a greater number of

flyable units, production still lagged behind the target figures. The goals might

be reached, a planning committee reported, if the air arm program were given

priority over all other consumers and if

no design changes (which would slow

down production) were introduced.41

The implication of this report was clear:

the President's goals could be reached

only by sacrificing all else. To attain

the desired level of production it would

be necessary to rule out the very design

changes that were essential to the production of aircraft superior to those of the

enemy. And by the same token it would

be impossible to attain the goals set and

still procure those spare parts without

which even the best of flyable units would

soon be depleted by cannibalization under combat conditions in the field.42

When asked to revise his production

goals in October 1942, the President remained adamant. He was "seriously disturbed," he said, by the existing production failures but insisted that he expected

full compliance with the 125,000 goal set

in January 1942. This meant, he reiterated, an output of 100,000 tactical aircraft during 1943 and not merely the attainment of that rate of production by

the end of 1943. "I am convinced," the

President wrote, "that this is not an impossible production requirement and can

and should be carried out."

 43

Even after the President had formally

insisted upon fulfillment of the established production goals, agitation for a

cutback continued in air arm circles.

Some officers felt that the goals were unrealistic. One officer intimately concerned with production planning suggested that the President's target figures

might actually lie beyond the resources

of the nation. The production record

gave some support to this view. During

September 1942, the last reported month

then available, actual deliveries were only

51 percent of scheduled deliveries.44

The record of actual output in con40

 R&R, Chief, Mat Div (draft by Maj Meyers), to

Fiscal Div, 2 Feb 42, AFCF 452.1-13F Proc of Aircraft. 41

 Jt Aircraft Planning Com, WPB, to D. M. Nelson, 26 Sep 42, USW files, ASF Planning Br, 452

Aircraft.

42 Interestingly enough, the officer who signed the

WPB report, Major Meyers, was the same man who

had drafted a directive for the Chief of the Air Corps

in October 1940 to reduce spare parts procurement

so as to increase the number of completed aircraft

procurable from limited funds. Memo, CofAC for

Chief, Mat Div, 11 Oct 40, AFCF 452.1-13F Proc

of Aircraft. 43

 Memo, FDR for JCS, AFCF 334.7 Bulky, President's Aircraft Program. 44

 R&R, AFADS to AFDAS, 6 Oct 42, AFCF 334.7

Bulky, President's Aircraft Program.
50,000 AIRCRAFT 241

trast to scheduled output must have influenced the President, for soon afterward

he relented somewhat from his earlier

stand. At his request the Air Staff surveyed the whole field of requirements

once again, and he formally approved a

revised statement of operational needs.

Instead of a production target of 125,000

aircraft for 1943, the new goal was to be

107,000 aircraft—82,000 tactical types and

25,000 trainers.45 Even this lower target

proved difficult to hit.

As the first quarter of 1943 slipped by,

more and more air arm officials began to

doubt that the new goal could be reached

even though they were not anxious to

have it reduced. The Deputy Chief of

the Air Staff declared flatly that without "prompt relief"—concessions of labor

and materials being absorbed by ground

force and naval programs—fulfillment of

the objective would be a "remote possibility."

 46

 The Assistant Secretary of War

for Air, Robert A. Lovett, believed the

same thing. He fed this information into

the White House via the backstairs route,

Mr. Harry Hopkins.

Lovett felt that a total of 88,000 rather

than 107,000 aircraft in 1943 would be

a realistic estimate.47 He urged Hopkins

to sell this to the President. Experience

had shown that the changing needs of

combat required a shift from inferior

models already in production to superior

models just emerging from an experimental status. Such a shift would unavoidably reduce aircraft output. Why

should not the President explain this

candidly to the public, Lovett urged, so

there would be no misunderstanding?

The production goals could thus be lowered to an obtainable figure, and the

public would know why.48

A single episode early in 1943 will

serve to illustrate the unintended absurdities stemming from an emphasis on

sheer numbers without corresponding attention to performance or quality. The

Douglas A-26, just emerging from experimental status, was reported to be "the

sweetest flying aircraft" ever built for

the air arm. Staff officers representing

the users or tactical arms pointed out

that the A-26 would go 100 miles per

hour faster and carry more bombs than

either the North American B-25 or the

Martin B-26. They urged that production of the two medium bombers be

tapered off (rather than increased as currently planned) and the A-26 substituted

instead. "Fifty 100 percent aircraft,"

said the Director of Military Requirements, "are of more value than a hundred 50 percent aircraft in actual combat." If it proved necessary to pay for

this increased performance with decreased production, he argued, it might

still increase over-all combat effectiveness.49

 Superior performance or quality

was clearly a more desirable objective

than mere numbers, mass production, or

quantity; at least this was the view of

those who had to fly against the enemy. 45

 FDR to SW, 29 Oct 42, SW files, Aircraft, item

2180. See also, Adm W. D. Leahy to D. M. Nelson,

26 Nov 42, AFCF 400.17A. 46

 R&R, DCofAAF, to CGMC, 17 Mar 43, AFCF

452.01-B Production. 47

 Lovett to Hopkins, 25 Mar 43, AFCF 452.01-B

Production. Lovett was not far off. Actual production in 1943 was just under 86,000 units.

48

 Ibid.

49

 R&R, Military Requirements to MC, 23 Jan 43,

comment 3; see also, comments 1 and 2, AFCF 452.01-

A Production.
242 BUYING AIRCRAFT

On the other hand, the suppliers were

in a position quite different from the

users. They too wanted to procure superior aircraft. But they were judged as

succeeding or failing not in terms of

quality but of quantity. The Chief of

the Materiel Command agreed "in principle" with the request of the users, but

then went on to explain why it would be

impossible to comply. General Arnold

had stated as a "must" a total of 133,000

aircraft in 1943 in place of the Roosevelt

goal of 125,000. Practical considerations

such as ground force and naval requirements coupled with the limited resources

of the nation led him to accept, however

reluctantly, 107,000 aircraft as the maximum production feasible. The Materiel

Command, then, felt committed to reach

this target. "We cannot get even approximately the number of aircraft which we

are directed to produce unless we adhere

to existing types and models with the

absolute minimum of changes."

 50

 In

short, those responsible for supplying

aircraft took their quantitative goals

more seriously than their qualitative

goals. This reply evoked an immediate

outcry.

As spokesman for the users, the Director of Military Requirements denounced

the tendency to place greater emphasis

on numbers than upon tactical usefulness. He saw the issue as one of utmost

importance and trotted out some horrible examples to support his case. Experience in operations showed the need for

winterizing airplanes, modifying production models to make them suitable for

all-weather operation in northern climates. Production authorities argued

against winterization since the introduction of such modifications would cut

down on the total output. If they had

won their point, the consequences would

have been appalling. Airplanes not winterized could not be flown to the Soviet

Union over the northwestern or Alaskan

route; by delaying winterization greater

numbers could be produced, but any attempt to fly such unmodified aircraft

through Alaska would surely have encountered heavy losses.

Worse than the delays in winterization

resulting from an emphasis on quantity

rather than quality was the continued

production of obsolete types. The Director of Military Requirements regarded

the Vultee A-31 as a "splendid example"

of what happened when the demand for

quantity was allowed to dominate. Long

after the airplane was recognized as obsolete and unsuited for combat, it was

continued in production, using up labor,

materials, and productive capacity.51 Obviously there was no profit in producing

airplanes nobody wanted.

Observations on the Numbers Game

If the suppliers became so engrossed

in the numbers game that they lost sight

of tactical usefulness, then the value of the

President's psychological targets might

well be questioned. On the other hand,

as British experience had shown, "the

best is the enemy of the good." Too

much stress on performance would leave

50

 R&R, CGMC to Dir, Military Requirements,

30 Jan 43, comment 4, AFCF 452.01-A Production.

51

 R&R, Dir, Military Requirements, to CAS, 5 Feb

43, comment 5, AFCF 452.01-A Production. Much

the same thing could be said of the A-35 and A-36.

See Memo, Arnold for Lovett, 22 Feb 43, AFCF

452.01-A Production.
50,000 AIRCRAFT 243

airplanes forever on the drawing board

and never in the hands of troops in the

field.

To balance quantity and quality called

for genuine daring from those in command. To stop production of an aircraft

model, no matter how obsolete, was to

draw public criticism. Unavoidably, labor would have to be laid off until a

newer and superior model could be

tooled up for production. And the layoffs would take place even as everyone

in the community, from schoolboys to

housewives, was urged to join the war

effort. On the other hand, it also took

courage not to discontinue a model already in production when a markedly

superior model appeared on the horizon.

The A-26 was indeed superior to the

B-26 in several respects, but performance was not the only factor to be considered. Elaborate training schools were

established to provide the B-26 with

crew members and maintenance mechanics. Spare parts were piling up in appropriate depots all over the map. Until

these elements could be adjusted, the superior A-26 might well prove unable to

carry as much punch to the enemy as the

inferior B-26 simply for want of spare

parts and mechanics trained to cope with

its particular eccentricities.

One final consideration should be

brought to bear when appraising the

President's production targets. Big

round numbers, such as 125,000 aircraft

in 1943, utterly failed to take account of

the rising gross weight of military aircraft. In January 1942 when the President announced his target for 1943,

the average airframe weight was 4,520

pounds. A year or so later the average

airframe being produced weighed some

8,900 pounds, or nearly twice as much.52

With some justice the Materiel Command could claim that the President's

target had been more than fulfilled if

one used a 1942 rather than a 1943 yardstick. But if this was so, responsible officers of the command should have been

doubly careful not to be coerced by the

numbers game into stressing quantity

out of proportion to quality.53

Return to Reality

Following the President's call for

50,000 aircraft in May 1940, air arm officers worked day and night to complete

the necessary contracts. At one time during the summer and fall of 1940 procurement officers were signing as many as

1,000 contracts a day at Wright Field

purchasing everything from flying boots

to four-engine bombers. Most of these,

of course, were for accoutrements and

maintenance supplies, but aircraft constituted the largest dollar volume. Two

weeks after Congress made funds available for the Air Corps share of the 50,000

program, the Secretary of War closed contracts for 11,000 airplanes. For the first

time since World War I, the War Department purchased more than a thousand

aircraft on a single order. The billions

of dollars available were quite enough,

as General Arnold said, "to stagger any

52

 Memo, Gen Echols for Bureau of the Budget.

10 May 43, AFCF 452.01-B Production. 53

 There is evidence that "coercion" was employed

to ensure a high level of acceptances regardless of

quality. See, for example, Deputy Air Inspector to

Chief, Technical Inspection Div (Air Inspector), 14

Jun 43, with inclosures, citing instances of ferry pilots

forced to take delivery of aircraft that still had ten

days of work yet undone. AFCF 333.5 Contract

Investigation.
244 BUYING AIRCRAFT

DOUGLAS A-26

mere officer" and "seemingly sufficient to

buy anything for anybody at any time."

 54

Schedules Versus Deliveries

Billions of dollars to spend and staggering production targets, 50,000, 60,000,

and even 125,000 aircraft, made a brave

show—for the future. The current realities were sobering in contrast. Against

the grand programs involving tens of

thousands of aircraft scheduled for delivery, the production actually achieved—

the aircraft actually "accepted" officially

for the air arm—amounted to little more

than a trickle. During one week in November 1940, more than six months after

the President announced his 50,000 target, the air arm received only two tactical

aircraft from the entire industry. There

were, it is true, nearly 40 small trainers

turned out in that same week, but even

this was utterly inadequate compared

with the scheduled requirement for trainers. Nor was this halting pace an isolated instance.55

 Production throughout

the remainder of 1940 and well into 1941

remained painfully low. The result: a

virtually unarmed air force.

An Unarmed Air Force

During the summer of 1941 General

Arnold grimly took stock of the consequences of the disastrous gap between

orders and deliveries. The GHQ Air

Force, supposedly the air arm's great offensive or striking arm, could muster

only two groups of heavy bombers (70

aircraft), two groups of medium bombers

(approximately 114 aircraft), two groups

of light bombers (approximately 114 aircraft), and three groups of pursuit (225

aircraft), nine groups or a paper total of

523 airplanes in all. But even this force

was, the General felt, something of an

54

 Arnold, lecture, AIC, 5 Oct 40, WFCF 350.001,

1941; Aviation (October 1940), p. 71.

55

 Chief, Mat Planning Sec, to Tech Exec, 20 Nov

40, and Memo, Asst CofAC for ASW, 12 Dec 40,

both in AFCF 319.1 Production Rpts.
50,000 AIRCRAFT 245

MARTIN B-26

absurdity since it lacked the mobile air

depots essential for sustained operations

in the field and, worse still, to operate

even those nine groups involved the use

of obsolete equipment—B-18's and P-36's

without leakproof tanks, gun turrets,

armor and all the other modifications

shown necessary by the war in Europe.

The Army's aerial striking force, said

General Arnold, was at "zero strength."

He concluded bluntly: the air arm was

not ready for war. Not until sometime

after March 1942 would aircraft production be expected to begin outstripping

training and pile up a backlog of aircraft.56

The small number of aircraft available

to tactical units in the field was in itself

alarming, but this was not the only danger present. Even those aircraft reported

as "tactically available" by the pitifully

few groups and squadrons in the field

were not always really available. At one

point during the summer of 1941, for example, the Chief of the Air Corps reported that two whole squadrons of heavy

bombers, B-17's, and an entire group of

medium bombers were grounded for

want of parts or because of structural

defects appearing after delivery.57

In some cases even aircraft officially

"accepted" by the War Department were

not in fact complete. Production of Bell

P-39 fighters, for example, ran well ahead

of propeller production. To avoid a

pile-up, air arm officers arranged to accept the units as assembled, fly them to an

air base, remove the propeller, ship it

back to Bell, fly away another, and so

on.58 Whatever the paper records may

have indicated to the contrary, the air

arm had a number of lame ducks on

hand. Even after Pearl Harbor, tactical

units continued to list aircraft on strength

56

 Memo, CofAAF for WPD, 7 Jul 41, AFCF 321.9E.

57

 Memo, CofAC for Lovett, 14 Jun 41, AFCF 452.1

Airplanes, Gen. 58

 Chief, Production Engr Br to Statistics Sec, 2 Sep

41, AFCF 319.1 Production Rpts.
246 BUYING AIRCRAFT

reports even though they lacked guns,

turrets, radios, and bombsights—without

which they would be of little use in a

shooting war.59

If every aircraft assigned to tactical

units were fully equipped and ready for

operations in the field, the available

strength at the time of Pearl Harbor

would still have been dangerously inadequate. As subsequent experience

during World War II was to show, there

is many a slip between the end of the

production line and airplanes actually

brought to bear on the enemy target. By

the middle of the war, the record revealed,

out of every 1,000 aircraft accepted, 38

percent, or 380, remained in the United

States with training units or in local defense organizations. Of the remaining

62 percent, or 620 aircraft, reaching theaters of operations, on any average mission day, some 45 percent, or 279 aircraft,

were undergoing repairs. This left 55

percent, or 341 aircraft, available for

strikes against the enemy. But on an

average mission 20 percent of this force,

or 68 aircraft, failed to reach the target.

This left 80 percent, or 273 aircraft—

27.3 percent of the 1,000 originally accepted—as the effective force available.60

At any given moment, therefore, perhaps

one-quarter of the net output of the production lines could be brought to bear

against a distant enemy.

A number of factors lay behind the

delays that hindered the growth of the

air arm. Diversions of production abroad,

notably to the Russians and the British

contributed substantially. So too did the

decision, when the crisis arrived, to buy

aircraft still on the drawing board or in

the experimental stage rather than go

ahead with current production models.

In buying "paper aircraft" and unproved

experimental models the Air Corps undoubtedly slowed down production, since

there were inevitable bugs to be eliminated before production could begin.

But at the same time, the decision resulted in the ultimate production of

markedly superior aircraft, the B-17's for

example, rather than the B-18 or B-23

bomber.61

Fundamentally, of course, the delays

in equipping the air arm stemmed from

the nature of the problem itself. The

aircraft industry was asked to effect a

revolution almost overnight. During the

1930's War Department orders for aircraft ranged anywhere from 100 to 600

items a year. Then rather abruptly they

soared, first to several thousand in early

1940 and then to tens of thousands twelve

months later.62 This flood of orders led

to a scramble—for labor, materials, factory capacity, machine tools, and the services of subcontractors. Only by careful

co-ordination and control could the wild

scramble be synchronized into an orderly

mobilization of resources and only by

understanding the administrative organizations contrived to achieve this synchronization can one fully appreciate the difficulties besetting procurement for the air

arm in this period of stress.

59

 Memo, Maj Luther Harris for Gen Arnold,

20 Jan 42, AFCF 452.1 Airplanes, Gen. 60

 Memo, Gen Arnold for SW, 20 Jan 44, AFCF

452.01-D Production.

61

 For a good general review of factors delaying

aircraft production, see Mat Div, OCAC, Memo

Rpt for Rcd, 8 Apr 41, AFCF 452.1 Airplanes, Gen. 62

 R&R, Chief, Mat Div, to Exec, 31 May 41, AFCF

452.1-13-F Proc of Aircraft, Actg Chief Stat Control

Div to ASW (Air) 12 May 43, AFCF 452.01-B Production.
CHAPTER XII

Organizing for Production

Posing the Problem

Military Foresight

Of the many lessons available to the

War Department from the experience of

mobilization in World War I, perhaps

none stood out more vividly than this:

If the nation were to avoid the scramble

that marred the rush to arm in 1917, any

future attempt at mobilizing the nation's

resources for war must be co-ordinated

and controlled by a single, central agency

under civilian control. This conclusion

was embedded in the policies of the War

Department and in the thinking of its

officials. The Army Industrial College,

the special military school on economic

mobilization for war, laid down the dictum in its teachings and its textbooks.1

With more than 800 graduates scattered

throughout the arms and services of the

Army, not to mention the Navy, the influence of the school was certainly appreciable. Moreover, the official mobilization plans actually drawn up on the eve

of the war spelled out in unmistakable

terms the principle of civilian dominance

over a single, central agency.2

The official mobilization plan of 1939

visualized the agency specifically as a

War Resources Administration (WRA)

staffed by "patriotic business leaders of

the nation" and topped by an administrator, or economic czar, appointed by

and responsible to the President. Pending the selection and formation of such

an organization in time of crisis, the planners provided for an interim or caretaker

arrangement by which the Army and

Navy Munitions Board would undertake

to co-ordinate the mobilization effort until the WRA was ready to take over.

Thus the planners, the officers who had

drawn up the official mobilization plan

and had spent the between-war years

studying the special problems involved,

would for the time being become operators.

The ANMB officially consisted of the

Assistant Secretaries of War and Navy,

with their appointees. In practice, the

actual operation of the board fell to a

working staff recruited largely from the

office of the Assistant Secretary of War.

The interim function anticipated for the

board in preventing a scramble for resources followed several broad paths. A

facilities division would try to allocate

or apportion available industrial capacity for production among the various

claimant agencies; a commodities division would seek to assure a fair division

of available material resources amongst

the various claimants by resorting to a

1

 See, for example, AIC, Special Text No. 97, published just before World War II. See also, ASW,

"Annual Report," p. 7, in the Secretary's annual

report for 1940. 2

 S Doc 134, 76th Cong, 2d sess, Industrial Mobilization Plan, Revision of 1939, pp. 6-7.
248 BUYING AIRCRAFT

system of priorities; and other similar

divisions would do the same for power,

transportation, and so on, in each case

co-ordinating all phases of the mobilization in one grand synthesis, balancing

ends with means.3

After twenty-odd years of study, military officials had contrived a logical,

flexible organization as well as a number

of more or less elaborate administrative

procedures to meet the emergency when

it arrived. But the very excellence of

this forehandedness may have been deceptive. At least some officials placed an

exaggerated trust in the utility of the

advance arrangements.4 When war did

break out in Europe in the fall of 1939,

for example, the Assistant Secretary of

War promptly asked the supply services

if any bottlenecks were anticipated. To

this question an air arm officer replied

in the negative, blandly announcing that

the Air Corps would crack down on defaulting manufacturers by purchasing "in

the open market," making the defaulters

pay the difference in cost.5 Here was

faith indeed in the efficacy of advance

planning. But would there be any "open

market" to which one could turn in a

crisis when the productive capacity of

every manufacturer was strained to the

utmost?

 6 It was all very well in theory

to take a cavalier attitude and talk of

coercing compliance or to rely confidently upon procedures worked up in

advance to facilitate mobilization, but in

the event theory did not always coincide

with practice.

Theory and Practice

Events did not obediently follow in the

footsteps of the planners. Of immediate

and unavoidable concern was the troublesome reality of politics. When the

crisis arrived, the President considered

establishing a War Resources Board

which, at least according to plan, would

in an emergency be converted into a single central civilian agency (WRA) to control and co-ordinate the mobilization.

But, desirable as such an agency might

be from the standpoint of efficient operations, the President found that the board

appointed simply was not politically expedient at the moment.7

 New Dealers—

3

 Ibid., pp. 8-12. For a brief description of ANMB,

WRB, and the plan, see H. J. Tobin, "Preparing

Civilian America for War," Foreign Affairs (July

1939). p. 686. 4

 For a good example of this faith in the efficacy

of the planners' work see Assistant Secretary of War

(Louis Johnson), "Annual Report," 1940, which

claims that ANMB had led Army and Navy to a

"complete understanding of each other's problems

in industrial mobilization" (page 7), as well as the

claim: "So far these plans have proved workable and

of material value." "No need for revision of these

plans in any important particular is apparent" (page

8).

5

 Memo, Maj R. H. Magee for CofAC, 2 Nov 39,

AFCF 319.1-A. See also, ASW to Douglas, 27 Nov

39, AFCF 452.1 Airplanes, Gen, and Memo, CofAC

for Chief, Mat Div, 30 Jan 40, AFCF 321.9 B, for

examples of the tendency on the part of military

officials to "order" production according to plan,

while refusing to "tolerate" delays.

6

 Interestingly enough, Louis Johnson had himself

made a special point of the circumstance that there

would be no "open market" in which to buy munitions in wartime. See ASW "Annual Report," 1940,

p. 10. 7

 See above, ch. VIII. See also, Civilian Production

Administration, Industrial Mobilization for War:

History of the War Production Board and Predecessor Agencies, 1940-1945 (Washington, 1947), and R.

Elberton Smith, The Army and Economic Mobilization, UNITED STATES ARMY IN WORLD WAR

II (Washington, 1959), pp. 99-102. For a partisan

account, see B. Rauch, Roosevelt: From Munich to

Pearl Harbor (1st ed.; New York: Creative Age Press,

1950), pp. 158-59, 207. For a brief but more objective account, see Langer and Gleason, Challenge
ORGANIZING FOR PRODUCTION 249

even within the Cabinet—protested that

the businessmen selected for the board

might undermine the social gains of the

administration. Union leaders were outspoken in deploring the lack of labor representation on the board, and at least one

senator professed to find the board dominated by "Morgan interests." The very

title of the board proved an embarrassment. The President was currently engaged in trying to persuade Congress to

amend the neutrality laws. While assuring the legislators that such a move would

not carry the nation nearer to war, he

could scarcely afford to grant a War Resources Board large powers over the national economy. As a consequence the

War Resources Board was disbanded, and

the President tried to co-ordinate the nation's mobilization efforts by a series of

expedient makeshifts.

Not until January 1942, more than two

years after the beginning of hostilities in

Europe, did the President finally create

a really substantial superagency for centralized co-ordination and control. Moreover, even this agency, the War Production Board (WPB), received powers that

were neither all-inclusive nor overriding.

In brief, it took more than two years of

acute crisis and confusion on the production front to bring theory and practice

into line—to establish the agency that,

long before the war arrived, the military

planners had considered to be necessary.

During the two years of delay between

the time the President dropped the War

Resources Board and the day he established the War Production Board, responsible officials, both military and civilian, had to hammer out organizations to

guide industrial production in the United

States. The organizations they contrived

did indeed work. Alternate solutions

might have worked better—or worse. But

this, at least, must be stated: their task

was vastly complicated by the President's

delay in creating a centralized agency

that every mobilization study between

the wars had shown to be so necessary.

Evolution of an Organization

The President's call for 50,000 aircraft

marked the real beginning of "wartime"

mobilization for the Air Corps. While

it is true that the de jure M-day did not

arrive until after Pearl Harbor, the air

arm's de facto M-day fell on 16 May 1940.

Thus it came about that the situation anticipated by the planners simply did not

materialize. Because the actual mobilization of the air arm took place before

the nation legally engaged in war, and

because the President never felt that it

was politically feasible during that period to set up a powerful co-ordinating

superagency such as the proposed War

Resources Administration, virtually the

whole prewar rearmament effort had to

be conducted without effective, centralized leadership.

For eighteen months the law lagged

to Isolation, pp. 269-72. For a fuller treatment, see

Troyer Anderson MS in OCMH, History of the Office

of the Under Secretary of War: 1914-1941, ch. 4,

passim, and Harry B. Yoshpe, Plans for Industrial

Mobilization: 1920-1939 (AIC Study 28), pp. 67-68,

as well as Thatcher, Planning for Industrial Mobilization: 1920-40. For WRB report and other documents as well as testimony regarding WRB and the

failure to use the mobilization plan, see Hearings

of Special Com Investigating the National Defense

Program (Truman Com), pt. 42, Industrial Mobilization Plan, 1948. For what purports to be a White

House view of WRB, see J. Alsop and R. Kintner,

American White Paper; The Story of American

Diplomacy and the Second World War (New York:

Simon and Schuster, 1940), pp. 49-51, 64.
250 BUYING AIRCRAFT

behind the facts. Nonetheless, the law

of supply and demand was in full operation. Just as the planners had anticipated, there ensued a scramble for labor,

materials, and productive capacity or facilities. The abrupt increase in demand

signaled by the President's message, even

if it did eventually simmer down to substantially less than 50,000 aircraft, sent

manufacturers scurrying to their vendors

and suppliers with ever larger orders.

Their requests soon exceeded the supply,

and one manufacturer after another, confronted with rapidly approaching delivery dates, brought stories of shortages to

the attention of the War Department

contracting officers.

The President had scarcely returned

from the Hill to the White House before

the impact of his call for 50,000 aircraft

was felt in War Department circles. The

air arm hastily sent a list of "anticipated

chokepoints" to the Assistant Secretary.

Gone was the cavalier assurance of the

previous fall. No responsible official

now talked of buying in the open market.

For some items there was no source at

all; for many others only premium prices

would command deliveries. Aluminum

castings, for example, precision castings

for engine crankcases, threatened to be

unobtainable. Limited supplies of forgings, die steel, electric furnace steel, machine tools, nylon and linen for parachute harnesses, and many other items all

seemed about to wreck the rearmament

program.8 Sometimes the critical item

was minute indeed. Iridium, for instance, used in electrical contacts or

breaker points in spark plugs and various

control mechanisms, posed a trivial problem in terms of tonnage but an acute

problem technically for want of a feasible substitute. Sometimes the shortages

came in entirely unexpected fields. Steer

hides offer a case in point. While substitutes for leather flying suits might be

readily found, at the time leather seemed

to be an essential component in self-sealing fuel tanks. Since the very idea of

such tanks was a novel one first found in

captured German airplanes, no advance

provision to obtain steer hides for the

purpose had been made. The supply of

aircraft engines was especially critical.

So desperate did the mounting shortage

of power plants become during the six

months following the President's request,

Air Corps officials were driven to the expedient of borrowing engines from one

of the leading commercial airlines in order to fly off otherwise completed B-17

bombers.9

Probably no single material shortage

caused more alarm and confusion than

did aluminum. Before the beginning of

1940, Army-Navy estimates on aluminum

forgings contemplated a maximum requirement of 600,000 pounds per month.

By August 1940, Alcoa was actually producing 1,500,000 pounds of forgings a

month—but even this was not enough to

meet the mounting demand.10 Aircraft

manufacturers were unimpressed by the

claim that Alcoa had far exceeded anticipated production. They responded to

the facts as they saw them. Alcoa deliv- 8

 Memo, Acting CofAC for ASW, 5 Jun 40, SW

files, Airplanes, item 1558a. See also, TWX, PES

to Tech Exec, OCAC, 29 Nov 40, WFCF 111.3 Munitions Program Requirements. This whole file is

filled with details on shortages.

9

 R&R, Maj Gen G. H. Brett to Gen Arnold, 21

Dec 40, AFCF 400.114. 10

 Memo, Maj Wood for Col Spaulding, 27 Aug 40,

AGO Rcds, ASF Planning Br file, 452.11 P&A.
ORGANIZING FOR PRODUCTION 251

eries on forgings were far behind schedule. To keep assembly lines from stalling, aircraft builders resorted to the

expensive expedient of substituting components machined out of solid billets of

aluminum. This was slow, costly, and

put a heavy strain on already overworked

tool rooms with the further effect of aggravating the machine tool shortage.11

There were indeed numerous delays

in the production of aluminum forgings.

Dies were difficult to fabricate, die sinkers were hard to train, and heavy forging

hammers were scarce. But not all these

delays were attributable to the suppliers.

Alcoa representatives pointed out that

aircraft manufacturers were guilty of

long delays in providing drawings for

the parts ordered. Merely placing an

order was not enough. Detailed drawings and specifications had to accompany

an order. Without these it was impossible to begin work on the construction

of forging dies. If, as was often the case

in 1940, aircraft manufacturers were trying to put models into production directly from the drawing board, it is not

surprising that all too frequently the necessary detailed drawings were not available when orders for parts went out to

the suppliers. Even when drawings were

sent with the initial order, it sometimes

happened that subsequent design changes

were introduced and the partially finished

dies had to be reworked.12

While suppliers and aircraft manufacturers were busy blaming one another,

General Marshall asked, with some irritation, how the aluminum producers

could protest that there was no shortage

at the very moment the aircraft builders

were explaining away their failure to

produce by pointing to unfilled orders

for aluminum products.13 Government

officials exploring the question began to

uncover some of the answers. Apart

from the intrinsic difficulties already mentioned, they found that aircraft builders

wanted to receive an entire order of forgings in one delivery. This not only simplified inventory control but permitted

the aircraft builders to work or machine

the forgings with a single tool setting.

But to provide such bulk deliveries for

each and every aircraft builder would

require hammer capacity on the part of

the material supplier far in excess of that

available. Moreover, any such arrangement would involve the supplier in a

feast and famine cycle—coping with peak

loads just after the aircraft manufacturers

placed their orders, then trying to survive

periods of idleness.14

Clearly the solution to this problem

was to schedule deliveries to aircraft manufacturers in monthly installments, rationalizing the flow by balancing the supplier's capacity with the actual needs of

the manufacturer's assembly line. In

short, if the suppliers, such as Alcoa, on

the one hand and the aircraft manufacturers on the other, were to be kept from

bootless recrimination and unrealistic delivery schedules, some sort of impartial

arbiter would have to ride herd on all

parties concerned. 11

 See, for example, comments from North American Aviation, initialed "L.A.," 6 Aug 40, AFCF

004.4. 12

 Notes on Conference on Export Aluminum Alloy Aircraft Production, 8 Jan 40; R&R, Chief, Mat

Div, to Exec, OCAC, 7 Aug 40. Both in AFCF 004.4.

13

 Memo, CofS for ASW, 9 Dec 40, SW files, Airplanes, item 1906. 14

 E. R. Stettinius, Jr., to ASW, 10 Dec 40; SW

files, Airplanes, item 1906. See also, Telg, Douglas

to NDAC, 6 Dec 40, same file.
252 BUYING AIRCRAFT

In the absence of a central co-ordinating agency, the attempt to bring order

out of confusion fell to the existing agencies of the Executive and to hastily improvised expedients. Moreover, for want

of centralized co-ordination and control

from 1939 on, the nation's mobilization

was confused, disordered, and at cross

purposes. The process of mobilization

thus entailed a great deal of overlapping

effort and lost motion as the parties concerned sought some means of relating

their efforts.

In Search of Co-ordination

By the terms of the mobilization plan

of 1939, the Army-Navy Munitions Board

was to serve as an interim agency for coordination until some superior civilian

agency such as WRA could be established. The problems of aircraft production commanded the board's attention

immediately. Since the demand for military aircraft far exceeded available capacity, it was readily apparent that joint

planning would be necessary. There

were no air arm representatives regularly

assigned to ANMB, so the board set up

a special ad hoc "aircraft planning committee" as a working staff. The committee proposed to ensure that all material

and industrial capacity requirements for

the Army and Navy air arms were presented on a common basis.15

 This was a

useful beginning, but, unfortunately, the

need for co-ordination was not limited to

conflicts of interest between the Army

and Navy.

As early as July 1939, even before the

outbreak of war in Europe, President

Roosevelt directed ANMB to set up a

clearance committee to help place foreign

orders for military aircraft and other munitions.16

 The work of the clearance

committee was useful insofar as it kept

the military services informed as to the

nature and extent of the load being imposed upon domestic capacity by export

orders, but knowledge after the fact was

not the same as positive control. Even

if it had been granted full powers over

export orders, the ANMB would obviously have been in no position to exercise them disinterestedly since the two

military services were themselves claimant agencies seeking an ever larger share

of the aircraft production pie.

In December 1939 the President removed the clearance committee function

from ANMB and assigned it to an informal committee of Army, Navy, and Treasury representatives with instructions to

report through the Secretary of the Treasury to the White House. This group,

with its membership revised, the President subsequently gave official status as

the Interdepartmental Committee for Coordinating Foreign and Domestic Military Purchases—the President's Liaison

Committee, as it was commonly termed

for convenience.17

Although the President's Liaison Committee was officially assigned the task of

co-ordinating procurement of foreign and

domestic arms to prevent conflicts over

materials and facilities, the President appears to have been less interested in co15

 R&R, Maj Lingle to CofAC, 20 Jul 39; Col Rutherford to CofAC, 13 Dec 39; Rutherford (as chairman

of Aircraft Planning Com, ANMB) rpt of 5 Mar 40.

All in AFCF 334.7 ANMB.

16

 ASW, "Annual Report," 1940, p. 6. 17

 Watson, Chief of Staff: Prewar Plans and Preparations, pp. 300, 367; U.S. Government Manual,

July 1940, pp. 59, 62-63.
ORGANIZING FOR PRODUCTION 253

ordination than he was to ensure a flow

of supplies to France and Britain. As the

Secretary of the Treasury blandly put it

when looking back on the event several

years later, the Treasury had "a less parochial view" than either the Army or

the Navy. While this may have been

true, there were still more compelling

reasons why the President turned to the

Secretary of the Treasury. So long as

isolationist Secretary Woodring remained

at the War Department, the President

had good reason to prefer dealing with

Secretary Morgenthau, whose views more

nearly coincided with his own on aid to

the fighting allies.18 Thus it came about

that the interim co-ordinating role contemplated by the planners for the ANMB

did not work out as anticipated. The

prewar mobilization planners had not

only ignored politics and personalities

but diplomacy as well. They had given

no real consideration to the possibility

of foreign orders as a factor in the market. As a consequence, instead of serving

as a stopgap agency building up effective

co-ordinating procedures until a civilian

superagency could be formed to take

them over, the ANMB remained merely

a joint board of the two military services

without authority to exercise practical

control over export orders, which comprised a major share of armament production. This was the administrative

situation that prevailed in the spring of

1940 when the President asked Congress

for 50,000 airplanes.

Production of 50,000 airplanes threatened to swamp the aircraft industry. The

President knew full well that co-ordination was more than ever necessary; makeshift arrangements such as the Liaison

Committee would no longer do. Therefore, in May 1940, he directed that all

aircraft contracts be cleared through

Henry Morgenthau at the Treasury until final machinery could be set up. Thus,

contrary to the expectations of the prewar planners and in apparent violation

of all logic, the Secretary of the Treasury

actually served as chief of the nation's

military aircraft production—at least for

a brief period.19

From its very inception, the President

definitely regarded Morgenthau's aircraft

production role as temporary. Even before assigning it he had begun to toy with

the possibility of erecting some sort of

civilian mobilization agency as a substitute for the discarded WRB, but he

moved with the utmost caution, for here

as elsewhere Mr. Roosevelt was reluctant

to let major policy decisions slip out of

his own hands. Moreover, the time could

scarcely have been less propitious politically. The major party conventions in

the summer of 1940 were only weeks

away, and virtually any steps taken could

cause difficulty; the President would be

damned for whatever he did do as well

as for whatever he failed to do.

On 28 May the President called in

White House newsmen to explain his

18

 Henry Morgenthau, "The Morgenthau Diaries,"

Colliers (October 18, 1947), p. 17ff. Morgenthau implies that the President was reluctant to force Woodring out because of Woodring's many friends on the

Hill.

19

 Memo, FDR to SW and CofS, 24 May 40, and

Memo, FDR for Secy Treas, 6 Jun 40, SW files, Airplanes, item 1522a. See also, cross reference, Exec,

OCAC, to Chief, Mat Div, 14 Jun 40, AFCF 452.1-

13-F Proc of Aircraft, and CPA, Industrial Mobilization for War, p. 24. For suggestions of the irritations caused in the Air Corps by Treasury interference, see Arnold, Global Mission, pp. 184-87, 193,

197.
254 BUYING AIRCRAFT

next move. Having released several trial

balloons during the preceding week, he

apparently felt sure of his ground.20 To

ask Congress for new legislation, the

President explained, might cost weeks of

delay. He had decided simply to make

use of an all-but-forgotten statute on the

books since 1916. Under this statute the

President could have formed a Council

of National Defense composed of selected

Cabinet members. But this portion of

the law he chose to ignore in favor of a

more promising provision that authorized the appointment of seven civilian

experts as advisors to the Council. Using

this authorization the President established a substitute for the ill-fated WRB,

a substitute that came to be known as the

National Defense Advisory Commission

(NDAC), but was formally named the

Advisory Commission to the Council of

National Defense.21

In forming the new agency the President was certain of one thing: he would

not repeat the mistake that had virtually

forced him to shelve the WRB. Instead

of manning the new NDAC entirely with

businessmen, he pointedly added a prominent labor leader to the list. His choice,

Sidney Hillman, was carefully selected to

avoid alienating labor votes. Hillman,

the President confided to reporters off

the record, was "just half way between

John Lewis and Bill Green."

 22

The question of leadership for the commission as a whole was not so readily

solved. When a perspicacious reporter

raised this question, the President was

evasive. "Why bring up the subject?",

he parried.23 To co-ordinate its several

members, the commission was to have no

chairman other than the President himself, who would preside over a full-dress

meeting once a week. Republican critics

charged that the President was playing

politics with national defense.24 Even

within Executive circles there was concern lest the President's expedients impair the functioning of the civilian

agencies long planned for the day of

mobilization.25

For better or for worse, this was the

situation with the coming of summer in

1940: an immense mobilization had begun to gather headway. More than a

billion dollars of abnormal expenditures

sent disturbing shock waves through the

national economy. In failing to establish the civilian agency sought by the

planners, the President left the task of

co-ordinating the mobilization effort to

20

 See, for example, the advance build-up reflected

in the New York Times, May 19, 1940, 6:1; May 21,

22:5; May 22, 10:4; May 26, 1:1; and May 28, 12:4.

The most important preparatory step taken within

the administration came on 25 May 1940 when the

President used the authority given him in the 1939

reorganization of the Executive to establish the Office

for Emergency Management (OEM), as an administrative catchall for defense agencies. See Bureau

of the Budget, The United States at War (Washington, 1946), pp. 21-23. See also, Sherwood, Roosevelt

and Hopkins, pp. 157-60. 21

 Transcript of Press Conference, 28 May 1940,

Samuel I. Rosenman, compiler, The Public Papers

and Addresses of Franklin D. Roosevelt, vol. 9 (New

York: The Macmillan Company, 1941), 241ff. See

also, Act of August 29, 1916 (39 Stat 649), and Smith,

The Army and Economic Mobilization, pp. 102-03.

22

 Press Conference, 28 May 40, in Rosenman,

Public Papers and Addresses of Franklin D. Roosevelt, 246. 23

 Ibid., p. 249. 24

 See criticisms of Herbert Hoover and Governor

Thomas E. Dewey reported in New York Times,

May 30, 1940, 9:4 and 15:4. 25

 F. L. Kluckhohn in a signed article, New York

Times, May 28, 1940, 13:1, reported objections by

officials responsible for national defense.
ORGANIZING FOR PRODUCTION 255

a whole series of more or less parallel

and conflicting agencies that had to grope

their way toward some sort of modus

vivendi.

As any brand new second lieutenant

soon learns, there is a great difference

between issuing an order and getting it

obeyed. This the President clearly understood.26

 Merely appointing a commission to co-ordinate the mobilization

effort would not immediately achieve

that goal. In fact, the results were to be

quite the reverse at first since the creation

of a new agency such as the NDAC injected a further complication into an already confused pattern of administration.

To begin with, there was the matter

of recruiting a staff. Mr. William S.

Knudsen of General Motors agreed to

serve as commissioner of production and

Mr. Edward R. Stettinius, Jr., of U.S.

Steel accepted a post as commissioner of

raw materials. In addition to Mr. Hillman, who was, as previously mentioned,

to be responsible for the labor supply,

there were four other commissioners concerned with prices, farm products, transportation, and consumer interests—all

elements of the economy liable to abnormal stress under the impact of millions

on millions of dollars to be poured out

in war orders. Naming the seven commissioners was only the beginning. Beyond these seven a whole series of staff

members had to be located and then persuaded to accept the pleasures and tribulations of public service. The big banner headlines at the end of June may

have made it appear that the commission

was indeed a fact, but for the people involved the process took longer. It required time to shift gears mentally as

well as to adjust physically to the job in

Washington. Since the NDAC continued to recruit staff during the rest of the

year, it continued to suffer from the unavoidable annoyances of a shakedown

cruise throughout the period.27

The three busiest commissioners,

Knudsen, Stettinius, and Hillman, were

all men of wide experience and acknowledged capabilities in their respective

spheres. Nonetheless, like old dogs in

new beds even the most experienced of

men needed time to trample out routines

for doing business. The commissioners

as well as lesser men had to discover exactly what their jobs would be. The

President had defined the function of

NDAC in general terms but left to

time, circumstance, and the commissioners themselves the more detailed refinement of the agency's role.

Demarking the precise limits of NDAC

power was not easy. If the new commissioners and their staff members had only

vague and general notions of their functions and procedures, the various arms

and agencies with whom they were to

deal were no better informed.28 Two

26

 Press Conference, 28 May 40, in Rosenman,

Public Papers and Addresses of Franklin D. Roosevelt, p. 245.

27

 Mr. Knudsen and Mr. Stettinius seem to have

cleaned out their corporate desks rather briskly.

See New York Times reports of June 2, 1940, IV,

7:1; and June 5, 1:3. For continuing recruitment

of staff see, for example, June 14, 13:1; June 30, 8:1;

and October 23, 13:6. 28

 For evidence of initial efforts to define the role

of NDAC, see U.S. Government Manual, July 1940,

pp. 50-53. Compare with comments in NDAC Official Bull 3, Defense, 30 Aug 40, and WPB Doc Publication 1, Minutes of the Advisory Commission to

the Council of National Defense, passim.
256 BUYING AIRCRAFT

GENERAL KNUDSEN

weeks after the formation of NDAC, the

executive at OCAC noted that the President had set up "two commissions" that

would "undoubtedly have dealings with

the Air Corps." He sent a staff officer

scurrying to dig up the facts about this

new development, a job that took five

days.29 In short, even old-line, established organizations such as the Air Corps

had to hammer out a working relationship with the NDAC, while the newly

appointed commissioners and their staffs

decided what their own jobs actually

should be.30 Instead of the well-drilled

and smoothly functioning team envisioned by the mobilization planners in

peacetime, the President's alternative

turned out to be something more akin

to a pick-up team of strangers who had

never played together before and lacked

general agreement on the rules of the

game.

Insofar as the air arm was concerned,

the NDAC meant for the most part the

Aeronautical Section of Commissioner

Knudsen's Production Division. As head

of the Aeronautical Section, Knudsen

chose George J. Mead, a former vicepresident and engineer at United Aircraft where he had helped develop the

famous Wasp engine. Mead had come

to Washington earlier at the call of the

Secretary of the Treasury to study the

problems of engine production, so he was

already at least partially acclimated.

Capt. S. M. Kraus of the Navy's Bureau

of Aeronautics and S. Paul Johnston, former Co-ordinator of research for the National Advisory Committee for Aeronautics (NACA), came in to serve as

administrators in the new organization,

while Mr. T. P. Wright (Vice President

and Director of Engineering at CurtissWright) and A. E. Lombard, Jr. (of California Institute of Technology) brought

to the staff professional skills of the utmost importance in dealing with the immediate problem of production scheduling.31

Broadly speaking, the NDAC was "to

coordinate" the nation's defense effort.

29

 R&R, Exec, OCAC, to Chief, Info Div, 14 Jun

40, and notes in reply, 19 Jun 40, AFCF 334.8 OPM. 30

 For details, see WPB, MS, Relations Between the

Armed Services and NDAC, Special Study No. 3, 5

Nov 43. For an unfortunate example of NDAC-AC

relations, see Wright to Arnold, 23 Aug 40, and related correspondence, AFCF 452.1-191.

31

 WPB, Aircraft Production Policies Under the

National Defense Advisory Commission and Office of

Production Management: May 1940-December 1941,

Special Study No. 21, 30 May 46, p. 4.
ORGANIZING FOR PRODUCTION 257

But what did that mean? According to

the old capitol saw, a Co-ordinator is simply a fellow with a desk between two expediters. As a matter of fact, the NDAC

undertook both functions. Sometimes

the expediting was imaginative and beneficial. This was certainly true, for example, when NDAC took the lead in urging

the armed services to use "letters of intent" authorizing manufacturers to proceed with construction even before completing the details in formal contracts.32

On the other hand, there were times when

NDAC officials seemed to go beyond coordinating and expediting to intrude in

what were essentially military decisions.

The borderline was not always clearly

defined, of course, but the military men

were understandably disturbed when, for

example, NDAC officials in search of

greater output questioned the advisability of putting the four-engine B-17

bomber into mass production.33

Probably the most important contribution of the NDAC to aircraft production

is to be found in the comprehensive series

of reports undertaken by the Aeronautical Section staff to survey the task at hand

and define the nature and scope of the

job to be done. The titles of the several

staff studies are sufficient to suggest their

value. Report No. 1, 11 June 1940, Military Air Force of the United States; Present and Anticipated set up production

targets. Report No. 2, 14 June 1940,

Aluminum Alloy Requirements for Airframes, Engines, and Propellers; 50,000

Plane Program tackled one of the most

pressing bottlenecks. Subsequent reports

went on to measure available productive

capacity for airframes, engines, and other

major components.34 These studies were

of value (even if not always fully exploited) insofar as they helped familiarize the civilian staffs with the question

as a whole and to survey and define the

tasks in hand.35 But to survey the problems was not to solve them. While it is

undoubtedly true, as "Boss" Kettering

has said, that "a problem defined is half

solved," a very large half was yet to be

mastered. There were shortages growing

daily more pressing, and somehow or

other the makeshift administrative organizations charged with orienting the

national drive to rearm would have to

prevent the uncontrolled scramble that

had marred the pace of mobilization in

previous wars.

The NDAC and the Air Corps

When the NDAC first began to function as an agency for co-ordinating the

rearmament effort, the whole vexing

problem of shortages had already become

32

 Memo, Mr. Eaton (NDAC legal consultant) for

Col Schulz, OASW, 29 Jul 40, SW files, Airplanes,

item 1652. 33

 Memo, ASW for Knudsen, 18 Oct 40, SW files,

Airplanes, item 1824. See also, TWX, Echols to

Brett, 23 Jul 40, WFCF 111.3 Munitions Program.

The tendency of NDAC officials to slight military

considerations (range, etc.) in emphasizing production offers an interesting counterfoil to the contentions of Eliot Janeway in The Struggle for Survival

(New Haven, Conn.: Yale University Press, 1951),

pages 212-18, regarding the role of NDAC-OPM in

weapon design, etc.

34

 See above, ch. VIII. 35

 By no means insignificant was the NDAC role

in educating the public, manufacturers, etc., in the

nature of the task at hand and in the problems to

be expected. See, for example, Wright, "50,000

Planes a Year: How Much? How Long?" Aviation

(July 1940). Although written before Wright joined

NDAC, the article suggests the kind of familiarization that was undertaken.
258 BUYING AIRCRAFT

acute for the aircraft industry as well as

other elements of the economy. The

plight of the industry can be explained

most readily by coming down to cases.

For example, when an important air arm

subcontractor complained of a pressing

need for a certain machine tool necessary

to continue his flow of production uninterruptedly, he asked if there were not

some standard, routine procedure whereby he might qualify for a priority to obtain the desired tool without delay. This

was a legitimate request and a most logical one too, since the mobilization planners were generally understood to have

spent the long peacetime years preparing

for just such an eventuality. Unfortunately, the air arm had little positive response to make other than to cite a recent

enactment of Congress authorizing such

priorities.36 Obviously the new law

would remain entirely meaningless until

it was translated into administrative procedures and put into force.

The plain truth of the matter was that

after more than six months of effort, no

detailed procedures had been worked out

to cope with the intricate question of

priorities; all seemed to wait upon the

action of Congress, which finally came

at the end of June 1940.37 Thus, as the

newly appointed civilian staff of NDAC

assembled, the officers in ANMB were

only beginning to contrive ways to execute the system of priorities. The peacetime planners had visualized the civilian

agency as taking over a going concern

set in motion at the onset of the crisis.

In the event, the civilian NDAC began

to consider the question of priorities at

almost the same time as did the military

ANMB.38

The ANMB, of course, was only a headquarters agency for resolving Army-Navy

conflicts, in this instance the relative importance of the claims of their respective

contractors. The actual point of contact

between business and the armed services

remained, for the Army at least, the Ordnance Department, the Quartermaster

Corps, the Air Corps, etc. It was these

services conducting day-to-day business

with the contractors that received the

complaints and passed them on to the

ANMB. For the Air Corps, this point

of contact with manufacturers was not

the office of the Chief, OCAC, in Washington, but the remotely located arm of

that office, the Materiel Division at

Wright Field. The typical Air Corps

contractor, of course, had only the

vaguest notion of the ANMB, whereas

he was actually dealing with the engineering and contracting officers at Wright

Field. It was, therefore, both logical and

sensible to direct contractors with priority requests to file them through already

familiar channels. The arrangement involved a minimum of confusion and delay, but at the same time it created a new

problem in itself. With Wright Field in

Ohio and the ANMB sitting in Washington, who would plead the case of air arm 36

 Adel Precision Products Corp., Burbank, Calif.,

to Arnold, 28 Jun 40, and reply, 11 Jul 40, AFCF

004.4. 37

 Act of 28 June 1940, Public Law 671, 76th Cong.

For evidence of earlier War Department concern

with the priority question, see, for example, ASW to

Pump Engineering Service Corp, 1 Dec 39, SW files,

Air Corps Gen Questions, item 734.

38

 See Memo, Secy, ANMB, for CofAC, 17 Jun 40,

for details of the board's priority committee and its

formation. A priority procedure was worked out

about a month later. See Proposed Procedure, 10

Jul 40, AFCF 334.7 ANMB.
ORGANIZING FOR PRODUCTION 259

priorities before the ANMB? To resolve

this difficulty the Chief of the Air Corps

established a Priorities and Allocations

Section in OCAC to serve as a special

mediator and advocate for all air arm requests.39

The advantages of maintaining a special advocate in Washington were obvious. The Priorities Section was ever

ready to present arguments in favor of

giving priority treatment to aircraft manufacturers for tools, materials, and component items. Air arm officials believed,

not without reason as it turned out in

practice, that it would pay dividends to

"retain counsel." On the other hand,

there were also some disadvantages in

this arrangement. The more layers or

echelons placed between contractors in

the field and the top of the ladder in

Washington, the more numerous the

opportunities for misunderstanding, delay, and multiplication of papers—not to

mention the difficulties involved in educating the staff members concerned in

each additional echelon.

The general procedure worked out by

ANMB and the services for handling priorities was to deal with individual cases

as they arose.40 When, for example, Bell

Aircraft asked for a priority on the delivery of a much needed Warner-Swasey

turret lathe, the request went to Wright

Field where most of Bell's earlier contractual contacts had been made. After

surveying the situation, officials there

found that a lathe of the desired type

could be secured by diversion from an

order previously placed by another Air

Corps contractor, the Lycoming Manufacturing Company. This information

was sent as a claim or request to the

Priorities and Allocations Section of

OCAC, where it was presented for adjudication to the ANMB priorities committee.

The officers of ANMB did not take long

to discover that decisions such as the one

raised by the Bell request were exceedingly difficult to make. Was the end

product at Bell more important than the

end product at Lycoming? Is an airframe

more important than an engine? And

even where the relative importance of

the end products was clear, as in extreme

cases, it proved difficult if not impossible

to make intelligent decisions on priorities since seldom were all the facts in

hand. Before assigning priorities on vertical boring mills, for example, it was

necessary to determine the number and

specifications of all those required by

contractors holding current orders and

the number available or on order with

the tool builders. This involved a series

of telegrams and phone calls to muster

the desired data—not only for boring

mills and machine tools in general but

for other critical items as well such as

raw materials and component parts.

The competition for tools and supplies

was not, of course, confined to contractors

supplying the Air Corps. Airline operators, anxious to expand with the war

boom, began to place orders in increasing numbers with the aircraft manufacturers. Since no statutory profit limit

curbed the aircraft builders' net on sale

to commercial carriers, such orders held

a considerable allure even against the

large volume promised in military con39

 Chief, Allocations and Priorities Sec, to Admin,

Exec, 2 Dec 40, and 21 Dec 40, and Col W. F. Volandt, OCAC, to Secy, ANMB, 13 Nov 40. All in

AFCF 321.9D. 40

 For a description of this procedure, see ANMB

Priorities Com Cir No. 1, 9 Dec 40, AFCF 334.7

ANMB.
260 BUYING AIRCRAFT

tracts. The obvious result was a conflict

of interests: civilian versus military production. This was equally true in the

matter of export customers for military

aircraft. The second half of 1940 was

the peak period of foreign armament purchases in the United States, and aircraft

represented a major element of these

transactions. Thus not only did manufacturers find foreign orders more profitable, but in a number of instances they

accounted for a larger volume of business than sales to the Army and Navy.41

As a consequence, the contests for materials and other scarce items were not always confined to Army versus Navy or

even military versus civilian orders but

also included domestic versus foreign orders. And in some instances, where a

manufacturer held orders from all of the

rival consumers, the contest did not even

involve different firms but the relative

priority of orders on the bench within

a single concern.

The whole summer and most of the

fall of 1940 were devoted to the search

for a workable procedure for dealing

with priorities to rationalize the scramble for resources.42

 The task moved

slowly. In mid-November the officer in

charge of priorities in OCAC could still

complain: "An effective system of priority control does not exist."

 43

 There were

a number of explanations behind this

confession. To begin with, the officers

tackling the problem were but recently

assigned and the job was novel. There

were no established routines to pursue.

This alone might readily account for

much of the delay, but there were even

more significant factors involved. Mustering information from so many diverse

sources proved hard work. Aircraft and

component manufacturers were slow to

submit reports on the tools and materials

they required, even when they were urged

to do so. And when they did reply to

such requests they sometimes submitted

their data in such a useless or incomplete

form, requiring follow-up requests for

more information before the priorities

committee could act with something approximating full information in hand.

Air Corps contractors, while calling desperately for machine tools, failed to include in their requests sufficient information as to the specifications of the tools

desired or the end products for which the

tools were to be used.44 Air arm staff officers had to educate manufacturers to appreciate the importance of, and the real

need for, backing up their priority claims

with full supporting data if they hoped

to receive favorable action from ANMB.

One explanation for the halting evolution of an effective priorities system

may be found in the "business as usual"

atmosphere that seemed to persist in

Washington. At least one journalist repeatedly jibed at the "national defenders"

who "stacked their arms" at lunch until

three, quit at four-thirty each day, and

41

 Bureau of the Budget, United States at War,

p. 19. For evidence on significance of airline and

export orders, see SW to Donald Nelson, 25 Nov 40,

SW files, Airplanes, and related correspondence filed

there, especially Memo, CofAC for ASW, 30 Sep 40,

item 1794; Memo, ASW for Knudsen, 10 Aug 40;

and Lockheed to ASW, 27 Sep 40, item 1860. 42

 A good insight on the problem is contained in

Chief, Allocation and Priorities Sec, to Tech Exec,

27 Nov and 4 Dec 40, AFCF 319.1-D. For representative illustrations of the kinds of priority problems encountered, see Chief, Facilities Sec, to Stat

Sec, 7 and 28 Jul 41, same file.

43

 Chief, Allocations and Priority Sec, to Tech

Exec, 20 Nov 40, AFCF 319.1 Production Rpt. 44

 Ibid.
ORGANIZING FOR PRODUCTION 261

then took Saturday afternoon off.45 These

strictures may have been unduly harsh,

but it was undeniably true that the Air

Corps was not yet on a war footing administratively, and OCAC had not entirely shaken off its peacetime routines.46

There was yet another consideration

that tended to retard the air arm in its

rearmament effort. The headquarters

organization of the Air Corps, OCAC,

simply was not geared to the task of mobilization. Apart from individuals of

considerable capacity, the organization

suffered from a want of administrative

talent.47 One deficiency in particular

stands out: the air arm headquarters

lacked some of the most necessary tools

of command. Procedures adequate for

a small peacetime force had become obsolete as the scale of operations mounted.

As the number of units and items under

discussion rose from tens and hundreds

to thousands and tens of thousands, crude

manual techniques of office routine broke

down. And at the very moment that officials of the newly created NDAC were

seeking statistical data on which to premise major plans, air arm officials were just

beginning to use machine record tabulations at OCAC.48

If the NDAC was a hastily contrived

and makeshift organization quite unready to shoulder the tasks confronting

it for a long period after its formation,

almost the same thing could be said of

such permanent military organizations as

OCAC and ANMB. For the reasons advanced, the processing of priority requests proceeded at a most painfully slow

pace. As late as December 1940, not a

single case of interest to OCAC had even

reached NDAC; not one had even cleared

ANMB.49

The officer in charge of priorities at

OCAC put his finger on the heart of the

matter when he declared that the officials

of ANMB had "neither the knowledge,

ability or authority" to cope with the

priority problem. He was not insulting

the individuals concerned but appraising the situation as it existed. The delays in ANMB stemmed from the circumstance that the board was attacking problems quite beyond its terms of reference.

The contentions requiring resolution

were not, as we have seen, limited to

45

 Aviation, October 1940, p. 71, and December

1940. p. 99. 46

 While individual officers did indeed work beyond duty hours, the fact remains that during the

fall of 1940, the OCAC working day ran from 8:45

to 4:15 with a half day on Saturday, and the record

reveals no civilian employees earning overtime pay.

See Memo, OCAC for all divisions, 19 Sep 40, and

Memo, Plans for Exec, 2 Oct 40. Both in AHO

Plans Div 145.91-246. For evidence on petty peacetime restrictions that continued to inhibit operations,

see, for example, TWX, PES to Admin Exec, OCAC,

13 Dec 40, WFCF 111.3 Munitions Program Requirements. 47

 For general criticisms of administrative efficiency,

see Memo, CofAC for Plans, 8 Apr 40, AFCF 321.9-B;

R&R, Exec, OCAC, to Chiefs, Mat, Plans, and T&O

Divs, 17 Oct 40, AHO Plans Div 145.91-246; as well

as Secretary Patterson's postwar reflections on lack

of "management" in the Air Corps, 6 Dec 45, Pringle

Papers, 18h.

48

 Machine record tabulations had long been used

in supply operations at Wright Field, but despite

frequent discussions on the subject from 1938 on,

little was done in OCAC to provide effective administrative tools of this character until well into

the war period. See Rpt of special com of Mat Div

(SO 217), 14 Sep 40, AHO Plans Div 145.91-246, and

Col Farthing to Col Spaatz, 22 Dec 39, AHO 145.91-

391. Machine records were first initiated at OCAC

in November 1940, almost six months after the real

mobilization began. See, Memo, J. M. Farrar for

CofAS, 28 Oct 41, AFCF 321.9 AAF Stat Control. 49

 Allocations and Priorities Sec, OCAC, Weekly

Activities Rpt, 11 Dec 40, AFCF 319.1-D.
262 BUYING AIRCRAFT

those arising between the Army and Navy

but were conflicts involving domestic airlines and orders placed by the British

Purchasing Commission (BPC) as well as

other foreign orders. What was needed,

the OCAC officer insisted, was a "procurement priority" to superimpose upon

the existing system of "military priorities." While the ANMB could iron out

conflicts between the military services, it

was clearly beyond the powers of the

board to cope with the current difficulty

since the real rivalry of the moment was

between the orders of the armed forces

on the one hand and of the airlines and

foreign nations on the other. In such a

situation only a national civilian agency

such as NDAC could hope to reconcile

priority contests effectively.

Far from trying to enlarge the powers

of ANMB or the military services at the

expense of the civilian agency, the air

arm priorities officer urged that all final

decisions on priorities should rest with

NDAC, "the only agency with the necessary perspective and jurisdiction to consider the aircraft industry as a unit and

. . . successfully administer priorities."

In this proposal he was supported by his

superiors, who urged that just such a

course be followed.50 Indeed, so pressing was the need for a single, strong,

centralized means of co-ordination and

control, air arm officials urged the appointment of a single head to "adjudicate

conflicts" currently being encountered in

the several agencies dealing with aircraft production—the Treasury, OCAC,

OASW, the Navy's Bureau of Aeronautics, the ANMB, and the British Purchasing Commission, all in addition to

the Production Division of NDAC.51

In the light of subsequent strictures by

civilian officials in the great mobilization

effort, it is of interest to note that air arm

officers sought to enhance the powers of

NDAC rather than curtail them. The

officers did this when they discovered

anew from experience what they had

known in theory all along: effective mobilization of the national economy for

war is impossible without some form of

central co-ordination. Co-ordination,

they came to realize, involves more than

the mere recording of facts in some central agency. Co-ordination implies a synthesis or rationalization of strategic plans

with production schedules, an apportionment of resources—men, materials, facilities, and output—among the various

claimant groups so as to match in the

most efficacious way the complex ends

desired with the limited means available.

As matters stood, no single agency existed that could provide such a synthesis.

The semiautonomous commissioners of

NDAC were certainly not organized to

do the job. They lacked not only coordination among themselves but were

uncertain where their powers began and

the powers of others left off.52 Until this

particular difficulty could be resolved and

until a truly effective agency for co-ordination emerged, the mobilization effort

50

 Ibid. See also, Memo, Asst CofAC for ASW,

12 Dec 40, Weekly Activities Rpt, 19 Dec 40, AFCF

319.1-D.

51

 Memo, Asst to CofAC (Gen Brett) for ASW,

19 Dec 40; Memo, Asst to CofAC for Gen Marshall,

19 Dec 40. Both in AFCF 452.1 Airplanes, Gen.

See also, AC Project Rcds (Lyon Papers), bk. 56. 52

 WPB Special Study 3, pp. 1-2.
ORGANIZING FOR PRODUCTION 263

seemed doomed to suffer an endless series

of inefficient and wasteful conflicts.53

The Achievement of Co-ordination

Although the culmination of the

mounting demands for an effective system of centralized co-ordination and control over the national mobilization did

not come until December 1940, insofar

as aircraft were concerned, responsible

officials had taken a long step in that

direction months before with the formation of a special co-ordinating committee

for aircraft production. From amidst the

welter of wartime agencies, this committee in particular offers insights of significance into the general problem of organizing production in time of national

crisis.

Until the President established the

NDAC, responsibility for co-ordinating

aircraft export sales with Army and Navy

procurement rested, in theory at least,

with the President's Liaison Committee.

This committee, it will be recalled, reported through the Secretary of the Treasury for reasons of political expediency.

However, since the Treasury was in an

echelon parallel to the War and Navy

Departments, the committee faced an inherently impossible task in its effort to

cope with the rivalry of Air Corps and

British spokesmen for the lion's share of

available aircraft output. Far from serving as a passive recorder of facts or even

as an impartial arbiter, Secretary Morgenthau became a litigant in the rivalry.54

With the formation of the NDAC, this

anomalous situation began to clear up.

In July Commissioner Knudsen of the

Production Division arranged a meeting

of representatives from the Army, the

Navy, and the British Supply Council to

decide upon a slicing of the aircraft production pie.55

 All present agreed that it

would vastly facilitate aircraft production

if a single authoritative committee could

be set up embracing Army, Navy, and

British members to make binding decisions on all three parties concerning the

apportionment of productive facilities in

the United States, rationalizing the flow

of materials, and so on.

While the formal establishment of an

Army-Navy-British (ANB) committee on

aircraft was still under discussion, the

enormous value of such a group was demonstrated by two steps taken on the basis

of the informal collaboration already accomplished. The first step took the form

of a production schedule projected by

NDAC staff members from the division

of output agreed upon in July at the

meeting conducted by Knudsen. This

schedule spread the aircraft in the current procurement program month by

month over the next two calendar years.

For the first time since the beginning of

the rearmament effort, it was possible to

plan comprehensively, and individual

manufacturers could find out what total

53

 For an insight on the misunderstandings that

marred the teamwork of the period, see Memo, Exec,

OASW, for CofS, 9 Dec 40, SW files, Airplanes, item

1901, as well as the retrospective comments of Maj

Gen J. H. Burns in Memo for M. S. Watson, 20 Feb

48, OCMH.

54

 Details of this difficult situation are suggested

in Watson, Chief of Staff: Prewar Plans and Preparations, pp. 305-09. 55

 For an excellent brief account of this meeting

and the agencies formed as a consequence, see R. D.

Masters, Handbook of International Organizations,

Carnegie Endowment for International Peace (New

York: Columbia University Press, 1945), pp. 249-53.
264 BUYING AIRCRAFT

burden they might be expected to shoulder. For the first time individual manufacturers were able to get a comprehensive view of their tasks and decide whether

or not facility expansions would be necessary. In addition, the month-to-month

schedule made it possible to order materials and component parts on a rational

basis of scheduled need rather than all

at once in panic lots that swamped vendors and suppliers alike.56

Meanwhile, at Wright Field the second

by-product of the ANB meeting in July

was coming to fruition. Manufacturers

had repeatedly pointed out that standardization among Army, Navy, and British

purchases would pay large dividends in

production by permitting the use of single assembly lines, longer production

runs, and lower unit costs. The absurdities to which the absence of standardization could lead were perhaps never better demonstrated than in the situation at

Douglas Aircraft where seven different

models of the same aircraft, each embodying minor variations to satisfy different

customers, were all proceeding toward

completion simultaneously.57

While it was readily apparent to everyone concerned that month-by-month

schedules and standardized designs would

be a great stride forward in rationalizing

and thus increasing production, it was

equally apparent that neither the schedules nor the standardized designs decided

upon were decisions that would stay put.

Each week, even each day, would raise

new difficulties and introduce new and

unexpected variables jeopardizing or

voiding the steps already taken. The

obvious answer lay in the formation of

an agency or administrative mechanism

to continue to make such decisions, revising the monthly schedules as circumstances dictated and reaching decisions

on standardization in the case of each

new item of equipment developed. After

many conferences and informal meetings

during the summer of 1940, the organizational solution finally contrived was officially designated in mid-September as

the Army-Navy-British (ANB) Purchasing Commission Joint Aircraft Committee.58

Formation of the Army-Navy-British

Purchasing Commission Joint Aircraft

Committee marked the beginning of a

genuinely effective system for co-ordinating aircraft production in the United

States. Although the committee represented the bulk of the aircraft orders

currently placed, its membership did not

56

 WPB Special Study 21, p. 35; ARCO Admin

Office, History of the Aircraft Resources Control

Office of the Aircraft Production Board and Predecessor Agencies: May 1940-September 1945 (hereafter

cited ARCO Hist), 29 Sep 45, p. 4. 57

 Lt Col C. E. Branshaw, resident representative

at Douglas Aircraft, to Asst Chief, Mat Div, 27 Jun

40, WFCF 452.1 Standardization of Aircraft. For a

survey of this topic in general, see USAF Hist Study

67, Standardization of Air Materiel 1939-1944: Controls, Policies, and Procedures, Nov 51. See also,

ARCO Hist, pp. 62-68.

58

 In addition to Handbook of International Organizations, and WPB Special Study 21, see Joint

Aircraft Committee Organization and Function,

pamphlet issued 1 Jan 42 by JAC, AFCF 334.8 JAC.

The long delay in establishing the joint committee,

23 July to 13 September 1940, may have been but

one of the unfortunate results of the dispute at this

time between the Air Corps and the Navy over their

respective aerial functions. See AGO Rcds Sec,

WPD-OPD 3807-41 and 888-103, as well as Memo,

CofAC for CofS, 3 Jul 40, with related correspondence, AFCF 360.01B, and Memo, CofAC for CofS, 5

Jun 40, AFCF 321.9-C. For further information on

the origin of JAC, see AAF Hist Study 6, Distribution of Air Materiel to the Allies: 1939-1944, AHO,

Jul 44, passim.
ORGANIZING FOR PRODUCTION 265

at the start embrace the whole of the nation's output. In addition to the export

orders placed by the British and those

taken over by them when the French

government fell, there were dozens of

foreign states placing aircraft orders in

this country, orders that were still handled by the Secretary of the Treasury

through the Liaison Committee. Likewise, orders from the domestic airlines

fell outside the competence of the committee. For all its advantages, the committee was not all embracing and could

not hope to co-ordinate the aircraft program in one grand synthesis. This piecemeal assault on the problem could be—

and subsequently, was—rectified by executive action redefining the committee's

authority to include control over all aircraft produced in the United States.59

Nevertheless, so long as it continued to

operate parallel to but apart from the

NDAC staff, the ANB Committee was

certain to be of limited value. This became increasingly evident after a month

or two of operations and led to agitation

for recasting the committee with broader

powers over the aircraft program.

In every echelon of activity in the national mobilization as the fall of 1940

wore on, responsible officials came to

recognize the crying need for centralized,

high-level, decision-making bodies to coordinate and control the intricate game

of production currently under way. They

were beginning to learn from experience

what they already knew from departmental doctrine. Thus it came about that

during December 1940 the various agitations in military circles for a strong central co-ordinating agency coincided with

favorable circumstances elsewhere. By

this time the Presidential elections were

safely over, and the NDAC had more or

less completed its shakedown.

Just before Christmas the President

took a major step forward when he decided to establish the Office of Production Management (OPM).60

 By this move

he superimposed a co-ordinating agency

on top of the existing NDAC, absorbing

virtually all of its functions. This was

undeniably an awkward arrangement.

However, the involved considerations inducing the President to create a form of

dual leadership with Knudsen and Hillman as director general and associate director general have already been suggested in the discussion of the NDAC,

and need not be recounted here.61 It is

sufficient to note that the formation of

OPM carried the administration of the

national mobilization one step nearer to

a single centralized agency such as the

War Resources Administration conceived

by the prewar planners.

Though not an ideal co-ordinating

agency, OPM at least offered greater

possibilities than the loosely contrived

NDAC. Once the initial confusion accompanying the formation of OPM had

59

 Memo, ANBPC Jt Com for SW, 5 Nov 40; Memo,

CofAC for CofS, 22 Nov 40. Both in AFCF 400.174.

See also, Actg SW to Chairman, President's Liaison

Com, 20 Nov 40, SW files, Airplanes, item 1885a.

60

 See Executive Order 8629, January 7, 1941, creating OPM, in Rosenman, Public Papers and Addresses of Franklin D. Roosevelt, IX, 689, item 154.

See there also, Administrative order and attached

note, 7 Jan 41, and item 147, p. 622, and item 153,

p. 679, press conferences explaining OPM. 61

 For suggestions on the political problems behind the formation of OPM, see Bureau of the Budget, United States at War, pp. 50-55, and Barron's,

September 16, 1940, p. 4, and November 25, 1940,

p. 4.
266 BUYING AIRCRAFT

subsided, the Aircraft Section of OPM

(taken over from the NDAC) was combined with the existing Army-Navy-British Purchasing Commission Joint Aircraft Committee. The officials of the

OPM Aircraft Section had the legal responsibility for co-ordinating the mobilization effort in general and the aircraft

program in particular. Moreover, they

alone could co-ordinate the aircraft program with the mobilization as a whole

through the machinery of OPM. On

the other hand, the ANB Joint Committee in its turn was capable of a unique

contribution too. Its members represented three different going concerns.

Each of these had its long established relationships with industry, and each had

its years of accumulated experience. In

addition, the members of the committee

either occupied positions high in the

military hierarchy and near the point of

effective decision making or enjoyed

ready access to those who did. Clearly

the combination of organizations offered

decided advantages, and on 22 April 1941

by mutual agreement the interested parties decided upon just such a move.62

The expanded committee, which added

OPM representatives as voting members

to the Army-Navy-British Purchasing

Commission group, styled itself the Joint

Aircraft Committee (JAC).63 The two

War Department members were Maj.

Gens. Henry H. Arnold and George H.

Brett. The Navy members were Rear

Adm. J. H. Towers and Capt. D. C. Ramsey; thus both the Air Corps and the

Bureau of Aeronautics were represented

by officers in the top echelon of command.

The two members from the British Supply Council were Sir Henry Self and Mr.

C. R. Fairey, both from the British Purchasing Commission, the former an Under Secretary in the British Air Ministry,

the latter a well-known British aircraft

manufacturer. The two members from

OPM were Mr. Merrill C. Meigs, head

of the OPM Aircraft Section, and Mr.

T. P. Wright, whose work in the NDAC

and OPM had already won him considerable recognition quite apart from his

reputation in engineering circles.

By the terms of its organic directive,

the JAC was put in a position to give the

aircraft program the kind of co-ordination and control it required. The directive vested the committee with power to

schedule all deliveries: Army, Navy, British, other foreign orders, and domestic

commercial orders. This included the

power to schedule the production of component parts as well as end products, and

the power to make decisions prescribing

standardization to be binding on all the

parties concerned.64

In practice the mandate of the JAC

brought several far-reaching results. Disputes among the several users or agencies

sharing in the end products could be settled speedily by frank discussion among

the principals, who had authority to make

their decisions binding.65 This was par62

 WPB Special Study, 21, pp. 14-15. 63

 SW to Gen Arnold, 22 Apr 41, AGO Rcds, SW

files, Airplanes. The term Joint was, in the light

of subsequent developments, rather unfortunate, for

joint came to be used for Army-Navy agencies whereas the term combined was used for U.S.-British agencies.

64 Ibid.

65

 For illustrative instances of the type of disputes

confronting JAC, see SW to SN, 8 Mar 41, and JAC

to CNO and CofS (April 1941), in AGO Rcds, WPDOPD 888-103, as well as Chief, Bureau of Aeronautics, to CGAAF, 14 Feb 42, and Memo, Exec,

Mat Div, to CofS, 16 Feb 42, AFCF 452.1 Production.
ORGANIZING FOR PRODUCTION 267

ticularly significant in the matter of standardization. Having pursued their courses

independently and freely for many years,

the Army, the Navy, and the British had

each evolved numerous items of equipment along entirely different lines. This

was especially true with regard to armament, communications, oxygen equipment, and other such accessories. Standardization in these areas would require

great concessions by all if substantial

gains in the direction of simplification

were to be attained, and, especially after

the passage of the Defense Aid Supplemental Appropriation Act in March 1941,

standardization was more than ever essential if the production authorities were to

increase output by reducing the number

of different types of the same item being

turned out.66

Probably no single function of JAC

was more important than its role in issuing continual revisions of the aircraft

production schedule. This the committee accomplished by simply revising repeatedly the initial effort NDAC made

in scheduling. Report 8 on airframes

was projected through a series of revisions designated 8A, 8B, through 8L in

March 1943, when a major recasting took

place to convert the schedules from a

"target" basis to a more realistic basis of

deliveries believed to be possible. Similar schedules were extended from the

original NDAC Report 9 on engines and

Report 10 on propellers.67

The three reports and their revisions

constituted a most useful tool for mobilization planning and control. All depended upon these basic schedules. Not

only were they vital in planning to keep

each of the three major items—airframes,

engines, and propellers—in proper relation to one another, each schedule also

provided the directive for an enormously

complex series of activities following in

its wake. If, for example, the official airframe schedule called for a monthly rate

of production that a given aircraft builder

could not meet, then expansion of facilities might be required. This would set

up a demand including such critical items

as structural steel and machine tools with

which to equip the new facilities—in addition to the raw materials and components required to construct the prescribed

number of airframes on the basic schedule. Each such collateral demand—for

steel, tools, components, etc.—of itself set

in motion a similar chain of events that

involved an equally complex set of responses. The schedule was the heart of

an intricate network of impulses. The

task of the planners and co-ordinators was

to keep the whole delicate network in

balance. If combat operations showed

an aircraft type to be obsolete, it might

have to be removed from the schedule.

Or a manufacturer might fail, despite all

urging and assistance, to meet the output

prescribed in the schedule. In either

event the schedule was revised accordingly. This in turn involved a careful

reapportionment of all the various types

66

 JAC, Organization and Function, 1 Jan 42, especially exhibit entitled "Organization and Function

of Working Subcommittee on Standardization of the

JAC." Typical items standardized, in addition to

aircraft as such, included: safety belts, seats, pyrotechnique equipment, spare parts for engines, and

self-sealing fuel tanks. Mr. T. P. Wright served as

chairman of this committee throughout the war.

67

 ARCO Hist, pp. 31-39, and WPB Special Study

21, pp. 15-22.
268 BUYING AIRCRAFT

of contributory items that were being fed

toward the end product. Unless these

items too were diverted and directed into

useful channels, much of the national

mobilization effort would be lost. The

great contribution of JAC stemmed from

its capacity to make and enforce the decisions so vital in keeping the production

schedule sensitively balanced, attuned to

the facts of the ever-evolving mobilization scene.

That JAC was a successful agency is

perhaps best attested by its survival to the

end of the war. Since it was a successful

administrative device, it may well justify

careful analysis. This seems especially

true inasmuch as the prewar mobilization

planners never mentioned any organization similar to the JAC. What were the

peculiar characteristics or features making this unique and entirely unplanned

agency so useful and so successful in surviving the periodic reorganizations that

beset all other wartime agencies?

The JAC in Retrospect

One explanation of the survival and

effective operation of JAC during the

war years can be found in its stature. The

agency was established high enough in

the chain of command to speak with authority. Its decisions were binding. But

this very advantage carried with it an inherent disadvantage, for the higher one

goes in the echelons of command, the

further one gets from the facts of the case.

As one mounts further and further from

the level of day-to-day operations, the

more difficult it becomes to secure the

information so necessary in making sound

decisions. While it is all very well to create an agency at the highest echelon to

speak with authority, the decisions of

such an agency are no better than the

facts and figures fed to it. This problem

—the fundamental need for a close relationship between the decision-making

and the operating echelons—was recognized by a number of experienced air

arm officials. Some, indeed, were only

too well aware of the frustrating isolation

that beset "desk" officers in Washington

remote from the engineers at Wright

Field.68 Although the special circumstances that separated the Washington

headquarters from the matériel functions

at Wright Field made this a particularly

difficult matter for the air arm, the problem applied to any hierarchical organization.69

The Joint Aircraft Committee was no

exception to this general rule. It had to

face the fundamental problem of how an

agency can keep its head in the upper

stratosphere of command and still retain

its feet upon the solid ground of fact derived from a working familiarity with

operations at the grass-roots level. Broadly speaking, the solutions JAC contrived

involved two separate administrative devices.

The first administrative mechanism to

be tried was the "working subcommittee."

For this device there was ample precedent

in the experience of the Joint Board,

which for years had freed its high-ranking members from well-nigh impossible

burdens by assigning most if not all of

the staff papers to working parties of

68

 For pointed illustrations, see IOM, Chief, Mat

Div, for CofAC, 13 Sep 39, AFCF 321.9 Mat Div Organization; and Memo, ACofAS, MM&D, for CGMC,

4 Jun 43, AFCF 452.01B Production. 69

 ANMB, for example, encountered much the

same sort of difficulty. See Secy, ANMB, to CofAC,

10 Sep 40, AFCF 334.7 ANMB.
ORGANIZING FOR PRODUCTION 269

younger officers. Thus, JAC appointed

subcommittees on allocations, standardization, and so on, with appropriate subgroups specializing in everything from

armor plate to windshields. The subcommittees, of course, could be no better

than the talent serving them, so in the

composition of these working parties lay

the success or failure of the device. But

here lay the rub. To transplant a wellinformed engineer from Wright Field to

Washington was to cut him off from the

roots that continuously nourished him

with new information—precisely the information that made him valuable to the

committee. This difficulty was resolved

by the use of visiting witnesses, experts,

project engineers, and the like, men thoroughly familiar with their own specialties, who could be called in to give evidence before the committee when needed

but not kept so long as to remove them

from intimate contact with their work.70

Insofar as the problem of standardization was concerned, JAC successfully

blended the authority of high rank with

the technical ability of specialists by the

use of visiting experts, but in the matter

of scheduling and allocation somewhat

different techniques were required. The

compilation of accurate production schedules projecting many months into the future depended more upon the realism of

the estimates supplied by the manufacturers than upon the technical skill of

individual witnesses before JAC or its

subcommittees. In July 1943, for example, JAC received information to the effect that the Fisher long-range fighter,

P-75, anticipated the following production in 1944: 1 unit in May, 10 in June,

50 in July, 100 in August, 175 in September, and 250 in October.71

 If this

projection was accepted by the JAC

scheduling subcommittee, a whole sequence of correlated factors would be

set in train: an appropriate number of

Allison V-3420 engines would have to

be earmarked to meet this schedule as

well as propellers, landing gears, and

hundreds of other components, accessories, and materials. As it turned out, the

P-75 never emerged from the test stage,

let alone reached full production.72 To

have scheduled the flow of vast quantities

of materials for the P-75 would have impaired the war effort by diverting scarce

resources into what turned out to be a

dead-end road. Clearly the schedule

makers could be no more accurate than

the data received by them. And it was

realization of this circumstance that led

JAC to its second solution for keeping

its feet on a firm foundation of accurate

information.

Besides authorizing the use of expert

witnesses, the directive establishing JAC

also provided for the formation of a working echelon, the Air Scheduling Unit

(ASU), at Wright Field. The ASU was

to serve as a central clearinghouse for

information from the industry to JAC

and from JAC to the industry.73 The

directive did not devise the scheme of

70

 For insights on some of the problems involved in

the use of expert witnesses before the working subcommittees of JAC, see IOM, Asst Exec, Mat Div,

OCAC, for Tech Exec, WF, 21 May 41; Chief, Engr

Sec, Mat Div, OCAC, to Chief, PES, WF, 28 Aug 41;

and IOM, Chief, PES, for CGMC, 28 Mar 42. All

in AFCF 334.8 JAC.

71

 Memo, ACofAS, MM&D, for JAC, 21 Jul 43,

AFCF 452.01B Production. 72

 Army Aircraft Model Designation, June 1946,

pp. 76-79. Total number procured (of 2,500 on production contract) was six. 73

 SW to Gen Arnold, 22 Apr 41, SW files, Airplanes.
270 BUYING AIRCRAFT

the working echelon for JAC but merely

took official cognizance of an arrangement that had been in operation for some

time. Like JAC itself, the Air Scheduling

Unit was not planned; it grew out of the

accidents of circumstances.

When the President replaced the

NDAC with OPM during January 1941,

the civilian officials charged with co-ordinating aircraft production realized the

futility of trying to perform the mass of

detailed work on production co-ordination with a yet-to-be-recruited staff in

Washington when the Air Corps already

had a trained staff doing this very type

of work at Wright Field. Discussion was

still under way on a plan to establish a

working echelon for OPM at Wright

Field when in February 1941 a directive

from Knudsen, the new director general

of OPM, ordered the Aircraft Section

(OPM) to utilize the existing Production

Engineering Section of the Air Corps'

Materiel Division at Wright Field as a

working staff and point of contact with

the industry. By April it had become

apparent that even with the best will in

the world, an air arm monopoly in the

flow of information to the Aircraft Section of OPM as well as to JAC was hardly

conducive to the ideal of impartiality. By

mutual agreement, therefore, the existing

unit, the Air Scheduling Unit of the Production Engineering Section at Wright

Field, was modified to serve the several

contending interests of the Washington

echelon—the Army, the Navy, the British, and OPM—by adding representatives

from the parties involved.74

In practice the modified ASU was a

board of three officers, Army, Navy, and

British, along with an OPM representative. These men together served as a

field staff (for JAC as well as OPM) reconciling conflicts whenever possible without reference to Washington. Of course,

three or four officials in Ohio were no

more capable of handling the vast array

of details—surveys, allocations, etc.—involved in scheduling the aircraft program

than were three or four officers sitting

in Washington, even if those in Ohio

were nearer to the vital source of information. The ASU had to rely upon the

existing staff services of the Air Corps

Materiel Division at Wright Field. By

the end of 1941 more than 100 officers

and 800 civilians at the Materiel Command headquarters were employed in

executing the mechanical details of scheduling: assembling bills of materials, compiling flow charts and delivery schedules,

reconciling conflicts, and adjusting other

difficulties. In 1942 more than 3,000

civilian and military personnel, including both Army and Navy officers, were

absorbed in this work.75

The task performed for ASU was truly

staggering. There were some 6,000 or

7,000 different types of end items to

handle. These involved more than 9,000

different bills of materials, any one of

which might embrace from one to literally hundreds of different types of components and basic raw materials.76

 All

the items and quantities had to be coded

74

 WPB Special Study 21, pp. 16-19.

75

 Col W. S. Cave, RAF, British History of the

Aircraft Scheduling Unit, May 45, copy in ICAF

Library, pp. 5-6. This historical sketch, including

illustrative supporting documents, gives an excellent

cross section of the ASU in operation. Colonel Cave

was the British representative on ASU throughout

its life.
ORGANIZING FOR PRODUCTION 271

and carded for machine records tabulation. Then, when total requirements

had been compiled—for any given moment and always subject to major change

—the gap between need and available

supply had to be reconciled in terms of

the end item preferences laid down in

JAC directives, by whatever expedients

seemed best. Sometimes ASU would divert a shipment of materials or components from one user to another to meet

a temporary crisis, arranging meanwhile

to "repay" the loan in the next shipment.

Sometimes ASU "borrowed" components

already delivered and in stock at one endproduct assembly plant and "loaned"

them to another similar end-product

plant to prevent impending stoppages

along the assembly line. On at least one

occasion an ASU agent broke up an impending shortage by pleading successfully with an alcoholic diemaker to stay

sober just long enough to finish the critical item he had in hand.77

In general, the technique of ASU

was informal. Staff members worked by

phone, telegram, letter, or personal visit

to arrange ad hoc adjustments, based on

the willing co-operation of the parties

concerned. Only as a last resort, in about

one case in a hundred, was it necessary

to employ mandates, formal compulsory

directives binding under law.78 Surely,

here was impressive evidence of the patriotic spirit of the nation's often maligned businessmen. Shortages needing

relief frequently ran to more than 1,000

a month. Between 1942 and 1945 ASU

received formal requests for assistance in

reducing 50,000 bottlenecks, and this figure ignores entirely an unknown number of informal requests.79

Accident and chance played a large

part in the evolution of the Air Scheduling Unit. The name itself tells the

story. What started out as a unit within

a branch of a section in the Air Corps'

Materiel Division ultimately became an

international or combined Army-NavyBritish and OPM agency for adjusting the

flow of materials for an aircraft program

involving literally dozens of claimant nations on a worldwide basis. In a sense,

the story of ASU is the story of JAC.

Neither was planned; both evolved. They

were the expedient outgrowth of experience—men groping pragmatically until

they hit upon workable and successful

organizations to cope with situations confronting them.

To call JAC a success is to oversimplify. This device of command did indeed work and on the record worked

well. But if administrative history is to

have any real meaning, it would seem to

be of more importance to know why JAC

worked well than to sing in praise of its

76

 The Air Scheduling Unit, prepared under direction of Brig Gen E. W. Rawlings, Sep 45, in Pringle

Papers, OCMH, p. 6. 77

 For an excellent account of ASU in operation,

supplementing Colonel Cave's account mentioned

above, see History of Navy Membership in the Aircraft Scheduling Unit, 1941-1945 prepared by the

Bureau of Aeronautics representative on ASU, Jun

45.

78

 Cave, British Hist of ASU.

79

 The ASU, p. 5. History of Navy Membership

in ASU gives the following breakdown of 47,000

critical shortages mentioned on page 18: 56 percent

concerned materials and 44 percent concerned components. Of materials, 21 percent were in steel, 22

percent in aluminum, 9 percent in other nonferrous

metals, and 4 percent in nonmetallic items. Of aircraft components, 23 percent were in bearings,

pumps, valves, fittings, etc.; 13 percent were in electrical equipment; 3 percent in landing gear; 2 percent in engine accessories; and 3 percent in radio

and instruments. This sample was taken after

February 1943 and thus does not accurately reflect

the whole war period.
272 BUYING AIRCRAFT

accomplishments. The individuals who

served on the committee deserve full

credit for their contribution to whatever

effectiveness it may have had, but, in attributing achievements to the men involved, it is possible to overlook the part

played by the conditioning circumstances

—the organizational structure and procedures that gave scope to and made possible the work they did. In other times

chance will place different men in these

or similar roles, and the varying abilities

of those who served in the past will be

of far less moment than the historical

record of the organization in which they

served.

The Joint Aircraft Committee bridged

the gap between the authority of high

command on the one hand and on the

other the familiarity with technical details found in the operating echelons.

This it did by a series of administrative

devices: working subcommittees, visiting

experts, field parties with delegated powers, and so on—each evolved in practice.

Sometimes the evolutionary process was

halting and painful. There were stresses

and strains, not to mention repeated malfunctionings. As rival interests jockeyed

for power there were personality clashes

and instances of acute interservice competition against and amongst the representatives of JAC.80

 On occasion the

whole mass of paper in the JAC mill

seemed to lag and accumulate in hopeless confusion.81

 Yet out of all this there

emerged an effective tool of administration. Moreover, at least some of those

in positions of authority actually did

garner significant lessons from this experience, as subsequent events were to

demonstrate.

After Pearl Harbor the more centralized War Production Board (WPB) replaced the OPM, but through most of

1942 this change had little direct effect

upon the organization for aircraft production beyond alterations in terminology. During the fall of 1942, however,

the continuing gap between the vast programs of aircraft production planned and

the disappointing level of output on the

assembly lines led to an agitation for

reform.82

As chairman of WPB, Donald Nelson

was inclined to attribute much of the

trouble to the existing administrative

system. Whatever his intentions were,

in air arm circles they were regarded as

an effort to build up a Washington staff

—perhaps in the nature of a Ministry of

Supply—to replace that already functioning at Wright Field. General Arnold's

memory extended back to World War I

when a similar concentration in Washington was tried with results that were

unimpressive if not disastrous. In the

light of this experience, he pointed out 80

 For an example of the political hazards encountered by JAC, see Memo, Maj Timberlake for Col

Meyers, 10 Oct 41, and Gen Arnold to Senator Lister

Hill, 14 Oct 41, AFCF 334.8 JAC. For an example

of personality conflicts, etc., see Memo, Rear Adm

R. Davison for Brig Gen G. E. Stratmeyer, 19 Mar

43, with related correspondence, AFCF 334 JAC.

For examples of the tendency of various claimants to

seek membership on JAC, see Brig Gen B. E. Meyers

to Dir, Gen Dept of Munitions and Supply (Canada),

19 Sep 42, and CGASC to CGAAF, 30 Jan 43, with

Inds, AFCF 334 JAC.

81

 Memo, Deputy Recorder, JAC, for Chairman,

Subcom on Production Programs, 26 Apr 43, AFCF

334 JAC. For a typical example of the grist in the

JAC mill, see Memo, Actg CofAC for CofAAF, 31

Dec 41, AFCF 334.8 JAC. 82

 ARCO Hist, pp. 21-22.
ORGANIZING FOR PRODUCTION 273

certain fundamental weaknesses in the

Nelson scheme: a board such as the one

that seemed to be proposed could speak

neither authoritatively for command, as

could JAC, nor could it possess the

knowledge of technical details available

to ASU.83

General Arnold must have placed his

shots well; in the subsequent reorganization of the aircraft production organization, the features he had identified as

essential were retained. The Joint Aircraft Committee remained intact. And,

although the Aircraft Branch of WPB

was abolished, its functions were absorbed

by the newly created Aircraft Resources

Control Office (ARCO), which served as

a secretariat or working party for the Aircraft Production Board (APB) established

within WPB as the top decision-making

and co-ordinating agency for air matériel.

Significantly, both of the newly established agencies, APB and ARCO, made

use of the principles for which General

Arnold had argued. As soon as it was

set up, ARCO delegated most of its operations to the ASU at Wright Field, which

continued operating as if no change had

occurred. Equally revealing was the

composition of the new Aircraft Production Board. It mirrored the pattern

found successful in JAC and drew its

members from the ranks of officials in the

highest echelons, both military and civilian, who could speak with informed

and decisive authority—men who knew

what they were talking about and had

the power to act.84

Not least among the external factors

contributing to the effectiveness of the

new machinery for co-ordinating aircraft

production was the physical location of

the offices involved. Whereas the original Aircraft Branch of WPB had been

housed in the Social Security Building,

where Mr. Nelson had his headquarters,

the reconstituted Aircraft Board and its

administrative offshoot, ARCO, were

moved into the Pentagon. This greatly

facilitated dealing with military procurement officials. At the same time, there

was no loss of contact with WPB, for the

chairman of the Aircraft Production

Board, Mr. C. E. Wilson, was also vice

chairman of WPB.

Thus, by the end of 1942, when the

penultimate aircraft production reorganization took place, insofar as air matériel

output was concerned the agencies for

controlling and co-ordinating production

had been hammered into a rough approximation of what the mobilization planners had recommended for many years

during peacetime. To be sure, the actual forms of the organizations finally

contrived were certainly unlike anything

visualized by the prewar planners, but

the principles underlying them were

essentially traditional: centralization of

authority for co-ordination and decision

and decentralization of operations in order to leave the technical details in the

hands of those familiar with them.

83

 CGAAF to Donald Nelson, 22 Nov 42, AFCF

452.01A Production.

84

 ARCO Hist, pp. 23-30, as well as British and

Navy histories of ASU cited.
CHAPTER XIII

Legislation for Procurement

Wartime Buying With

Peacetime Laws

The Problem: Inadequate Laws

At the momentous White House meeting of November 1938 the Administration turned a corner in policy and decided upon aerial rearmament.1

 At that

time the President called for 10,000 aircraft in two years' time. This Executive

pronouncement stirred up a flurry of

planning activity in Air Corps and War

Department circles as crash programs

were concocted to meet the new target

figures. And in short order the major

obstacle blocking completion of the President's bold new program became all too

evident.

To procure 10,000 aircraft in the

United States—or even half that many—

within the two years prescribed was patently impossible if the War Department

were constrained to use the forms of

competition prescribed by law and by

administrative ruling.2 Under the prevailing system of competitive procurement evolved during the thirties, contracts for production quantities of aircraft were awarded to the manufacturer

who submitted the best sample aircraft

in an open competition involving advertising for bids months in advance, the

laborious fabrication of samples to be

submitted, a careful evaluation of these

samples, and, finally, the drafting of contracts with the winning manufacturer in

each competition. This process may

have been scrupulously fair and quite

above reproach politically, but it was

time consuming. Moreover, it led to a

well-nigh fatal concentration of business.

Who won the competitions? Presumably the most efficient manufacturers.

The rearmament program had no sooner

got under way than it became clear that

the bulk of the production contracts was

concentrated in the hands of three or

four firms who soon had more work than

they could handle. To deliver within

the two-year program period these firms

would have to expand their facilities.

But meanwhile more than a dozen aircraft manufacturers, the losers, were confronted with empty factories and idle assembly lines for want of aircraft orders.

Unless some means could be found to

circumvent the requirements on competitive bidding, it would be impossible

to meet the President's target figure in

time.

The laws governing aircraft procurement were peacetime laws hardly suited

to an emergency situation with its crash

programs seeking overnight results. The

1

 See above, ch. VIII. 2

 Memo, CofAC for ASW, 28 Feb 39, AFCF 452.1

Proc of Aircraft. See above, chs. IV and V.
LEGISLATION FOR PROCUREMENT 275

normal, legally prescribed procedure, for

example, stipulated that advertisements

for competitive bids had to be carried

in three leading aviation journals inviting returns in ninety days. When Air

Corps staff officers tried to carry out the

President's hurry-up program during February and March 1939, they discovered

that aeronautical journals as well as aircraft manufacturers had to have lead time.

Not until the issues of the following

month could they insert their invitations

to bid, and this would mean that bids

would return no sooner than the following July.3

 The forms of law were geared

only to the needs of peace. As a consequence, Air Corps attack bombers, a type

in which the air arm was sadly deficient

at the time, even if promptly procured

with funds from fiscal year 1939, would

not be delivered until July 1941, two

years hence.4

If the President's instructions were to

be carried out, Air Corps officials had to

find some way to circumvent the obstacles in the law and spread the production

load over the entire aircraft production

capacity of the nation.5 Their first effort

in this direction was to scan the language

of the existing laws themselves in the

hope of finding some loophole to cope

with the situation. Sure enough, the legislators had anticipated exemptions and

deviations under certain circumstances.

The Defense Act of 1920, for example,

authorized the Secretary of War to procure by direct negotiation, without regard to the usual statutes calling for competition, "in time of war or when war is

imminent." This would seem to provide just the authority desired. Unfortunately, this convenient escape route

was blocked as a solution to the problem.

An old opinion of the Attorney General

held that "emergency" procurement for

a time when war was "imminent" could

only be construed to mean "unanticipated" procurement. Since the President's 10,000 aircraft program was hardly

unanticipated, this door was closed.6 Similar restrictions blocked all practical use

of the escape clause in Revised Statute

3709 which stipulated the general use of

competition in government procurement.

Here too accretions of legal barnacles

vitiated the clear intent of the laws when

the emergency the lawmakers had anticipated finally did arrive.7

Inasmuch as the procurement laws appeared to offer no obvious or convenient

loopholes, Air Corps officers had perforce

to cast about for alternatives. It might

be possible, they believed, to attain the

ends sought by administrative action

within the existing laws. With this in

mind officials at Wright Field turned to

the Air Corps Act of 1926 and dusted off

the long unused device of the design competition authorized in Sections 10a to 10i.

The use of a design competition gave the

War Department a good deal of latitude. 3

 Memo, Dir, Current Proc, OASW, for CofAC, 4

Mar 39, SW files, Aircraft, item 1107. 4

 Memo, Gen Arnold for SW, 20 Oct 38, AFCF

452.1. 5

 For a detailed argument on the need for spreading the work load across the productive capacity

available, see Memo, Exec, OCAC, for ASW, 13 Mar

39, AFCF 452.1-13E, Proc of Aircraft. See also,

Memo, CofAC for ASW, 24 Oct 38, same file.

6

 Memo, W. M. Reading for Gen Arnold, 21 Oct

38, and unsigned Memo (not sent) for JAC, 22 Oct

38. Both in AFCF 452.1A Proc of Aircraft. See

National Defense Act of June 3, 1916, as amended

June 4, 1920, sec. 120. 7

 Service Sec, Proc Div, ATSC, Prewar Procurement by the Air Corps, p. 18.
276 BUYING AIRCRAFT

Not only did it shorten the time for

opening bids but it also authorized direct

negotiations with more than one manufacturer on production contracts under

certain circumstances. However, by no

stretch of the imagination was the design

competition a panacea. Design competitions in 1939 and 1940 were sure to

suffer from the same faults that led to

their abandonment before. Instead of

buying a known product, a sample aircraft reduced to practice, with the design

competition the Air Corps would be buying a paper promise to perform that

might or might not turn out satisfactorily.8

 And what is more, even when

using a design competition a firm already

filled beyond capacity with production

orders might well win the contest.

The Solution: New Legislation

When War Department officials and

Air Corps officers failed to solve their

problem either within the existing statutes or by administrative action, they

concluded that there was only one course

left open. They would have to seek

new legislation from Congress authorizing them to abandon competition in aircraft procurement during the current

emergency. With new legislation such

as this, they could negotiate directly with

manufacturers at will, placing contracts

wherever the exigencies of the situation

and the availability of capacity dictated.

In short order the headquarters paper

mill began to grind out draft bills, officers in OCAC as well as OASW and the

Army JAGO contributing. The final

version stated in part:

 9

. . . hereafter, whenever the Secretary of Wa

. . . determines such action to be in the pu

lic interest, he may in his discretion, in addi- tion to any other method prescribed by law, purchase . . ., with or without competitio

such aircraft, aircraft parts, aeronautical

equipment, or aeronautical accessories from

such sources as he may elect. . . .

But almost as soon as this proposed bill

was polished to a proper finish, War Department officials began to have sober

second thoughts about the wisdom of

putting it into congressional hands. Any

attempt to introduce novel legislation,

however desirable, might well open the

gate to congressional tampering with

some of the most useful aspects of the existing laws, notably section 10k of the

Air Corps Act. In fact, some congressmen had already done just what air arm

officers most feared: proposed legislation

that in curing one complaint would cause

a whole new sequence of ills by introducing violent changes in the existing scheme

of statutes.10 Moreover, as air arm representatives discussed their proposal on the

Hill, they discovered that congressional

sentiment was cool indeed to the whole

idea of negotiated contracts. There were

a number of factors that seemed to have

helped in shaping congressional opinion

8

 Memo, CofAC for ASW, 22 Mar 39, AFCF 452.1

Aircraft Requirements Program; and Immediate Action Letter, Chief, Mat Div, to CofAC, 22 Mar 39,

AFCF 452.1-13E Proc of Aircraft.

9

 Memo, Dir, Current Proc, OASW, for JAG, 12

Nov 38, and 1st Ind, JAGO to ASW, 18 Nov 38, Army

AG Gen Rcds Sec 400.12 (18 Nov 38); Memo, CofAC

for CofS with Incls, 14 Dec 38, AFCF 030 President

and Congress; Memo, Col Warren for CofAC, 2 Mar

39, AFCF 452.1-13E Proc of Aircraft. 10

 H.R. 3804, introduced February 7, 1939, 76th

Congress, 1st session, for example, would have imperiled Section 10k of the Air Corps Act. See draft

of SW to Representative May, Chairman, House Military Affairs Com, 16 Mar 39, AFCF 032 Air Corps

Act and Amendments.
LEGISLATION FOR PROCUREMENT 277

on the subject of negotiated contracts.

In part, faith in competitive bidding was

a product of the general congressional

climate prevailing ever since the sensational hearings of the middle thirties.

Another circumstance that may have

helped to shape opposition on the Hill

was the fact that the aircraft manufacturers themselves, speaking through the

Aircraft Chamber of Commerce, were

opposed to abandonment of the established principle of competition in quantity procurement of aircraft. Several considerations were present to motivate such

a seemingly contradictory stand taken by

the manufacturers, many and even most

of whom did not hold production contracts for military aircraft. To begin

with, President Roosevelt's scheme for a

series of air arsenals or governmentowned facilities to provide standby capacity against any sudden demand for

output in war frightened many manufacturers.11

 To some, no doubt, this reeked

of socialism; even for less doctrinaire

partisans any such plan spelled trouble

in the form of increased competition in

a business already subject to periods of

feast and famine.

Even if the President did not press his

air arsenal idea, a very similar threat had

appeared in another quarter. This was

a Senate bill proposing the establishment

of an Aviation Engineering Center, a sort

of aircraft TVA to be used as a yardstick

on costs in the aircraft industry.12 This

project, a hardy perennial in Congress,

was quite sufficient to intimidate the industry at large. There was little need to

fear that undue profits would be exposed

for few if any manufacturers in the industry were so fortunate as to enjoy them,

but all knew, as one journalist expressed

it, that any government yardstick would

never be 36 inches long.13 The aircraft

manufacturers took the only course that

seemed open to them. They climbed on

the congressional bandwagon and signed

the pledge as faithful believers in the

higher virtues of good old-fashioned competition—among themselves, that is, and

not between privately owned and government-owned facilities.14

Under the circumstances, air arm staff

planners realized there was little hope for

the legislation they proposed. The War

Department bill, which would have authorized the placement of contracts without competition, was filed away in the

traditional departmental pigeonhole until Congress in general, and the House

Military Affairs Committee in particular,

adopted a more receptive mood.15

Without the amelioration expected

from new legislation authorizing negotiated contracts, the troubles of the Air

Corps continued to mount. Moreover,

each temporary and expedient improvisation failed, as had makeshift arrangements in the past. Which is to say, because the Air Corps lacked the power to

place contracts rationally, where capacity

was available, business continued to concentrate in the hands of those few firms

that won in open competition. In a total

11

 See above, pp. 177-79. 12

 H.R. 5197 and S. 1738, 76th Cong, 1 sess. See

also, Senate Military Affairs Com, Hearings on S.

1738 to establish a military aircraft engineering center, April 7, 1939.

13

 Stubblefield, "Washington Windsock," Aviation

(August 1939), p. 53. See also above, pp. 124-26. 14

 J. H. Jouett for ACC to ASW, 1 Feb 39, with

Incls, AFCF 030 President and Congress. 15

 R&R, Supply Div to CofAC, 17 Feb 39, cited

in AAF Hist Study 22, p. 65.
278 BUYING AIRCRAFT

of 537 pursuit aircraft for which funds

were available, the necessity of awarding

contracts competitively brought the apparently inevitable result: a single manufacturer won the competition and received orders for 524 of the 537 to be

purchased. Yet on every hand rival manufacturers—the losers—continued to stare

at virtually empty factories and silent

production lines.16

Air Corps attempts to ease the situation

by awarding service test contracts helped

to distribute the load somewhat. Service

test aircraft were classified as experimental items and could be purchased without

competition under Section 10k of the Air

Corps Act. At best, however, this remedy

had only limited utility since, under the

prevailing legal interpretation of Section

10k, not more than fifteen aircraft of any

one type could be purchased in this manner.17

 Nevertheless, even an order for

fifteen items was helpful in encouraging

manufacturers to get production under

way.

For a brief period during the fall of

1939 air arm officials believed they had

stumbled upon an ingenious solution for

their difficult problem. They hoped they

could avoid the time-consuming delays

encountered in awarding contracts only

through competition by the simple expedient of exercising options on those

contracts, extending the number of items

to be purchased as desired. Here again,

unfortunately, the law stood in the way.

The prevailing ruling held that options

could not be extended endlessly, even if

the bidders were willing—which was not

always the case.18

One after another the various administrative expedients failed. At last it became apparent that a trip up to the Hill

could no longer be delayed. If Army

airmen were to be provided with adequate air power in the current emergency

—in quantity and on time—remedial legislation would have to be sought no matter how dangerous such a step might be

and no matter how unpropitious the climate around the Capitol.

Return to the Hill

When War Department leaders finally

decided to secure a revision of the statutes governing aircraft procurement, they

planned their maneuver with considerable care. As a first step, they tried to

persuade Congress that the War Department had no intention of proposing a

permanent departure from the prevailing practice of competitive procurement.

General Arnold let it be known that he

was deeply attached to the principle of

competition. He professed to oppose the

whole idea of negotiated contracts—in

principle. But as to the present emergency, that was another matter. Without abandoning one iota of his belief in

the benefits of competition as a general

rule, he urged the necessity of deviation

in time of crisis. The present moment,

he declared, was just such a crisis.19

16

 CofAC to ASW, 8 Jul 39, AFCF 452.1-13F Proc

of Aircraft. 17 Ibid.

18

 1st Ind, Current Proc Br, OASW, to CofAC, 30

Sep 39, basic unknown, AFCF 452.1 Aircraft Requirements Program; P. G. Johnson, of Boeing, to

J. P. Murray, 19 Mar 40, SW files, Aircraft, item 1454. 19

 See, for example, testimony of Gen Arnold,

Hearings of Subcom of House Appropriations Com

on supplementary WD appropriation for 1940, May

19, 1939, p. 62.
LEGISLATION FOR PROCUREMENT 279

As a second step in their campaign to

sell the idea of negotiated contracts to

Congress, War Department officials had

doctored the text of their original bill

to make it more palatable—to congressmen if not to the aircraft industry. They

tacked on a proviso which ostentatiously

applied the profit limitations of the Vinson-Trammell Act of 1936 to all procurement that might be effected under the

proposed measure.20 Taking the profits

out of war, forestalling the profiteers, was

certain to alienate few votes and it might

go far to dispel any notion that the War

Department had a sinister purpose in

mind when it asked for power to negotiate contracts rather than adhere to the

tradition of sealed bids.

As a third step, supplementing the

other preliminary approaches to the Hill,

the Assistant Secretary urged the President to lend the prestige of his backing

to the measure sought by the War Department.21

 But the President no doubt recognized a hot potato when he met one.

Although he approved the bill drafted by

the Department, he was apparently unwilling to give it his blessing or come out

publicly and wholeheartedly for it. Journalistic scuttlebutt at the time hinted

that the President's reluctance stemmed

from his unwillingness to contradict himself; having used General Foulois and his

negotiated contracts as a scapegoat in the

airmail and aircraft procurement hearings of the middle thirties, it was suggested, he was now unwilling to ask for

the power to negotiate that he had so recently criticized.22

 Whatever his motives,

the President gave the bill no special

backing.

With all the preliminaries out of the

way, War Department officials in July

1939 hopefully sent their bill to the

Hill.23 There it made no headway at

all. This was not surprising in view of

the long prevailing mood of Congress.

Even the doctored version of the bill

failed to excite any enthusiasm in the

House Military Affairs Committee. The

committee members, no less than the

President, were well aware of the attitude

of Congress on the question of negotiated

contracts. Confronted with the chill reception at first base, the staff officers riding the bill lost no time in bemoaning

its fate. They knew the measure would

never carry, so they returned to the task

with a compromise, a bill drafted along

entirely different lines.24

The new proposal did not ask Congress

to grant the War Department what military officials really wanted and needed,

that is, blanket authority to negotiate aircraft contracts at the Secretary's discretion and without resort to competitive

bidding. Instead, it called for competi20

 Memo, Col Warren for CofAC, 2 Mar 39, AFCF

452.1-13E Proc of Aircraft. 21

 Memo, Dir, Current Proc, OASW, for ASW, 8

Jul 39, with inclosed drafts of letters for President

to sign, AFCF 452.1-13F Proc of Aircraft. See also,

AAF Hist Study 22, p. 69.

22

 Stubblefield, "Washington Windsock," Aviation

(September 1939), p. 53. 23

 The bill was introduced by Representative May,

Chairman of the House Military Affairs Com, as

H.R. 7111, 76th Cong, 1st sess, July 10, 1939. 24

 The new bill, sponsored by Representative Dow

Harter of Ohio, was H.R. 7267, 76th Cong, 1st sess,

July 10, 1939. See SW to Representative May, 21 Jul

39, SW files, Aircraft, item 1229, and AAF Hist

Study 22, p. 70. Perhaps the most striking evidence

of congressional suspicion is to be seen in Public

168, 76th Congress, July 13, 1939 (53 Statutes 1000),

which authorized procurement of secret devices

"without advertising" but only after first securing

three reputable bids.
280 BUYING AIRCRAFT

tion as in the past but with a new twist.

Now, instead of awarding an entire production contract to a single winner, the

compromise bill proposed to authorize

awards, at the Secretary's discretion, to

the first, second, and third bidders in

order of merit.25 This was the so-called

split-award provision.

The split-award measure, which included the profit-limiting proviso of the

earlier War Department bill, retained

the advantages of competition and thus,

in the eyes of Congress, protected the

public purse. Yet, at the same time it

did provide the Department with some

latitude in permitting negotiations 011

price with the second and third place

winners. On balance, the split-award

bill would appear to have been a rather

watered down compromise to which no

one would take exception. However,

even this limited authorization was resisted on the floor of the House, where

the fear of negotiated contracts was repeatedly expressed. One member, for

example, asked, with characteristic if

erroneous distress, if the proposed measure would not permit awards to the

"highest bidder."

 26

 Against such opposition even the compromise split-award

bill made slow progress. Introduced in

July 1939, it was not finally made into

law until March 1940, only two months

before the disaster that was soon to befall

the democratic cause in Europe.27

Procurement Law: An Appraisal

This, then, was the situation at the beginning of the new year 1940. Even as

Hitler posed his forces for the dramatic

and terrifying assaults that marked the

early spring, the Congress continued to

see no emergency. As a consequence,

Air Corps procurement for the coming

year had to be by formal advertisement

and bids—by the traditional safeguarded

procedure of competition.28

If the law lagged dangerously behind

the facts in the matter of authorizing

emergency power to negotiate contracts,

this was equally true with regard to other

statutory provisions concerning procurement. Certainly it was so with most of

the statutes originally enacted to promote

social welfare rather than military efficiency. Many of the welfare statutes, indubitably meritorious in conception and

intent, created serious problems for those

concerned with national defense as a few

illustrative instances will show.

The Buy American Act of 1933, as its

name implies, was intended to encourage

domestic industry by requiring all purchases for the government to come from

within the nation.29 Just as the Buy

American Act was to protect the nation's

businessmen, the Walsh-Healey Act of

1936 and the Eight-Hour Law of 1912

Were designed to protect labor.30 The

Eight-Hour Law, drafted originally to

abolish the notorious stretch-out, forbade

all labor in excess of the eight-hour day

25

 Merit was determined by the formula that had

been worked out to equate performance, utility as to

types, price, etc. See above, p. 138. 26

 Cong Rcd, July 31, 1939, p. 10538. See also,

Appendix, p. 4107, extension of remarks by Representative Harter, as well as testimony in Hearings

of Senate Military Affairs Com on S. 2868 (H.R. 7267)

76th Cong, 1st sess. 27

 Public 426, 76th Cong, March 5, 1940 (54 Stat

45).

28

 TWX, Exec, OCAC, to Tech Exec, WF, 24 Jan

40, WF Proc files, 400 Proc Method. 29

 Public 428, 72d Cong, March 3, 1933 (47 Stat

1521). 30 Walsh-Healey Act, Public 846, 74th Cong, June

30, 1936 (49 Stat 2036); Eight-Hour Act, Public 199,

62d Cong, June 19, 1912 (37 Stat 137).
LEGISLATION FOR PROCUREMENT 281

on public works. Among its many provisions the Walsh-Healey Act required contractors on government work to meet the

prevailing minimum wage and pay time

and a half for labor in excess of the 40-

hour week. Similarly, the various antikickback acts imposed heavy fines and

prison sentences on contractors extorting

rebates from employees engaged on public works.31

The statutes mentioned above, a list

representative rather than exhaustive,

were broadly conceived as social legislation for general application in time of

peace. Congress had recognized, specifically in some cases, that amendment or

outright suspension would be necessary

in time of war. But what about the twilight zone that was neither peace nor

war? What about the period of rearmament from the White House decision in

November 1938, to the attack on Pearl

Harbor? In present-day jargon, this was

an era of cold war, but most unfortunately

the statutes made no mention of such a

circumstance.

As the aircraft expansion program

gathered headway in the summer of

1939 and, one after another, contracts

were let, the War Department began to

receive a wave of complaints. Many

manufacturers were dismayed at the inclusion of the Eight-Hour Law stipulations in their contracts. They were more

than willing to pay time and a half for

overtime, they assured the Department,

and had made their bids accordingly.

Only belatedly had they discovered that

the Comptroller General insisted upon

the eight-hour clause in their contracts

as an absolute prohibition on work in

excess of eight hours in any single day.

Even with overtime work allowed, the

shortage of skilled labor constituted a

serious deterrent to the rearmament program. Responsible procurement officers

believed that the Comptroller's intransigent insistence upon the exact letter of

the law might bring outright disaster by

leaving the nation unarmed in its hour

of peril.32

There followed a frantic appeal to the

Attorney General whose lawyers went

burrowing after precedents to authorize

an escape. The search was no doubt hastened on when one of the nation's leading

engine manufacturers, in fact the sole

source for liquid-cooled, in-line engines,

flatly refused to bid on an Air Corps contract containing the Eight-Hour Act provisions. This refusal was neither autocratic nor unpatriotic; the manufacturer

was quite willing to pay for overtime work

but to comply with the eight-hour curb

on labor would have disrupted his entire

plant, which was already at work on an

overtime basis.33 For months the various

legal advisors of the Government passed

this question to and fro. At last, during

the catastrophic days of May 1940, Congress acted to suspend the Eight-Hour

Law during the emergency.34 Meanwhile, nine precious months had been

lost.

31

 See especially, Public 798, 71st Cong, March 3,

1931 (46 Stat 1494); Public 324, 73d Cong, June 13,

1934 (48 Stat 948); and Public 403, 74th Cong, August

30, 1935 (49 Stat 1011).

32

 Memo, CofAC for ASW, 15 May 40, AFCF 161

Contract Requirements. See also, Compt Gen to

SW, 19 Oct 39, WF Proc files, 016 Compt Gen Decisions; and 17 Compt Gen 937. 33

 TWX, Contract Sec, WF, to Contract Sec, OCAC,

14 May 40, for Allison case; J. K. Northrup to Contracting Officer, Mat Div, 25 Jun 40. Both in WF

Proc files, 016, Compt Gen Decisions. 34

 Copy, SW to Compt Gen, 13 Feb 40, and related

correspondence, SW files, Aircraft, item 1411.
282 BUYING AIRCRAFT

Another difficulty arose from a strict

compliance with the Walsh-Healey Act

and its related statutes. For effective enforcement, these laws required the submission of public contracts to the Secretary of Labor for approval. In addition,

manufacturers were required to inform

the Secretary of the Treasury each week

the exact wages paid to each employee

engaged on a public contract, including

not only the labor force of the prime contractor but the employees of all subcontractors as well. Even in peacetime, compliance with these provisions imposed a

heavy burden of administrative overhead.

As the nation rearmed during 1939 and

1940, the difficulties of administration

became well-nigh insupportable. The

number of subcontractors on many contracts multiplied from tens to hundreds.

By the spring of 1940, the average airframe manufacturers had between 300

and 400 subcontractors and one airframe

builder had more than 700 of them.35

Employment rose, sometimes almost overnight, from hundreds to tens of thousands. Obviously, under such circumstances, full compliance with legislation

drafted when labor desperately needed

such safeguards threatened to become utterly unworkable in a period when labor

had a seller's market.36 The national

defense effort, including work on the

B-17, Boeing's famous Flying Fortress,

appeared to be menaced by a bookkeeper's nightmare—all because no legislative

provision had been made to take into account the situation presented by a period

of rearmament that was neither peace

nor war.

Probably no statute better shows up

the difficulties than does the Buy American Act. As the flood of defense orders

began to absorb a larger and larger portion of the nation's resources and acute

scarcities appeared in many raw materials, manufacturers and suppliers began

to protest against the restrictions of the

law that required military purchases to

be made within the United States. Their

complaints reached something of a climax

over the problem of supplying aviation

fuel for Air Corps units stationed in the

Panama Canal Zone. Tank storage there

was inadequate, and tankers were not

always available. As an expedient, the

supplier, Standard Oil of New Jersey,

wished to transport aviation gasoline

from the United States to Aruba, the

Dutch isle off the coast of Venezuela

where the corporation had ample storage

facilities. From Aruba, Standard Oil

could readily supply the needs of the

Panama defense forces without delay.

However, since the tanks at Aruba also

stored oil from Venezuelan sources, the

corporation could not honestly certify

that the product withdrawn from the

common tankage was the very same as

that shipped originally from the United

States. After a delay of weeks, War Department attorneys found a way out of

this dilemma in a five-page legal opinion

holding fuel to be a fungible commodity

comparable to grain in a common elevator and therefore not identifiable.37

35

 Col M. C. Cramer, JAGD, to Actg Asst Solicitor

Gen, 23 May 40, JAG (Army) Rcds Gen Sec, 160

Contracts (4 Dec 39). 36

 A good illustration of the staggering administrative burden involved in compliance with the statutes

in question may be found in: Murray, of Boeing, to

Chief, Mat Div, 30 Oct 39, and Memo, JAG for ASW,

13 Dec 39, WF JAGO Kickback file.

37

 Memo, Asst to Dir, Purchases and Contracts,

OASW, for JAG, 13 Aug 40, and 1st Ind, JAG to

ASW, undated. Both in WF JAGO, Buy American

file.
LEGISLATION FOR PROCUREMENT 283

Thus it turned out that some six weeks

after the President had declared aviation

fuel "essential to defense" by formal proclamation, the Buy American Act still intruded delays in the national mobilization program.38

 It continued to do so

until well after Pearl Harbor, for as late

as June 1942 contracting officers were still

worried over the legality of contracts that

omitted, at the direction of the Secretary

of War, the Buy American stipulation.39

To pursue the roster of statutes that

posed difficulties to the nation's rearmament program is unnecessary. The examples cited illustrate that the statute

books contained laws for peace and laws

for war, but the laws were inadequate

for an era of cold war or half-war such

as that existing from the time the Air

Corps expansion program began in 1938,

or at least from the outbreak of war in

Europe during 1939, to Pearl Harbor.

Improvising Legislation in a Crisis

The Turning Point

President Roosevelt's message of 16

May 1940 in which he asked for 50,000

aircraft marked the real turning point for

procurement legislation in the United

States. Where before the Congress was

suspicious, it was now openhanded. The

President took an entirely unqualified

stand in behalf of more arms—such a

stand as he had not taken during the

previous summer when Assistant Secretary Louis Johnson urged him to support

even so modest a request for discretionary

powers as that contained in the splitaward bill. But now the rush of events

had caught up with him. After the

Wehrmacht triumphs in Europe, his dramatic plea for 50,000 aircraft was no

longer far out in advance of public opinion, nor, for that matter, was it far ahead

of congressional thinking; the mood of

Congress had changed. Where only a

few short months before congressmen

had refused to see the emergency described by military officials, they now

asked, "What can we do to strengthen

the nation's defense?"

 40

 "Tell us your

needs," senators urged the Army and the

Navy, as they hastened to give priority to

defense legislation already on the Hill

and to consider whatever additional legislation the emergency required.

Emergency Legislation

The first fruits of the new enthusiasm

in Congress for military measures took

the form of money bills—vastly enlarged

appropriations to finance defense spending.41

 Even more significant, however,

were the bills drafted to speed up the

procurement process. In the week following the President's plea for 50,000

38

 Proclamation 2413, July 2, 1940, in Federal Register, V, No. 30, July 4, 1940, 2467. 39

 TWX, Contract Sec (Washington) to Contract

Sec (WF), 22 Jun 42, WF JAGO, Buy American file.

40

 For congressional reluctance to recognize the

emergency as such, see House Hearings on supplementary WD appropriation for FY 1940, May 19,

1939, p. 62. See also Aviation (September 1939), p.

53. For the changing mood of Congress, see, for

example, Cong Rcd, May 14, 1940, p. 60844, and

House vote on H.R. 9850, 76th Cong, 3d sess, May

24, 1940. 41

 Appropriation for FY 1941, June 13, 1940, Public 611; 1st Supplement, June 26, 1940, Public 667;

2d Supplement, September 9, 1940, Public 781; 3d

Supplement, October 4, 1940, Public 800. All 76th

Cong, 3d sess.
284 BUYING AIRCRAFT

aircraft at least half a dozen measures of

signal importance to national defense

were referred to committees for consideration. In the Senate and House both

the military and the naval committees

set to work on these proposals and in a

matter of days reported out bills that

would effect fundamental and even revolutionary changes in military buying.

The first bill of importance to military

procurement to be enacted after the

President's address was not, strictly speaking, an Air Corps bill, although it was to

have a far-reaching effect upon air arm

operations. The act authorized the Reconstruction Finance Corporation (RFC)

to lend money or to buy stock in corporations organized to promote national

defense. The Defense Plant Corporation

(DPC) set up under this act was empowered to extend loans to manufacturers

needing working capital and to finance

facility expansions. The underlying philosophy of the act is evident: the RFC

could absorb any postwar losses better

than could private bankers who were understandably reluctant to underwrite the

high risk of immense wartime expansions, which might become utterly uneconomical at the close of hostilities.

The application of this act can best be

discussed in the following chapter; for

the moment it is sufficient to see it as but

a single item on the roster of emergency

laws.42

The second emergency measure to be

enacted was one sponsored by Congressman Vinson of Georgia, chairman of the

House Naval Affairs Committee. This

was essentially a Navy measure; as passed,

however, some of its terms applied to the

War Department. The Vinson Act (the

National Defense Expediting Act) was an

involved piece of legislation with many

sections and subsections, but the powers

it conferred and the curbs it imposed may

be summarized briefly.43

The act authorized the Secretary of the

Navy to negotiate contracts in his discretion. The inhibitions, the fear of fraud

that had marked past congressional thinking, were now swept away in a broad

grant of powers safeguarded only by the

Navy's promise not to use the privilege

save when necessary.44 The act did not

stop with negotiation; the Secretary of

the Navy was even empowered to modify

existing contracts where the exigencies of

defense warranted such action. The act

also provided for the payment of advances

of as much as 30 percent on the contract

price to help contractors get defense production started. Once begun, partial or

progress payments were authorized before completion of the contract, to help

manufacturers meet their operating costs

when undertaking projects far beyond

the normal range of their working capital.

The Vinson Act also authorized the

use of cost-plus-fixed-fee (CPFF) contracts, provided the fee did not exceed

7 percent of the estimated cost. The

cost-plus-a-percentage-of-cost (CPPC) contract made odious during World War I

was expressly prohibited. In banning

the CPPC contract, Congress hoped to

deny manufacturers any incentive to pyramid their costs and thus their profits.

42

 Public 664, 76th Cong, 3d sess, June 25, 1940

(54 Stat 573). See also, AAF Hist Study 40, pp. 30-

32, and ch. XIV, below.

43

 Public 671, 76th Cong, 3d sess, June 28, 1940 (54

Stat 676). 44

 House Rpt 1863, 76th Cong, 3d sess, June 20,

1940, p. 7.
LEGISLATION FOR PROCUREMENT 285

The CPFF contract, on the other hand,

gave manufacturers no reason to increase

their costs, although it must be admitted

that it gave little incentive for reducing

them either. But the advantage of the

CPFF contract to the government was

obvious: using it, manufacturers with

little or no experience in operations on

the scale proposed in the defense program could be induced to sign contracts

they would never touch if compelled to

sign the conventional risk-type or fixedprice contract form.

The discretionary powers mentioned

above were available only to the Navy,

but some provisions of the Vinson measure were intended to govern both Army

and Navy procurement. One such was

the profit limit on all Army and Navy

aircraft contracts. Where previous profit

curbs had been set at 10 and 12 percent,

the new ceiling stipulated was 8 percent.

If actual cost was less than the contract

price, the contractor was then allowed to

retain 8.7 percent of this cost as his profit.

The act also subjected subcontractors to

this profit limit whenever the sum involved reached $25,000.

A final feature of the Vinson Act applying to the Army as well as the Navy

was the section authorizing the Secretaries to certify to the Commissioner of

Internal Revenue as to the necessity for

and cost of any additional facilities required by manufacturers to fulfill a defense contract. Certification amounted

to a decided tax advantage to manufacturers with munitions contracts since

they could write off their capital costs by

the amount certified rather than the 5 or

10 percent normally allowed under the

prevailing peacetime statutes. All in all,

the Vinson measure gave the Navy, and

to a lesser extent the Army, broad discretionary powers with which to hasten defense production.45

The third major procurement bill enacted after the President's appeal was one

sponsored by Representative May, chairman of the House Military Affairs Committee. In its final form this measure

was far more sweeping than the Vinson

legislation.46 It authorized the Army to

make use of negotiated contracts, CPFF

contracts, advance payments, and actually authorized the government to undertake the erection of facilities even when

this had to be done on private sites.

These provisions conferred powers nearly

parallel to those given the Navy. In addition, Representative May's measure included statutory language granting the

broadest sort of powers to the President

so that he might "provide for emergencies," exercise wide discretion, and buy

"with or without competition."

The three acts described above were

"emergency legislation" in every sense of

the phrase and as such they were noteworthy. The acts gave the Army and

Navy what they needed most desperately

—sweeping grants of discretionary power

to escape the time-consuming restraints

of peacetime competitive buying and to

place orders with smaller and weaker

concerns that could never have won orders competitively, thus broadening the

base of defense production.

On the other hand, the character and

content of the three acts suggest some45

 This discretion included the power to suspend

certain civil service and social welfare statutes where

necessary. For an extended discussion, see Smith,

The Army and Economic Mobilization, ch. IX. 46

 Public 703, 76th Cong, 3d sess, July 2, 1940 (54

Stat 712).
286 BUYING AIRCRAFT

thing of the inherent difficulty encountered when enacting emergency legislation. Although the problem of industrial

mobilization confronting the services was

a common one, Congress, operating within the traditional framework of separate

committees for the Army and Navy in

each house, came up with separate bills

for each service. As a consequence, even

though there was some overlapping with

laws common to both, the Secretary of

the Navy enjoyed some powers not given

the Secretary of War and vice versa. The

two services, then, rushed to rearm under

numerous statutes that gave them inequitable and unbalanced powers for dealing

with the common tasks of mobilization.47

Even more significant than the differing statutory bases of Army and Navy

operations was the character of the laws

themselves as indicative of the difficulties

to be met in emergency legislation. True,

the emergency statutes granted broad

powers to the responsible civilian Secretaries and even broader powers to the

President, but the powers were only a

beginning. Discretionary powers—such

as the authority to negotiate contracts—

were certainly of the utmost utility to the

services in speeding procurement. Nevertheless, generous grants of power, when

hastily conferred at the penultimate crisis, are no substitute for legislation built

out of years of experience, legislation

carefully tailored to suit the needs of the

services as revealed in practice.48 In

fact, the very passage of the statutes authorizing procurement without competition brewed trouble. The newly authorized power to negotiate contracts opened

a whole new field of activity that was soon

crying for clarifying legislation—a field

hitherto unknown and unexplored, since

many of the problems encountered when

negotiated contracts were introduced simply did not exist so long as procurement

had been restricted to sealed bid competition.

Still another difficulty inherent in

emergency legislation was the matter of

timeliness. The wide discretionary powers that Congress granted to the military

services were adequate only so long as

the government enjoyed a buyer's market. Such a situation had existed when

the War Department first sought permission from Congress to negotiate contracts.

When at last Congress did grant this authority, the whole outlook of the industry had changed. Where before most

Air Corps contracts had tended to cluster

in the hands of a few successful manufacturers, leaving the rest of the industry

idle and begging for work, now, especially after Dunkerque and the fall of

France, a flood of orders from abroad had

induced a seller's market—the aircraft

manufacturers, vendors, and suppliers

had more work than they could handle.

The military services were authorized to

negotiate contracts, but by this time the

manufacturers were not particularly interested in negotiating since the industry's order backlog was already mounting

by millions of dollars. What is more,

export orders were not subject to the

profit curbs imposed by Congress. Why,

asked the manufacturers, should we

dicker with the government and submit

47

 By way of illustration, the Secretary of the Navy

received authority to seize facilities when necessary

by the Act of June 28, 1940, although the Secretary

of War did not receive comparable authority until

ten weeks later. 48 See Chapters IV and V for discussion of the

importance of operating experience in making new

legislation meaningful.
LEGISLATION FOR PROCUREMENT 287

to all the inconveniences and disadvantages of military purchasing when we can

sell abroad virtually without strings?

Desperate states in Europe with their

backs to the wall, ordering in panic, could

scarcely afford to bargain as closely with

the aircraft manufacturers as procurement officers for the military services at

home were certain to do. Some manufacturers, already swamped with domestic as well as foreign orders, even urged

procurement officers to give the available

orders to their competitors.49

In a word, the emergency statutes of

June and July 1940 were not only obsolete, already lapped by the course of

events when passed, but also created new

problems that in turn required legislative solution. Even though conscientiously drafted to permit the widest possible latitude to the departments, the

emergency statutes were of necessity only

the beginning of a long series of acts, each

a piecemeal or patchwork attempt to hasten and foster the nation's defensive mobilization.

Patchwork Laws

Congressional zeal for the cause of defense did not burn itself out with the

passage of the laws already mentioned.

Symptomatic of the co-operative spirit on

the Hill was the resolution, introduced

by Senator Tom Connally of Texas, proposing that all defense contracts be required to go on full shift, twenty-fourhour operation. This was enthusiastic

co-operation indeed; it was, in fact, a bit

too enthusiastic. As War Department

spokesmen pointed out, some items in

the armament program were less urgently required than many others, and to insist, by compulsory legislation, that all

contracts be pursued at full force around

the clock might well lead to needless

overloading of production capacity to

the detriment of the defense effort.50

Enthusiastic support from the Hill was

most welcome to the War Department,

but less compulsion and more elaboration of discretionary powers would seem

far more appropriate. During the summer of 1940, experience gathered when

operating under the emergency statutes

passed just after the President's call for

50,000 aircraft clearly demonstrated the

need for further legislation to meet the

deficiencies in the measures. New statutes would be needed not only to handle

the difficulties growing out of the novel

practice of negotiating contracts but also

to cope with the exigencies of a seller's

market. Congress would have to concoct

measures—inducements or coercions—to

secure the productive capacity of the nation's manufacturers for the defense effort.

By early fall Congress was ready with

a set of legislative patches to cover the

flaws the summer's operations had revealed. Within the span of a relatively

few days a large number of laws went on

the statute books. These, too, were emergency laws, yet in a very real sense the

underlying philosophy on which they

rested had subtly shifted from what it

had been earlier in the season. In the

spring the assumption had been that once

freed of the requirements of competition,

49

 See AAF Hist Study 40, ch. III, n. 23.

50

 S Res 289, 76th Cong, 3d sess, July 1, 1940, text

in Cong Rcd, July 1, 1940, p. 9098. See also, AF

Hist Study 22, pp. 75-76.
288 BUYING AIRCRAFT

contracts could be freely entered with the

nation's munitions manufacturers. This

second round of emergency laws rested

upon a skillful mixture of carrot and

stick. Manufacturers were confronted

with a series of blandishments and compulsions to participate in the great national defense effort.

The first legislative patch was distinctly

carrot. In addition to lavish appropriations to expedite production, the act contained inducements to new and inexperienced firms of uncertain financial

standing. Procurement officers were authorized to waive bid bonds, hitherto

required of all contractors to guarantee

satisfactory performance or money back

on the items procured. If some congressmen had had their way, the carrot would

have tasted far better; they proposed to

raise the profit curb on aircraft manufactured for the United States from 8 to 12

percent of contract price. To the chagrin

of the manufacturers, however, this provision was stricken before enactment. On

the other hand Congress, ever anxious to

take the profits out of war, reduced the

allowable fee in CPFF contracts to 6 percent of cost.51

The second bit of legislative patchwork insofar as military procurement was

concerned took the shape of a club slipped

into the epochal Selective Service Act of

16 September 1940. It was, no doubt,

shrewd politics to balance the encroachments of the draft upon personal freedom

with a commensurate restraint on corporate freedom. At any rate, Congress

seized this convenient moment to impose

on all government orders an obligatory

priority that would ensure delivery on

defense contracts ahead of export sales.

In conjunction with this, Congress gave

the Secretary of War power to seize production facilities from recalcitrant or unco-operative manufacturers who delayed

the defense effort. Procurement officials

had little desire to wield this club, but its

mere presence in the department's legislative arsenal was expected to animate

manufacturers with a willingness to negotiate rather than lose their facilities

and suffer the heavy fine or imprisonment

imposed as penalties.52

A month later Congress was still blending incentives and mandates to shore up

the system of negotiated procurement

with whatever additions and corrections

events had shown to be necessary. Of

particular interest was a statute designed

to help smaller business firms by authorizing the assignment of claims. Under

the terms of this act, manufacturers

working on defense orders could assign

to banks their claims for payments by the

government in return for advances in

working capital, a practice hitherto precluded by a century-old law.53

Without doubt, the most important

bait offered by Congress to cajole manufacturers into the defense effort appeared

in the Second Revenue Act, 8 October

1940. In this statute, Congress suspended

51

 Public 781, 76th Cong, 3d sess, September 9,

1940 (54 Stat 872). See also, House Rpt 2810, July 31,

1940.

52

 Public 783, 76th Cong, 3d sess, September 6,

1940 (54 Stat 885). See also, Cong Rcd, 20 June

1940, p. 8680, and following for evolution of S. 4164,

and J. H. Ohly, History of Plant Seizures During

World War II, 1947, draft MS, OCMH. 53

 Public 811, 76th Cong, 3d sess, October 9, 1940

(54 Stat 1029). See also, CPA, Policies Governing

Private Financing of Emergency Facilities, Hist Rpts

on War Administration, WPB, Special Study 12, p.

24.
LEGISLATION FOR PROCUREMENT 289

the profit limit on aircraft entirely.54

Capitalism rather than compulsion, the

congressmen hoped, would induce greater

production. And the profits allowed,

having served their purpose, would be

taken up in the excess profits taxes laid

on elsewhere in the same statute. Removal of the profit limitation on aircraft

manufacturers was not merely a concession granted under pressure but rather

an effort to return the aircraft manufacturers and shipbuilders to the status of

all other manufacturers. So long as aircraft and shipbuilding firms, and they

alone, labored under profit limitations,

they found it difficult if not impossible

to get subcontractors (who were subjected to the same profit limitation imposed on the prime contractors) to enter

negotiations.55 And why should subcontractors accept aircraft orders if there

were jobs to be had in other segments

of industry producing munitions for defense that did not impose profit curbs?

Another feature of the Revenue Act, decidedly more persuasive than peremptory,

was the section authorizing rapid, fiveyear depreciation of new facilities certified as necessary for defense by the Secretaries of War and Navy.56

 Under this

provision, manufacturers expanding their

productive facilities for defense could, on

certification, write off 20 percent of their

capital outlay each year as depreciation,

an unusually advantageous deduction in

a period of abnormally high taxes.

In 1941 Congress enacted virtually no

legislation of significance to military procurement. The broad powers already

conferred left the War Department with

a relatively free hand to work out its own

problems. Thus, from October 1940 to

December 1941, apart from a few relatively minor items such as an extension

of the statutory authority already granted,

Congress did not alter the procurement

laws.57 Some few bills were proposed

calling for important changes, but none

passed.58

If procurement officers lacked adequate

latitude in negotiating contracts before

Pearl Harbor, Congress tried to rectify

any such omission in the First War Powers Act of 18 December 1941, which authorized the President and his agents to

enter contracts without regard to the provisions of existing law when to do so

would hasten the war effort. At last all

restrictions on the negotiation of contracts were swept away. Insofar as procurement legislation was concerned, this

was a capstone.59 Congress did, of course,

continue to add patches and pieces of

legislation throughout the war. But with

the possible exception of the renegotiation statute which can be considered more

conveniently in a subsequent chapter,60

for all practical purposes, with the passage of the First War Powers Act, procurement officers had just about all the

major discretionary powers they needed.61

54

 Public 801, 76th Cong, 3d sess (54 Stat 974, Title

IV).

55

 H. Rpt 2810, 76th Cong, 3d sess, July 31, 1940, p. 8. 56

 54 Stat 974, Title III. For an extended discus- sion of the amortization plan in operation, see Smith,

The Army and Economic Mobilization, ch. XX.

57

 Public 89, 77th Cong, 1st sess, May 31, 1941,

(55 Stat 236). 58

 See H.R. 1615, 1775, and 4945, 77th Cong, 1st sess.

59

 Public 354, 77th Cong, 1st sess, December 18,

1941 (55 Stat 838). The Second War Powers Act,

March 27, 1942 (56 Stat 176), contained no powers

of interest to War Department procurement officers. 60

 See ch. XVII. 61

 For evidence on the adequacy of existing laws for procurement, see IOM, JAG (WF) for Chief, Contract Sec, 30 Sep 41, AFCF 400.12.
CHAPTER XIV

The Problem of Industrial Capacity

The Beginning of Facility

Expansions

The Foundations of Policy

The President's call for 50,000 airplanes precipitated a veritable avalanche

of correspondence upon the desks of Air

Corps staff officers. Not least among

their troubles was the question of capacity. Would the productive facilities of

the nation's aircraft manufacturers be

sufficient to meet this new and vastly enlarged requirement?

The Air Corps had paid a good deal of

attention to the problem of productive

capacity during the prewar years.1 Officers concerned with mobilization planning throughout the twenties and early

thirties had drawn up rather elaborate

factory plans calling for the manufacture

of aircraft in the automotive facilities of

Detroit during an emergency. All these

plans rested upon the assumption that

aircraft builders would freely consent to

hand over their latest designs for mass

production. With the coming of a real

emergency, however, this general principle, which had seemed sound enough

on paper, now lost much of its appeal.

When War Department officials tried

to bring individual airframe and automobile manufacturers together, most of

the aircraft builders shied off. They argued that the automobile manufacturers

lacked aeronautical engineers and facilities with adequate clearances for the

wing span of current aircraft. More significant, perhaps, was the reluctance of

the old-line aircraft builders to train postwar competition among car builders with

their well-known reservoirs of tooling

skills and working capital. Under the

circumstances, Air Corps officers found

it necessary in the fall of 1938 to recast entirely their mobilization plans. Thereafter, it was agreed, all final airframe assembly work would be performed by oldline, established aircraft firms as prime

contractors. The automotive manufacturers would serve only as subcontractors

providing the primes with parts and subassemblies.2

As a consequence of this reversal, which

redefined the anticipated role of the automotive firms, the detailed factory plans

compiled over the past two decades had

to be scrapped. Since they were admit1

 See above, chs. VII, VIII, and IX.

2

 ASW to CofAC, 23 Sep 38, and 1st Ind, CofAC

to ASW, 12 Oct 38, WFCF 381 Mobilization (1939);

AAF Hist Study 40, pp. 17, 21. The decision not

to use automobile manufacturers as prime contractors on aircraft appears also to have rested on lessons

derived from the British shadow factory plan. The

whole subject of the influence of British experience

on U.S. policy is one that could profitably be studied

at length. See especially, London Military Attaché

Rpt 39854, 4 Jan 39, WF CADO F35/375.
THE PROBLEM OF INDUSTRIAL CAPACITY 291

tedly faulty, their demise probably occasioned little real loss.3

 Nevertheless, it

was this turn of events that led the Air

Corps to enter the period of acute national crisis with a policy but no plans.

The Detroit car builders were not the

only competitors feared by the aircraft

manufacturers. The President's air arsenal scheme was even more disturbing

in its implications. To manufacturers

who could remember with distaste the

acres of empty floor space that burdened

them during the depression years, the

prospect of competition from federal aircraft plants could scarcely be regarded as

other than ominous. Not surprisingly,

the industry as a whole broke into a

chorus of assurances that the Air Corps

rearmament program could readily be

accomplished without further plant additions.4

 In such an environment of fear

and misgivings, serious consideration of

possible wartime plant expansions was

difficult, to say the least, since any suggestion of government-financed facilities,

however necessary they might be for war

purposes, was bound to bear the taint of

nationalization for manufacturers acutely sensitive on this point.

Further complicating the task of determining whether or not the nation's

aircraft manufacturers could handle the

load was the shifting character of that

load itself. What had begun as the President's goal of 10,000 in November 1938,

was watered down to some 5,500 in Congress the following winter, only to leap

up to 50,000 in May 1940. Each such

gyration in quantity, not to mention the

matter of quality, models, types, and so

on, brought drastic variations in the estimates of capacity required.

All these difficulties were in themselves

decidedly upsetting to the mobilization

planners, but, as the reader will recall,

throughout most of the 1939 build-up

period air arm staff officers were actually

unable to measure productive capacity

with any reasonable degree of accuracy.

The program of modified educational orders or production data contracts helped

to clarify the problem but did so only

belatedly. More useful were the findings

of the Yardstick Board, which gave Air

Corps staff officers a most necessary tool

for planning. But even this measuring

stick became available only after war

broke out in Europe, and by then the

whole problem of aircraft production capacity in the United States had entered

a most crucial phase.5

By the time the industry had been resurveyed with the Yardstick Board's criteria, several more precious weeks had

passed. Therefore, not until the late fall

of 1939 did it become generally apparent

that vast new facilities would be required

in the aircraft industry. In tenor with

the prevailing attitude, these were envisioned as additions to existing facilities

owned by the aircraft manufacturers

rather than as air arsenals or governmentowned installations.6

3

 See above, ch. VII. 4

 ASW to C. W. Larner (Baldwin Locomotive

Works), 11 May 39, SW files, Airplanes, item 116Y;

Review of Methods Employed by the AAF . . . , ATSC

Logistics Planning Div, p. 16. The planners at

Wright Field accepted the assumption that the President's air arm build-up could and should be done

without further plant expansion. See Chief, Mat

Div, to CofAC, 22 Dec 38, AFCF 452.1A Proc of Aircraft. See also above, pp. 175-79.

5

 See above, pp. 189-93. 6

 Memo, Dir, Planning Br, OASW, for CofAC,

3 Oct 39, and 1st Ind, reply, 10 Oct 39, AFCF 004.4.
292 BUYING AIRCRAFT

Thus it turned out that in the months

immediately before the President's call

for 50,000 airplanes, the Air Corps staff

officers responsible for mobilization planning were only just emerging from the

exploratory stage in which they had endeavored to find out how much aircraft

production capacity the nation really did

possess. Of necessity, their program for

expanding facilities was little more than

a sketch, tentative and unfinished. The

planners themselves confronted their

tasks with a good deal of uncertainty; not

only were they inexperienced in the problems of facility expansion, they had to

set about their tasks before the necessary

enabling legislation had been passed.7

The problems of industrial mobilization—including accurate measurement of

capacity and the planning of facility expansions—are far too complex and too

laden with variables to lend themselves

to simple solutions or easy generalizations

on policy before the event. Because of

this, useful and detailed mobilization

planning in advance for facility expansions was difficult if not impossible to

achieve. Responsible officers may have

been sorely at fault for their prewar failure to explore alternatives of policy with

vigor and imagination, but insofar as detailed planning is concerned, it is doubtful whether the most prescient of staffs

could have drafted plans to encompass

the many parameters of the national

scene during the early months of 1940.

Whether the military staffs were remiss

or not in failing to provide suitable plans

in advance for the crisis of May 1940 is

now beside the point. The fact remains

no plans were available. Even the very

nature of the task at hand was unclear.

In his call for 50,000 airplanes the

President had boldly set a production

target; now the problems involved in

reaching this goal required definition.

Commissioner Knudsen of the NDAC

suited the needs of the occasion. He was

an industrial titan with great prestige.

Moreover, he was trained by his industrial experience to look at the "big picture" and reduce it to simplest terms.

Having looked, in those agonizing days

of May 1940 when all Europe seemed to

collapse, Mr. Knudsen drew the whole

problem into focus with two blunt questions: "How much capacity do you need?"

and "When do you need it?"

 8

How Much and When?

Knudsen's questions defined the job in

hand and set in motion a train of action

in the War Department.9 Hitherto no

one had so narrowly defined the character of the problem. The President himself had been vague concerning the implementation of his production goal.

Soon after his address before Congress,

he received a group of reporters as he

worked in shirtsleeves at his desk. Engine production was the real bottleneck,

he told them; there was already an ample margin of idle airframe capacity. If

plant expansions should be needed, private capital rather than public money

would do the job.10 The Secretary of

War echoed these assurances—the War

7

 See above, chs. VIII and XIII.

8

 Watson, Chief of Staff: Prewar Plans and Preparations, p. 174 and n. 106. The words are attributed

to Knudsen by Colonel Burns, Executive Assistant

to Mr. Johnson. Memo, Burns for ASW, 13 Jun 40. 9

 Ibid. See also Wright, "50,000 Planes a Year:

How Much? How Long?" in Aviation (July 1940). 10

 New York Times, May 22, 1940, 10:5.
THE PROBLEM OF INDUSTRIAL CAPACITY 293

Department had no intention of erecting

aircraft plants with federal funds.11

But the President and the Secretary

were expressing opinions and intentions,

not facts. Mr. Knudsen's provoking challenge showed up their words for what

they were and touched off a furious round

of conferences and staff studies to get the

facts that would answer the questions

Knudsen posed.12

On the first of July 1940, a month and

a half after the President's address before

Congress, the combined efforts of the

military and civilian agencies produced

the necessary answers. On that date the

Airplane Division of the NDAC submitted its crucial report on the nation's

aircraft productive capacity.13 To approximate the President's program, a 200-

percent increase in floor space would be

required. And along with this there

would have to be a 400-percent increase

in the labor force, widespread agreement

on standardization, and willingness to

spread the work load across the available

capacity, particularly by greater use of

subcontracting. To these prescriptions

the authors of the NDAC report added

an explicit caveat: any attempt to reduce

the expansions indicated in the report by

postponing the completion date of the

program should be avoided as dangerous

to national security. Moreover, they

warned, manufacturers should be informed in advance of the whole load expected of them. Any other course of

action would result in confusion and lost

motion by forcing individual aircraft

builders to revise and rework their plant

expansions with every subsequent alteration in program.

With the facts in hand, it was a relatively easy matter for Army and Navy

officials to reach agreement on a slicing

of the productive pie. Having decided

upon a 36,500 to 13,500 split, each service assumed responsibility for sponsoring

the facility expansions required by the

manufacturers with whom it held contracts. Where individual manufacturers

served both the Army and Navy, the service with the lion's share of business took

cognizance.14

Although the division of labor agreed

upon by the Army and Navy mentioned

only airframe and engine facilities, the

problem of facilities for accessory items

was not ignored. Accessory items were

absolutely vital to completed aircraft, but,

so long as the small and inadequate staff

at Wright Field was preoccupied with

airframes and engines, consideration of

11

 SW to Joplin, Mo., Chamber of Commerce, 29

May 40; SW to Senator Morris Sheppard, 31 May 40;

SW to Senator Tom Connally, 5 Jun 40. All in SW

files, Air Corps, Gen Questions, item 809a. 12

 See, for example, AC Project Rcds (Lyon Papers),

bk. 29, OCAC Conference, 19 Jun 40. 13

 T. P. Wright and A. E. Lombard, Report on a

Study of Airplane Manufacturing Capacity, 1 Jul 40,

Airplane Div, NDAC, Rpt 4, copy in AC Project

Rcds (Lyon Papers), bk. 22. Report No. 7, 22 July

1940, treated engine capacity. See also, Study 21,

p. 26ff.

14

 For Army-Navy agreement of 3 July 1940, see

Memo, ASW for ASN, 16 Jul 40, SW files, Airplanes,

item 1612. The division was as follows:

Army: airframes: Beech, Bell, Boeing, Cessna,

Curtiss, Douglas, Fairchild,

Lockheed, Martin, North

American, Republic, Ryan,

Stearman, Stinson, Vultee

engines: Allison, Continental, Jacobs,

Lycoming, Menasco, Wright

Navy: airframes: Brewster, Grumman, Spartan,

Vought, Consolidated

engines: Pratt and Whitney, Ranger

See also, CofAC to ASW, 8 Jul 40, AFCF 451.1

Airplanes, Gen. For an indication that the agreement was not foolproof, see Memo, Asst CofAC for

CofAC, 10 Dec 40, AFCF, 004.4 Manufacturers.
294 BUYING AIRCRAFT

accessories would have to wait; first things

had to come first.15 Furthermore, just as

airframe capacity was hard to measure, so

too was it difficult to get precise figures

on accessory output. There was no convenient yardstick to estimate capacity for

these items; the only alternative was to

start from scratch with a new inquiry.

A flash survey, pending more exhaustive

study, revealed that a substantial number

of accessory manufacturers would require

plant additions. Magnetos, carburetors,

starters, turbo-superchargers, and almost

all panel instruments—to mention but a

few items—threatened to become dangerous chokepoints unless facilities were immediately expanded.16

The NDAC report on capacity had insisted that manufacturers should be informed in advance of the total load to be

assigned them so they could plan accordingly. This was sound advice, but it was

an ideal scarcely to be achieved. Staff

officers were still apportioning the total

load and planning expansions to suit this

load when it became evident that the

"total" capacity figures rested upon an

unsound premise. In computing the

load, the NDAC officials had assumed that

spares and spare parts could be produced

in sequence to regular production runs

rather than concurrently with them.

Thus in the case of propellers, all units

turned out were earmarked for use on

aircraft scheduled to be produced. There

would be no productive capacity available for manufacturing spares until the

end of the program. Such an arrangement was utterly unacceptable to the air

arm. Concurrent production of spares

had to be provided. This meant that

"total load" had to be revised upward and

manufacturer's plans for facility expansions altered accordingly.17

Thus, finding the answer to Mr. Knudsen's questions proved to be slow work.

Not until well into the middle of July

1940, did the expansion program gather

headway. Even then the question of facilities for the production of accessories

had yet to be decided. Moreover, still

remaining was the vexing problem of

ways and means: how should the proposed facility expansions be financed?

Financing Facilities

On the day following the President's

statement on 50,000 aircraft, the Secretary of War had called in a number of

officials from the War and Treasury Departments to discuss the problems that

might be anticipated in any effort to reach

this target figure. All those who met with

the Secretary were well aware of the extent to which the nation's aircraft industry had already expanded to meet the demands of foreign purchases. During 1939

aircraft, engine, and propeller plants had

been enlarged by approximately a third,

to a total of 13,000,000 square feet. The

French and British Governments had contributed some $72,000,000 toward accel15

 AAF Hist Study 40, p. 73. 16

 R&R, Exec, OCAC, to Chief, Mat Div, 28 Jun

40, WFCF 111.3 Munitions Program, and reply, 9

Jul 40, AFCF 452.1 Airplanes, Gen. See also, TWX,

PES (WF) to Engr Sec (Washington), 5 Jul 40, WFCF

111.3 Munitions Program, and draft Memo (ASW)

for Knudsen, NDAC, 26 Sep 40, AFCF 452.1. For an

interesting insight on the question of expanding the

facilities of accessory manufacturers, see Fairchild

Aviation Corp. to Col Volandt, 23 Jul 40, and reply,

31 Jul 40, AFCF 004.4.

17

 Memo, Actg CofAC for ASW, 12 Jul 40, AFCF,

004.4; TWX, Engr Sec (Washington) to PES (WF),

20 Jul 40, WFCF 111.3 Munitions Program.
THE PROBLEM OF INDUSTRIAL CAPACITY 295

erating airframe production alone, and

there were, of course, numerous additions in floor space and equipment privately financed by manufacturers receiving foreign orders. The Secretary of War

and the officials who met with him had

every reason to recognize the nation's

enormous debt of gratitude to those foreign states, notably Britain and France,

who had done so much to hasten the pace

of rearmament.18 Now, however, if further expansions were to be undertaken,

they would have to be financed at home.

But how? That was the problem.

The various federal officials who considered the problem of facility financing

in the weeks immediately following the

President's call thought almost entirely

in terms of private investment. The government had no intention of financing

facility expansions with public funds.

Indeed, insofar as plant financing was

concerned, the government had no plans

at all.

Not until after the President's message

to Congress on 16 May 1940 was any

really sustained and serious consideration given to the general question of

financing the construction of whatever

new capacity might be needed in the nation's emergency. Those who finally did

begin to grapple with the problem undoubtedly started out with a predilection

for private financing, but this did not

prevent them from exploring and finally

using a number of alternatives.19

One rather obvious procedure suggested but immediately rejected as a solution was to add a small increment to

the unit cost of each item purchased on

a production contract. The advantage

of such a scheme was its simplicity. There

would be no new and complicated procedures to evolve, no problems of special

financing apart from the basic supply

contract signed by a contractor who would

simply handle the whole expansion problem in the traditional way, and gladly so,

since he would be reasonably protected

against loss.

There were, however, decided disadvantages to any plan to pay for new capacity by added charges to unit costs.

The nation would be in the position of

having presented all those fortunate

enough to hold such war contracts with

free factories. Moreover, this would be

over and above any profits that might

have been earned and without regard to

whether or not the contractor had performed efficiently or not. Even if a manufacturer's wartime production record

had been sufficiently impressive to win

him some sort of bonus, an outright gift

of a new plant was unthinkable and, to

say the least, indefensible, if for no other

reason than on the grounds that it would

give unfair advantage in the postwar

market to the favored manufacturers who

were in a position to receive such gifts

during the war.20

A second alternative means of paying

for emergency plant extensions lay in

outright government ownership. Whatever additions were required would be

built, paid for, and owned by the government but operated by private con18

 SW to ASW, 17 May 40, SW files, Airplanes,

item 1525a. See also, Wesley Frank Craven and

James Lea Cate, eds., "The Army Air Forces in

World War II," Men and Planes (Chicago: The University of Chicago Press, 1955), ch. IX, pp. 299-304. 19

 See especially CPA, Policies Governing Private

Financing of Emergency Facilities, WPB Special

Study 12, pp. 9-10. 20

 Compt Gen to SW, 16 Aug 40, AFCF 016.
296 BUYING AIRCRAFT

tractors. This was the governmentowned, contractor-operated (GOCO)

plan. The arrangement offered one decided advantage: expansions could be

undertaken at need without thought for

postwar competitive considerations that

inevitably colored the thinking of contractors building plants on private account. But in this arrangement there

were admittedly some disadvantages too.

If the scheme were adopted, the War

Department would have to foot the entire cost of construction at once, and in

the fall of 1940 the heavy demands on

available appropriations made it expedient to avoid such immediate outlays

where possible. Then too, the many

legal and administrative complications

arising from construction under the auspices of the Corps of Engineers constituted another argument against this form

of financing. Although the Ordnance

Department did eventually use the

GOCO arrangement extensively—for the

very good reason that virtually no one

would be interested in owning a shellloading plant in peacetime—the air arm

used this form of financing only in a few

exceptional instances.21

In air arm circles, special tax concessions such as the five-year depreciation or

tax-amortization scheme, already mentioned, were far more popular than outright government construction and ownership. This is hardly surprising, for

ever since the outbreak of war in Europe

in 1939 manufacturers in the aircraft industry had been urging the War Department to approve some form of rapid

amortization. There was much to commend the idea, since as matters stood under the prevailing tax laws, even when

foreign states such as France and Britain

built and paid for facility expansions to

speed aircraft and engine production of

individual manufacturers in the United

States, the money so spent was regarded

as additions to capital and was taxed as

such.

Not surprisingly, manufacturers looking ahead fearfully to the lean times anticipated for the postwar era had no desire to carry the burden of excessive plant

charges for 10 or 20 years—or long after

the current emergency—which would be

the case at the usual depreciation rate

ranging from 5 percent to 12 percent for

plant and equipment.22 Individual manufacturers argued that the government's

interest as well as that of the manufacturers would best be served by a rapid

tax-amortization allowance.23 Rapid tax

amortization was not all give-away. If,

for example, a manufacturer had been

allowed to take a 20-percent depreciation

allowance for 5 years beginning in 1939,

he would have written off the plant by

1943, and with no depreciation to take

thereafter would have had to meet the

full bite of wartime taxes for 2 more

years. Thus, when some manufacturers

urged immediate and total depreciation

of extraordinary or emergency facility

costs and others suggested two-year writedowns, they did so with the knowledge

that it would lay them open to the full

burden of wartime taxation on earned

21

 AAF Hist Study 40, pp. 43-44. See also Smith,

The Army and Economic Mobilization, p. 496ff.

22

 Smith, The Army and Economic Mobilization,

pp. 456-60. 23

 United Aircraft Corp. to CofAC, 18 Sep 39, SW

files, Airplanes, item 1350; Allison Engineering

Co. et al., to CofAC, 1 Sep 39, AHO Plans Div,

145.93-183.
THE PROBLEM OF INDUSTRIAL CAPACITY 297

income. At first blush these proposals

might seem to be in the nature of an outright steal or what would amount to a

free gift of plant from the government,

but even in France, where the socialists

had not been notably friendly to private

contractors, three-year tax amortization

was the order of the day in emergency facility expansions.24

Perhaps the most telling argument in

favor of tax amortization was raised by

the officials of United Aircraft Corporation. They pointed out that only by

heavy expenditures on tooling and equipment—quite apart from mere floor space

—could the aircraft industry hope to cut

over-all production costs and hence reduce unit prices to the government.25

 If

the government failed to grant depreciation concessions, manufacturers would be

loath to install the very tools that could

be counted upon to lower prices and speed

delivery to the government as purchaser.

All the points mentioned above were

raised privately in discussions between

manufacturers and government officials

in the months following the outbreak of

war in Europe. And although the idea

of tax amortization was not brought out

officially in public until the President

spoke of it in his fireside chat some ten

days after he urged Congress to provide

50,000 airplanes, the proposals of the

eight or nine months just past were not

entirely in vain if they helped educate

War Department officials to the intricacies involved.26

Unfortunately, once the proposition to

grant rapid depreciation concessions entered the public forum on Capitol Hill,

a new difficulty appeared. Manufacturers who were dickering with the government for facility expansions during the

summer of 1940 were reluctant to tie

themselves into any rigid contract when

far more favorable terms might be just

around the corner in pending legislation.27

 Thus, ironically, it turned out

that the provision for rapid depreciation,

which promised to be of major importance in encouraging manufacturers to

undertake vast expansions to increase

production for the emergency, actually

had the short run effect of delaying those

expansions—at least until October 1940

when Congress finally enacted a whole

basketful of legislation coupling excess

profits taxes with the rapid depreciation

privilege and repeal of the amended

Vinson-Trammell profit curb.28

In their zeal to prevent individual

manufacturers from getting undue advantage under the depreciation privilege,

the congressmen wrote into the law a provision requiring War Department officials to certify that prices in all contracts

held by a contractor using rapid depreciation contained no hidden increment of

facility cost buried in his showing of production costs. In short, Congress wanted

to make absolutely certain that no contractor received double reimbursement

for his facilities. On its face a sound pre24

 J. C. Ward, president, Fairchild Aircraft, The

French Aircraft Industry: 1940, Lecture, AIC, 7

Oct 40. 25

 Wilson, Slipstream, pp. 225-28. 26

 Smith, The Army and Economic Mobilization,

p. 459.

27

 See, for example, North American Aviation to

ASW, 23 Jul 40, SW files, Airplanes, item 1637; and

ASW to Representative Francis Case, 14 Aug 40, SW

files, Airplanes, item 1702; as well as lecture draft by

Materiel Division, for General Arnold to give at

Army Industrial College, 5 Oct 40, WFCF 350.001

(1941). 28

 See above, ch. XIII.
298 BUYING AIRCRAFT

caution, in practice this provision proved

virtually impossible to administer. Item

costs were extremely difficult to analyze

with accuracy in a time of economic flux,

and cost analysts found it difficult enough

to squeeze out suet from every item of

product cost without in addition having

to pay special heed to facility costs. After

causing untold delays and annoyances,

this certification stipulation was removed

by Congress.29

Although the rapid depreciation provision was eventually widely used, the

depreciation privilege alone did not provide a full answer to the question of paying for emergency extensions to plant.30

Even the most liberal tax concessions offered no assurance to a manufacturer that

his earnings would be sufficiently high to

meet the costs that vast factory additions

would inevitably involve. Moreover, if

rapid depreciation did meet the departmental objection to direct government

financing by forestalling an immediate

drain on the available appropriations, it

did not answer the cries of the banking

community, which anxiously clamored

for an opportunity to participate in the

expansions about to be launched across

the country.31 For these reasons, as well

as to provide a means of proceeding while

waiting for Congress to act, government

officials and members of the banking fraternity contrived yet another means for

financing facility construction. This was

the emergency plant facility (EPF) contract.

The EPF contract was specifically designed to lure private capital into emergency construction work. Under its

terms a manufacturer would undertake

to build whatever facility the government wished him to, and he would build

it big enough to meet the needs of the

emergency without regard to postwar

economics. For its part, the government

would agree to buy back the facility from

the contractor with a series of equal payments spread over sixty months.32

The advantages of the EPF contract

are readily apparent. To begin with, it

promised to place no immediate and

overwhelming drain on War Department

appropriations. Because it was designed

to be bankable, the EPF contract was expected to simplify the manufacturer's task

of borrowing through normal banking

channels the funds required for factory

construction contracts. At the same time,

by leaving the actual problems of designing and building to the manufacturer, the

War Department gave him a great deal

of latitude if not a free hand. Along the

same line, the manufacturer would enjoy virtually complete freedom in operating his plant since title would not

transfer to the government for sixty

months, which, it was assumed, would

extend beyond the emergency. On the

other hand, to keep the contractor from

extravagance in conducting the expansion, he was given an option of buying

the plant at the end of the emergency.

Obviously, the lower the initial cost, the

lower the price he might expect to pay

eventually.

When put into practice, the EPF contract revealed a number of unexpected

shortcomings. Although the EPF con- 29

 Smith, The Army and Economic Mobilization,

pp. 467-71. 30

 Ibid., p. 473, Table 50. 31

 AAF Hist Study 40, p. 37ff.

32

 This account of the EPF contract is based on

AAF Historical Study 40, and Smith, The Army and

Economic Mobilization, pages 476-84.
THE PROBLEM OF INDUSTRIAL CAPACITY 299

tract had been devised at least in part to

give private banking circles an opportunity to participate in financing the

vast expansion program, the conservative

banking community insisted upon writing in safeguards to the point where EPF

financing became cumbersome if not unworkable. Fearing that Congress might

not finally appropriate the full amount

committed for five years in the future,

the bankers included a clause in the contracts that, in practice, forced the War

Department to maintain a cash reserve

sufficient to meet the whole obligation.

This led to the ridiculous situation in

which the government on one hand had

to pay up to 4 percent in interest charges

to the banks for loaning money to the

manufacturers—who passed on this burden as a cost of doing business—while on

the other hand the government, which

is to say the War Department, carried

balances sufficient to liquidate the entire

obligation at once.33 Under such circumstances it was advantageous for the government to take title immediately by

prompt payment of the construction

costs, thus saving needless interest charges.

There was an additional advantage for

the manufacturer in prompt payment of

the EPF contract. So long as a manufacturer retained title to a plant under the

EPF arrangement, he had to pay state

taxes on it. In California, where an important segment of the airframe industry

lay, the state government even insisted

that manufacturers receiving EPF repayments for facility expenditures had to

report them as income and pay state taxes

accordingly.34

The anticipated advantages of the EPF

contract were clearly outweighed by its

drawbacks, but there were only revealed

by experience. Thus, although the air

arm entered 11 EPF contracts beginning

with the Boeing B-29 plant in Seattle, by

1945 all of these save two, the Ford Dearborn plant and the Martin Middle River

plant, were either canceled, amended, or

converted to other types of contracts.

Probably the most attractive form of

emergency facility financing was the Defense Plant Corporation (DPC) arrangement, which came to be used in place of

the EPF contract. During June 1940,

Congress authorized the depression-born

Reconstruction Finance Corporation

(RFC) to set up the DPC as a wartime

holding company, but opposition from

the banking community delayed the operation of this agency for some time. Under DPC auspices a manufacturer selected

for expansion by the War Department—

or any other military agency for that matter—sized up the task at hand and applied

for DPC financing. On approval, DPC

put up the cash and the manufacturer

occupied the plant on a rental basis, full

title resting with the government from

the very start.35

There was much to commend the DPC

form of financing although it, too, did

not want for difficulties in administer33

 The charges involved were by no means trivial.

For a single project, Ford Dearborn, the interest

amounted to approximately $1.25 million. See Smith,

The Army and Economic Mobilization, p. 481, n. 15.

34

 That the state tax could make the difference

between profit and major loss is suggested by the

California state tax of $800,000 imposed on the Douglas Long Beach facility constructed under an EPF

contract. See Smith, The Army and Economic Mobilization, pp. 481-82. 35

 This summary of DPC financing is based on

Smith, The Army and Economic Mobilization, pp.

484ff. and AAF Hist Study 40, pp. 39-42.
300 BUYING AIRCRAFT

ing.36 Because it was not tied down by

prolonged advance negotiations with the

bankers and because it did not require

certifications such as those necessary to

secure tax amortization, the DPC arrangement was fast and flexible. Moreover,

when an expansion project had to be

modified or enlarged in midstream—and

experience proved this was to be the typical situation—a simple amendment could

be worked out on the initial DPC agreement to cover the increased costs.

DPC financing had still other advantages. With clear title to the expanded

facility never out of government hands,

there could be no difficulty with state

governments over taxes. And under the

prevailing federal statutes DPC, as a

quasi-independent governmental corporation, was not subject to audit by the

General Accounting Office, a circumstance that might have raised the fears

of some critics but certainly contributed

notably toward speeding the rearmament

program, not only in freeing DPC officials from cumbersome bureaucratic routines but also in avoiding the need for

accumulating literally tons of bookkeeping records.

The DPC scheme was especially acceptable to the War Department during the

hurried months of defense build-up in the

latter half of 1940 and throughout 1941

when the rush of work fairly swamped

departmental staff officers, particularly

those charged with supervising the construction projects undertaken for the government. Since DPC provided a supervisory staff of its own on DPC projects,

War Department officers were released

for work elsewhere. Just as it stretched

personnel, so too the DPC arrangement

stretched funds. Although Congress appropriated seemingly astronomical sums

for defense after May 1940, the War Department was trying to overcome a generation of disarmament all at once; even

the most lavish grants seemed never

enough for the tasks at hand. Thus, insofar as it was able to transfer the burden, even temporarily, to DPC, the War

Department could stretch its defense dollars just so much further.

A less obvious but no less substantial

advantage in the DPC scheme of construction was that it removed the question of facilities from the immediate concern of those using them. Thus the

Army and Navy, instead of disputing over

who should expand a facility and thereby

get the inside track, could place the project in the somewhat more objective

hands of the DPC. This was a particularly advantageous settlement in the

matter of secondary manufacturers who

served as vendors and suppliers to the

prime contractors producing for the services, since here it was not at all uncommon to encounter individual firms serving prime contractors for all the using

arms.

By the same token, the dispassionate or

detached quality of DPC administration

made it possible for the government to

drive harder bargains in arranging for

construction of facilities by individual

supply contractors. Since DPC officials

had nothing to do with end-item procurement, they were not subject to the same

pressure that beset War Department contracting officers who might be intimidated by manufacturers who could insist

36

 For an insight on at least one of the difficulties

met, see the suggestive exchanges contained in IOM,

Chief, PES, to Chief, Mat Div, 25 Sep 40, and related correspondence, AFCF 004.4.
THE PROBLEM OF INDUSTRIAL CAPACITY 301

that the provision of facilities on generous terms was a necessary prerequisite to

early delivery of the aircraft and other

munitions so eagerly sought by the using

arms.

Insofar as air matériel was concerned,

the DPC arrangements proved in practice to be a most popular method of

financing facility expansions during the

emergency period. Beginning as a rather

hesitant experiment in August 1940 with

a DPC plant for the Packard Motor Car

Company to build the British RollsRoyce aircraft engine, DPC projects attracted more and more favor until the

end of the war when the total of DPC

projects sponsored by the War Department reached 935 and involved some

three billion dollars in capital. Of these,

more than 80 percent were air arm projects.37

Financing expansions of productive

capacity was one of the crucial problems

of defense. Until decisions were reached

here, construction could not go ahead.

Because mobilization planners in the

War Department, Treasury, and even

Congress itself had not prepared effective

financing procedures in advance, all had

to be done in haste during the summer

and fall of 1940. As a result, the decisions actually reached and the forms of

financing finally selected in individual

cases were determined less by logic than

by accident—the accident of whatever alternative arrangement was readily available at the moment. This was true almost down to Pearl Harbor, by which

time legislation had combined with experience to make possible a more informed and rational selection of fiscal

instruments.

Perhaps the prewar planners could not

possibly have foreseen and prepared for

the difficult problem of facility financing,

but this much at least is clear: the delays encountered while various officials

worked out suitable financial instruments

seriously retarded the nation's rearmament effort. Delay was the penalty of

improvisation. At the beginning of August 1940, nearly three months after the

President had galvanized the country

with his call for an air armada of 50,000,

the Air Corps had signed contracts for

but 33 additional aircraft, although this

figure rose to 343 by 20 August.38 To be

sure, Air Corps contracting officers had

been ready and waiting, pen in hand,

since June, but the manufacturers were

inclined to drag their feet. Understandably enough, contractors were reluctant

to sign until Congress made up its mind

on rapid depreciation, excess profits, and

profit limitations, and on the whole subject of emergency facilities.

Some manufacturers were hardy

enough—or foolhardy enough—to go

ahead with the patriotic business of rearmament without waiting for Congress

and the financial experts to conclude

their deliberations. But in the main, the

first round of Air Corps contracts for facility expansion initiated in July 1940

took several months to reduce to terms.

The First Round of Expansion

The initial series of facility expansions

undertaken by the Air Corps involved

37

 Smith, The Army and Economic Mobilization,

pp. 494-96, especially Tables 51 and 52. 38

 Craven and Cate, eds., Men and Planes, p. 307.
302 BUYING AIRCRAFT

some twenty projects.39 After a preliminary bout of informal discussions, official

letters of intent went out on a single day

in the middle of July 1940 to the first

thirteen manufacturers selected to receive factories. In line with the policy

agreed upon by the prewar mobilization

planners, all of these proposals went to

old-line, established firms in the aviation

industry, both airframe and engine builders—the firms with design skills, production experience, and technical knowhow.40

The expansion projects evolved during the summer of 1940 varied according

to the need in each case. The Boeing

Airplane Company, for example, undertook an extension of its Seattle plant to

assemble B-17 heavy bombers (Flying

Fortresses) and in addition agreed to

build a whole new plant for fabricating

subassemblies at Wichita, Kansas, the two

involving an outlay of over $10,000,000.

Glenn L. Martin agreed to double the

floor space at its Middle River plant near

Baltimore to increase production of the

B-26 medium bomber (the Marauder), a

project expected to cost nearly $7,000,000.

And this was only the beginning, since

changes, overruns, and additions almost

invariably led to increased expenditures

in plant expansion projects. North American Aviation received nearly $2,500,000

for an addition to the firm's plant at Englewood, California, and at the same time

agreed to erect an entirely new $6,500,000

plant at Dallas, Texas, for the production

of training aircraft.

In addition to the projects mentioned

above, Bell, Curtiss-Wright, Republic,

Vultee, Ryan, Fairchild, and Beech had,

by the end of October, agreed to various

types of expansions. These of course

were only the first in a list that was to

grow longer and longer as time passed.

There is no need to describe all of the

projects sponsored by the Air Corps.41

Nevertheless, some of the difficulties encountered in almost every facility expansions are suggested by a typical example.

The plant expansion sponsored by the

Air Corps for the Bell Aircraft Corporation in Buffalo, New York, was neither

the largest nor the smallest undertaken.42

It reflects nonetheless a considerable body

of meaningful experience. The initial

Bell proposal called for an assembly plant

of 240,000 square feet, a floor area 400

by 600 feet, to be used to speed production of the P-39 Airacobra pursuit. Negotiators for the manufacturer and the

air arm dickered at considerable length

over the amount that would be allowed

the contractor under an EPF contract to

construct the proposed plant for the government. At last they agreed upon a figure just over a million dollars.

The agreement with Bell had scarcely

passed through the long chain of official

approvals required—the Secretary of War,

the NDAC, and the President himself—

before Bell representatives were back asking for the inclusion of $100,000 for "contingencies not previously considered."

Even while the negotiators had bar39

 LI-65, Chief, Mat Div, to Asst Chief, Mat Div,

21 Aug 40, AFCF 452.1 Aircraft, Gen; Rpt of New

Productive Capacity, OCAC, Mat Planning Sec, 5

Sep 40, AFCF 004.4 Manufacturers. 40

 AAF Hist Study 40, p. 73ff.

41

 An excellent brief survey of the over-all program

is published in Craven and Cate, eds., Men and

Planes, p. 308ff. 42

 For the Bell story in general, see AFCF 004.41

Bell EPF, passim.
THE PROBLEM OF INDUSTRIAL CAPACITY 303

gained, it appears, the cost of materials

and equipment had spiraled—a process

familiar to those with knowledge of the

behavior of the national economy under

the stress of a war boom. A week later

Bell officials were back again. This time

they wanted a change order approving a

$60,000 increase to cover the interest

charges paid by the manufacturer on the

money borrowed to finance construction

of the new plant. When these extras

were approved the manufacturer returned with a long list of things allegedly

forgotten in the initial negotiations. A

sewer pump, an incinerator, and fluorescent lighting, among other such items,

were presented for approval as justifying

an increase over the initial fixed-price

contract.

Gradually the irony of the situation

began to dawn on responsible officials in

the Air Corps. It was the familiar old

story of air matériel procurement during

the previous twenty years repeated all

over again. Before signing a contract,

manufacturers were willing to promise

the moon itself; after signing a contract

they asked for change orders increasing

the contract price for every little item

not included when the original fixed

price was under consideration. In fairness, it must be recognized that many

such change order requests were fully

justified. In a highly fluid situation it

was inevitable that unforeseen contingencies would occur. The Bell requests

mentioned above may well have been

justified, but the Chief of the Materiel

Division, as the officer directly responsible, began to have qualms. "Some day,"

he said, "there has to be an accounting."

The cold shadow of a Leavenworth cell

block fell across the future. If air arm

negotiators were too liberal, if they failed

to drive adequately hard bargains, the

Chief of the Materiel Division observed,

it would be "terrifically hard to explain"

at any postwar day of reckoning.43 The

appropriate subordinate officials at

Wright Field were admonished accordingly. But tightening the purse strings,

where at all possible, met only one of

the many problems of facility expansion.

If the problems of financing vexed

operation of the various facility expansions sponsored by the air arm, even more

troublesome were the complications arising out of the perpetually changing scope

and scale of the projects undertaken. The

original Bell expansion involved some

240,000 square feet. By the summer of

1941 air arm officers were perfecting a

plan to provide Bell with 500,000 square

feet of additional space in an entirely

new DPC plant to build B-17 subassemblies. Despite pressure from OPM officials who urged that this new plant be

located in some other labor area less saturated with war work, air arm officers argued that Bell management resources

were too thin to allow cadres to be split

off in order to set up an operation remote

from the parent plant. Only a few

months later, soon after Pearl Harbor,

air arm officials again urged Bell to undertake an expansion. This time, apparently ignoring their earlier assertions

regarding Bell's lack of depth in management, they pressed the manufacturer to

operate a giant $14,000,000 B-29 Superfortress heavy bomber assembly plant

outside Atlanta, Georgia.

43

 Chief, Mat Div, to Asst Chief, Mat Div, 16 Oct

40, AFCF 004.4.
304 BUYING AIRCRAFT

The record of Bell's experience in facility expansion shows that the problem

of productive capacity kept changing.

Events in Europe and Asia continually

raised the sights for aircraft output. As

a consequence, no grand synthesis, no

overview, was ever quite possible. One

day's "ultimate" program was utterly

lapped by needs rising over the next

day's horizon. If mobilization planning

and facility expansion were to be logical,

orderly, and rational, as T. P. Wright had

noted in his earliest production studies

for NDAC, it was essential to get a picture of the "whole load." Yet in practice

it was precisely this "whole load" that

never could be discovered. Not only

did the turn of events, both military and

diplomatic, keep changing the requirement for aircraft output, but Congress

made available larger and larger funds

and more flexible means of financing facilities. In a very real sense the rules of

play were in continual flux during the

entire game. And at the same time the

industrial managers were themselves

changing. Bell officials who thought

they faced a big job when they set to

work on their first million-dollar expansion at home in Buffalo were not staggered when asked to tackle a $14,000,000

project in Georgia only a little over a

year later.

The Bell story illustrates the fact that

it was difficult to plan for procurement

when all the factors turned out to be

widely fluctuating variables. What had

been visualized as the full expansion

program in the early summer of 1940

ended up as merely the first round in a

long series of expansions. That the first

round of expansions was entirely inadequate became increasingly apparent during the fall of 1940.44

 By the time the

President described the nation as the

Arsenal of Democracy during his fireside

chat at the end of December 1940, it was

already clear that it would be necessary

to look elsewhere for increased aircraft

production—to Detroit, for instance, with

the as yet virtually untapped resources

of the automobile industry and its vast

congeries of vendors and suppliers.45

Enter Detroit: Air Arm Use of the

Automobile Industry

Mr. Knudsen Takes the Initiative

The old-line, established aircraft manufacturers of the country feared the automobile industry as a potential competitor, and this attitude on the part of

aircraft manufacturers seems to have colored the thinking of air arm officers who

did business with them. The officers

spoke in a general way of utilizing the

productive capacity of the automobile

industry, but when it came down to cases

in the frantic summer of 1940, they sponsored large expansions for the old-line

aircraft firms long before they turned to

Detroit. Commissioner Knudsen of the

NDAC broke the pattern. No one knew

the productive potential of Detroit better than Knudsen, and it was he, rather

than the automobile men themselves or

air arm officers immediately concerned,

44

 Memo, CofAC to Chief, Mat Div, 21 Oct 40,

AFCF 452.1 Production. See also AAF Hist Study

40, pp. 79ff. 45

 For a concise account of the growing realization of the need for more aircraft production capacity, see William L. Langer and S. Everett Gleason,

The Undeclared War: 1940-1941 (New York: Harper

and Brothers, 1953), pp. 238-40.
THE PROBLEM OF INDUSTRIAL CAPACITY 305

who took the initiative in calling in the

automobile manufacturers.46

To recruit the Detroit manufacturers

Mr. Knudsen appeared before them in

person in October 1940, first at a meeting of truck and automobile builders in

New York City and then before a much

larger gathering in Detroit including not

only the big automotive leaders but representatives of the body manufacturers

and parts suppliers, as well as the tool and

die firms serving them, a cross section of

the entire industry assembled through

the auspices of the powerful Automobile

Manufacturers Association (AMA), an

organization ideally suited to such a

function.47 By appearing in person, Mr.

Knudsen made his proposal immensely

appealing. It was not the brainchild of

some theorist or politician but a proposition from Big Bill Knudsen, whose rise

to power from the shop floor to the top

of General Motors won him immense respect, not least of all from his former competitors. Moreover, Mr. Knudsen skillfully cast his proposal in dramatic and

daring terms. Specifically, he called for

12,000 bombers over and above those

currently on program. The government

would erect two large assembly plants to

be operated by experienced airframe

manufacturers, but it was up to Detroit

to utilize its available capacity to produce

the parts and subassemblies to feed into

these plants. Without the aid of Detroit,

Knudsen declared, this vast new program

could never be accomplished.

If Knudsen's approach to the automobile manufacturers appealed to their patriotism, equally skillful was the accompanying appeal to the intense pride of

the industry in its technical skills. While

Knudsen was up in front making his

pitch, some imaginative officers were

busy setting up displays of typical aircraft parts and subassemblies as well as

blueprints to suggest to manufacturers in

the Detroit family how their various productive capacities might be utilized.48

When confronted with the twofold

challenge to their pride and their patriotism, the automobile manufacturers accepted with enthusiasm. They set up a

committee to consider ways and means

of meeting the challenge. The committee, called the Automotive Committee

for Air Defense (ACAD), was no empty

formality. Its members, drawn from the

top echelons of the industry, included

such leaders as Edsel Ford, K. T. Keller

of Chrysler, and Charles E. Wilson of

General Motors. It was an auspicious

beginning. Detroit had enlisted with

enthusiasm. Indeed, Mr. Knudsen had

succeeded in recruiting his forces before

the plans to employ them had actually

been completed. The precise details of

the government's bomber plant program,

which he outlined in Detroit, had yet to

be hammered out. 46

 Memo, drafted by Maj Lyon for SW, 26 Oct 40;

Memo, ASW for Brig Gen Carl Spaatz, 23 Oct 40.

Both in AFCF 004.4 Manufacturers. See also New

Republic (November 11, 1940), p. 659. 47

 Automobile Manufacturers Assn., Freedom's Arsenal: The Story of the Automotive Council for War

Production (Detroit, 1950), pp. 1-9; AAF Hist Study

40, p. 79ff; and app. VI, text of Knudsen's speech

of 25 Oct 40. See also, WF Memo Rpt, Insp-M40-36-E, 29 Oct 40, AFCF 452.1 Production.

48

 The record is unclear as to just who was responsible for the challenge to the automobile industry's technical skills implied in the parts exhibit

in Detroit. Knudsen had it in mind even before he

went to Detroit on 25 October 1940, but the idea

may have originated elsewhere. See Memo, ASW

for Gen Spaatz, 23 Oct 40, SW files, Airplanes, item

1834. By the end of 1940, more than 800 firms had

studied the exhibit. AMA, Freedom's Arsenal, 37ff.
306 BUYING AIRCRAFT

THE B-24

The Bomber Plant Program

The automobile manufacturers and

others on the ACAD lost no time in getting the government bomber plant program under way. As they visualized the

task, it fell into four equal parts. Approximately 25 percent of the work would

involve the fabrication of parts. Making

subassemblies would account for another

25 percent. These two jobs would be the

responsibility of the automotive industry. The manufacture of fuselages would

take up another 25 percent, which, coupled with the installation of parts and

final assembly by the old-line aircraft

manufacturers who were to manage each

of the two government-furnished plants,

would round out the program.49 As one

automotive manufacturer saw the process

in retrospect, it was a wedding of the aircraft and automobile industries without

benefit of shotgun. The fear of old-line

airframe producers that automobile

builders would run away with the postwar airplane market was laid by an explicit promise to the contrary, and soon

more than a thousand design and production men from Detroit were swarming

through the aircraft plants studying the

problems they would have to face.50

Air Corps officers in charge of the project knew only too well that getting government bomber plants into production

would inevitably turn out to be a long

and complex undertaking. To begin

with, the necessary funds were not readily available and would have to be found

somewhere. Once construction had begun, it would still take an estimated ten

to twelve months to complete the plants;

thus the first trickle of production could

scarcely be expected before another year,

and full production was not anticipated

in less than eighteen months. To make

matters worse, Air Corps officers were

unable to decide exactly which bombers

should be produced in the government

plants. Consolidated's experimental fourengine heavy bomber, the XB-24, might

turn out to be superior to the tried and

tested Boeing Flying Fortress, which was

already several model changes along the

way as the B-17E. Similarly, the twinengine Martin medium bomber, B-26,

might prove superior to the North American B-25 in tests yet to be conducted.

Thus it was necessary to start the program

and bring automobile builders into cooperation with aircraft builders even be- 49

 WF Memo Rpt, Insp-M-40-4-A, 6 Dec 40, WF

Contract files, 321.91 Organization. 50

 AMA, Freedom's Arsenal, p. 24.
THE PROBLEM OF INDUSTRIAL CAPACITY 307

THE B-25

fore anyone was certain just which airplanes would be built.51

The selection of sites for governmentowned assembly plants presented another

problem almost certain to delay the program. No one in the War Department

had specialized experience along this

line, and the instructions drafted for the

first Plant Site Board were amateurish

indeed, though there was actually no reason for this floundering. Nearly a month

before work commenced on the bomber

plant projects, the Aeronautical Chamber of Commerce, with a wide range of

executive skills at its disposal throughout

the industry, had drafted an able and

imaginative check list for site board work;

the check list was not used. In addition,

the industrial development department

of the Baltimore and Ohio Railroad had

proffered the services of its skilled and

experienced staff, but this, too, seems to

have been ignored.52 And even when

the Air Corps finally did send survey

teams out into the field to study possible

sites, it took some time to shake off the

cumbersome administrative routines of

peacetime. Occasionally compliance with

existing regulations led to situations nothing short of absurd. Each long distance

call placed by a board in the field, to take

but one illustrative example, had to be

authorized in writing in advance. Thus

it not infrequently happened that a board

had to run up heavy bills in per diem

charges for want of permission to make

a call costing a few dollars at the most.53

The officials who selected facility sites

had to reconcile a number of conflicting

interests. For many years it had been accepted doctrine that any major expansion

of the aircraft industry in an emergency

should be in the interior of the country,

"behind the mountain chains" for obvious strategic reasons. In practice the doctrine was largely ignored. Manufacturers

built new plants and expanded their old

plants where it was most economical to

do so. Even when the government footed

the bill as it did in the first round of expansions during the fall of 1940, responsible air arm officers were unwilling to

ignore the contention of many manufac51

 Memo, CofAC for ASW, 4 Oct 40, AFCF 004.4

Manufacturers; Memo, Actg SW for President, 16

Nov 40, AFCF 030. See also, AAF Hist Study 40,

p. 84. 52

 Memo, OASW for CofAC, 22 Jul 40, and ACC

release of 10 Jun 40, as well as B&O RR to Brig Gen

C. T. Harris, 3 Jul 40. By way of contrast, see the

site survey prepared by a manufacturer's engineer,

J. T. Hartson, of Glenn L. Martin to Col Volandt,

13 Dec 40. All in AFCF 004.4.

53

 Memo, Chief, Plans, OCAC, for Exec, 8 Jan 41,

AFCF 311.3 Phone Calls.
308 BUYING AIRCRAFT

turers that to build secondary plants in

the interior, at a distance from parent

plants, would seriously slow down production.54

 On the other hand, those responsible for site selections were subjected to a good deal of pressure from

various localities in the interior urging

their advantages and the need for an

equitable distribution of defense orders.55

Neither political nor purely strategic

considerations called the turn. The matter was decided, rather, by inescapable

economic factors. The government assembly plants were ultimately located in

communities not already burdened—or

blessed—with defense contracts. And each

site was selected only after the most careful survey showed that the available housing, power, transportation, labor supply,

flying weather, and the like justified the

choice.56

The Site Board surveys made it apparent that the initial plan for two government bomber plants was not feasible. To

erect new plants expecting to hire upward of 20,000 employees in any one industrial area threatened to impose an impossible strain on the local resources in

labor, housing, transport, and so on. The

obvious solution was to divide the load.

Thus, by the end of 1940 there were

four rather than two government bomber

plants under way in or near Omaha, Nebraska; Kansas City, Kansas; Tulsa, Oklahoma; and Fort Worth, Texas. Each of

these localities was to receive a bomber

plant big enough for use in assembling

the largest designs on the experimental

horizon, the XB-29 or the XB-32, for

example, even though the immediate

plan only called for the production of

medium bombers at Omaha and Kansas

City.57

While the surveys leading to the selection of sites proceeded, Mr. Knudsen's

negotiators were busy trying to bring the

automotive and aircraft manufacturers

together. The task was extremely involved. First, each individual airframe

firm had to be persuaded to do business

with a particular set of automobile companies. With this basic agreement

reached, the interested parties had to decide what parts or subassemblies each

would make, what patent licensing would

be required, and how the flow of design

data would be arranged, since the exigencies of battle would inevitably keep

designs in a high state of flux even after

mass production had begun.

The government bomber plant program, or Knudsen automotive program

as it was sometimes called, finally took

the following form: Glenn L. Martin of

Baltimore agreed to produce the B-26

medium bomber in the government-built

plant at Omaha, using parts supplied by

the Chrysler Corporation and the Hudson Motor Car Corporation of Detroit

and the Goodyear Aircraft Corporation

of Akron. North American agreed to

assemble the B-25 medium bomber at

the Kansas City plant, using parts and

54

 Wichita, Kans., Chamber of Commerce, to SW,

20 Mar 39, with 2d Ind, OCAC to TAG, 8 Apr 39,

AHO Plans Div 145.91-244, and SW to Senator

Arthur Capper, 15 Dec 37, SW files, Air Corps Gen

Questions, item 471, offer some insight on the subject. 55

 See, for example, telegrams of Senator Josh Lee

of Oklahoma to Gen Arnold, 10 Dec 40, and Senator

Sheppard to Gen Brett, 13 Dec 40. Both in AFCF

004.4. 56

 Gen Brett to J. J. Cochran, 30 Dec 40; Col

Volandt to Shreveport, La., Chamber of Commerce,

9 Jan 41. Both in AFCF 004.4. 57

 Memo, CofAC for ASW, 27 Nov 40, AFCF 004.4.
THE PROBLEM OF INDUSTRIAL CAPACITY 309

subassemblies provided by the Fisher

Body Division of General Motors and its

related subcontractors and suppliers. Although the Boeing B-17 had been the

favored heavy bomber when the automotive program was first broached, by the

time negotiations were completed early

in 1941 it had been decided to concentrate on the B-24 designed by the Consolidated Aircraft Corporation of San

Diego. Consolidated agreed to set up a

second B-24 assembly line in the government-built plant at Fort Worth, while

the Douglas Aircraft Corporation undertook to open still another for the same

aircraft in the government plant at Tulsa.

To feed the big assembly units at Tulsa

and Fort Worth, the Ford Motor Company agreed to supply a total of a hundred sets of knockdown airframe parts

per month, each set consisting of virtually all the major components of the

bomber—fuselage, wings, tail, landing

gear, and so forth.

All but one of the automobile manufacturers contributing airframe parts and

assemblies arranged to do so in their existing plants or in privately financed

expansions. Ford was the exception.

Ford persuaded the government negotiators that it would be necessary to erect

an entirely new plant in addition to the

$2,000,000 conversion job done at the

River Rouge factory. The new facility

that grew out of this decision was the

multimillion dollar project at Willow

Run some thirty-odd miles west of Detroit.58

The expansion of aircraft engine production followed close on the heels of

airframe expansion. Even before Knudsen's appeal to Detroit, Wright Aeronautical had received government assistance

for the erection of a facility at Lockland,

Ohio, near Cincinnati. This new plant,

with its installations of automatic equipment, not only increased the output of

Wright R-2100 radial engines but also

constituted what was probably the nearest approach to automation in a World

War II engine factory. The foremost

manufacturers of in-line aircraft engines,

the Allison Division of General Motors,

undertook a large expansion of its Indianapolis plant without government assistance, while the Lycoming Division of

Aviation Corporation received a $1,500,-

000 expansion to speed output of the

R-680 engine for use in training planes.

But even these additions to plant were

insufficient to keep up with the rising

curve of demand.

With engines as with airframes, government officials soon turned to Detroit.

The first automobile manufacturer to

enter the field was the Packard Motor

Car Company, which agreed to produce

the British Rolls-Royce Merlin engine,

V-1650, for delivery to the British as well

as to the United States. Because the top

management of Pratt and Whitney felt

that its staff had already been spread thin

on the expansions sponsored for the firm

by the French and British, it seemed wise

to increase the output of the Pratt and

Whitney R-2800 engine by utilizing the

management resources of Ford. Ford

was duly licensed and built a new plant

on the River Rouge site at a cost initially

estimated at $22,000,000.59 To increase

production on yet another Pratt and

Whitney engine, the R-1830, in phase

58

 AAF Hist Study 40, pp. 87-89. 59

 Ibid., pp. 77-78.
310 BUYING AIRCRAFT

with the anticipated output of the two

government-built B-24 assembly plants

at Tulsa and Fort Worth, as well as to

meet British requirements, the Buick

Motor Division of General Motors agreed

to sponsor a $31,000,000 facility financed

by the government at Melrose Park near

Chicago. Similarly, to step up the output of the Wright B-2600 engine to

match the expected demands of the B-25

assembly plant at Kansas City, the

Studebaker Corporation agreed to operate three plants, located in Chicago,

South Bend, and Fort Wayne, which the

government would finance at a cost of

just under $50,000,000.60

The expansions mentioned here, both

airframe and engine facilities, constituted

only the beginning of a long sequence.

As events in Europe and Asia led to increased requirements, further additions

to plant were undertaken. In some cases

even before ground was broken for these

initial projects, it was decided to double

or even triple the floor space involved.

A whole new group of manufacturers was

brought into the program too. Moreover, extensive facility expansions were

granted to the firms producing accessory

items—gun turrets, landing gear assemblies, and the like.61

By July 1941, the end of the fiscal year,

the air arm could report that there were

over 24,000,000 square feet of floor space

in the aircraft industry, double the area

available in January 1940. The labor

force directly employed in the industry

had tripled to 180,000 workers. Counting suppliers and vendors as well as prime

and subcontractors, the air arm had sponsored some 45,000,000 square feet in facility expansions, which, together with

outlays for tools, cost a total of $721,000,-

000.62

All these undertakings held promise of

enormously increased production—when

completed. Unfortunately, since many

involved new construction rather than

conversion of existing plant, a long delay

between inception and fulfillment was

inevitable. The public, never fully informed of the difficulties involved, was

doubtlessly led to expect too much too

soon. It was all too easy to confuse the

big bold headlines—promising 12,000

bombers from Detroit—with the reality

of fully functioning production lines.

Among those disturbed at the gap between promise and fulfillment at Detroit

was Walter Reuther of the CIO United

Auto Workers, who sought to bridge the

distance in what came to be known as

the Reuther Plan.

The Reuther Plan

During December 1940, Mr. Reuther

offered the government a plan by which

he claimed the automotive industry could

produce 500 fighter aircraft a day after

a mere six months spent in tooling up.

Automobile output was to continue unabated at existing levels. This miracle

of mass-produced aircraft was to be

achieved entirely by utilizing the excess

floor space of Detroit. With its capacity

equal to 8,000,000 units a year but currently turning out a scant 4,000,000, the

automobile industry should be fully ca60

 Ibid., pp. 90-91. 61

 Ibid., pp. 93-94.

62

 Hearings of Special Com Investigating the National Defense Program (Truman Com), July 15,

1941, pt. 6, p. 1527-28.
THE PROBLEM OF INDUSTRIAL CAPACITY 311

pable of building 500 fighter aircraft a

day, if the manufacturers involved would

but accept three proposals Mr. Reuther

proceeded to spell out. First, they would

have to agree to forego the usual annual

car model change for production year

1942 in order to free the industry's tool

and die men to work at tooling up the aircraft project. Second, the participating

manufacturers would have to agree to

pool their machine tools so that particular tools could be moved about from one

plant to another as the occasion might

require. Third, Mr. Reuther called for

the formation of a nine-man board of

supervisors or directors to conduct this

great co-operative effort. The board

would include three representatives from

management, three from the government,

and three from organized labor.63

The Reuther Plan and the uproar it

engendered can be understood only in

the context of the running feud of unions

and management in the decade of the

nineteen thirties. On the part of organized labor, Mr. Reuther was anxious to

hold and even expand the social and legal gains already won by the unions. Not

least among these objectives, as stated by

Reuther, was the hope of forcing Ford

into full compliance with the terms of

the Wagner Act.64 On the other hand,

some spokesmen for management seemed

to feel that the whole Reuther scheme

was an effort to prepare for a drive for

more pay and shorter hours by discrediting management's record in the defense

effort before management could do the

same to labor.65

As soon as the Reuther Plan was publicized, both sides indulged in a good deal

of blatant grandstanding. A number of

stories rather obviously inspired in Detroit appeared in the news. They all

sang the same refrain: only a very small

proportion of the tools and equipment

in the automotive industry would be

suitable for use in airframe and aircraft

engine work. One spokesman flatly declared that not more than 10 percent of

the industry's tools could be used.66 This

intramural fencing for advantage tended

to make truly objective evaluations and

decisions on the Reuther Plan extremely

difficult.

Even the most cursory examination of

the plan by government officials revealed

that it was based on a number of misunderstandings. To begin with, 500 fighter

aircraft a day were far more than the Air

Corps needed, wanted, or could use. The

Air Corps desired bombers—long-range,

multiengine, heavy bombers—with immense wing spans that were far too great

to permit assembly in the narrow bays

of the existing automobile factories.

Perhaps the most serious objection to

the Reuther Plan was that it did not come

to grips with the most difficult and central problem of design: just how would

Mr. Reuther transfer the design of an

aircraft, continually in flux as a design,

from the drawing boards of an aircraft

63

 The Reuther Plan was officially titled, Program

for Utilization of the Auto Industry for Mass Production of Defense Planes. A copy is available in

the records of the OEM Library in the National

Archives, but, for easier access, see the New York

Times, December 23, 1940, 1:1, and December 24,

1940, 1:1. For a brief description, see AAF Hist

Study 40, p. 82. 64

 See, for example, remarks by Walter Reuther in

radio address reported in New York Times, December 29, 1940, 20:6.

65

 See feature story, datelined Detroit, in New York

Times, December 29, 1940, sec. X, 4:6. 66

 Ibid. See also, same issue, sec. IV, 5:8.
312 BUYING AIRCRAFT

manufacturer to the production lines of

Detroit. This task, by no means impossible, nevertheless imposed acutely difficult problems on management. Yet the

management Mr. Reuther sought to establish was not one already perfected as

a team with years of experience but a

co-operative affair pooling individuals

from a number of firms, an arrangement

almost certain to lose the advantages that

government officials hoped to gain when

they turned to Detroit. One of the important reasons for selecting Ford, Chrysler, and General Motors as key producers

was that each of these corporations had

built up elaborate purchasing organizations whose experience would be invaluable in dealing with the host of

subcontractors, vendors, and suppliers

necessarily involved in the government's

bomber plant program.67 If these drawbacks were not in themselves sufficient to

induce rejection of the plan, Reuther

himself offered the coup de grâce by suggesting that the whole Detroit aircraft

effort be managed by a mixed commission of representatives from labor, management, and government. Such a proposal was almost certain to kill off enthusiasm even among those anxious to

co-operate with organized labor.

The objections to the Reuther Plan

were immediately apparent to responsible officials in the government, but to

reject it out of hand was inexpedient.

Since the whole scheme had come into

focus as a contest of organized labor versus big business, no matter how cogent

the arguments against Mr. Reuther's proposal, the administration could not afford

to come out immediately in favor of one

side over the other. Instead, it was necessary to play for time. An aircraft was

provided to carry Mr. Reuther on a tour

of aircraft and engine plants to study the

application of his plan. The trip was

well worth the trouble. An officer assigned to the expedition observed that as

a result of their several conferences, the

attitude of the manufacturers toward

Reuther changed from hostility to tolerance. And, for his part, Reuther appeared to come away with a far greater

appreciation of the technical difficulties

that would be encountered when building airframes in automobile plants. After

learning at first hand that many aspects

of the aircraft job required watchmaker's

precision work, the union leader was not

quite so self-assured as he had been when

he blandly excoriated the "bugaboo of

tolerances" in his initial proposal. Then

he had said "we'll add more gauges"; now

he was not quite so sure.68

Although the Reuther Plan did have

serious shortcomings, there was indeed

considerable merit to the claim that aircraft production could be substantially

increased if the automotive manufacturers would subordinate all work in preparation for their 1942 models in favor of

defense contracts. Mr. Reuther might

have served the cause of defense better

had he concentrated on this central theme

without the obfuscation of the 500-airplane-a-day promise. Of course, it might

well be argued that he would never have

found any listeners had he not first presented such an extravagant proposition.

Without the headlines captured by the

67

 AMA, Freedom's Arsenal, p. 37. See Rpt of

NDAC decision of 18 Dec 40.

68

 Memo, Maj D. W. Watkins for Gen Arnold, 28

Jan 41, AFCF 333.1 Contract Inspection. See also

Wilson, Slipstream, pp. 247-48.
THE PROBLEM OF INDUSTRIAL CAPACITY 313

plan, it would have been more difficult

to urge labor's claim for a seat in the

councils directing the nation's economic

mobilization. And, as the debate over

the plan clearly showed, this was by no

means the least important purpose visualized by its author.69

The moment was opportune for a bid

to further power by labor. A Gallup poll

conducted toward the end of 1940 revealed that 58 percent of the nation's

voters were inclined to blame the Roosevelt administration for the lag in defense

production.70 Mr. Roosevelt's answer to

this criticism was to superimpose a coordinating agency, OPM, on top of the

loosely correlated NDAC.71 As Director

General of the new organization, the

President appointed Mr. Knudsen, the

representative of big business. But, significantly, at the same time he named

labor's Mr. Hillman as Associate Director General. Seen from the vantage

point of organized labor, Mr. Reuther's

Plan would appear to have been highly

successful—at least in one respect.72

While it may be true that the Reuther

Plan had to be broached in extreme form

—500 aircraft a day—to stir up excitement

and attract attention to make gains for

labor, these advances were not made without losses in another direction. Since a

program of 500 fighter aircraft a day was

manifestly impractical, it drew upon itself the withering fire of the automotive

industry. Many of the objections leveled

against this aspect of the plan were entirely valid, but that only served to obscure the real issue. After all, Mr. Reuther's main point was not precisely 500

fighters a day but rather a fuller utilization of the available capacity in Detroit.

Once the headline writers identified the

Reuther Plan with "500-a-day," the damage was done; soon afterward the union

proposal was tacitly shelved.73

The Reuther Plan, if taken as a whole,

was certainly not feasible. With knowledge of all the factors involved, its author

himself would doubtlessly have accepted

this conclusion. But rejection of the

plan as such did not dispose of Mr. Reuther entirely. Even if he conceded that

only 10 percent of the automobile manufacturers' tools were suitable to conversion to aircraft work, Mr. Reuther argued effectively that this scant 10 percent

represented a pool far in excess of the

tools currently in use throughout the entire aircraft industry. And if the car

manufacturers would but defer their

preparations on their 1942 models, their

equipment could be converted promptly

to aircraft work. The trouble was not

that the automobile makers refused to cooperate in the defense effort but that they

insisted on doing so on their own terms.

They would build aircraft, some labor

spokesmen claimed, only if they received

new plants supplied by the government

or won big tax concessions, and even then 69

 See, for example, the radio address by R. J.

Thomas, president of UAW, CIO, urging adoption

of Reuther Plan, as reported in New York Times,

January 4, 1941, 7:8. 70

 New York Times, January 4, 1941, 7:3. 71

 See above, ch. XII. 72

 For an interesting perspective on the advantage

to Reuther himself growing out of the plan, see

Nelson, Arsenal of Democracy, p. 318.

73

 The whole newspaper debate on the Reuther

Plan offers an excellent case history on political practice. The plan was adroitly done to death by killing

off a nonessential feature and then leaving it in suspended animation, neither accepted nor rejected,

denying its frustrated author sufficient leverage for

further action. See especially, New York Times,

January 2, 1941, 8:4, and January 3, 1941, 8:6.
314 BUYING AIRCRAFT

only if they were allowed to continue

building automobiles too.74 If they were

to enter the defense effort, Mr. Reuther

charged, the automobile manufacturers

wanted the prestige of producing end

products, aircraft and engines, and not

just parts appearing under someone else's

brand name.75 In fine, the union view

suggested that the automobile manufacturers put profits ahead of preparedness,

that they were lagging rather than leading in the nation's defense effort.

Leading or Lagging?

There was a measure of justice in the

charge that the automobile manufacturers were dragging their feet rather than

leading in the rearmament program.

Hardly a day passed but some news account out of Detroit explained just why

the industry could not be converted to

aircraft production as Mr. Reuther suggested.76

 No doubt many of these stories

were inspired by manufacturers frightened by the more extreme features of

the Reuther Plan. In their anxiety they

apparently allowed themselves to be

drawn to the opposite extreme, greatly

underestimating the extent to which Detroit's capacity could be used for aircraft

work. This was unfortunate, for the industry was just at this time in the midst

of a boom in automobile production, the

like of which had not been seen since

1929. Thus, by their own words the automobile manufacturers were cast in the

role of those who put the profits of production ahead of the patriotism of conversion for defense. Before condemning

them, however, it might be useful to consider the question in a somewhat broader

context.

There were actually a number of very

good reasons why the facilities of Detroit

could not readily be diverted immediately to aircraft use. To begin with, no

single manufacturer, acting individually

and on his own initiative, could decide

to omit the usual tooling up for model

1942. For a single automobile builder

to do this in the highly competitive automotive field would be market suicide.

It was a case of all firms omitting the

changes or none. Similarly, no single

firm could drop automobile production

entirely in favor of aircraft work, as some

critics suggested. The whole empire of

dealerships and distribution channels as

well as carefully nourished customer relations made any unilateral action in this

direction simply unthinkable. To ask

automobile manufacturers to act individually in accepting aircraft orders would

be to ask a higher order of patriotic response from them than from the nation

as a whole.

One solution of the difficulty was to

have guns and butter, continuing automobile output in existing facilities while

building new ones to absorb the aircraft

load. It was this duplication of facilities

that union spokesmen were inclined to

regard as a selfish grab at the taxpayer's

expense. However, it should be noted

that the manufacturer's preference for

74

 See CIO Outlook as quoted in New York Times,

December 29, 1940, 19:2. 75

 Memo, Maj Watkins for Gen Arnold, 28 Jan

41, AFCF 333.1 Contract Inspection. Reuther's remarks were doubtlessly aimed especially at Ford,

whose insistence on an assembly plant at Willow

Run made the charge appear valid. See AAF Hist

Study 40, p. 88. 76

 See, for example, J. S. Edgerton, Aviation Editor, in Washington Star, January 22 and 31, 1941;

and New York Times, February 9, 1941, 39:3.
THE PROBLEM OF INDUSTRIAL CAPACITY 315

new construction rather than the conversion of existing plants stemmed, in part

at least, from a peculiarity in the regulations on financing production acceleration. Neither the War Department nor

the Defense Plant Corporation would

generally agree to pay for reconversion

or nonrecoverable charges such as the

cost of removing and returning machinery, strengthening floors to carry heavier

equipment, and other similar expenditures in privately owned buildings. Since

making the conversion changes in some

instances ran up formidable totals, manufacturers were inclined to favor operations in new government-built plants

rather than in portions of their own

plants converted to aircraft use.77

Although individual Detroit manufacturers did show an understandable reluctance to enter aircraft production if

it involved dropping automobile output

or unless they received additional facilities in which to do the job, the fact remains that while the debate raged over

Detroit's failure to convert rapidly to

defense, an increasingly heavy volume of

aircraft contracts was placed with them.

Even before Mr. Reuther leveled his

charges, Douglas had placed a $20,000,-

000 order for wing assemblies with the

Murray Body works, and other aircraft

manufacturers soon followed suit.78 Nor

should it be forgotten that other branches

of the services were pouring orders into

Detroit. By the end of March 1941, for

example, the industry was turning out

military vehicles at the rate of more than

13,000 a month. By the end of June

1941, more than half of Detroit's $2,000,-

000,000 defense load was concerned with

air matériel, the remainder being motor

vehicles, marine equipment, guns, and

ammunition.79

While it was entirely feasible for the

automotive industry to absorb aircraft

contracts gradually, there were many obstacles to any effort at sudden or abrupt

transition to military production.80 As

the British had learned at great cost in

the early phases of their mobilization,

any attempt to cut automobile production suddenly leads to mass unemployment and severe economic dislocation.

Officials on the planning staff in the Under Secretary's office were well aware of

this difficulty as were a number of air

arm officers, but it was not always easy

to get this point over to critics in and out

of government who urged an immediate

transition to all-out defense. Those who

favored the latter course presupposed

that orders for military aircraft were all

ready to place in the hands of the automobile builders. Such was not the case.81

It was easy to criticize Detroit for not

cutting off production sooner, but firms

could scarcely be blamed for wishing to

retain automobile production until they

77

 AAF Study 40, p. 85. 78

 Business Week (November 2, 1940), p. 17.

79

 AMA, Freedom's Arsenal, pp. 46, 58. 80

 Mr. Nelson has pointed out (Arsenal of Democracy, page 218) that there is no such thing as partial

conversion of a modern production line. It is a case

of all or nothing. Although this is undeniably true

with regard to the automobile assembly lines, it

does not apply to the satellite subcontractors and

suppliers who not only could but did gradually

move into aircraft work. 81

 Memo, Dir, Planning Br, OUSW, for USW, 21

Apr 41, in app., vol. II, ASF Control Div, Monograph,

The Period of Military Preparedness: June 1940-

December 1941, OCMH; Memo, Asst CofAC for USW,

22 Jan 41, AC Project Rcds (Lyon Papers), bk. 56,

Proc Data.
316 BUYING AIRCRAFT

actually had large-scale defense orders in

hand.

Seen in retrospect, it seems clear that

automobile production should have been

curtailed sooner or at least the 1942 model

changes should have been curbed more

drastically. But to place responsibility

for these steps upon the manufacturers

themselves is to charge them with a leadership in the nation's economic mobilization that they did not possess. If responsibility rests anywhere, it rests with

those officials—civilians and military alike

—who shared the burdens of authority in

the period of national crisis. But, although they legally held authority to

take the necessary steps and provide for

the nation's defense, they could not exercise that authority until it was politically

feasible to do so. Since the public—if its

opinions had been gauged aright—was

believed to feel that the production of

both guns and butter was not only entirely possible but desirable, no orders

categorically directed Detroit to stop

automobile production until after the

United States entered the war.82

The capacity of Detroit was not adequately used for aircraft production before Pearl Harbor, but this was not so

much the result of poor planning by government officials or egregiously selfish

conduct on the part of the automobile

makers as it was a product of the inherent

difficulties involved in any attempt to

mobilize a competitive, capitalist economy within the framework of a politically free state. Walter Lippmann may

have put his finger on the very heart of

the problem when he charged that Knudsen and Hillman had been trying to act

as umpires between industry and labor

instead of taking command.83 But command rests ultimately upon the threat of

coercion rather than co-operation and, at

least until the Japanese struck, it was

probably not possible to resort to coercion. The nation's formal declaration of

war after 7 December 1941 changed the

nature of the facility problem drastically

but by no means solved it.

Expansion or Conversion?

Big Business and Small Business

The automobile industry was not the

only segment of the national economy to

face the dilemma of expansion or conversion even though the question first came

into focus there. During each successive

month of 1941, as material shortages became increasingly acute, more and more

small business firms were driven to seek

contracts for military items, contracts

that would assure their material requisitions a priority status. Small business,

generally defined by the Army as concerns employing 500 or fewer workers,

had hitherto avoided government contracts because of the inevitable mass of administrative overhead involved.84

 When

82

 Indicative of the guns and butter attitude is

the following from Business Week (November 23,

1940), page 4, "There is no point in curtailing auto

production . . . so that body plants can devote themselves to (aircraft) assemblies. . . ." Even a year later,

attempts by OPM to curb production of butter for

guns encountered opposition. A Fortune poll, November 1941, page 200, showed that 75 percent of

the nation's businessmen felt that the New Deal was

using the crisis as a pretext to push its social program.

83

 Walter Lippmann, syndicated column "Today

and Tomorrow," January 16, 1942. 84

 See chs. IV, V, and VI, above.
THE PROBLEM OF INDUSTRIAL CAPACITY 317

faced with the alternatives of military

contracts and their interminable rules,

regulations, and intricacies on the one

hand and, on the other hand, the prospect of going out of business for want of

certain raw materials available only to

those holding priority ratings, however,

small businessmen clamored for defense

orders.

Somewhat to their surprise, many small

firms had their offers of idle capacity rejected. On every side they heard laments that munitions output was far below requirements, yet they returned

empty handed from their search for contracts. Procurement officers for the supply services were passing out orders involving millions, but all seemed to go to

big business. Appeals to these contract

winners for subcontracts often brought

no better results. This was confusing

and disturbing in itself; what followed

was even more so. At the very moment

that small businessmen were casting about

anxiously and even desperately for defense orders to occupy their idle factories,

the newspapers were filled with reports

of vast new facilities being erected at government expense to speed munitions output. Was this gross favoritism to big

business or the result of flagrantly bad

planning? A special Senate group, popularly called the Truman Committee,

was soon investigating this alleged discrimination in the award of contracts.85

The irritation felt by many disgruntled

small businessmen was reflected in an

early interim report of the Truman Committee. The special investigators were

inclined to place the blame on Army and

Navy shoulders. The military services,

the committee found, had failed to make

adequate peacetime preparations. As a

result there had ensued a mad scramble

for matériel. True, the services did try

to co-ordinate, but their efforts in this

direction fell short. For want of preliminary planning, procurement officers

were left at the mercy of the contractors.

When manufacturers who were anxious

to continue the production of civilian

goods while taking on military contracts

insisted that they would require new

plants if they were to meet delivery deadlines, procurement officers were in no position to argue. In their eyes, early delivery was at least as important as cost.

Furthermore, the committee reported,

lack of experience prevented procurement officials from scrutinizing manufacturers' proposals in sufficient detail to

determine whether or not they provided

for the maximum amount of subcontracting. Although a great many small business firms might have been converted to

war work by forcing prime contractors

to subcontract work wherever possible,

the committee concluded that procurement officers in the military services had

taken the line of least resistance and had

authorized generous facility expansions

for prime contractors instead of insisting

on conversion of existing facilities where

it was feasible to do so.86

The charge of the Truman Committee

that procurement officers had favored big

business over small business was hard to

contest. By midsummer of 1941 approximately three-quarters of the $ 10,000,-

000,000 in defense orders already placed

were in the hands of some 50-odd large

85

 S Res 71, 77th Cong, 1st sess, March 1, 1941.

86

 Senate Rpt 480, 77th Cong, 1st sess, November

17, 1941, pt. 3, pp. 2-4.
318 BUYING AIRCRAFT

corporations. Worse yet, some of these

favored firms had been granted facility

expansions that increased their capacity

well beyond existing requirements—and

this at a time when more and more small

firms were slowing down for want of priorities on scarce materials.87

The fabrication of oleo struts offers a

case in point. During the fall of 1940,

Wright Field procurement officers recognized that difficult-to-manufacture hydraulic shock-absorber struts were threatening to become a dangerous bottleneck.

Airframe firms on every hand reported

shortages in this item. The civilian officials in NDAC lacked sufficient staff to

deal with the problem, so it fell to the

Air Corps by default. A hurried survey

revealed that the leading manufacturers

of oleo struts were swamped with business. Under heavy pressure for results,

procurement officers moved fast.88 Less

than seventy-two hours after the survey

had been completed, they dispatched a

letter of intent to one of the most important strut makers, the Cleveland Pneumatic Tool Company, authorizing expenditures up to $4,500,000 for enlarging floor space and buying new tools to

triple the firm's output of struts.89 In

the weeks and months that followed, half

a dozen other firms received similar assistance in the rush to build up production

to meet the needs of the successively

larger aircraft programs as they were announced. These expansions continued

for nearly a year until finally, in October

1941, one of the newly financed strut

manufacturers, the Hughes Tool Company of Houston, found itself fairly teeming with capacity but no orders.90

At first glance the plight of a manufacturer with production capacity enlarged

at government expense but standing idle

would appear to confirm the most damaging charges leveled by the Truman

Committee. The actual situation, however, was somewhat different. Production

of oleo struts still lagged behind demand,

but aircraft builders primarily interested

in early deliveries preferred to place their

orders with the more experienced strut

makers rather than with firms just coming into production. Thus, until procurement officers at Wright Field could

persuade airframe manufacturers to place

orders filling up the newly erected capacity, the air arm itself had to award contracts for standard sizes of struts to keep

the newly expanded firms occupied.91

This was an awkward arrangement, but

the same situation would have occurred

even if strut production had been enlarged by conversion rather than by new

construction. Moreover, even if the expansions granted to the several strut

manufacturers did run production capacity ahead of orders placed by aircraft

builders, this was no evidence that expansion was unnecessary or undesirable,

for air arm officials were consciously planning not alone for current or on-order

needs but also for potential needs should

87

 Business Week (August 16, 1941, page 7, and

August 23, 1941, page 15) reflects the growing irritation of small business with the Army's failure to

spread orders across the economy. See also Nelson,

Arsenal of Democracy, pp. 271-72. 88

 Memo, CofAC for Gen Brett, 28 Nov 40, and

reply, 2 Dec 40, AFCF 452.1-H Parts. 89

 Col Volandt to Cleveland Pneumatic Tool Co.,

30 Nov 40; TWX, Tech Exec, WF, to Facilities Sec,

OCAC, 25 Nov 40, AFCF 004.4.

90

 Memo, Chief, Mat Div, for USW, 17 Oct 41,

AFCF 452.1-H Parts. 91

 Ibid.
THE PROBLEM OF INDUSTRIAL CAPACITY 319

war come. As a matter of fact, for certain critical raw materials there had been

a conscious policy shift early in 1941 from

expansions predicated upon orders in

hand to expansions based upon anticipated orders.92

 Seen in this perspective,

the enlargement of strut capacity beyond

the level of current orders was clearly justified as prudent military planning. But

this still does not come to grips with the

general question of why procurement

officials resorted so frequently to expansion—new construction—in preference to

conversion of extant facilities throughout

the nation.

There were, in practice, a number of

reasons why both Air Corps procurement

officers and prime contractors favored the

construction of new plants over the conversion of old ones. To begin with, it

is entirely understandable that procurement officers preferred to deal with wellknown, old-line, established firms rather

than with newly converted strangers. To

take the example of oleo struts again, it

was certainly much simpler administratively to award the Cleveland Pneumatic

Tool Company an 800,000-foot expansion in floor space than to go out and

round up one or more idle plants under

different management to get the same

amount of productive area. A newly

located firm might or might not turn out

to be capably managed or financially

sound; its technical skills might very well

fail to measure up to the exacting requirements of strut fabrication, and even if its

labor force and available machine tools

were of the highest quality, it would still

be necessary to spend a considerable period in tooling up and training. Even

after such obstacles as proprietary rights

and patents were cleared away, a newly

converted firm would have to co-ordinate

its production line with the design

changes introduced by the initial manufacturer. Under the circumstances it

often seemed patently easier to accomplish this intricate task under one roof

and one management.

There were still other reasons why the

construction of new floor space and the

installation of brand new machine tools

sometimes appeared preferable to the

conversion of extant facilities. Some

small manufacturers represented themselves as eager to convert their idle plants

to the production of military end items

when in reality what they wanted was to

have the government put them in business, providing a plant, tools, working

capital, and orders, or just about everything, including a guaranteed profit.93

Sometimes the facilities offered were little more than junk—several acres of floor

space in a Chicago railway carshop, for example, empty throughout the depression,

encrusted with rust and still haunted by

the memories of 1929.94

Not least among the reasons why prime

contractors urged expansions for themselves instead of subcontracting to converted manufacturers was their reluctance to build up potential competitors

among the subcontractors they trained.

This was by no means a purely hypothetical fear. One manufacturer trained

as a subcontractor by Glenn L. Martin,

92

 Memo, Asst Chief, Mat Div, for USW, 25 Mar 41,

AFCF 470.1-B.

93

 See, for a characteristic case, W. S. Knudsen to

E. Schram, RFC, 3 Oct 40, SW files, Airplanes, item

1797a. 94

 Maj F. M. Hopkins to Col Volandt, 19 Mar 41,

AFCF 004.4.
320 BUYING AIRCRAFT

to take but a single illustration, ended

up by luring away eight Martin engineers

and then applying to the Air Corps for

an independent prime contract.95

On balance, then, the charges of the

Truman Committee were not without

merit, but it should be clear that decisions on whether to build new floor space

or convert existing facilities were at best

difficult to make. With the perspective

of time it now appears that procurement

officials did on occasion undertake expansions where they probably should

have pressed for conversions. No one

would deny the need for new construction in providing vast assembly plants

with bays wide enough to accommodate

the largest wing spans, but the erection

of new factories for accessory and equipment manufacturers posed a different

problem. Doubtlessly a watertight case

could be made for the erection of an entirely new Curtiss-Wright engine facility

planned for efficient mass production just

outside Cincinnati, but would it be possible to do the same for the thirty satellite

subcontractors and suppliers around this

prime contractor, who also received facility expansions? Occasionally a new

process, magnesium casting, for example,

made new construction unavoidable, but

it is difficult to believe that each and

every firm among the thirty was a unique

or exceptional case for which conversion

was entirely impracticable.96

Air Corps procurement officers probably gave too little consideration to the

potentialities of conversion. Certainly

the conversion of existing facilities, especially the capacity of small business, was

desirable for both economic and political reasons, but it is imperative to remember that the decisions taken must ultimately be judged in terms of military

necessity, which is to say in this instance,

speed of delivery and quality of product.

To reach any conclusion on this point

it will be useful to defer judgment, at

least momentarily, so as to first survey the

facilities question as a whole. Suffice it

to say that by midsummer 1941 more

and more small business firms were

driven from their normal channels by

"priority shortages."

 97

 Their reiterated

complaints brought mounting pressure

from Congress.

The Facilities Problem

After Pearl Harbor

From midsummer through 7 December 1941 the official position held that

expansion was over. Future increases in

capacity would be achieved by conversions. Only in unusual circumstances

where the need for specialized facilities

made new construction unavoidable was

it anticipated that deviations from this

stand would be granted. Nonetheless,

the nation had scarcely awakened to the

shocking realities of war in the days immediately following the Japanese assault

before this policy was discarded and the

air arm set off on yet another round of

new construction.

There were a number of reasons for

the apparent reversal in policy. When

the nation at last plunged into war, it did 95

 Memo, Chief, Mat Div, for CofAC, 3 Jan 41,

AFCF 452.1 Airplanes, Gen. 96

 Hearings of Special Com Investigating the National Defense Program (Truman Com), April 15,

1941, pt. 1, p. 24.

97

 For a statement of policy, see R&R, Chief, Mat

Div, to Personnel Div, 4 Nov 41, AFCF 004.4.
THE PROBLEM OF INDUSTRIAL CAPACITY 321

so under the most undesirable circumstances—the blow fell before the rearmament program reached completion, and

it came simultaneously on two fronts.

The sudden and appalling prospect of a

two-ocean war made existing computations of requirements seem utterly inadequate and led to the formulation of new

and higher goals. Moreover, since the

shooting war arrived before the conversions that were taking place throughout

the mass-production industries had begun to pay off with impressive records of

output, responsible officials in the air

arm and the civilian agencies alike may

well have underestimated the potentialities of the as yet unconverted capacity of

the nation. Whatever their reasoning

may have been, they gave the signal for

the construction of a large number of

entirely new plants.98

Before the nation had been two weeks

at war, North American, Bell, CurtissWright, Douglas, Republic, and the

Fisher Body Division of General Motors

all launched new facility construction

projects, at costs ranging from 20 to 50

million dollars each, to increase production of fighters, bombers, and heavy transports. In addition, most of the major

airframe manufacturers who had received

facility projects during the first round of

building in the fall of 1940 were now

authorized to enlarge them with further

additions. Nor was this all. Small- and

medium-sized airframe concerns were

now deluged with orders, mostly for

training aircraft, and they too received

authorizations for new facilities commensurately scaled to their needs. Included

in this group were such firms as Aeronca

of Middletown, Ohio; Beech of Wichita,

Kansas; Bellanca of New Castle, Delaware; Fairchild Aviation of Hagerstown,

Maryland; and Northrop of Hawthorne,

California, to name but a few of the better known.

Manufacturers of accessory and equipment items—instruments, superchargers,

magnetos, and the like—shared in the

wave of newly authorized facilities as did

the engine manufacturers, not only those

previously mentioned but other companies as well. New construction provided

for the engine manufacturers was even

more lavish than that for the airframe

builders. Projects ranged from $50,000,-

000 up. The largest of these, a 6,750,000-

square-foot expansion for the Dodge Division of the Chrysler Corporation at a

cost of $173,000,000, turned out to be the

largest facility project sponsored by the

air arm during the war, larger even than

the more widely publicized Willow Run

plant. A most graphic indication of the

impact all this new construction had on

the nation's economy was to be observed

in the priority issued by OPM for some

7,000,000 tons of structural steel to begin

work on these facilities. In short, despite

all the hue and cry about the desirability

of conversion rather than expansion, the

new construction authorized (for the most

part in the first four months after Pearl

Harbor) actually exceeded the facilities

provided during the previous year.99

The unhappy truth was this: most officials were ready to admit that it was

highly desirable to convert rather than

expand, but no one had any really effective scheme of conversion ready to use

or ready to assure results. The air arm

98

 AAF Hist Study 40, pp. 109-11. 99

 Ibid., pp. 111-13.
322 BUYING AIRCRAFT

no less than the other military services

lacked a comprehensive plan for this purpose. Although Mr. Knudsen had first

raised the question of conversion in Detroit during October 1940, as late as

January 1942 General Arnold was only

just beginning to urge that a study of

idle facilities be conducted there, and an

officer in the area responded that although

the facilities there were inadequate for

assembly work, it might be well to collect data to determine whether or not

they could be utilized for depot repair

work.100 Twenty years of industrial planning and facility survey work seem to

have been largely in vain.

The military services, of course, were

not alone at fault when conversion was

not pushed as aggressively as it might

have been. Employers in some of the

larger firms receiving military orders

were sometimes fearful of the dislocations that were expected to accompany

the change-over from civilian to military

production. Skilled workmen and vital

foremen might be lured away and then

prove unwilling to return later on. Labor, too, feared unemployment and loss

of seniority rights during a prolonged

period of conversion. Many small firms

with less ample capital resources, even

those successful in getting war contracts,

worried about the costs of financing conversions. Tooling up for production of

items for which a firm lacked any experience whatsoever was a venture into the

unknown not to be undertaken lightly.101

Although various federal statutes on

the books authorized the Executive to

convert industries to war production by

commandeering wherever necessary, such

a course was clearly inexpedient, politically as well as technically, in all but the

most extreme cases.102 Since even a commandeered factory must be managed and

a coerced management was liable not to

be very co-operative, plant seizure by the

government was obviously only a last

resort.

The most effective method for bringing about a wide-scale conversion of facilities to war production, as the preceding pages have shown, was the obvious

expedient of shutting off the flow of raw

materials to nonessential industries. In

the auto industry, the war itself called

the turn; the Japanese advance cut off

the supply of raw rubber, making curtailment in the production of civilian

automobiles virtually unavoidable. For

most other industries, however, the granting or withholding of raw materials required a fine adjustment of conflicting

considerations—precisely the role long anticipated for a civilian superagency set up

to ride herd on the nation's war economy.

Neither NDAC nor OPM had measured

up to the task, but the shift in public

opinion that accompanied the nation's

plunge into war so strengthened the administration's hand that the President

finally felt able to take the step long

urged upon him. He created the War

Production Board (WPB) under Donald

Nelson, with powers at last sufficiently

broad to dominate the economy at least

to the extent of forcing conversions by

100

 Asst AAG to CofAC, 15 Jan 42; unsigned Memo

for CofASC, 26 Jan 42. Both in AFCF 004.4. 101

 AAF Hist Study 40, p. 114. See especially the

sources cited on pp. 111-13.

102

 See, for example, the National Defense Act of

June 4, 1920, Section 120, as well as the acts passed

during the summer and fall of 1940 as described in

Chapter XV.
THE PROBLEM OF INDUSTRIAL CAPACITY 323

systematic curtailments in the flow of resources.103

The WPB did indeed play a major role

in enforcing conversions to war work, not

only by driving in the small producer,

but also by putting pressure on the military services to meet these offers of capacity halfway with prime contracts for end

items and by forcing big contractors to

utilize the converted capacity of small

business by a greater distribution of subcontracts. Yet, in crediting this role to

WPB, it is important not to overlook

other factors that were at work. After

Pearl Harbor, conversion carried with it

the sanction of patriotic enthusiasm, and

many of the miracles of the shift to military production accomplished by industry were unquestionably the work of determined men driven by zeal for victory.

To reinforce this patriotic zeal, a significant innovation appeared in the rules for

government financing of facilities. Hitherto, officials responsible for the most attractive financing arrangement, the DPC

scheme, had virtually refused to underwrite more than 5 percent of a manufacturer's anticipated postwar rehabilitation

costs. A few weeks after the outbreak of

war, this allowance was raised to 10 percent. Similar relaxations appeared all

along the line. Applications for facility

financing were less closely scrutinized;

contractors were permitted to include

sizable contingency allowances in their

estimates; purchases of general-purpose

machine tools (which would have postwar value) were authorized with relatively

little question. In short, the new rules

made conversion far more attractive.104

As it turned out in practice, conversion

proved less painful than many had anticipated. There were, it is true, as many as

150,000 unemployed workers in Detroit

during the spring of 1942, to cite an important example, but as the tooling-up

process reached completion, unemployment virtually disappeared. Strenuous

efforts were begun to import labor from

outlying areas, while local housewives

were pressed to take up jobs in the factories. Despite earlier contentions, by

the middle of June 1942, nearly 70 percent of the Detroit pool of machine tools

was being used on war contracts—a backlog of orders then amounting to some

$14,000,000,000 in contrast to the $4,000,-

000,000 worth of orders on the books in

Detroit on 7 December 1941.105 The pattern laid down in Detroit was substantially repeated throughout the nation in

other segments of the economy as the curtailed flow of resources, wartime fervor,

and simplified administrative regulations

induced more and more manufacturers

to convert their facilities to war production.

Although conversion rather than expansion was increasingly enforced after

April 1942, there was a certain amount of

new construction authorized after that

time. Nevertheless, in the final analysis,

it turned out that more than 75 percent

of the facilities sponsored by the air arm

in World War II had been authorized before the end of 1942, and most of this construction was begun before the end of the

first quarter.106 The few projects that

came afterward were for the most part

those made necessary by the exigencies of

103 AAF Hist Study 40, pp. 114-20. 104

 Ibid., pp. 124-28.

105

 Ibid., pp. 121, 123. 106

 Ibid., p. 130.
324 BUYING AIRCRAFT

the war or the appearance of new technical processes, rather than any general

shortage of capacity.107 Once again, it

would appear, the air arm, and for that

matter the military services in general,

repeated the pattern of 1941, preaching

conversion but practicing expansion

whenever military exigency seemed to require immediate results. A careful appraisal of the record in retrospect should

shed some light on whether or not this

policy—if it could be called such—was

justified.

The Facilities Program:

An Appraisal

The Record of Achievement

During the war years from 1940

through 1945 the air arm sponsored some

190 facility projects. Of these, 57 involved factories for building airframes,

gliders, or subassemblies; 8 involved engine plants; and 107 involved plants for

fabricating parts, equipment, or accessories. The remaining 18 projects developed modification centers where postproduction alterations could be introduced in finished aircraft.108

 To pay for

these projects the air arm authorized some

$3,000,000,000 in direct expenditures.

In addition, tax amortizations or rapid

depreciation privileges accounted for an

additional $840,000,000. As the following figures show, more than half of the

direct expenditures were authorized in

1942, and by far the greatest proportion

of this amount came in the first few

months of the year—just after the nation

entered the war:109

Percent

Expenditure of 5-Year

Year Authorized Total

1940 $151,298,472 4.9

1941 629,999,116 20.3

1942 1,665,972,004 53.8

1943 426,360,787 13.8

1944 222,504,289 7.2

All the new construction connoted by

these billions in disbursements, taken in

conjunction with the existing aircraft industry already enlarged under the stimulus of foreign orders, plus the conversions

effected during the war, represented an

enormous increase in productive capacity.

Between September 1940, when the government began its facility expansion program, and the end of 1944, the year of

peak production, the weight of aircraft

actually produced rose 1,900 percent.

And even at that, privately financed expansions had already greatly enlarged the

industry in 1939. Available capacity rose

more rapidly than actual output of airframes. During the year following September 1940, aircraft production in the

United States doubled. By the end of

another year, in the fall of 1942, capacity

had doubled the 1941 figure and during

1943 this multiplication was more than

repeated. Thus by the middle of 1944,

in time for the invasion of Europe, aircraft productive capacity—not output—

was estimated at about 2,000 percent of

the level available in September 1940.

The record of the nation's increasing

capacity to turn out airplanes is an im- 107

 Ibid., ch. 8, passim. 108

 Craven and Cate, eds., Men and Planes, p. 318.

The subject of modification centers is treated at

greater length in Chapter XX, below.

109

 AAF Hist Study 40, p. 222. Unless otherwise

indicated, the contents of this section are based on

Chapter X of the study.
THE PROBLEM OF INDUSTRIAL CAPACITY 325

pressive one. In a period of five or six

years the aircraft industry jumped to first

place among the nation's manufacturing

enterprises, reflecting at once the imagination and energy of those who participated in the expansion and the lavishness

with which facilities were provided.110

Nevertheless, to be meaningful in shaping policy for the future, this record of

achievement must be studied from a number of perspectives.

The Cost in Time

Vastly expanded productive capacity is

of little value if it is not ready when

needed. The facilities program of the

air arm must be measured ruthlessly

against this unyielding criterion: How

long did it take?

For newly constructed airframe factories, from green grass to the day the

first acceptable airplane rolled off the

assembly line, the average time lag experienced in World War II amounted to

18 months. From green grass to full production averaged 31 months—in contrast

to the 18 or 20 months anticipated by

some Air Corps planners in 1940. Averages, of course, are deceptive. Some

fighter plants were built, equipped with

machinery, and attained full production

in 24 months. And at the other extreme,

the newly constructed plants for the Boeing Superfortress, the B-29, consumed

about 40 months from green grass to full

production, although technical difficulties

in the aircraft itself as well as delays in

plant construction contributed to the

extended lag. As a general rule, the time

required to get into full production was

appreciably less where the aircraft design

in question was well out of the experimental stage when the tooling process

began.

In contrast to the time involved in construction at entirely new or green grass

sites, is the time spent in building additions to existing plants. Here the span

from the decision to build to the achievement of full scheduled production averaged 21 months. The time lag from the

decision to build to the day the first acceptable aircraft appeared is thus significantly less than was the case with entirely

new plants. Nonetheless, the step up

from first production item to full production in the expanded plants took just

about as long as did the process in entirely new plants, since difficulties such

as the recruitment of labor, training of

supervisors, and so forth were involved

in both cases.

Even when a manufacturer was already

in full production on a given type of aircraft, such as a civilian transport, the experience of the war years showed that it

required an average of 28 months to

switch over to full production of a military aircraft. This did not mean that

there had to be a gap of 28 months with

no production whatever, of course, since

work on one type could be tapered down

while the other was building up. In such

change-overs only about 5 months actually elapsed between the last month of

peak production on the old line and the

first month of peak production on the

new. The rest of the 28-month period

was spent in tooling up and pilot line

work on the new model.

Whether one takes the extreme of 40

months or the most favorable minimum

110

 Williams, "Growth of the Aircraft Industry,"

Prospects and Problems in Aviation, p. 3.
326 BUYING AIRCRAFT

of 18 months, it took a painfully long

time to accelerate production in the

emergency. When one recognizes the

enormous advantage the nation enjoyed

in the facility expansions undertaken during the year or two before Pearl Harbor,

the implications of an 18- to 40-month

delay in reaching full production is all

too obvious.

What was true of airframes was almost

equally true of aircraft engines. Where

the government undertook to build entirely new factories, from green grass to

full production required an average of

23 months. From the beginning of building to the first acceptable item required

an average of 14 months.

Taking the experience of airframes and

engines together, it is clear that the quickest way to accelerate production by building was to make additions to existing

plants rather than begin work on entirely

new sites. But any attempt to apply this

conclusion in the future would have to

assume that adequate pools of labor and

other resources would be readily available at the site of each going concern to

be expanded.

Conversion or Construction?

The experience of World War II shows

that it required just about the same

length of time, on the average, to convert

automobile factories to aircraft engine

production as it did to build an entirely

new plant, tool it up, and get into production at full schedule. This seeming

paradox is explained largely by the fact

that the manufacturing of aircraft engines in mass-production quantities called

for the installation of numerous specialpurpose tools. Production could not begin until these intricate tools were themselves fabricated and installed. During

the long months in which the machine

tool builders were at work on them, it

was quite possible to erect new floor

space. Thus it turned out that the converted automobile plants and the newly

erected plants started just about even

when their special tools were delivered.

For airframes, a comparison of the relative merits of conversion and new construction is difficult if not impossible to

make—at least with any degree of validity.

Only one automobile manufacturer,

Ford, actually converted to the fabrication of complete fly-away aircraft and,

ironically, this was done largely, though

not entirely, in a newly constructed plant

at Willow Run. The facts of Ford's production record are available but are extremely difficult to interpret. From the

decision to locate at Willow Run, it required 18 months to turn out the first

acceptable item. This time span is not,

however, an entirely meaningful one

since the original Ford program called

for the production of knockdown sets of

parts at Willow Run for assembly by aircraft manufacturers elsewhere; only belatedly was it decided to build complete

airplanes at the Ford site. Some 38

months went by before Willow Run had

full scheduled production, in contrast to

delays running from 25 to 32 months encountered in the three other plants making the same bomber, the Consolidated

B-24 Liberator. But here again the

measuring stick is not adequate, for much

of Ford's trouble stemmed from the difficulty of luring labor out to Willow Run,

a location that offered inadequate housing.

In terms of direct man-hours of labor
THE PROBLEM OF INDUSTRIAL CAPACITY 327

expended per pound of airframe turned

out, the Ford Willow Run plant for a

brief period held the best record in the

entire industry. And even this favorable

ratio could easily have been improved

had Ford been allowed to go all out once

the obstacles to production had been circumvented, but by that time the end of

the war was in sight and the need for an

indefinite number of B-24 bombers had

passed. The record of low labor outlay

per airframe pound turned out was not

won without cost, for the special tooling

that made it possible was extremely expensive. In short, the Ford triumph in

proving that the mass-production methods of the automotive industry could be

utilized for aircraft was won at a cost in

time lag and tooling dollars that went far

to offset the subsequent savings in labor

costs and the ultimate achievement of

mass production.

By the yardstick of cost per square foot

of floor space obtained, the facility program of the air arm in World War II

shows that airframe capacity could be obtained by conversion at approximately

one-third of the initial outlay by the government needed for new construction.

But even here initial costs could be deceptive, since the long-run cost of new

construction would have to include sums

recovered by plant sales at the war's end,

rents paid for the duration, and the potentially lower prices chargeable on end

products procured from manufacturers

using government-owned facilities in contrast to procurement from manufacturers

using their own facilities. The differences in taxes paid between these two

classes of contractor would still further

complicate any valid comparisons drawn

between them.

It is impossible to determine whether

it is faster and cheaper in the long run

to convert or construct airframe and engine facilities in an emergency. Even

after conceding that speed is more important than cost in wartime, it is still

not possible to derive a positive conclusion on the relative merits of these two

courses. A Scots verdict is seldom popular and never dramatic; it fails to give a

clear-cut answer to those who want a simple rule of thumb for use in guiding

policy. But frustrating or not, there it

must stand insofar as airframes and aircraft engines are concerned.

In the matter of facilities for manufacturing aircraft accessories and equipment,

the data available are inadequate to permit any conclusions on the problem of

conversion or construction, but the same

factors that conditioned aircraft and engine facility policy might be expected to

apply. For those items requiring special

tooling and special-purpose machine tools

consuming months to build, new facilities might easily be erected while the tools

were on order, offsetting the most important time saving offered by conversion.

Once again, it would appear that tools

and tooling lay at the heart of the facility

question and should be studied with particular care.

Although the air arm spent some

$3,000,000,000 in direct financing of facilities during the war, by no means all

of this money went into the construction

of new floor space. Actually, only 35 percent went toward new construction. An

additional 4 percent went for the purchase of land for building sites, railroad

spurs, and the like, but the remaining 61

percent was spent for the purchase of
328 BUYING AIRCRAFT

tools.111 Since in many instances new

tools had to be provided whether the floor

space utilized was secured by new construction or conversion, the total of direct

air arm expenditures charged up to facilities can be misleading. Far from indicating a preference on the part of the

air arm for new construction in lieu of

conversion, these expenditures merely

show that machine tools rather than floor

space constituted the real problem. For

if the major facility cost to the government was in tools rather than floor space,

then the crucial question of policy, the

vital choice between the alternatives of

construction and conversion, comes down

at last to a series of decisions on tools.

In sum, conversion offered no real saving in time over construction where special tools had to be built and installed before production could begin. Moreover,

many other factors such as dispersion,

labor availability, and the like must also

enter the equation, for the most part in

favor of new construction. On the other

hand, where general-purpose tools would

serve well enough for the manufacturing

tasks in hand and were available, conversion was certainly to be preferred over

new construction, other things being

equal. Where procurement officers of the

air arm urged government financing of

new construction and the purchase of

new tools when conversion of existing

plants and utilization of existing generalpurpose tools were entirely feasible, they

erred. That they did err in this respect

is clear.

There were, of course, good reasons to

explain if not to excuse the course pursued by air arm procurement officials.

They were under pressure from their superiors for results, early deliveries and a

rapid build-up of output, so they were

especially vulnerable to contractors who

brought in studies showing that new tools

and new floor space at government expense were essential if the desired production targets were to be met. What is

more, some contractors may have felt an

incentive to inflate their estimates as to

the additional tools and plant required,

since they might reasonably expect to buy

up any such facilities from the government at bargain prices at the end of the

war. While a big airframe manufacturer

might be wary of overloading with millions of square feet of excess assembly

area in peacetime, a manufacturer of accessory and equipment items whose business was not exclusively oriented toward

aircraft products need have no such fear.

For him, the inducement to seek generous

financial assistance for facilities was strong

indeed.

If one concedes that the air arm did

finance some unnecessary facilities for

equipment and accessory manufacturers,

yet another extenuating circumstance

should be considered. The great bulk of

these expansions, whether in tools or in

floor space, was authorized in the frenzied early months of the war. Procurement staffs were totally inadequate to the

task, and it proved impossible to scrutinize each facility application as closely

as it should have been—and would have

been had the more rigorous criteria of the

pre-Pearl Harbor period been continued

in use.

The mad rush to provide adequate productive capacity to meet the military requirements of World War II only served 111

 Craven and Cate, eds., Men and Planes, p. 317.
THE PROBLEM OF INDUSTRIAL CAPACITY 329

to prove anew what the public, Congress,

and military planners had known all

along: haste makes waste. A failure to

build up adequate productive capacity by

appropriating enough for aircraft procurement in peacetime made the scramble to provide that capacity in wartime

both expensive and dangerous. The reluctant taxpayers and their congressmen

must share in this responsibility for the

wartime rush to secure facilities, but that

fact did not relieve military officials from

their own responsibilities. Perhaps the

greatest weakness of the air arm in World

War II insofar as facilities were concerned

lay in its failure to perfect or expand an

administrative organization capable of

obtaining and using the information

without which sound decisions on such

questions as construction or conversion

can scarcely be made. The facilities

problem was far too complex to have permitted anything in the way of detailed

advanced planning, but broad surveys

and studies of general policy were entirely

feasible. And here the pre-Pearl Harbor

record of the air arm proved to be one of

inadequacy.
CHAPTER XV

The Negotiation of Contracts

The Transition to Wartime Buying

The Variable Objectives of

Military Purchasing

Buying aircraft for the United States

was a far more involved process than

mere purchasing. The very objectives

of procurement had a subtle way of changing direction and shifting in emphasis

while the buying went on.

In time of peace the mechanics of purchasing aircraft and their related equipment revolved primarily around the problem of equating quality (especially that

aspect of quality expressed in terms of

maximum possible performance) and

price.1 In time of war a number of rather

different and infinitely more diverse objectives came into play. At least at first,

prices declined in relative importance,

and, although maximum performance remained highly desirable, speed of delivery and ability to produce in quantity

contended for first-ranking importance.

As wartime shortages mounted, the ability to produce while conserving scarce

resources—manpower, transport, materials, facilities, and the like—became an

ever more insistent objective. Gradually,

however, as the supply of munitions grew

larger and the nation's strength in weapons in relation to those of the enemy became increasingly favorable, low cost

once again rose to pre-eminent importance. Other desirable objectives such

as the prevention of excessive profits to

war contractors reflected a similar rise

and fall in emphasis and importance. The

extremes to which the pendulum of emphasis could go are perhaps best illustrated by two examples: in the fall of

1940 the President still listed the reduction of unemployment as one of the aims

of the rearmament program; in 1951 a

group of industrial spokesmen studying

the aims of military procurement failed

even to list speed of delivery as a factor

of significance.2

Those charged with buying military

equipment had to contrive means to accomplish their immediate ends—the delivery of weapons—while taking into account the elusive and often transient

goals comprehended within the general

subject area labeled "military procurement." Somehow, responsible officers had

to devise contract forms that would accomplish these varying objectives to the

satisfaction of a legion of critics. But

1

 See above, chs. IV, V, and VI.

2

 H Doc 950, 76th Cong, 3d sess, September 13,

1940, and Industry Advisory Com on Military Contractor Relationships, Rpt to Munitions Board: Review of Major Problems in Military Procurement and

Recommendations, 31 Aug 51, p. 37. For a survey

of official promulgations reflecting shifts in procurement objectives, see Smith, The Army and Economic Mobilization, pt. IV, "Army Purchasing Problems and Policies," passim.
THE NEGOTIATION OF CONTRACTS 331

the contract itself was only half the battle.

Once signed, contracts had to be administered; their clauses had to be interpreted

and their discretionary phrases approved.

In short, procurement officials were expected to make continual and rather

subtle adjustments in the rules of the

game while running the bases.

A final judgment—whether the military

buyers bought wisely or foolishly—need

not concern us here. The mere recital

of their efforts should afford meaningful

insights into the problem of military procurement as a whole. Within this context, the relatively large share of the total

falling to the air arm (approximately half

of munitions expenditures in the first few

months after the President's call to arms

in May 1940 and upward of a third thereafter) makes a close scrutiny of air matériel procurement especially worthwhile.

And no phase of the whole procurement

story is more crucial than the difficult era

of transition from the pace and practice

of peacetime to the urgent and expedient

methods of war—where possible, by administrative action; where necessary, by

legislative enactment.

Speeding Procurement by

Administrative Means

At the very beginning of the rearmament program, Air Corps officials had recognized that the protracted procurement

sequence of peacetime would have to be

drastically streamlined if the air power

essential for national defense were to be

delivered on time. A number of steps

could be taken to this end. Some of them

represented major shifts in policy; others

involved seemingly trivial changes in

practice but brought substantial reductions in the time span of the procurement cycle.

Typical of the major changes in policy

taken at executive discretion was the decision to buy untried designs for production model aircraft, off the drawing board

as it were, instead of requiring manufacturers to submit samples reduced to practice beforehand. There were serious

shortcomings in such a procedure. Of

this procurement officers were fully

aware, but the new policy promised to

shorten the procurement cycle by several

months and the need for speed in arming the nation seemed to justify the risks

involved.3

Of the minor changes in procedure that

helped to shorten the procurement cycle

appreciably, perhaps none was more significant than the inauguration of a daily

air courier service between Wright Field

and the Washington headquarters. Even

a later generation accustomed to the easy

communication made possible by the almost unrestricted use of leased telephone

lines to Ohio should be able to appreciate

the delays and frustrations that continually beset the business of aircraft procurement before regular courier service was

introduced. Another administrative innovation, seemingly trivial but of farreaching effect, was the directive ordering

all contractual papers to be "hand carried" through the headquarters paper

mill. In normal peacetime practice a

contract could spend days and even weeks

wending its way at a leisurely pace from

3

 For background on the relative merits of design

competitions and the sample aircraft method of

procurement, see above, pages 132-43 and 247-49.

See also, Service Sec, Proc Div, ATSC, Prewar Proc

by the Air Corps, pp. 14-18, and Gen Arnold, Lecture at AIC, 5 Oct 40, WFCF 350.001 Lectures, 1941.
332 BUYING AIRCRAFT

out basket to in basket as it gathered the

co-ordinations and approvals required by

law or regulation. The stipulations in

themselves could not easily be evaded,

but by assigning an individual pusher or

runner to each contract it was at least possible to cut down on the time papers customarily spent merely waiting for pickup

and delivery.4

The number of minor peacetime routines that could be modified by alert officials to effect appreciable savings in the

time required for procurement was, for

the most part, limited only by the ability

to break through peacetime habits of

thought. Occasionally, however, even the

petty mechanics of administration proved

difficult to alter because they involved

matters beyond departmental discretion.

The little matter of corporate seals presented just such a case. As the buying

rush mounted, contracting officers at

Wright Field repeatedly found manufacturers' negotiators ready to sign a contract but inhibited for want of the official

corporate seal, without which the signatures of the company's officers would not

be binding. Even though this was clearly

a minor technicality, neither contractors

nor contracting officers wished to risk

evasion however expedient it might

appear. Inquiries were hurriedly dispatched to Washington: would the Government Accounting Office invalidate a

contract without the corporate seal? Two

months later the Comptroller General's

favorable reply reached Wright Field.5

Meanwhile, one is left to imagine, the representatives of multimillion dollar aircraft firms flew in to Wright Field lugging twelve pounds of corporate seal in

their briefcases.

Skillful streamlining of procedures by

administrative action could and did cut

down on the time lag in the procurement cycle. But in the crisis of May 1940,

when all Europe seemed about to collapse, no amount of procedural improvement could overcome the major cause of

delay—aircraft manufacturers showed increasing reluctance or, in some cases,

downright refusal to sign production contracts.

Manufacturers' Resistance to

Government Contracts

The President's call to arms of 16 May

1940 galvanized the air arm procurement

organization to furious action. Negotiations were already afoot with the leading

aircraft manufacturers before the President spoke, but now the number of units

to be produced increased spectacularly.

Unfortunately, as the need for airplanes

went up, so too did the demands of the

manufacturers. As one Air Corps officer

euphemistically expressed it: the negotiations ran into "legal difficulties." By

this he meant that the airplane builders

now insisted upon all sorts of changes

in the proposed contracts before they

would sign them. They wanted escalator

clauses to protect them against unanticipated increase in the cost of labor and materials; they refused to sign liquidated

damage clauses that would penalize them

for belated deliveries; and they were reluctant to include the usual option clauses

granting the government the right to pro4

 R&R, Asst Exec, OCAC, to Maj Bevans, 25 Jun

40; Memo, Asst to Dir of Purchases and Contracts,

OASW, for CofAC, 14 Aug 40. Both in AFCF 161

Contracts. 5

 Chief, Contract Sec, to CGMC, 27 Nov 42; and

GAO to CGMC, 29 Jan 43, AFCF 161 Contract

Requirements.
THE NEGOTIATION OF CONTRACTS 333

cure further increments of aircraft in the

future at stated prices. In short, as an

officer at Wright Field complained with

impressive understatement, the manufacturers were making things "very difficult."

 6

Doubtless many public officials became

exasperated as days of tedious negotiation

dragged on before contracts were signed.

It would be grossly unfair, however, to

condemn these businessmen without a

full awareness of the considerations that

operated on both sides of the bargaining

table. To begin with, the sums involved

and the tasks proposed—even if dwarfed

in retrospect—seemed staggeringly large

at the time. Individual firms were being

invited to undertake projects far beyond

the normal range of their capital. This

alone would inspire hesitation. But there

was another consideration in the calculations of the negotiators. The manufacturers naturally wanted to make a profit

but, more particularly, they were anxious

to avoid loss. When considering a multimillion dollar contract on a small base

of capitalization, even a slight miscalculation or ill-advised concession at the bargaining table could bring not only a failure to profit but destructive, bankrupting corporate loss. Procurement officers

with long experience knew that managements on the verge of bankruptcy, or fearful of that threat, did not achieve creative wonders in design, development,

and production. While it is easy to look

back and condemn the leading aircraft

manufacturer who took so long to sign

contracts in the desperate spring and summer of 1940, such criticisms may not invariably be warranted.

One can find evidence suggesting that

certain manufacturers did take advantage

of the nation's exigency, but judgments

should not be made without knowledge

of the circumstances. One airplane

builder, for example, did refuse to guarantee the performance of the airplanes he

turned out. The facts show, however,

that the manufacturer was being asked

to put a novel design directly into largescale production, and he had already lost

over a million dollars on Army and Navy

contracts during 1940.7

The fear of loss made men reluctant to

act. Sometimes corporate officers preferred to accept a contract foregoing profits if only they were guaranteed against

loss.8 Ironically, as events were to demonstrate, "no profit" or limited profit contracts turned out to be something less

than desirable from the government's

point of view since they offered little or

no incentive to efficiency. Yet, for all the

valid fears of loss, there were actually

manufacturers at the other end of the

spectrum who went full steam ahead—

and damn the torpedoes—ordering materials, getting production under way, incurring liabilities even while still haggling around the negotiation table at

6

 R&R, Brig Gen G. H. Brett to Gen Arnold, 6

Jun 40; TWX, Prod-T-6, Brett to Volandt, 31 May

40. Both in AFCF 161 Contracts. The fear of litigation resulting from entering contracts in haste was

not without foundation in fact. Several millions of

dollars of contract values from U.S. procurement in

World War I were still being contested in the courts

when World War II arrived. Office of Fiscal Dir

(Army), History of Fiscal Services: 1940-1945 (1946),

p. 829.

7

 Hearings of the Special Com Investigating the

National Defense Program (Truman Com), August

22, 1941, pt. 6, pp. 1856-57. 8

 Wilson, Slipstream, page 253, vividly illustrates

the attitude of one representative corporation official.
334 BUYING AIRCRAFT

Wright Field to get as much contractual

protection as possible.9

Between the rigidity of the laws, which

no amount of administrative simplification could entirely offset, and the looming

fears of the manufacturers, who refused

to sign contracts, the aircraft procurement

program seemed destined toward fatal

delay. In desperation officials in the War

Department, always reluctant to tamper

with the procurement statutes, decided

to ask for and received legislative relief.10

The new statutes sought to hasten procurement from two directions: first, by

authorizing procurement by negotiation, and, second, by authorizing costplus-fixed-fee (CPFF) contracts. Unfortunately, even the most skillfully drawn

statutes did not in themselves resolve all

the problems of execution or administration.

Special Legislation No Panacea

The emergency statutes of the spring

and summer of 1940 did grant sweeping

powers to procurement officials. As one

of them expressed it, the new laws allowed

contracting officers to do just about anything short of selling the Washington

Monument. It would seem that such

powers should have opened the floodgate

to a veritable deluge of buying utterly uninhibited by the traditional restraints.

In practice, however, military negotiators

found that they enjoyed a good deal less

freedom of maneuver than the statutes

seemed to grant.

The emergency laws had scarcely been

passed before the Secretary of War began to whittle them down with supplementary interpretations and instructions.

Negotiated contracts in lieu of the customary competition, he directed, should

be used only where "necessary" to accomplish the defense program. Cost-plusfixed-fee contracts were to be used only

where the Assistant Secretary of War gave

his personal approval. Initially, the declared policy of the War Department was

to oppose the use of CPFF contracts for

the purchase of equipment.11 The official line was to use the new powers hesitantly, if at all. Under such circumstances it was only the boldest negotiators

who sought to use the powers contained

in the emergency statutes. When officers

must justify their decisions to their superiors at every turn, they tend to act conservatively.

Quite apart from the matter of departmental policy, there was another very

good reason why CPFF contracts were

not immediately favored: there simply

were no appropriate contract forms or

clauses ready to use. Despite all the talk

in the between-war years on the probable

use of some sort of cost-plus contract in

a future emergency, a very rough draft of

the contract form was all that had been

prepared. Only after the crisis arrived

and Congress had hurriedly approved the

cost-plus principle did procurement officers begin to work out the detailed mechanics of a form for CPFF contracts.

More than a month after Congress acted,

no CPFF contract form suitable for aircraft procurement was available.12

9

 See, for example, Telg, Kindleberger to Arnold,

27 Jun 40, AFCF 161 Contracts. 10

 See ch. XIII, above.

11

 Actg SW to CofAC et al., 2 Jul 40, AFCF 032;

Memo, Maj E. C. Langmead for Chief, Mat Div, 8

Jul 40, AFCF 452.1 Airplanes, Gen. 12

 OASW to CofAC et al., 23 Jul 40; Memo, CofAC

for ASW, 8 Aug 40. Both in AFCF 161 Contracts.
THE NEGOTIATION OF CONTRACTS 335

If much of the evidence suggests that

leadership in the field of procurement

from the top echelon of the War Department seems to have been something less

than sure-footed, it should be recalled

that the incumbent officials were still new

to the job. Secretary of War Stimson was

not appointed to his office until late in

June 1940. Assistant Secretary Patterson

arrived several weeks later. These men

had to learn the ropes; inevitably, in doing so they groped and stumbled until

they found their bearings.13

The Assistant Secretary, for example,

worked hard to safeguard the government's interest in CPFF contracts. This

was a laudable purpose; unfortunately it

missed the mark. As a lawyer and a judge,

Patterson tended to see the ends sought

in terms of honesty and equity. But when

the new Assistant Secretary tried to impose equity by requiring all CPFF contracts to use a standard form without deviation unless personally authorized by

himself, air arm officers had to educate

the new civilian chief of procurement.

The plain fact of the matter was. that the

recently revised standard War Department CPFF form would not cover all the

special considerations involved in aircraft procurement. As if to drive this

point home, the very first CPFF contract

entered by the air arm was a most unusual

one, a three-party deal involving the

United States Government, the British

Government, and the Packard Motor Car

Company. Until the newly appointed

Secretaries came to understand the endless complexities of their jobs, the aircraft

procurement program continued to encounter delays from that quarter.14

The delays marking the initial use of

CPFF contracts should not be attributed

entirely to the hesitant policy of the civilian Secretaries. Several responsible air

arm officers also opposed this type of contract. They argued with considerable

point that the use of the CPFF arrangement would lift responsibility from the

manufacturer's shoulders, and the government would lose control of its program. With the government footing all

the bills, what would stop a manufacturer

from paying labor whatever it demanded?

How, they asked, could the government

ensure delivery by the dates specified in

the contract schedule? With no profit incentive a manufacturer was under no

great pressure to produce. The CPFF

contract was designed to allay the manufacturer's fears regarding costs over which

he had no control. Might it not quiet

these fears rather too much, making manufacturers too little concerned with results, leaving them content to let the government pay their costs and collect their

fees when at long last they finished the

work on contract?

 15

Experience was to reveal a host of difficulties yet unmentioned. Nonetheless,

General Arnold and Mr. Knudsen decided to use the cost-plus approach. Since

most manufacturers in their fear of uncontrolled costs flatly refused to accept

traditional fixed-price or lump-sum con13

 Anderson, Hist of OUSW, ch. IV.

14

 TWX, DHQ-T-1120, Brett to Volandt, 5 Sep

40, AFCF Contracts; Memo, Asst to Dir of Purchases

and Contracts, OASW, for CofAC et al., 30 Dec 40,

AFCF 161 Contract Requirements; TWX, Cont-T27, Contract Sec, WF, to Bolandt, 14 Jan 41, AFCF

161 CPFF Contracts. 15

 R&R, Chief, Mat Div, to Arnold, 31 Jul 40,

AFCF 161 CPFF Contracts.
336 BUYING AIRCRAFT

tracts in any event, the CPFF contract,

for all its obvious drawbacks, seemed to

be the only practical escape.16

Even the final decision to utilize the

CPFF principle in major aircraft contracts did not immediately uncork a flow

of signatures on contracts. The necessary forms were not available and would

take days or weeks to perfect. And at

the same time, manufacturers who were

abruptly presented with an opportunity

to accept allegedly loss-preventing CPFF

contracts as well as some of the other novel

features of the emergency statutes discovered that the innovations raised as many

problems if not more than they solved.

Not surprisingly, the manufacturers began to boggle over a new set of difficulties.

How would the new "certificates of necessity" affect their depreciation? Would the

Bureau of Internal Revenue agree with

the War Department on this? If not,

would the hapless contractor find himself

in the middle of a bureaucratic brawl?

 17

Questions such as these and a dozen

other legal niceties threatened to consume

further weeks of precious time in protracted negotiations. Clearly some way

had to be found around the legal roadblocks that continued to arise from the

very statutes Congress had provided to

obviate such difficulties. Here was a situation calling for the utmost in executive

leadership.

The newly appointed Assistant Secretary of War was far from settled in his

office; nevertheless he saw clearly that the

hour called for prompt and imaginative

action.18 To meet the occasion he came

forward with a legal stopgap, the so-called

letter of intent, which would authorize

manufacturers to go ahead on the preliminary steps to production with the full

assurance of indemnification while the

negotiators and legal experts took their

time about working out all the details of

a formal contract.

Whether it was the Assistant Secretary

or one of his subordinates who initially

conceived the letter of intent is now of

little moment.19 The Secretary made the

idea his own; he accepted the risks involved in its application and deserves substantial credit for whatever it accomplished—and the letter of intent accomplished a great deal. It proved to be just

the device needed to get production rolling. Soon air arm negotiators were doing

a land office business.

A Land Office Business

By the middle of August 1940, letters

of intent had gone out to just about every

major airframe and engine manufacturer

in the United States. By the end of the

month most of the firms had accepted the

letters and had started to work even

though formal contracts were yet to be

negotiated.20 This task, involving so

16

 R&R, CofAC to Brett, 31 Jul 40, AFCF 161

CPFF. 17

 For a good resume of some of the important

difficulties delaying contracts, see Memo, Actg CofAC

for ASW, 11 Jul 40, AFCF 161 Contract Requirements; Memo, CofAC for ASW, 30 Jul 40, SW files,

Aircraft, item 1652 b.

18

 For an informed and highly personal view of

the Assistant Secretary during his first few weeks in

office, see Anderson, Hist of OUSW, ch. IV, pp. 14-19. 19

 The record is unclear on the origin of the letter

of intent. For Patterson's views, see report of conversation with him, 6 Dec 45, in Pringle Papers, 18h. 20

 Asst to Chief, Mat Div, to Asst Chief, Mat Div,

9 Aug 40, AFCF 452.1-13-F Proc of Aircraft; ASW

to NDAC (Knudsen), 14 Aug 40, SW files, Aircraft,

item 1686; Memo, Asst CofAC for ASW, 27 Aug 40,

AFCF 161 Contracts.
THE NEGOTIATION OF CONTRACTS 337

many important contracts all at once,

threatened to swamp the small staff of negotiators at Wright Field. To avoid any

such eventuality as well as to keep the

contractors' representatives from falling

over one another in the corridors and

crowding each other out of hotel space,

the procurement staff at Wright Field set

up an orderly schedule inviting contractors to come in on fixed dates to negotiate.

By this means, before the end of September 1940, more than 9,000 aircraft were

actually placed on contract.21

In all, approximately 300 contracts with

100 manufacturers of airframes, engines,

and accessories were drawn. At the time

this looked like an immense volume of

business. Two years later, when the Air

Force was buying from some 4,000 different concerns, the 1940 roster of contractors no longer looked very impressive,22

but in those two years air arm procurement officials were to learn from painful

experience that it was the negotiating and

administering of contracts that caused

most of the difficulties, not the mere profusion of contracts.

The Negotiation of Contracts

The Letter of Intent

The utility of the letter of intent lay

in the speed with which it could be applied. In essence, it authorized a manufacturer to incur expenses in starting production and obligated the government to

reimburse him for expenses whether or

not a formal contract could subsequently

be agreed upon. By this device, weeks

of debate over detailed contract terms did

not hold up production. What is more,

by using the letter of intent, it was possible to escape, at least temporarily, the

normal delays encountered in the headquarters paper mill. Much of this delay

revolved around the need for collecting

all the required signatures of approval

and the initialed co-ordinations that, as

the office wags put it, helped spread the

responsibility against the day of investigation. In short, the letter of intent was

simply "an agreement to try to agree

later." Yet even this expedient at times

proved too slow, and during the late summer of 1940 some letters of intent actually took the form of telephone calls to

manufacturers authorizing them to begin

work immediately without even waiting

for a confirming letter, which would be

mailed later.23

Naturally this improvisation could not

continue for long. To be sure, the letter

of intent was again widely used during

the rush to place orders after Pearl Harbor. January 1942 was the biggest procurement month of that year. At Wright

Field alone, orders were placed for $6,-

000,000,000 worth of equipment. Most

of the orders were originally placed as letters of intent and ranged all the way from

a single aircraft production order of approximately $200,000,000 down to

"small" orders for accessory items such as

$6,000,000 worth of starters, $3,000,000

21

 TWX, DHQ-1137, Echols to Brett, 9 Sep 40,

AFCF 161 Contracts; Memo, ASW for SW, 20 Sep

40, SW files, Aircraft, item 1767. 22

 Memo, Actg CofAC for ASW, 17 Jul 40, AFCF

400.12; Budget Office, AFAMC, to CGMC, 23 Dec 40,

AFCF 161 Contracts.

23

 Interv with J. W. Schwinn, WF, 25 Jul 55. For

an illustration of the utility of the letter of intent

in cracking a manufacturer's reluctance to act, see

Asst Tech Exec, Mat Div, to Chief, Mat Div, 14 Sep

40, AC Project Rcds (Lyon Papers), 59-32.
338 BUYING AIRCRAFT

worth of sights, and so on.24 Procurement

officials also found the letter of intent

helpful as a means for hastily obligating

unexpended funds that would otherwise

revert to the Treasury at the end of a

fiscal year. But continued use of the letter led to revisions and improvements until finally it was converted into a short

form or letter contract. This new form

was undoubtedly a tighter instrument

legally; unfortunately, it was also far less

flexible than the original letter of intent

and for that reason lost a great deal of its

utility.25

Here was the classic pattern of administration; the expedient and flexible

short cut gradually became encumbered

with so many formalities and "improvements" that it lost the very characteristics

that made it valuable in the first place.

The time had arrived for further innovation, for the discovery of new short cuts

and escapes.26

During the desperate summer and fall

of 1940 the letter of intent probably justified its use by saving precious weeks of

time, but there were drawbacks attending

its application. Manufacturers found

that once they started work under a letter

of intent they had the government at a

decided disadvantage in the subsequent

negotiation of formal contract terms. Although it was the policy of the War Department to convert outstanding letters

into contracts as soon as possible, some

manufacturers were able to spin out negotiations for many months. The longer

the delay, the more difficult it became for

procurement officers to negotiate a contract to the government's advantage. Despite the determined efforts of the procurement staff at Wright Field, as late in

the war as December 1944 the Air Forces

still had outstanding 177 letters of intent

representing over a billion dollars in procurement.27

The Setting for Negotiation

Broadly speaking, the task confronting procurement officers when they sat

down to negotiate contracts was to get

buyer and seller into agreement on the

terms and conditions of a formal contract.

The emergency statutes passed during

the summer of 1940 authorizing negotiated contracts greatly simplified the procurement process by permitting military

buyers to narrow the range of possible

24

 See Asst to CofAC to Asst Chief, Mat Div, 2 Feb

42, AFCF 004.4 Manufacturers. See also, Lecture 22,

Production Statistics, by Maj D. R. Tyson, AAF Contracting Officers School, WF, Winter 1944-45. The

lectures before the AAF Contracting Officers School

at Wright Field are to be found in the Wright Field

Historical Office files and in a file in the possession

of Mr. Schwinn, a key wartime employee at Wright

Field. Neither set of lectures is complete. 25

 The annual report of the Under Secretary of

War for 1941, pages 30-31 mentions the revised form. 26

 For a brilliant illustration of a suggested innovation, consider the proposal (JAG, WF, to Chief,

Contract Sec, WF, 7 Jan 42, JAG files WF, Proc 10K)

to use the compulsory powers of Section 9 in the

Selective Service Act of 1940, not to coerce unwilling

manufacturers but to give legal sanction to reimbursement for work done before the signing of a

contract. The record is not clear on just why this

idea was not widely used. It may have been because

co-operating manufacturers feared that even the

amicable use of the compulsory power would carry

a stigma.

27

 Memo, Col A. J. Browning, Special Representative of USW, for CGMC, 28 Sep 42; CGMC to CG,

Mat Center, 30 Sep 42. Both in AFCF 161 Contract

Requirements. For an illustration of a letter of

intent that misfired, see Memo, Wright for Meyers,

14 Mar 42, AFCF 400.12 Proc. See also, Negotiation

and Administration of Contracts, Lecture, by Lt Col

J. G. Scarff, AAF Contracting Officers School, WF,

12 Dec 44, WFHO.
THE NEGOTIATION OF CONTRACTS 339

contractors or suppliers quite arbitrarily

to manageable numbers, if necessary to a

single source. On the other hand, this

freedom to negotiate did not leave the

military buyers utterly untrammeled

agents at liberty to bargain as they would.

Contract negotiators for the War Department had to operate within a rather rigid

set of rules, the Procurement Regulations

laid down by the Assistant Secretary of

War under authority granted in the Defense Act of 1920.

The Procurement Regulations of the

War Department, or PR's as they were

commonly called, consisted of a numbered series of instructions prescribing

the general policies and forms to be used

for all departmental buying. The regulations not only spelled out uniform procedures to be followed by procurement

personnel but amassed in one convenient

place all those provisions, prohibitions,

inclusions, and exclusions that had been

laid down by Congress in one statute or

another over a great period of years but

never gathered together and issued in

codified form until the summer of 1942.

The PR's were the procurement bible, a

dismayingly intricate compendium synthesizing scattered statutory mandates,

departmental regulations, opinions of

the Attorneys General and rulings of the

Comptrollers General, not to mention all

those administrative procedures and practices that had evolved from experience

over the years.28

To write a contract required threading

one's way through the complex maze of

directives, prohibitions, and prescriptions laid out in the Procurement Regulations.29

 A number of stock contract forms

simplified the task by providing at least

a point of departure for the use of the negotiators. There was, for example, the

stock form for cost-plus-fixed-fee contracts, which had been drafted with so

much difficulty during the summer of

1940. The intricacies of this form are

such that it will be convenient to defer

consideration of it until later. A second

standard form was available for use in

the purchase of standard units such as

nuts, bolts, and other similar off-the-shelf

items. This form, an informal contract,

was called a purchase order. It amounted

to little more than an order blank with

conditions prescribed. By far the most

important instrument in the arsenal of

the Procurement Regulations was Form

32, the one that was provided for the

normal pattern of procurement—fixedprice or lump-sum contracts. Such contracts were formal documents representing mutual agreements certified by the

participating parties with their seals and

signatures.30

28

 To read the Procurement Regulations of the

War Department as they are published at any one

time is as deceptive as judging the whole reel from

the appearance of a single frame of film. To understand the PR's one must study them in evolution.

Unfortunately the files are inconveniently organized

for this purpose. There is apparently no extant

historical file of PR's available anywhere that reflects

all the changes introduced. AF Records Section,

Record Group 506, A 51-66, contains some suggestive

material of this sort but is not complete. 29

 There are almost no accounts of the negotiating

process available. Of the few to be found, the following are most useful: Lecture 1, The Procurement Function of the AAF, the ATSC, and the Contracting Officer, by Brig Gen D. C. Swatland; Lecture

10, Negotiation and Administration of Contracts, by

Scarff. Both lectures before AAF Contracting Officers School, WF, Winter 1944-45, filed in WFHO. 30

 For a detailed analysis of contract forms, especially the fixed-price contract, see Lecture 11, Provisions of Fixed Price Contracts, by Maj L. A. Mincer,

AAF Contracting Officers School, WF, 11 Dec 44,

WFHO.
340 BUYING AIRCRAFT

Each stock contract form consisted of

a series of articles or numbered paragraphs specifying the terms of the agreement. By and large the articles fell into

two fairly distinguishable categories. On

the one hand there were those inescapable

stipulations that for the most part reflected congressional mandates. Typical

of this category were the labor requirements of the Walsh-Healey Act, which

were a compulsory feature of every government contract above a given dollar

volume. Another required article was

that prohibiting interested officials from

benefiting under the terms of a contract.

In the jargon of the trade, articles such

as these were "boiler plate"—not subject

to negotiation in the absence of unusual

circumstances. On the other hand, the

second category of articles comprised all

those normally open to bargaining. In

this group were to be found clauses covering the nature and specification of the

items to be purchased, the character of

the inspection required, the components

to be supplied by the government to the

manufacturers, the additional facilities to

be provided where necessary, and, finally,

the critically important factor of price.

The use of standard contract forms

might be expected to speed up negotiations by narrowing the area of discussion

to those articles actually negotiable. One

might assume that the boiler plate articles

would be taken for granted since they

were in any event unavoidable. In practice, the use of boiler plate clauses and

articles did not work out this way. To

begin with, not all manufacturers were

familiar with the stock articles. The rush

of war orders brought thousands of businessmen into association with military

buyers for the first time. Lack of familiarity bred caution. As a consequence,

procurement officers frequently found

themselves involved in prolonged sessions

struggling to convince would-be contractors that there were no hidden catchphrases in the boiler plate. As a matter

of fact, even those manufacturers long

familiar with government business practices were inclined to mistrust the apparently innocuous articles. It must be admitted that their fears had a certain justification, for even the boiler plate articles

belied their name. Frequent additions as

well as alterations and special deviations to meet unusual circumstances kept

the supposedly unchanging "standard"

clauses in a state of flux. Since even slight

changes in terminology could affect the

margin between profit and loss, manufacturers showed a good deal of reluctance

to act without first exploring every line of

contractual text for pitfalls. Inasmuch

as some of the larger contracts embraced

several hundred pages of text, this line-byline search could be exceedingly time consuming. To placate manufacturers' fears

and to save time, procurement officers

actually went so far as to include a special

article in each contract identifying in detail any deviations from the standard or

conventional contractual verbiage.

That the procurement staff at Wright

Field appreciated the need to forestall

manufacturers' fears concerning possible

pitfalls in the standard articles of military

contracts is evident from the peculiar history of Form 32, the stock instrument for

fixed-price contracts. In 1935 the Treasury Department issued the original Form

32 for use by all governmental purchasing agencies. The initial instrument had

fifteen articles. Over the years, as experience showed the need for clarifica-
THE NEGOTIATION OF CONTRACTS 341

tions and additions, more and more articles were added, until by 1942 it had become a bulging document of 42 articles.

Inevitably this growth by accretion involved a good deal of overlapping and

duplication in the various clauses.

Early in 1943 the procurement staff decided that a redrafting was long past due

and set about revising, trimming down,

and lopping off the obvious deadwood

in Form 32. This was clearly desirable,

but it threatened to hold up negotiations

simply because it was new. Procurement

officers recognized that businessmen, especially those most familiar with the old

form, would recoil suspiciously from a

novel contractual instrument and insist

upon giving it to their legal advisors for

close scrutiny—and weeks of delay would

follow. To minimize the time lag unavoidably arising from this sort of reaction, an ingenious officer arranged to label

the new instrument "Form 32"—Materiel Command Form 32 rather than Treasury Form 32. Under this flag, manufacturers' fears could be soothed with an

oblique reference to "the same old form"

merely pruned and reshuffled, which,

indeed, was the truth.31

In short, procurement officers discovered that they had to spend a great deal

of time "negotiating the unnegotiable,"

allaying the fears and suspicions with

which manufacturers regarded the fine

print and the changes in the fine print

that continually occurred.32

The British Ministry of Supply when

confronted with this same mistrust of the

fine print on the part of manufacturers

faced the problem somewhat differently.

The whole gamut of stock articles the

Ministry commonly employed in contracts were numbered serially and published in a bound booklet readily available through His Majesty's Stationery

Office to all who applied for it. Businessmen, including those infrequently entering government contracts, were thus free

to study the fine print at length even before so much as considering a particular

bid on government work. By this simple

device the boiler plate portion of many

British munitions contracts was reduced

to a mere listing by cross references to appropriate articles in the published catalogue of standard provisions.33

If the fine print in the boiler plate articles of air arm contracts led to difficulties and delays at the bargaining table;

how much more so was this true of those

articles and clauses open to give and take

—those actually subject to formal negotiation? Whether they concerned specifications defining the nature of the end

item itself, patent rights, the provision of

additional facilities, or equipment for

production at government expense, or

the procedures for inspection, packing,

and shipping, these negotiable articles

opened endless opportunities for dispute

and disagreement.34

By way of example, consider the possibilities of misunderstanding and delay

in the matter of tooling. Who should

pay the cost of special tooling, the jigs,

31 Ibid.

32

 A candid expression of a typical management

attitude can be found in Lecture, Aircraft Production, by J. T. Hartson, vice president of Glenn L.

Martin, AIC, 6 Nov 41.

33

 C. F. Robinson, R. C. Kyser, and J. D. Millett,

Foreign Logistical Organizations and Methods: A

Report for the Secretary of the Army, Oct 47, p.

163, OCMH. 34

 Negotiation and Administration of Contracts,

Lecture by Scarff.
342 BUYING AIRCRAFT

fixtures, dies, and the like, that made

mass production possible? To begin

with, the line of definition between general- and special-purpose tools was often

difficult to discern, let alone agree upon.

If the government agreed to pay for certain tools and tooling and retained title

to them, would the manufacturers then

be responsible for wear and tear or loss

resulting from breakage? Would contractors be free to lend this tooling to

subcontractors where necessary? If special tooling owned by the government

could be used to produce for the commercial market—in fabricating a cargo airplane, for example—should the contractor be authorized to do so? If so, how

would the government's representatives

meet the cry of inequity that might arise

from rival firms? Since virtually every

negotiable article of a contract offered

equally complex grounds for discussion

and disagreement, the opportunities for

delays in signing air arm contracts were

almost without limit.35

One of the most vexatious articles in

the negotiation of wartime contracts was

that covering the provision of spare parts.

Aircraft contracts signed in wartime

called for the delivery of an initial complement of spare parts concurrently with

the aircraft themselves. Unfortunately,

no one, not even the airplane's designer,

knew in advance precisely which spare

parts would be required. Each individual aircraft design presented a novel

problem, and only after extended operation in the field could enough experience

be accumulated to indicate with any degree of accuracy just which parts would

be required in great numbers as replacements and which not at all. In such a

situation to ask a manufacturer to sign a

contract placing an itemized price tag on

each replacement part in advance was to

expect him to base his production costs

on unknown quantities.

In almost any field of manufacturing

the length of the production run bears

an appreciable influence on unit cost.

Manufacturers were readily tempted to

cut costs on spares by running off additional quantities when turning out the

parts required for the aircraft on contract. With luck and a good deal of

shrewd estimating a manufacturer could

save both time and money in this fashion, but heavy risks were involved. In

wartime, especially, the flux in design was

rapid. Each change in design could involve extensive retooling; thus a manufacturer who tried to be forehanded

could, and sometimes did, end up with a

warehouse full of spares made obsolete by

subsequent alterations in design.

The elaborate contractual arrangements by which the difficulties encountered in procuring spare parts were eventually circumvented, if not entirely resolved, need not be spelled out here. Suffice it to say, the fundamental difficulty

of buying and selling unknown quantities

of spare parts continued to plague contract negotiations throughout the war.36

Framing appropriate articles to cover

the complexities of tooling, spare parts,

or any of the other problems mentioned

35

 Chief, Proc Div, WF, to Chief, Legal Br, Dir of

Materiel, ASF, 6 May 44, AFCF 161 Contract Requirements.

36

 Lecture, Spare Parts Procurement, 13 Dec 44,

by Lt Col E. R. Wardell; Negotiation and Administration of Contracts, Lecture by Scarff. Both lectures before AAF Contracting Officers School, WF,

Winter 1944-45, filed in WFHO. See also, A. F. E.

MacInerny, Production of Airplane Spares (Lockheed Aircraft Corp., 1944).
THE NEGOTIATION OF CONTRACTS 343

above created obstacles for the negotiators on both sides of the table, but in the

final analysis these were often subordinate

to the fundamental and pervasive question of price. It was in negotiating the

all-important price of the article that air

arm procurement officials faced their

most serious challenge. No one would

ever dream of disputing the pivotal role

of price, yet, oddly enough, it was here

that the negotiators found themselves

literally groping in the dark.

Negotiating in the Dark

One subtlety that requires precise explanation is the difference between a "negotiated contract" and "contract negotiation." When procurement officers spoke

of "negotiating a contract," they referred

to the discussion that led up to the signing of any contract. A "negotiated contract," on the other hand, was specifically

one in which the crucial question of price

was reached by agreement between the

parties involved rather than by competition involving the use of invitations,

sealed bids, and public opening.

By March 1942 air arm procurement

officials operated under Army directives

stipulating that all procurement must

employ the negotiated contract in preference to competitive bidding unless explicitly exempt by the Under Secretary.37

From its status as the unusual exception

to be used with circumspection, the negotiated contract had come full circle to

rank as the general rule. This was not

just a simple shift in procedure but a

revolution in military procurement. As

such, it encountered something less than

an enthusiastic reception in some circles.

Use of the negotiated contract made it

possible to abandon competition in the

open market in favor of direct dealings

with arbitrarily selected individual firms.

To deal directly with such firms without

the cumbersome mechanics of competition, sealed bids, and all the rest was expeditious as well as efficient and therefore highly desirable in wartime, but the

advantages could not conceal the inherent

drawback in negotiated contracts. If the

great arbiter — competition — which policed price albeit imperfectly via the

pressures of the market place, were once

abandoned, then some alternative had to

be substituted to accomplish the same

end. If the machinery of normal competition would no longer maintain continuing downward pressure on price, the

burden necessarily fell upon the government negotiators. Protecting the public

interest required skilled horse traders,

negotiators who could achieve by shrewd

bargaining over the table what the general economic forces of the market had

formerly done. This was the challenge

of the negotiated contract.

An impartial observer in 1942 might

well have questioned whether the challenge would be met. The outlook at that

time was hardly favorable. To begin

with, whether they chose to use the fixedprice or the cost-plus-fixed-fee contract,

the government's negotiators had to be

able to make a rather close estimate of

probable costs. In the fixed-price contract, such an estimate was needed to hold

a manufacturer to a close price that would

still cover his costs adequately. Which is

to say, a price had to be set tight enough

to give him an incentive to improve his

37

 Memo, OUSW for CofAC et al., 4 Mar 42, AFCF

161 Contract Requirements. Based on WPB Directive No. 2, 3 Mar 42.
344 BUYING AIRCRAFT

methods and increase his profits, yet slack

enough to ensure him against disastrous

losses resulting in delayed delivery or

downright failure to produce at all. And

similarly, in the CPFF contract, a careful study of probable costs was essential

before the government could compute intelligently the allowable fixed fee, not to

mention appropriations and budgeting.

In the last analysis, without data on which

to make such estimates, air arm procurement officials really could not even make

an intelligent selection of the appropriate

contractual instrument—the fixed-price or

fixed-fee form—let alone work out a close

price.

Accurate cost analysis hinges upon two

factors: first, highly experienced negotiators with a thorough grasp of the manufacturing processes entering into the fabrication of every different type of end item

purchased, and, second, information on

the current market in all the many ingredients contributing to that heterogeneous class called air matériel. These ingredients included not only semifabricated and self-contained component parts

but also raw materials in bulk such as

sheet aluminum, strip copper, and the

like, each in a bewildering array of grades

and varieties, every one of which carried

a price tag that fluctuated daily. In addition to the materials costs were costs of

labor reflecting not only the varying wage

levels in different parts of the country but

also the individual pay scales established

for the whole gamut of skills encountered

in the aircraft industry—from tinsmith

to time clerk. Effective negotiation demanded trained men fully armed with

vast quantities of up-to-date information

on a host of costs.

At Wright Field the air arm did have

a handful of highly experienced contract

negotiators, but for many months, especially in the early days of the war, these

men found themselves working virtually

in the dark. The few tools they had at

their disposal were rudimentary at best.

The procurement staff had acquired some

experience in price negotiation during

the peacetime years when lining up contracts for experimental aircraft under the

provisions of Section 10k of the Air Corps

Act of 1926. And there was, in addition,

a considerable quantity of cost data available in the audits of aircraft manufacturers' books authorized by the Air Corps

Act, but much of the information was

hopelessly outdated by the inflationary

pressures that had sent prices spiraling

upward ever since the outbreak of war

in 1939. The experience in negotiating experimental contracts and the data derived

from audits did indeed have some utility,

but both suffered from an almost fatal defect. Each applied to a volume of operations utterly dwarfed by the immense rush

of war orders. Production costs valid for

orders measured in tens or hundreds obviously did not hold true when applied

to thousands. The Wright Field negotiators were well aware of the "learner

curve" worked out for the aircraft industry in the thirties by T. P. Wright. By

using the system of projections conceived

by Mr. Wright, they were able to estimate

the reductions in labor costs per unit that

should be obtained by any given increase

in the total number of units in production. Even when skillfully applied, however, these curves or projections gave only

crude estimates so long as it remained

impossible to verify all the cost factors

introduced to construct the curves. At
THE NEGOTIATION OF CONTRACTS 345

this point the Wright Field negotiators

were really handicapped, for they simply did not have the necessary information at their finger tips.38

Although virtually disarmed by want

of adequate factual data, the air arm negotiators did not succumb to the manufacturers across the table. What they

lacked in the way of information they

tried to make up in rigorous bargaining,

even though there was no substitute for

full and up-to-date cost data.39 The urgency of wartime demand gave high

trump cards to the manufacturers' representatives. As the cry for increased production became more frantic, Wright

Field negotiators were placed under

heavy pressure to sign contracts in the

shortest possible time, even if this meant

doing so without a thorough cost analysis beforehand.

The nadir of orderly procurement

seems to have come in March 1942 when

the chief of the Contract Section himself

confessed that the process had by then

devolved to one of "price asking" by the

manufacturers and "price taking" on the

part of the government.40 This, it would

seem, was tantamount to conceding an utter breakdown in the air arm's ability to

bargain effectively. Even after allowing

for a certain hyperbole in the contract

chief's remarks, they still imply that the

procurement organization at Wright

Field suffered from a serious deficiency.

Bluntly stated, that organization was still

not ready for the rush of war orders some

two years after the rearmament program

began and months after the fall of France

had unleashed torrents of appropriations

for air matériel.

Perfecting the Organization

The difficulties confronting the Contract Section at Wright Field in driving

effective bargains for the government

when the real wartime crisis arrived suggests the existence of a defect in the organization, which, in theory at least, had

labored throughout the peacetime years

to be ready for the tasks of war. There

were, to be sure, a few really able negotiators on the permanent civil service staff

who had perfected their skills in the years

before the war, but their experience, if

wide in scope was limited in scale. In

1939, for example, they purchased only

865 aircraft and wrote only 353 formal

contracts. The whole civilian staff of the

Contract Section numbered but 70-odd

persons. The modest scale of their operations is probably best suggested by the

annual tabulation of GFE items—engines,

accessories, and the like—purchased by the

Air Corps. As late as 1939 the entire list

could be itemized on three or four sheets

of paper.41

When the rush of war orders finally

arrived it literally overwhelmed the Contract Section at Wright Field. In 1939

the air arm had spent some $35,000,000

38

 Interv with Mr. Schwinn, 25 Jul 55. 39

 See, for example, TWX, Echols to Brett, 26 Aug

40, AFCF 452.1-13-F Proc of Airplanes. 40

 IOM, Chief, Contract Sec, for Chief, Mat Div,

2 Mar 42, quoted in M. L. McMurtrie, History of the

AAF Materiel Command (Materiel Center): 1942,

WFHO, Aug 46, p. 92. See also, Memo, Brig Gen

H. A. Shepard, Chief, Proc Div, for Maj Gen O. R.

Cook, 13 Jan 50, WFHO Proc and Production Activities.

41

 Mat Div Annual Rpt, FY 1939; M. L. McMurtrie, and P. M. Davis, History of the AAF Materiel

Command: 1926 Through 1941, WFHO, Nov 43, app.

vol. II, E, tab 2.
346 BUYING AIRCRAFT

for such categories of matériel as aircraft,

engines, and other GFE items; by the end

of fiscal 1942 commitments for the same

items involved outlays in excess of $11,-

500,000,000.42 And by that date the staff

at Wright Field was negotiating an average of 392 formal contracts each month,

not to mention handling 2,500 informal

contracts or purchase orders at the same

time. Clearly the small staff of highly

trained civilian negotiators could not be

stretched over this immense volume of

business. Those in authority responded

to this challenge by calling for additions

in staff.

Although large numbers of people were

recruited for the procurement staff—by

the end of fiscal 1942 the Contract Section alone employed over 850—individuals with appropriate talents were virtually impossible to find, let alone hire

on existing civil service pay scales. The

obvious alternative was to train men almost from scratch, but this could be done

only with great effort and by prolonged

exposure to experience, a process necessarily time consuming. Thus, when the

ultimate crisis arrived after Pearl Harbor,

the procurement staff, though already

vastly enlarged, was still dangerously undermanned.

Civil service procedures as to personnel and budgetary limitations, at least

down to Pearl Harbor, went far to inhibit the opportune development of an

organization capable of handling the increased volume of buying.43

 Perhaps the

most serious criticism that has been

brought against those in command is that

they continued trying to solve the procurement problem by additions to staff

long after it should have been clear that

sheer numbers (even if appropriately

skilled individuals were obtainable)

could no longer keep pace with the

mounting workload. Not until several

months after the United States entered

the war did those in command undertake

a thorough overhaul of the procurement

organization at Wright Field in an attempt to deal with the enormous difficulties inherent in wartime purchasing

by means other than additions of personnel in ever greater numbers.

To be sure the procurement staff did

continue to expand rapidly after Pearl

Harbor, and the statistics of that expansion are impressive. In a sense they are

too impressive. Their sheer magnitude

in contrast to the recent past is so striking, so dramatic, as to divert attention

from the underlying lessons and implications behind the facts. During the first

half of 1942, for example, each month

found several thousand visitors—agents,

manufacturers, negotiators, and the like

—thronging the corridors at Wright Field

in search of contracts. Each visitor required time and attention. Each brought

new complications to be faced. By the

year's end the Air Force was doing business with some 7,000 prime contractors

and over 60,000 subcontractors.44 Obviously, absolute additions to staff were

unavoidable if this upsurge of business

was to be handled at all. More negotiators, more expeditors, more file clerks,

42 and more typists were hired until the

 Ibid.

43

 For a general discussion of this question, see

McMurtrie and Davis, Hist of AAF MC: 1926-41,

ch. V. 44 Ibid.
THE NEGOTIATION OF CONTRACTS 347

Contract Section doubled, redoubled,

then doubled again. But this kind of expansion only obscures the far more significant refinements of organization that

were gradually introduced during 1942

and 1943.

The organizational innovations that restored the air arm's contract negotiations

to effectiveness involved a host of lesser

details introduced piecemeal over many

months, but virtually all of the changes

grew out of one central principle: the

functional breakdown of the procurement process into subdivisions performing highly specialized activities. Before

the war a small group of men in the Purchase Branch at Wright Field did nearly

all the negotiating necessary for the entire service. These men were experts

broadly qualified by experience to conduct negotiations on whatever contract

came their way, be it aircraft engine or

parachute, fuel truck, or flying boot. So

long as the volume of work remained

small and time was not of the essence,

such an arrangement was doubtlessly efficient. A few widely qualified generalists who could handle almost any task

were less costly to maintain than a whole

stable of specialists.

With the coming of war, however, the

advantage of the peacetime organization

disappeared. What is more, the weakness of peacetime planning for the wartime procurement organization stood

clearly revealed as the inevitable happened: the workload rapidly outstripped

the available staff while those in command frantically sought to recruit manpower even though it might reasonably

have been anticipated that highly trained

negotiators would prove difficult to hire

in the midst of a war boom. Not until

well after Pearl Harbor—which is to say

not until after the most hectic months of

procurement were past—did the responsible authorities undertake a functional

breakdown or subdivision of the procurement organization into a series of

narrow specialties for which experts, if

they could not always be hired, might

be trained fairly rapidly.

Within the context of limitations that

beset the peacetime air arm, those in

command can scarcely be criticized for resorting to the form of organization they

had used in the prewar years. But can

the same be said of their planning for

war? For that matter, was any really

serious consideration given to the problem of staff and organizational planning

before the crisis arrived? If there was,

little documentary evidence of such activity remains, and the piecemeal manner in which the reorganization of the

procurement function actually took place

during 1942 and 1943 strongly suggests

that it was done pragmatically and under

the pressure of events rather than as a

consequence of conscious foresight. Planning for the contingencies and imponderables of a remote future is always difficult, but the trouble in this instance seems

to have stemmed not so much from faulty

planning as from an almost complete absence of planning.45

The air arm's failure, until belatedly,

45

 Probably the easiest way to trace, at least superficially, the course of organization change at Wright

Field is by use of the data supplied in McMurtrie

and Davis, Hist of AAF MC: 1926-41, app. vol. II.

For further comment on organizational weaknesses

at Wright Field, see Lt Col L. S. Friedman, IGD,

rpt to IG, Inspection of Procurement Operations

at Wright Field, 11 Nov 43, AFCF 331.1 Inspection

(Bulky).
348 BUYING AIRCRAFT

to resort to functional subdivision and

specialization on a large scale is the more

surprising because the principle involved

had long since been applied by the very

aircraft manufacturers with whom officials at Wright Field were negotiating

every day. Before the war, most aircraft

firms employed a relatively large percentage of highly skilled workmen, each one

almost a master machinist capable of proceeding from sketchy blueprints containing a minimum of detail and fully able

to work without close supervision. With

the coming of mass production in wartime when such highly skilled men were

not to be found, the aircraft concerns

solved their problem by a series of

progressively smaller breakdowns that

brought more and more tasks into the

range of semiskilled or narrowly trained

workers. But even with this example at

hand, the air arm was slow to follow suit.

Not until 1944 did the procurement

organization at Wright Field reach what

may be called maturity. By then the old

catchall Purchase Branch had been moved

up to the superior status of a section within which the various purchasing functions were parceled out on functional

lines: an Aircraft Procurement Branch,

still further subdivided into separate

units buying airframes, engines, and propellers, was paralleled by a General Procurement Branch with individual subunits buying GFE items, maintenance

equipment, and so on. In each of these

several internal organizations were to be

found highly specialized negotiators, each

an expert in his particular field—fuels

and lubricants, instruments, electrical

equipment, and the like. Obviously an

officer who in civilian life had been a

commission throwster in the silk trade

would make a more sensitive negotiator

in the parachute field than would a man

whose entire civilian experience had been

confined to selling heavy machinery to

highway contractors, although the latter

might make a highly competent negotiator buying fuel trucks and other such

equipment.

In a word, a major key to the effectiveness of the mature procurement organization was to be found in its reliance

upon negotiators—as well as others—who

were specialists. Yet this was by no means

the only significant organizational change

introduced.

While the principle of specialization

applied to negotiation was highly important, perhaps even more so was the proliferation of units designed to improve

the flow of vital information toward the

negotiators who most needed it. In the

Purchase Section, to consider but one illustration, was established a Cost Analysis Branch manned by an officer and ten

civilians. One group in this branch, the

Industrial Cost Unit, analyzed the cost

estimates presented by manufacturers negotiating for contracts by working up detailed reports on the adequacies of the

estimates presented on tooling, labor

time, and materials costs. The data compiled by these people was then sent to the

government negotiators at the bargaining table—the procurement firing line—

to help them in their efforts to establish

a close but fair price. A second group

within the branch, the Corporate Profit

Unit, supplied negotiators with information on a contractor's over-all profit picture to help them drive harder bargains

where in the past a manufacturer's profit

had been excessive or to be somewhat

more generous where he had suffered loss,
THE NEGOTIATION OF CONTRACTS 349

especially where the loss stemmed from

circumstances beyond his control.46

The reorganization of the Contract Section paralleled that of the Procurement

Section. In prewar days and during the

early rearmament rush, the procurement

staff often negotiated contracts and then

sent them to the legal staff to be drafted

in proper legal form. For several months

after the outbreak of war the legal talent

for this task continued to be drawn on

a part-time arrangement from the base

judge advocate's office, which handled all

the other customary legal burdens of an

air field, including military justice and

small claims. After Under Secretary Patterson himself had singled out this glaring organizational weakness for criticism,

a full-time Legal Branch was established

within the Contract Section and staffed

with lawyers concentrating on highly

specialized segments of the broad field of

procurement law. The mature Legal

Branch of late 1943 and early 1944

employed 40-odd officers, almost all of

them attorneys, and well over 200 civilians.47

 This was a remarkable increase

in numbers, to be sure, but here too it

would be well not to let mere increases in

staff conceal the more meaningful trend

toward functional breakdown or job simplification that lay at the root of the procurement organization's vastly enhanced

wartime capabilities.

Substantial as were the improved efficiencies of the mature procurement organization, the forward steps taken were

not without some costs and losses. Although an elaboration and subdivision

of functions did provide a highly useful

flow of information to assist the negotiators in their work and helped pit wellinformed government specialists against

manufacturers' representatives operating

in their own home territory, the sheer

bulk of the data fed up to them tended to

become unmanageable. By 1944 the

various offices at Wright Field were turning out some 115 recurring reports: 17

daily, 15 weekly, 16 monthly, and so on.

A dozen of these originated within the

purchasing organization itself.48 Admittedly much of this information was absolutely vital to sound negotiation, but its

compilation and use did lead to numerous

difficulties.

Many manufacturers complained at the

burdens imposed by the preparation of

the many recurring reports expected of

them. This is hardly surprising considering their number. Boeing, for instance,

took tally at one point in the war and discovered that the Air Force required the

corporation to submit 425 different reports each month.49

 Some manufacturers

wryly suggested that the Air Force expected contractors to turn out more

weight in paper than in airframes.

People as well as papers complicated

the task of co-ordination. As the procurement organization doubled and redoubled, it was difficult to keep the right

hand aware of what the left hand did.

The increase in staff at Wright Field repeatedly ran ahead of construction work

on new floor space. The various sections

and branches had to use office accommo- 46

 For a general description of the Procurement

Division as it approached maturity, see Office for

Organizational Planning, Materiel Command, Report on Decentralization of Procurement Division,

11 Sep 43, WFHO Research file. 47

 McMurtrie, Hist of AAF MC: 1942, p. 63.

48

 R. R. Russel, History of the Air Technical

Service Command: 1944, WFHO, May 46, p. 63. 49

 Proc Div Decentralization Progress Rpt, 30 Sep

43, WFHO.
350 BUYING AIRCRAFT

dations where they could be found.

Throughout the first two years of the war,

branches of a section and units of a branch

frequently had to set up shop in offices

remote from one another. When the

overflow led to the use of rented office

space and even to the conversion of an

old high school building in downtown

Dayton, expansion of staff had long since

passed the point of diminishing returns.

The loss of effective co-ordination implicit in all this may be inferred from

the following statistics: by 1944 the Materiel Command as a whole had expanded

to a total of 43,821 people (34,304 civilian

and 9,517 military) in contrast to a total

of but 1,900 in 1939. The procurement

staff over this same period grew from 70

people to 876 (542 civilian and 334 military).50

Clearly, the advances toward efficiency

wrought by specialization were offset at

least in some measure by a decline in

close, timely co-ordination of operations

and a decided impairment of comprehensiveness in over-all supervision. When

the force at Wright Field swelled from

hundreds to thousands and then to tens

of thousands, general officers in command

could not avoid finding it increasingly

difficult to maintain a "general" view of

operations in their charge.

That the problem of co-ordination

would become more pressing as the procurement force grew larger was inevitable. And just as inevitable was the high

cost—in time as well as money—of every

administrative device installed to keep

all interested parties informed of what

was going on. Quite apart from the expense in terms of manpower, salaries, office space, and the like, each device added

to improve co-ordination increased the

administrative time lag by minutes or

hours and even days. Despite repeated

efforts to cut down on the time it took

to process contracts, the lag continued to

be, as one official declared, "something

appalling." Toward the end of the war,

when procedures were well oiled, it still

took an average of thirty days to get a

contract to the point of agreement around

the bargaining table. And this was not

the culmination but only the beginning

of the paper chase, since formal contracts

still had to go up through several echelons of the Air Force for signatures and

co-ordination. What is more, such contracts often had to make parallel journeys

back through a manufacturer's organization to get appropriate corporate approvals at the home office. At the very

end of 1944 it still took an average of

seventy-eight days after reaching agreement by negotiation to get a signed and

legally binding contractual instrument

safely back in the files at Wright Field.51

Sometimes it happened that manufacturers' bids would expire while previously agreed upon terms were plodding

through the headquarters mill gathering

signatures of approval. Prudent manufacturers placed time limits on the acceptance of their quotations for sound

business reasons. It would never do to

be called upon to perform on a quotation

given at a date much earlier in the inflationary spiral, since a geometric progression in labor and material costs could

make any bid totally unrealistic in a matter of months or even less. If the air arm

negotiators were to avoid returning to

50

 Russel, Hist of AAF ATSC: 1944, app. IV.

51

 Negotiation and Administration of Contracts,

Lecture by Scarff.
THE NEGOTIATION OF CONTRACTS 351

the bargaining table all over again, it was

imperative to hold the delays in the headquarters mill to the minimum.52

Some critics were tempted to condemn

the delays of the headquarters paper mill

as "typical Army red tape." Part of this

criticism is undoubtedly justified; the

elaborate and hastily expanded administrative machinery of the procurement

organization certainly offered grounds for

improvement. But were most of the imposed delays really avoidable? Unless

time-consuming follow-ups, co-ordinations, cross-checks, and approvals were

provided, the occasions for costly errors

to slip by would have been legion. Experienced procurement officers, even

those who most deplored the creaking

slowness of the paper mill, were convinced that most of the steps along the

way to a fully signed and co-ordinated

contract were well worth the trouble and

entirely justified by the savings effected.53

The prevention of fraud or monetary

loss was only a part, probably a minor

part, of the benefit to be derived from

the elaborate administrative routine applied to contracts. A full flow of accurate

and timely information was essential to a

taut and efficient mobilization of the national economy where resources were in

short supply and available quantities

had to be apportioned with care among

many competing users. Unless each contract was co-ordinated and cleared with

those directing the national mobilization,

unless these officials were supplied with

full and early information on each contract signed, the whole complex task of

rationalizing the flow of resources fell

into chaotic disarray. Yet it is precisely

here that the delays began. Clearing a

contract through the mobilizers imposed

unavoidable costs mounting through

hours to days of delay.54 And it is these

delays that the uninitiated found easy to

deplore as the consequence of Army red

tape and inefficiency.

Among the many factors contributing

to the delay in getting air arm contracts

completed, none was more vexing than

the stipulation that all must be approved

not only by the top officers of the command in the Washington headquarters

but by the Under Secretary of War as

well. The outlying position of the major

procurement staff at Wright Field made

this requirement even more cumbersome

than might otherwise have been the case.

The delays inherent in the circuitous

journey to Ohio could have been disastrous had they not been eliminated or

reduced.

Shortly after Pearl Harbor Under Secretary Patterson laid down some broad

outlines of policy for wartime leadership.

"War," he said, "calls for the same boldness and imagination in procurement as

it does in the . . . field."

 55

 To show th

his words were not empty symbols, he

proceeded to demonstrate a good deal of

"boldness and imagination" in the exercise of his high office. His method was

52

 For a wartime insight on this problem, see

TWX, Asst Chief, Mat Div, WF, to Chief, Mat Div,

OCAC, 9 Dec 41, WF, JAG file, Proc 10K. 53

 For an extended statement of the reasons for

retaining time-consuming co-ordinations, see Negotiation and Administration of Contracts, Lecture by

Scarff.

54

 A rather brief resume of some of the steps taken

by a requirement on the way to becoming a completed contract will be found in Procurement Statistics, Lecture by Tyson. 55

 Quoted in OUSW Purchasing and Contracting

Dir No. 8, 14 Jan 42, abstract in WF JAGO file,

War Powers Act.
352 BUYING AIRCRAFT

simplicity itself: he delegated vast segments of the power legally vested in him

to approve contracts. By passing the

power of final approval to a long chain

of subordinates, endowing each with authority to make the ultimate decision on

sums commensurate with his rank, the

Under Secretary hastened the procurement process immeasurably. Successive

modifications of the original order from

time to time increased the total contract

values that subordinate officials could approve until toward the end of the war the

following cascade of delegations and redelegations were in force:56

All contracts of $5 million or more required signature of Under Secretary.

All contracts of $1 to $5 million required

signature of Commanding General,

Materiel Command.

All contracts of $100,000 to $1 million

required signature of Chief, Procurement Division.

All contracts of less than $100,000 required signature of contracting officer

only.

Delegation of authority can be a powerful instrument in the arsenal of leadership. A timid man is afraid to delegate

power; a selfish man refuses to do so. Under Secretary Patterson was neither.

Nevertheless, even while admitting the

impetus given to procurement by his decision to delegate final authority, some

detractors have been inclined to scoff that

far from being bold, Judge Patterson's

decision was belated.57 Indeed, it might

better have come long before Pearl Harbor, perhaps as early as the summer or

fall of 1940 when the paper mill bottleneck on contract approvals first became

acute. With some justice the Under Secretary's critics could point out that to

delegate wide contractual authority after

Pearl Harbor may have required imagination but only a minimal boldness, for

by then the public, the voting public, was

badly frightened and willing to follow

the nation's leaders without too much

cavil. Genuine boldness, it can be argued, would have risked such a delegation of power—would have risked censure

—in the broader interest of national defense months earlier at a time when such

a move was almost certain to provoke political fireworks.58

Against the charge of timidity a number of relevant circumstances must be

considered. To begin with, directives issued by OPM required that all contracts

over $500,000 be submitted for review by

the OPM staff. So long as this practice

prevailed, Judge Patterson understandably insisted upon scrutinizing every

Army contract of that size before it was

released to OPM. It was at least in part

because of his insistence that OPM relaxed this requirement after Pearl Harbor. Furthermore, Judge Patterson did

not even come to the War Department

until July 1940 when he became Assistant

Secretary of War. He assumed the title

of Under Secretary in December 1940.

Inevitably, some months were to pass before he could grasp the intricacies of his

56

 Negotiation and Administration of Contracts,

Lecture by Scarff. 57

 Typical of the criticism leveled against the Under Secretary is IOM, Asst Chief, Mat Div, for Chief,

Mat Div, 1 Oct 41, AFCF 400.12.

58

 To understand just how scathing such criticism

could be, the reader need only to recall the political

roasting described above, pages 119-128 and 128-131.
THE NEGOTIATION OF CONTRACTS 353

office.59 Delegations of authority were

utterly out of the question until the Under Secretary came to know and trust the

men with whom he had to work and to

whom he would apportion fractions of

his power. Probably no aspect of procurement administration illustrates more

pointedly the crucial importance of mutual confidence among the top political

and military officials of the War Department. Similarly, confident redelegations

of power down within the military echelons were possible only when those with

political and military responsibility at the

top of the system knew they could rely

upon the ability and integrity of the men

inside the procurement organization,

where most of the actual buying took

place. For this reason a closer look at

some of the types of personalities and positions involved—both as buyers and as

sellers—might be appropriate.

A Note on Buyers and Sellers

Peacetime practice and the terminology of the Procurement Regulations enshrined the contracting officer as the military buyer. He was the legally responsible

official, the legal link between the government and the manufacturer. But the

subdivision of functions made necessary

by the vast expansion of procurement

during the rearmament period tended to

bring an increasing differentiation in

function between those who negotiated

contracts on the one hand and the lawyers

on the other hand who drafted the formal

instrument in legally acceptable terms.

As the pressure to turn out weapons

became acute after Pearl Harbor, many

contract negotiators grew more and

more impatient with the lawyers. In the

negotiators' view, once the really vital

terms had been agreed upon—price, delivery schedules, and so on—the real work

of buying was done. The formal contract

with all its technical niceties and fine

print they were inclined to regard as

"lawyer's nonsense." To them the contracting officer was simply the last man up

the line who put his signature on the

contract. At best, the negotiators saw the

lawyers as necessary evils; at worst, they

blamed them for injecting staggering delays into the procurement process.60

In a sense, the negotiators were right.

The legal details in formal contract writing did account for much of the time lag

in the procurement paper mill. It is also

true that lawyers were reluctant to seek

new and radical legislation authorizing

sweeping powers to hasten procurement

by expedient means. But this conservatism was not simply congenital professional blindness to innovation. Legal officers knew only too well that new powers

and expedient means would inevitably

upset the hard-wrought body of procurement procedures and practices and make

it necessary to obtain new rulings and

decisions at the cost of much delay and

many mistakes.61

As the war progressed the impatient

negotiators came increasingly to recognize and appreciate the intrinsic importance of the legal draftsmen and their con- 59

 Anderson, History of the Office of the Under

Secretary of War, Chapter IV, sheds a good deal of

light on the difficulties of the incumbents coming to

understand the powers and responsibilities of the

office.

60

 Proc Function of AAF, Lecture by Swatland. 61

 See, JAG (WF) to Chief, Contract Sec, 30 Sep

41, WF JAGO file, Proc 10K.
354 BUYING AIRCRAFT

cern for the seeming minutiae of language. This change in attitude came, in

part at least, from a rather subtle transformation in the nature of contract negotiations that took place during the years

of crisis. In peacetime, contracts were

negotiated by principals. For the air

arm, the ranking contracting officer

headed the list. And on the manufacturer's side, as often as not, the top corporate official of an aircraft concern sat

across the table. On both sides the men

were personally interested in airplanes.

They flew them, they designed them, and

they built them; they knew and understood aircraft. With the massive expansion that characterized the rearmament

program much of this intimacy and dealing among principals was lost. The principals might still come to Wright Field,

but now they came with a retinue of lawyers and accountants, men who were specialists in taxes and amortization procedures, insurance experts, and the like.62

If the air arm wished to bargain skillfully

and protect the government's interest, it

too must add specialists. For this reason

there was a marked tendency, at least during 1944 and 1945, to add legal experts

and the contracting officer to each group

of negotiators, making procurement the

work of an integrated team rather than

a series of separate steps in sequence.63

Such teams may have turned out better

contracts, but unavoidably they took

more time doing so.

By the time the air arm procurement

organization reached maturity it numbered literally dozens of buyers on its

staff if one included all those specialists

purchasing bits and pieces. Nevertheless, a relatively small group of men, including both officers and civil servants,

negotiated contracts for most of the major components such as airframes, engines, and propellers, which accounted

for the overwhelming preponderance of

the dollar volume obligated. These men,

who spent billions of dollars and dealt

with some of the best paid corporate executives in the country, did a large portion of their work on salaries and at ranks

that can only be described as modest.64

While there was remarkably little

change of personnel in the teams negotiating for major items during the war,

this was not the case with those charged

with procuring the hundreds of small

items comprising the broad category of

accessories and related equipment. Here

there was a continual and substantial

turnover in personnel, which raised a

number of vexing problems. Specialist

negotiators were hard to recruit in competition with industry. When commissioned officers filled these slots the abler

men won promotions and generally

moved off to other duties. Into their

places moved young reservists and OCS

graduates who may have been able

enough but had considerably less general business experience than was desirable. Inexperience was a far more seri62

 IOM, Asst Chief, Mat Div, for Chief, Mat Div,

1 Oct 41, AFCF 400.12. 63

 Proc Function of AAF, Lecture by Swatland.

64

 See, for example, IOM, Chief, Contract Sec, for

Chief, Mat Div, 27 Sep 41, AFCF 161 CPFF. Among

those who served prominently as negotiators were

Col K. B. Wolfe, a production man, Col F. P. Shaw,

a JAG officer, Col A. E. Jones, wartime chief of the

purchasing organization, and two career civil servants, J. W. Schwinn and F. E. Roush, although to

single out these may seem to disparage others by

neglect.
THE NEGOTIATION OF CONTRACTS 355

ous matter than dishonesty among negotiators.65

With but a very few exceptions, air

arm procurement officials turned in a remarkable record for probity during the

war.66 The exceptions, notably one case

concerning a civilian and another, an officer, occurred in cases involving small

sums of money.67 Though small, the

amounts concerned did not in any way

diminish the degree of error, for these

breaches, especially that of the officer, did

unquestionably harm the morale of the

procurement staff as a whole.68 Where

absolute personal integrity could not be

vouchsafed with reasonable assurance,

those in positions of top command were

unable to allow that freedom of action

that saves time and simplifies many administrative complications.

While breaches of the public trust by

dishonest procurement officials were few,

those attributable to inept or inexperienced buyers were more numerous. Understandably, the permanent records, the

files at Wright Field, are scarcely teeming

with carefully documented instances of

this sort of lapse. Nonetheless, the record of subsequent activity along the line

of repricing and renegotiation amply indicates a quality of negotiation that, to

say the very least, could often have been

improved. Ironically, legislators and

public critics spent their energies in hot

pursuit of dishonesty—which was all but

negligible—while virtually ignoring the

far more important problems of recruiting, compensating, and training or retraining buyers, especially in the accessory

or small item field, where the greatest opportunity for improvement undoubtedly

lay.

The discussion thus far has concerned

itself with but one side of the table. What

of the spokesmen for industry on the other

side? The old-line airframe and engine

builders who had been visiting Wright

Field for years were all familiar with many

of the peculiarities and pitfalls of

government procurement, and without

doubt this factor of experience was of

decided advantage to them in negotiating contracts. Yet even amongst these

old-line firms there were substantial differences in effectiveness at the bargaining table, sometimes springing from variations in corporate policy and sometimes

from the individual personalities involved.

In a study such as this, a discussion of

the respective merits of rival firms or the

personal attributes of individual corporate executives is patently out of place.

Suffice it to say that air arm negotiators

for one reason or another found a relatively uniform pattern in their opposite

numbers at the bargaining table. Negotiations with some firms were consistently

harmonious and expeditious, conducted

in an atmosphere of mutual understand65

 Lecture, The Procurement Function of the

AAF . . . , by Lt Col J. G. Scarff, AAF Contracting

Officers School, WF, Winter 1944-45, WFHO; Memo,

J. M. L. for Brig Gen A. E. Jones, 2 Nov 43, AFCF

161 Purchasing and Contracting. For an interesting

comparison with a similar problem in World War I,

see Procurement Correspondence: 1923, Staff Study

on World War I experience, WFHO file, Proc. 66

 This generalization is based on a study of the

reports of congressional investigations searching for

fraud, the confidential reports of inspectors general

and intelligence units assigned to fraud cases, as well

as interviews with a number of civilian and military

officials on duty in the procurement organization

throughout the war period. Needless to add, the

documentary record is at best imperfect evidence in

such matters. 67

 The sordid details are extensively documented

in Hearings of the Special Com Investigating the

National Defense Program, 80th Cong, S Res 46,

November 5-21, 1947, pt. 43. 68

 Ibid., p. 27152.
356 BUYING AIRCRAFT

ing and co-operation. On the other hand,

some firms invariably proved recalcitrant,

suspicious, and un-co-operative. In the

last analysis, however aggressively their

representatives may have haggled, the

firms of the old-line aircraft industry were

willing to give and take across the bargaining table.

Somewhat different were the attitudes

and practices of the industrial giants—for

example, the major automotive concerns

—firms whose business was not exclusively

or even predominantly in the field of

aviation. With these, the military buyers

had a great deal of difficulty. The giants

were no less honest or more profit conscious than the aircraft industry, but the

fact remains that negotiations with them

tended to encounter exasperating delays

and disruptive points of disagreement.

When the industrial giants first began to

consider air arm contracts in substantial

volume, they sent highly paid corporate

officials to Wright Field accompanied by

whole phalanxes of advisors who left the

impression that they looked down on the

"junior officers" and "minor functionaries" negotiating for the government.

They also left the impression that they

were doing the government a favor in accepting military contracts. Neither of

these attitudes lasted long, but they did

little to facilitate negotiations.

Galling as the intangibles of attitudes

may have been, they were not the main

reason why it proved difficult to come to

terms with the larger industrial firms.

The heart of this difficulty lay elsewhere:

the great industrial combines, like the

military buying agencies, were bureaucracies in themselves. They had promulgated corporate policies and procedures

based on long experience in the industrial

world. They wished to alter their policies and practices no more than the government negotiators wished to break Procurement Regulations.69

 In brief, negotiations between the air arm and the giant

industries tended to be difficult precisely

because buyer and seller were so much

alike.

The question of integrity on the part

of the manufacturers dealing with the air

arm cannot be dismissed in a single or

simple generalization. Insofar as fraud

is concerned—leaving the matter of excessive profits to later discussion—the

major aircraft and engine manufacturer

came through the war with a noteworthy

record for integrity. There were, to be

sure, charges of improper workmanship,

diversions of resources, and so on, but

investigation almost invariably revealed

the charges to be untrue or attributable

to minor employees rather than willful

acts of corporate policy. Although the

vast majority of smaller firms doing business with the air arm were no less honest

than the major airframe and engine companies, among the several thousands involved there were some cases of outright

fraud, but these, of course, were exceptions to the general rule.70

69

 The generalizations of this and the immediately

preceding paragraph are of necessity based largely

upon the opinions of air arm officers and civilians

who served at Wright Field during the war. 70

 Only one old-line airframe firm seems to have

fallen into the hands of persons of questionable integrity, and that company sold the air arm only two

aircraft in the years 1940-45. See MID rpt 2D-3630,

10 Apr 41; FBI to G-2, 29 Jul 41. Both in AFCF

004.4 Manufacturers. For an example of minor peculation within a major contractor's organization, see

Asst to Atty Gen to SW, 23 Feb 42, AFCF 333.5

Investigation of Contracts. For suggestions that some

contractors were not unwilling to resort to the use

of influence short of fraud, see AAF Hist Study 40,

pp. 216-18.
THE NEGOTIATION OF CONTRACTS 357

If the record of business honesty indicated here seems to suggest flattering generalizations on the national character, it

might be well to point out, with no intent

to disparage the business community, that

there were certain very real deterrents to

fraud in military contracts. Heavy penalties on the statute books coupled with

the activities of a legislative investigating committee backed by legions of patriotically motivated informants, not to

mention the government's sweeping

powers of audit in air arm contracts, all

combined to minimize peculation. But

surely a major deterrent to fraud must

have been the relative ease with which

ample profit margins could be acquired

under war boom conditions.

Negotiating at High Noon

By the end of 1944 the negotiators at

Wright Field were more or less consistently writing contracts that contained

fair and reasonable price clauses. The

Procurement Regulations defined "fair

and reasonable" prices as those "close

enough to costs so that producers must

exercise careful management and ingenuity to increase production and decrease costs in order to earn a reasonable

profit."

 71

 The goal of the government

negotiator was to achieve prices sufficiently close to make contractors hold

down their costs.

Without a mass of detailed factual information at his finger tips, the most

skillful negotiator was relatively helpless.

For this reason, one of the most significant tools of the air arm negotiators was

the Standard Proposal Form, which all

prospective contractors were required to

submit signed under oath. This document probed so searchingly into the inner workings of a contractor's business

and asked such an array of questions that

many manufacturers grumbled over its

use, which, they said, made them sit at

the bargaining table with all their cards

face up. It did. The proposal form required separate price quotations on each

major component of any item purchased,

then demanded a cost breakdown showing labor, material, and overhead charges

with a full explanation of how each was

derived. In addition, the form required

an itemized statement of cost experience

on similar articles, if any, turned out by

the bidder. Further questions exacted

information on labor requirements, tax

burdens, royalties, facility requirements,

the bidder's balance sheet, operating

statement, and so on.72

The data derived from the Standard

Proposal Form and its supplements became powerful weapons in the negotiators' arsenal, but the completed forms

were not always easily come by. Most

large corporations, accustomed to operating under the glare of public scrutiny,

supplied the desired information readily

enough. Among the smaller firms doing

business with the air arm, however, there

were many who resented the necessity of

divulging the details of their operations.73

This circumstance, it would appear, was

71

 Proc Function of AAF, Lecture by Swatland.

72

 See Materiel Command Form 43.1 and PR 243.1

(1944). The Standard Proposal Form is described

at length in Training Section, Readjustment Division, Materiel Command, Readjustment Training

Course Manual, WF, 1945, copy in ICAF files. 73

 Negotiation and Administration of Contracts,

Lecture by Scarff.
358 BUYING AIRCRAFT

not without some relevance to the alleged

favoritism shown by military buyers to

"big business." Certainly the reluctance

—or inability—of many small firms to reveal the intimate details of their operations must be assessed as a factor in any

attempt to weigh the relative distribution

of orders between "big business" and

"small business."

The government's negotiators did not

content themselves with the use of the

Standard Proposal Form. They exploited

other sources of information as well.

Within the organization at Wright Field

extensive records were accumulated to assist in the procurement process as a corps

of clerks maintained up-to-date alphabetical files, by product and by maker, showing every item purchased for the Air

Force. To these were added the reports

of contract audits as they became available and, later, the reports of renegotiators.74

 Comments and reports by resident

representatives within the manufacturer's

plants, procurement district officers, and

project officers of the Engineering and

Production Divisions at Wright Field

added to the growing store of information.75

 Late in 1943 still another flow of

data became available when the War Department began to publish weekly indices on prices paid throughout the technical services. These provided not only

a comprehensive survey of price trends

but a factual basis for spot comparisons

as well.76

Armed with numerous readily available sources of fact, trained and experienced negotiators had several courses of

action open to them in undertaking a

given purchase. Even after WPB Directive No. 2 made mandatory the use of

negotiated contracts, procurement officials could make use of competitive bidding when the circumstances seemed to

warrant such action. If the situation

justified the use of a negotiated contract,

there were two general techniques that

could be used to reach agreement on a

close price—the price comparison method

and the cost analysis method. Air arm

buyers in actual practice frequently resorted to a combination of two or more

of these tools as the best means for protecting the public interest.

Although the exigencies of war made

the procurement of aircraft by the traditional procedure of invitation and bid out

of the question, this was not true with a

large number of smaller items, especially

where more than one manufacturer

turned out similar commercial counterparts. In such instances, the military

buyers frequently sent out invitations or

circular proposals to seven or eight and

sometimes to as many as fifteen potential

bidders. The number of bids submitted

in response was almost always disappointing; only infrequently would more than

three or four manufacturers reply. Probably no other evidence better illustrates

the fundamental weakness of competitive

procurement in wartime. In a seller's

market, where so many manufacturers

already had more orders than they could

handle, there was little incentive to seek

additional orders. Those who did respond were under little or no pressure

to compute their bids as carefully and as

74

 Renegotiation is discussed in Chapter XVII,

below. 75

 For comments on the information sources used

by negotiators, see Proc Statistics, Lecture by Tyson;

Negotiation and Administration of Contracts, Lecture by Scarff. 76

 The refinement of Army pricing techniques is

discussed in Smith, The Army and Economic Mobilization, pp. 311-25.
THE NEGOTIATION OF CONTRACTS 359

closely as possible. In consequence, the

primary benefits of competition were

lost.

Nonetheless, competition was by no

means useless as a technique of buying.

If it only brought in three interested

manufacturers, the resort to competition

accomplished an important function. Under the authority of the emergency

statutes, the military buyers were under

no obligation to award a contract to the

low bidder at his quoted price. Instead,

the price could be used as a point of

departure for subsequent negotiations.

Many, indeed, were the price reductions

effected around the bargaining table

after competition had isolated or identified the low bidder in the field.77

Another tool in the buyer's hands involved the use of comparative prices.

After a year or two of high-volume procurement, the accumulation of historical

records on prices in the Wright Field files

began to provide a useful basis for comparison on costs of like or similar items.

And even where no information was

available on a directly comparable procurement, the records on price were

useful in showing general price trends.

There were, admittedly, certain serious

limitations on comparative pricing as a

tool for negotiators: the prices paid in

earlier purchases of a given item might

themselves have been out of line, either

too high or too low; if the prices on

file represented purchases effected many

months earlier, subsequent shifts in wages

and material costs might well have invalidated the record for meaningful subsequent comparisons.

Procurement officials at Wright Field

during the war years found that a combination of competitive and price comparison techniques oftentimes brought

excellent results in the direction of close

pricing.78 If an invitation to bid brought

in two or three proposals, the prices set

might be far too high, but at least they

offered a valid basis for comparison. Here

all prices to be compared were current

prices and no adjustments for wage or

material costs would be necessary as was

the case with historical comparisons.

Moreover, since each bidder had to submit a cost breakdown in his Standard

Proposal Form, discrepancies would loom

immediately. For example, when three

manufacturers bid on the same item and

one showed material costs substantially

higher than the other two, explanations

were immediately in order. If it turned

out that the higher figure was justified

by a larger percentage of subcontracting,

material costs could be legitimately

higher but the indicated labor cost must

then in consequence fall proportionally

lower since there would be less inside

fabrication involved. If they did not, the

manufacturer's figures were open to the

suspicion of error and invited further

scrutiny.

Scrutiny was precisely what was involved in cost analysis, the third tool

available to the military buyers. By all

odds, cost analysis was the most difficult

technique of negotiation to administer,

yet it offered the highest rewards in terms

77

 Proc Function of AAF, Lecture by Swatland.

78

 The material in this and the several paragraphs

following is based largely upon Lecture, Price Analysis in Relation to Procurement, by Lt Col A. P.

Smith, Jr., AAF Contracting Officers School, WF,

Winter 1944-45, WHFO.
360 BUYING AIRCRAFT

of close pricing. Although the various

elements of cost can be divided and subdivided into an almost endless number

of categories, the usual breakdown employed at Wright Field during the war

was: materials, labor, manufacturing and

administrative overhead, tooling, and

profit. In essence, to apply the cost analysis method of negotiation was to study

every accessible bit of information on

one, several, or all of these classes of estimated expense in an effort to locate needless fat.

To the uninitiated, cost analysis may

look like a highly technical field open

only to certified public accountants. Actually the task was far less esoteric than

it looks. To be sure, a few aspects of the

job required the services of highly trained

experts, but a large part of the most effective kind of cost analysis could be accomplished by an intelligent but relatively inexperienced staff willing to indulge in a great deal of plain hard work.

The available evidence on the point is

unclear, but looking back after the war

it seems that at least one reason for the

agonizingly slow development of an effective cost analysis staff at Wright Field

during the war was the tendency of those

in command to believe that only trained

accountants and the like could handle the

job.79 Whether or not they were correct

in this belief may be apparent from a

study of the steps actually involved in

cost analysis work.

Material costs were probably the easiest of all to verify. Raw material prices

cited in a manufacturer's estimate could

be checked against market quotations.

For even greater accuracy reflecting transportation costs, discounts, and so forth,

analysts could study a manufacturer's general purchase records to compare his material estimates in the Standard Proposal

Form with his payments on materials for

customers other than the government.

For other types of materials such as purchased parts and subcontracted assemblies, cost analysts could require a manufacturer to reveal the procedures he followed to ensure close pricing in his purchases from suppliers and subcontractors.

If his methods seemed unsatisfactory, the

analysts sometimes went directly to the

suppliers and subcontractors to study

their pricing techniques. While there

was patently nothing abstruse about all

this, it could involve days of gruelling

work with meticulous attention to detail.

Testing the accuracy of a manufacturer's estimate on direct labor presented

a considerably greater challenge than did

the analysis of material costs. Rates could

be checked readily enough by comparison

with prevailing rates on other jobs in a

manufacturer's own plant, with rates in

his community, or with rates in the industry at large. Hours, on the other hand

—a manufacturer's estimate of the number of direct labor hours required to complete the contract—were extremely hard

to pin down.

Meaningful appraisals on this kind of

estimate demanded the services of skilled

estimators. Such men had to be capable

79

 There is much evidence on the delay in perfecting a cost analysis organization in the air arm.

See, for example, the remarks of General Swatland,

late in 1944, in lecture to AAF Contracting Officers

School, The Procurement Function of the AAF: "We

are gradually getting in a position where our negotiators and cost analysts personnel can smoke out

the unjustified items in the cost breakdowns furnished by contractors." See also, Friedman, rpt to

IG, Inspection of Proc Operations at WF, 11 Nov 43.
THE NEGOTIATION OF CONTRACTS 361

of reading a blueprint and formulating

an independent appraisal of the wagehours and machine time needed to finish

any given part. For such work the buying staff had to find the necessary talent.

Sometimes the Engineering and Production Divisions could supply project officers or engineers experienced in one or

another of the processes involved in the

fabrication of a given item. On occasion,

where the dollar volume involved warranted still closer study, the price analyst

could request the Air Force resident representative or area representative to run

individual time studies on a contractor's

shop floor to verify a disputed estimate.

Engineering studies of costs and manufacturing methods were most useful in

analyzing estimates, but they were often

unobtainable. Highly trained production men and experienced estimators

were all working full tilt in the fundamental job of speeding up war production. Few were available for counterchecking cost estimates, even if they felt

so inclined. In consequence, it was virtually impossible for the procurement

organization at Wright Field to build an

elaborate staff for this purpose. The

sheer variety of production processes

used by the hundreds and thousands of

manufacturers who served the air arm as

contractors and subcontractors made insoluble the task of assembling a fully

competent staff of estimators. To have

maintained a huge staff covering every

manufacturing process would have left

many of the experts relatively idle for

long periods while at the same time withdrawing them from the production field

where their skills were desperately

needed. The alternative—the solution

actually used during the war—was to engage a small staff of experienced estimators and manufacturing methods men,

using their skills to the utmost while

recognizing their limitations.

The difficulties encountered in compiling accurate estimates of direct labor

requirements for any given contract may

be better understood when one considers

the many imponderables usually present.

An airframe production contract, for instance, might call for a run of deliveries

spread over a period of six months beginning twelve months after the contract

was signed. Given the dynamics of a

wartime economy, the efforts of negotiators to verify the labor needs indicated

in a manufacturer's proposal was something of a voyage into terra incognita.

Labor productivity hinges upon a host of

factors. Included among them are such

elusive intangibles as the extent of dilution with unskilled workers, the state of

worker morale, and the effectiveness of

the control exercised over the flow of materials to the assembly point, for example.

Clearly, no watertight verification of direct labor requirements ever was possible.

Nevertheless, air arm negotiators did

have some rough and ready tools whose

use could at least force manufacturers to

keep some semblance of reason in their

estimates.

First in importance among the techniques for rough verification of direct

labor computations was the "learner

curve." Experience in aircraft construction had shown that every time the number of units in production was doubled,

the direct man-hours of labor required

dropped about 20 percent. This formula, or one of its derivatives, when projected for a given contract was called the

"learner curve." Thus, for example,
362 BUYING AIRCRAFT

while the first B-17 Flying Fortress

turned out by Douglas at Long Beach

absorbed over 100,000 man-hours of direct labor, by the time the 1,000th item

rolled off the line, the figure had been cut

to something in the neighborhood of

16,000 man-hours.80

When the learner-curve yardstick, be it

ever so crude, was applied at the bargaining table, manufacturers were less inclined to submit grossly inflated, padded,

or simply careless estimates. With good

reason they might haggle over the precise point to be chosen as the beginning

of the projected curve, for the high flux

of design typical in the early stages of production might well delay the normal projection of the curve even where a manufacturer exercised due diligence to secure maximum labor efficiency. But

whatever difficulties attended its application, the use of this negotiator's tool was

more than justified by the realism it induced in the figures submitted by most

manufacturers.81

There were other tools available for

cross-checking manufacturers' estimates

on direct labor needs. One such device

was the simple expedient of applying a

manufacturer's computed labor figure

against his anticipated rate of production

to see if the results obtained would square

with the delivery schedule promised.

Finally, in the later months of the war

after a good deal of experience had accumulated, air arm negotiators found it

useful to check a manufacturer's labor

estimates on previous contracts with his

actual requirements under those contracts

as a measure of the adequacy of his

methods.

Analyzing overhead charges in manufacturers' cost estimates gave just about

as much trouble as direct labor. Manufacturing overhead included such items

as the indirect labor of supervisors and

inspectors as well as heat, light, and so on,

while administrative overhead covered

such costs as taxes, administrative salaries, and accounting. The greatest difficulty arose, of course, when one tried to

allocate these costs among several different contracts held by a manufacturer at

one time. Where a firm held governmental and nongovernmental contracts

simultaneously, air arm analysts had to be

alert to see that the government contracts

were not loaded with an undue portion

of the total overhead. When a manufacturer entered a number of government

contracts in sequence, the cost analysts

had to exercise great care to be sure that

each successive contract did not repeat

overhead payments already absorbed in

earlier jobs. This was particularly true

where other governmental buyers, such as

the Navy Bureau of Ordnance, were

dealing with the same concern. With

co-ordination among the buyers at best

something less than ideal, if the cost analysts were not everlastingly alert the government could end up paying the same

overhead charge two or three times.

80

 Lecture, Special Characteristics of Aircraft Procurement, by Lt Col J. G. Scarff, undated but approximately 1944, data in folder, AAF Proc Program,

prepared by MC, filed in USAF Hist Div Liaison

Office, Hq USAF. See also, Negotiation and Administration of Contracts, Lecture by Scarff. 81

 Beginning in July 1943, the Aircraft Resources

Control Office began turning out an index of airplane production efficiency (Report 17 et seq.) that

measured the relative efficiency of various manufacturers in terms of output per airframe pound or

horsepower per man per day. The wide differences

in the performance of various manufacturers as revealed by the reports was expected to stimulate a

spirit of competition and a consequent improvement

in manpower utilization.
THE NEGOTIATION OF CONTRACTS 363

While some manufacturers may have

flagrantly loaded their overhead accounts,

by no means all of those who did so were

guilty of deliberate padding. In the confusion and rush of wartime business,

manufacturers were themselves oftentimes utterly lost in the intricacies of cost

analysis. In fact, there is a good deal of

evidence scattered through the records to

suggest that the cost analysis work done

for and by the negotiators at Wright

Field taught a number of manufacturers

a great deal about the inadequacies of

their own business methods. An illustration may be to the point.

At a crucial juncture during the war,

the military buyers at Wright Field approached a well-known manufacturer and

invited him to come in as an additional

source producing a rather complicated

gear box assembly. He submitted an estimate showing a unit cost of $2,450. A

quick comparison showed that this figure

was not too far from the $2,300 charged

by the existing source, the manufacturer

who had long been producing this gear

box and whose experience might be expected to bring his costs down substantially. Thus, superficially, on the basis of

price comparison alone, the estimate

seemed acceptable. However, to verify

this figure before negotiations, the staff at

Wright Field began a cost analysis. Almost immediately it appeared that the

estimated price simply would not hold

water. The analysts could not reconcile

the overhead rate indicated in the manufacturer's Standard Proposal Form reply

with the rate shown in his annual balance

sheet and operating statement. Surprisingly enough, it wasn't that the rate was

too high; it was much too low! Which is

to say, the manufacturer appeared not to

be absorbing enough of his legitimate

overhead on the government contract.

On the other hand, the direct labor estimate seemed excessive. To get at the bottom of this confusion the manufacturer

was summoned to Wright Field for a conference. Confronted with the questions

raised by the analysts, the manufacturer

admitted that he had set the $2,450 unit

price quite arbitrarily (probably with one

eye on the price charged by the original

maker of the gear box) and had then simply hypothesized all the elements of cost

after inserting the profit figure desired.

The manufacturer further admitted that

he had never actually made a detailed

cost analysis or breakdown even for his

own use. When he did so, after the conference at Wright Field, he came up with

a unit price for the gear box below the

price charged by the original and presumably more practiced firm. Subsequent production experience revealed

that his revised bid was a fair one allowing an adequate profit. On this one negotiation alone "close pricing" saved the

government over two million dollars.82

Tooling costs also gave the cost analysts

a great deal of trouble. Here, too, it was

important to be sure the government was

not buying something it already owned,

for jigs, fixtures, and special tools used in

one contract were often usable in another

with slight modification. Another danger against which the negotiators had to

guard was the possibility of paying for jigs

and fixtures once under the guise of overhead and a second time as tooling. By

the end of the war the Air Force contract

negotiators had acquired a considerable

82

 Price Analysis in Relation to Proc, Lecture by

Smith.
364 BUYING AIRCRAFT

knack for ferreting out such duplications

as these.

In sum, negotiations at high noon—the

work of the mature procurement organization at Wright Field late in the war—

were much closer to the ideal of close

pricing. There was room for improvement, to be sure, but the horse trading

was certainly shrewder than it had been

in the months just before and just after

Pearl Harbor. For whatever the figures

may mean, an Air Force spokesman at

Wright Field toward the end of 1944

claimed that on cost-plus-fixed-fee contracts alone the negotiators had squeezed

a billion and a quarter dollars from the

estimates submitted by manufacturers.

And this would result in a saving of some

$45,000,000 on the single item of fees, if

nothing else.83 Clearly, cost analysis was

a most lucrative device for rending the

suet from manufacturers' proposals.

Moreover, the savings effected were by no

means limited to reductions in fees and

profits. Far more significant were the reductions in costs brought about by close

pricing with its stimulus to efficiency and

economy. The savings wrought by pressure in this quarter were far greater than

those accomplished by reductions in fees

and profits.84

If it does no more than begin to suggest

the complexities besetting those who negotiated Air Forces contracts, the foregoing account will have served its purpose.

Unfortunately the contract, when negotiated, signed, sealed, and on file at Wright

Field, marked only the beginning of administrative difficulties. Still ahead were

the burdens of contract administration, a

field of endeavor certainly no less complex than negotiation and replete with

trials and tribulations of its own.

The Administration of Contracts

The term contract administration embraces the whole range of governmental

supervision required to get delivery of

the end product desired in the least time

and to the best advantage of the public.

Included in this phrase are such functions as production expediting, inspection, and auditing, each a vital element

in the procurement process. In the following pages the focus is limited entirely

to those aspects of administration performed personally by the contracting

officer.

The Contracting Officer

Although production men and engineers working out practical problems on

the shop floor were often inclined to regard contracting officers as mere paper

pushers, these much maligned individuals were actually of crucial importance

—they represented the focal point in the

relationship between military officials and

manufacturers. No matter how intimately the technical staff of the buyer and

seller may have co-operated in working

out the engineering details of a given contract, when it came to the all-important

matter of dollars and cents, the contracting officer held the whip hand. His signature and his alone made a government

83

 Negotiation and Administration of Contracts,

Lecture by Scarff. 84

 See especially the comment by Smith, The Army

and Economic Mobilization, pages 324-25, that the

true industrial patriot was not the entrepreneur who

emerged with the lowest profit, but the one who succeeded in producing at the lowest cost. The question

of profits and fees is discussed in Chapter XVII,

below.
THE NEGOTIATION OF CONTRACTS 365

contract legal. Without his consent the

manufacturer could collect not a penny

of recompense.

Patently, then, the contracting officer

was far more than a pro forma signer of

documents. As a matter of fact, he occupied a rather unique status in the military hierarchy. Although subject to the

command of his immediate superior for

administrative purposes—pay, promotion,

and the like—he did not sign contracts "by

order of" that superior. Instead he

signed: "The United States of America,

by Richard Rowe, Contracting Officer."

When acting as such, the contracting officer represented the government. His

discretion and his alone validated a contract. He could be removed by his superior, but he could not be coerced either

in signing a contract or in making determinations under its terms.85

The essence of the contracting officer's

role in contract administration, as distinguished from contract negotiation, is

to be found in his obligation to make determinations and give approvals as provided in the terms of the instrument. In

signing a contract, the contracting officer

accepted a large number of working responsibilities. Even in relatively simple

procurements, substantial discretionary

powers were almost invariably left in his

hands. For example, the standard form

used during the war for fixed-price procurements mentioned the contracting officer some nineteen different times and

each mention afforded him one or more

opportunities or obligations to act at one

time or another during the life of the contract.

There is no need to enumerate all nineteen instances of the contracting officer's

discretionary power to convey an appreciation of his role in contract administration. A few will suffice. For example,

Article V in the standard fixed-price form

provided certain penalties for delays in

deliveries beyond the time specified in the

contract. Whether or not these delays

were excusable was for the contracting

officer to determine. In extreme cases he

could go out into the open market and

buy the items on contract from other

sources, holding the original contractor

liable for their cost as a result of his default. Obviously, when armed with such

powers a contracting officer, by the character of his decisions, might easily make

or break a manufacturer. Needless to add,

during the war this latent power was seldom exercised adversely. Even in 1944,

the year of peak production when nearly

50 percent of all Air Forces contractors

were behind schedule in their deliveries,

only twenty-five firms were declared officially in default.86

One of the heaviest burdens of administration placed on the contracting officer's shoulders grew out of changes in the

design of an end item arising during the

life of the contract. Article II of the

standard fixed-price instrument author85

 Manual for Contracting Officers Engaged in the

Administration of Contracts, prepared by ATSC Proc

Div, 10 Jan 45, ATSC Reg 70-31, ICAF.

86

 MC, Readjustment Div, Readjustment Training

Course Manual, Aug 44, pp. 100-01. For an example

of an aggravated default, see IOM, Chief, Contract

Sec, for CGMC, 4 Sep 42, AFCF 164 Performance

and Non-Performance, as well as other correspondence in this file. For a hardship case, see DeLong

Hook and Eye Co., to WF, 17 Jun 42, and subsequent

correspondence, AFCF 164. By way of contrast, see

also, Memo Rpt CM-1187, Contract Sec, 9 Sep 41,

AFCF 163 Bids (K).
366 BUYING AIRCRAFT

ized the contracting officer to make whatever changes the exigencies of the service

might require in the specifications of the

item on order. The necessity for injecting alterations in the design of production model airplanes to ensure superior

performance in the face of the enemy inevitably led to a more or less continual

flow of change notifications. And for

every one of these changes involving an

appreciable amount of work, the manufacturer was entitled to an equitable adjustment in the amount of his compensation. Contract administration, then,

became a matter of negotiating an endless

series of supplementary agreements to

cover the changes injected along the way.

During the war, as the number of design modifications in a given aircraft on

the production line mounted astronomically, the peacetime practice of writing

supplemental contracts for each modification proved utterly unworkable. In the

first place it was scarcely feasible to hold

up an urgently needed modification on

the production line while procurement

officials haggled over price with the manufacturer. Secondly, since many modifications were introduced on the strength of

oral directives from project engineers, it

sometimes proved difficult to recall all the

necessary information when tying up the

contractual details at a later date. For

example, some eighteen months after production had been ended on the Martin

B-26C at Omaha, procurement officers

were still trying to tidy up the contract

for that aircraft to embrace all the changes

introduced. The solution finally worked

out to meet this problem of supplemental

agreements was to compile serial lists of

all modifications made from day to day

but to leave all discussions as to price

until quarterly sessions, when the changes

accumulated to date could be lumped and

a single appropriate adjustment in contract price negotiated.87

Though the procedures worked out by

procurement officers in peacetime to handle contract changes proved cumbersome

in wartime, there were extenuating considerations that should not be overlooked.

Changes in design had always been authorized in fixed-price contracts, but the

process of writing supplemental agreements as practiced in peacetime was a

long and complicated one. Still more

difficult to accomplish were any other

kinds of amendment. Mutual mistakes,

even when admitted freely by both parties, were all but impossible to correct

and then only with the approval of the

Comptroller General.88

The reason why the amendment of contracts in peacetime was made difficult is

not hard to discern. Then, the emphasis

of procurement laws and administrative

regulations was upon dollar economy

rather than speed of delivery. If amendment were too simple, it would be a relatively easy matter for a manufacturer to

win a contract with an abnormally low

bid and then make up his losses by wan87

 Contract Change Notification, Lecture by Maj

D. Sommers, 14 Dec 44; Proc Function of AAF, Lecture by Swatland; Flexible Pricing in Fixed Price

Contracts, Lecture by Maj L. W. Dinkelspiel; Negotiation and Administration of Contracts, Lecture by

Scarff. All lectures before AAF Contracting Officers

School, WF, Winter 1944-45, WFHO. 88

 For an illustration of the unwillingness of GAO

to relax the rules on reformation of contracts, see

Compt Gen to SW, 15 May 41, AFCF 161 Contract

Requirements. See also, Lecture, Supplemental

Agreements, by Maj K. Masters, and Lecture, Contract Adjustments Without Consideration, by Maj

J. G. Hodges, AAF Contracting Officers School, WF,

Winter 1944-45, WFHO.
THE NEGOTIATION OF CONTRACTS 367

gling a succession of high-priced supplemental agreements more than covering

the cost of modifications introduced after

the contract was too far along to cancel.

The passage of the first War Powers

Act in 1941 went far to remove the rigidities prevailing in the peacetime years. As

amplified in Executive Order 9001, it

not only permitted contract amendments

where mutually agreeable but also authorized follow-on orders increasing the

number of items on contract without the

necessity of redrawing the whole instrument. This marked a radical deviation

from peacetime practice, which rigidly

prescribed the number of items on order

and the unit price to be paid, allowing

no increases without further competitive

advertising. Just how extensively the

flexible wartime powers were actually

used may be suggested by the case of the

complex three-party Rolls-Royce engine

contract drawn by Packard, the British,

and the War Department in 1941. Five

years later the same contract was still in

force—it was far too involved to renegotiate repeatedly—but 199 supplementary

agreements had been added to it. In its

final form the bare text of the contract

required several reams of paper standing

in a pile a foot high.

The greater flexibility in contract

amendment authorized in wartime

proved highly convenient to procurement officers and manufacturers alike.

For example, the use of supplemental

agreements in lieu of a succession of separate contracts resulted in substantial

savings in accounting, and many manufacturers found that it brought about

economies in marking and labeling tools

and parts as required by shipping instructions. On the other hand, the new

flexibility was not without its drawbacks.

Contracting officers learned that the preference shown by many manufacturers

for supplemental agreements rather than

new contracts was not invariably innocuous. It sometimes happened that the

original contract contained clauses that

were highly advantageous to the manufacturer but were subsequently outlawed

by statute or regulation. A good example of this is to be seen in the generous reconversion allowances written into

some of the early large-scale contracts negotiated in the disastrous summer of 1940

but excluded from later contracts as a

matter of policy. So long as the manufacturer continued to add supplemental

agreements to the original contract, he

could legally expect the benefits specified

therein, even if he would no longer be

eligible for them when entering into a

new contract for precisely the same items

contemplated in the supplements.89

In yet another sense the simplified

process for wartime contract amendment

tended to increase the burdens of contracting officers. Whenever a contract

was negotiated containing new and favorable clauses—for example, highly advantageous provisions for covering termination costs not included in earlier

instruments—the word would spread by

grapevine. Soon dozens of other manufacturers would come flocking in clamoring to have their contracts similarly

amended. As a consequence contracting officers found themselves on a veritable treadmill, continually rewriting the

terms of previously drafted contracts. By

1944, in addition to their major task of

89

 Supplemental Agreements, Lecture by Masters.
368 BUYING AIRCRAFT

negotiating new contracts, Wright Field

contracting officers found they were

grinding out no less than 2,000 changes

on existing contracts every month.90

Contract changes, especially those involving price adjustments, while extremely burdensome, constituted only

one of many facets of the job contract administration. Among their other duties,

contracting officers had to approve the

various subcontractors selected by primes,

certify as to a contractor's progress in

order to permit partial payments, issue

tax exemption certificates, and perform

many similar functions. Activities such

as these obviously presupposed that the

contracting officer would maintain an

almost continual personal supervision

over every individual contract of substantial size. Although in peacetime,

when the number of contracts written

each year was small and the problems of

administration less numerous and certainly less pressing, it may have been feasible for contracting officers to maintain

close supervision from their desks in

the procurement organization at Wright

Field, in time of war such a procedure

was patently impossible. Manufacturers

could hardly be expected to go all the

way to Wright Field for the approvals

and determinations required under their

contracts, and contracting officers could

scarcely be expected to spend time traveling to the manufacturers. Nonetheless, the terms of the instrument were

explicit: the contracting officer was the

only person who could legally implement

those clauses calling for his discretion.

Changing Concepts of the

Contracting Officer

If air arm procurement officials were

to avoid a hopeless legal snarl detrimental to the whole supply program, some

means had to be contrived to escape the

impossible situation in which contracting officers found themselves. The solution was expedient and simple. Originally "the contracting officer" was a

designation that meant just what it said:

the officer who actually signed the instrument for the government in the first

place. But when it became evident that

the contracting officer who signed a contract at Wright Field could not possibly

administer that contract personally, procurement officials simply enlarged the

concept of "the contracting officer" to include three different sets or levels of contracting officers to handle the different

categories of functions legally required

of the officer who signed a given contract.

First, there were the contracting officers

at Wright Field who negotiated contracts

in the original instance. Next, there

were contracting officers located in the

procurement district headquarters geographically decentralized around the

country. Finally, where the size or complexity of a contract justified such a

course, there were individual contracting officers actually stationed in manufacturers' plants. In short, under the

pressure of wartime demand, the initial

conception of the contracting officer gave

place to a new view in which the term

the contracting officer came not to mean

a single or particular individual but

rather a contracting officer, any accredited contracting officer duly assigned to

the task. The change did not result from

90

 Negotiation and Administration of Contracts,

Lecture by Scarff.
THE NEGOTIATION OF CONTRACTS 369

any deliberate study by those in command; the practice simply evolved as a

matter of practical necessity and was then

confirmed after the fact as official policy.

By making contracting officers interchangeable—for this was the effect of the

new policy—air arm procurement authorities established a functional division of

labor among them. No matter how far

away a manufacturer's plant might be,

there were some tasks of contract administration that could best be handled at

Wright Field. Price adjustments, changes

in government-furnished equipment, terminations, insurance agreements, and so

on were more easily handled at headquarters because only there could the

pertinent information and the trained

specialists be found. On the other hand,

those facets of contract administration

that virtually necessitated local supervision were assigned either to a contracting

officer operating out of a procurement

district headquarters or to one permanently located in a manufacturer's plant

as a member of the resident representative's military staff.91

Although the new scheme of interchangeable contracting officers did

make for simpler administration, the

gain was won at a considerable cost.

When the concept of the contracting officer was enlarged to encompass more than

one person, the risk of conflicting interpretations and contrary rulings was substantially increased. Unless the most

rigorous care were exercised in co-ordinating the decisions of contracting officers at every echelon, a manufacturer

might find himself getting one decision

or ruling from a local contracting officer, another from a district contracting

officer, and still another from a contracting officer at the Wright Field headquarters. In fact, some shrewd manufacturers

soon learned that they could exploit the

split personality of the interchangeable

contracting officers by playing one off

against another to extract rulings most

favorable to themselves.92

To prevent manufacturers from shopping up and down the line for advantage,

regulations were drafted specifying the

contracting officer to whom a manufacturer should turn on any particular question. Needless to say, the mere publication of a parcel of regulations did not

curb the practice entirely. Manufacturers continued to go over the heads of local

contracting officers seeking more authoritative or more lenient decisions from

headquarters. This was hardly surprising. Experienced contracting officers

were hard to find, and the best of them

were generally retained at Wright Field

to carry on the critical work of negotiating new procurements. The men sent

out to serve as local contracting officers

were thus all too often inexperienced and

unsure of themselves. Even some of the

abler men, when bereft of the support

readily available through consultation

when stationed at headquarters, showed

a distressing tendency to refer all questions to Wright Field for authoritative 91

 Lecture, Administration of Fixed Price Contract,

by Maj J. G. Hodges, AAF Contracting Officers

School, WF, Winter 1944-45 WFHO; Chief, Proc

Div, to Proc Br, MM&D, 17 Jul 43, AFCF 161 Purchasing and Contracting, as well as MC, Contract Sec,

Office Memo 42-394 (1942). 92

 Proc Function of the AAF, Lecture by Swatland.
370 BUYING AIRCRAFT

opinions.93 Manufacturers, sensing this

lack of self-confidence, were quick to

take advantage of it by making informal

appeals to the higher echelons paralleling those of the local contracting officer

in an effort to influence the advice subsequently sent down to him.

If in theory the local contracting officer

was fully competent to exercise discretion in all matters legally within his jurisdiction without coercion or compulsion

from his superiors, he frequently felt that

his power was substantially eroded in

practice. The local contracting officer

was inclined to complain that he became

a whipping boy, whose main purpose in

life was to take the blame for all decisions

unfavorable to the contractor. For example, a resident representative (they

were usually production men and therefore anxious to maintain harmonious relations with the manufacturer being supervised) found it convenient to insinuate

that he would be more than pleased to

permit a certain course of action desired

by the manufacturer were it not that the

local contracting officer refused to countenance it. Then, making a virtue of a

necessity, he could piously point out that

while the contracting officer was actually

one of his military subordinates as a

member of the resident air arm staff at

the manufacturer's plant, official regulations forbade any coercion in the exercise of his discretion. One cynical observer of this situation was led to remark

that the only real jobs left to local contracting officers were the distasteful ones

such as renegotiating prices downward or

taking the rap for approving aircraft for

payment when they were actually lacking countless parts.94

Disputes and Appeals

Although most local contracting officers regarded themselves as the underdogs of contract administration, many

contractors seemed to feel that they and

not the officers were the actual underdogs.

The essence of the manufacturers' complaint was that the deck had been stacked

too heavily in favor of the government.

They found it difficult to deal with local

contracting officers, who operated out at

the end of a long chain of command and

were guided almost entirely by regulations, orders, and instructions they themselves had little or no part in framing.

"You can't talk with the man who put

the clause in the contract," protested one

prominent aircraft manufacturer; "you

can't reason with the principal party."

 95

Naturally this breakdown in communication led to all manner of disputes in

the normal course of contract administration.

In anticipation of disputes between

manufacturers and contracting officers,

Article XII of the standard fixed-price

instrument provided for appeals to the

department head on disputed points.

But this procedure proved to be less than

satisfactory. Since all questions of fact

arising under a contract were, under its 93 terms, decided finally and conclusively See especially, Memo, Chief, Mat Div, for Gen

Brett, 24 Feb 41, AFCF 300.6; Lecture, CPFF Administration, Maj R. H. Demuth, AAF Contracting Officers School, WF, Winter 1944-45, WFHO. See also,

Memo, C. Lynde for the Air Inspector, 3 Apr 44,

AFCF 333.1 Misc.

94

 Maj J. G. Allen, IGD, to IG, 21 Oct 42, AFCF

333.1A Consolidated; CPFF Administration, Lecture

by Demuth. 95

 Hartson, Aircraft Production.
THE NEGOTIATION OF CONTRACTS 371

by the contracting officer, manufacturers

were inclined to feel that the trumps lay

with the government. During 1942 repeated complaints of this situation led to

the creation of a Board of Contract Appeals to provide a more equitable consideration of disputes. The new board

devised a set of simple procedures for

deciding questions of fact with a judicial

detachment scarcely to be expected from

a department head relying upon a case

prepared by interested parties as had

been the practice hitherto.96

The vastly enlarged scale and scope of

wartime procurement, not to mention the

imperatives of speedy delivery, brought

about something of a revolution in the

field of contract administration. Changes

in the fundamental conception of the

contracting officer inescapably led to a

whole string of collateral changes in the

procedures of contract administration.

The account above has discussed these

changes and the shifting character of the

contracting officer more or less in the abstract. For a fuller understanding of the

broader implications of contract administration, it will be necessary to pursue

the topic along lines of discussion at once

more tangible and more specialized. To

this end the chapters that follow are devoted to such major facets of contract

administration as those raised by the costplus-fixed-fee instrument, the question of

price adjustment, and the problem of terminations.

96

 For a brief published account of the organization and operation of the board, see J. W. Gaskins,

"New Method for Handling Appeals Under War

Department Contracts," Engineering News-Record

(July 1, 1943), p. 80.
CHAPTER XVI

The Cost-Plus-Fixed-Fee Contract:

Negotiation and Administration

Some Revolutionary Implications

From the day in 1940 when Congress

authorized its use, the cost-plus-fixed-fee

contract (CPFF) was an unwanted stepchild. Cost-plus transactions had been

generally discredited by the abuses perpetrated under this name during World

War I, and post-World War I congressmen in the early nineteen twenties

legislated explicitly against the use of

cost-plus-a-percentage-of-cost (CPPC) contracts.1

 However, the cost-plus method

of contracting had far too much functional utility to be legislated into oblivion. The notorious CPPC instrument

was only one of several versions of the

cost-plus contract. To destroy a useful

principle for the shortcomings of a single application would be absurd. The

CPPC contract, by defining profits as a

percentage of costs, offered a positive incentive for a manufacturer to enlarge his

costs and thus pyramid his profits. The

CPFF contract, on the other hand, reimbursed a manufacturer for his expenses

but limited his fee or "profit" to a figure

rigidly fixed beforehand. The two forms

were alike in that they were intended to

repay a contractor for his legitimate costs,

but they were intrinsically unlike insofar

as the element of profit was concerned.

To say the very least, the War Department officials who secured congressional

authorization to employ the CPFF contract displayed a certain lack of semantic

sensitivity when they continued to use

the phrase cost plus in spite of all its obnoxious connotations. Since the CPPC

and CPFF contracts were so substantially

different, there would have been no loss

of candor in calling the latter instrument

a fixed-fee contract or some other harmless name. While honorable officers certainly did not wish to deceive Congress

by a misrepresentation of the facts, little

was to be gained and something was almost certainly lost by deliberately courting guilt by association through the careless application of terminology. Thus,

as it turned out, the CPFF contract began

life in 1940 facing an uphill fight. Congress authorized its use reluctantly and

only after repeated departmental assurances that the defense program would

break down unless some escape were provided from the limitations of the conventional fixed-price form of contract.2

1

 See above, ch. IV.

2

 ASF Purchases Div, Monograph, Purchasing

Policies and Practices, Sep 1939-Jun 45, 1945, OCMH,

p. 231ff. See also, Smith, The Army and Economic

Mobilization, ch. XII, passim.
THE COST-PLUS-FIXED-FEE CONTRACT 373

The arguments in favor of the CPFF

device were exigent: many manufacturers simply would not accept fixed-price

contracts to turn out complex items of

equipment for which they had no production experience and for which the

elements of cost were unknown. The

difficulties encountered in the procurement of gliders will amply demonstrate

the point. Since the whole aircraft industry was swamped with aircraft orders,

glider production was deliberately

placed outside the industry—with furniture firms in Grand Rapids and with

piano makers across the land. Waco, the

old-line firm that had designed the production model glider, estimated unit

costs at $14,000. The average unit cost

actually encountered on the first 1,000

units produced came closer to $26,000.

The inexperienced firms demanding

CPFF contracts in such circumstances

were evidently entirely justified.3

Lack of production experience was not

the only consideration urging the use of

the CPFF form. Where government orders ran a firm's total output far beyond

its normal business volume, even old-line

manufacturers with extensive cost data

in hand and a good grasp of production

methods refused to negotiate the usual

fixed-price contract. Lack of working

capital, not lack of patriotism, often lay

at the root of the matter. The firm turning out struts for the Boeing Flying Fortress, by no means an industrial giant,

suddenly found itself with billings running as high as $7,000,000 a month, far

beyond the normal scope of its capital resources.4

 Some form of CPFF contract,

for all its revolutionary implications,

seemed to offer the most obvious line of

escape from this difficulty.

The introduction of the CPFF contract

did indeed bring a revolutionary change

in air arm procurement, a change no less

significant than that wrought by the shift

from competition with sealed bids to negotiated contracts. On the surface at

least, resort to the CPFF form seemed to

remove most of the conventional economic pressures from a manufacturer's

shoulders. With the government paying

all bills for labor, for materials, and so

on, a manufacturer would appear to have

little incentive to make the most economical use of available resources. In

protecting a producer from unforeseen

and incalculable costs, the CPFF instrument threatened to protect him too much

by removing virtually all the goads to

efficiency found in the customary fixedprice contract. To a certain extent this

inherent weakness did militate against

the use of the CPFF form, but experience in World War II was to demonstrate

that the drawbacks, while real, were not

insurmountable, provided only that those

in command recognized fully the implications of the CPFF contract and took

appropriate steps to cope with them.

The key to effective use of the CPFF

contract can be found in a single word:

responsibility. Just as the switch from

competitive to negotiated contracts forced

officials at Wright Field to evolve techniques of bargaining to substitute for the

pressures of the market place, so too the

introduction of the fixed-fee contract re3 quired a significant transfer of responsi- Lecture, CPFF Contracts, by Maj D. Sommers,

AAF Contracting Officers School, WF, 12 Dec 44,

copy in possession of Mr. Schwinn. 4 Ibid.
374 BUYING AIRCRAFT

bility. Procurement administrators had

to develop methods of supervision to replace the normal profit and loss incentives bearing upon a contractor. Although no blanket judgment on the

relative merits of the fixed-fee contract

as opposed to conventional fixed-price or

lump-sum contract can be made, the record suggests that each type possessed substantial, even compelling advantages for

meeting widely different situations. The

many problems arising under the fixedfee form of contract become vastly more

meaningful if they are viewed not merely

as ad hoc solutions of particular difficulties, but collectively, as attempts to

achieve by administrative measures what

competition and the incentives of the

profit motive system would normally accomplish in peacetime without such close

governmental supervision.

Procurement officials in the top echelons of the War Department certainly

did not foresee all the many convolutions and ramifications to which the administration of CPFF contracts would

eventually lead, but from the very day

Congress authorized the use of CPFF

they did recognize that the government

would have to assume far more responsibility for the detailed supervision of a

manufacturer's operations than was habitually the case with fixed-price contracts. All the technical services were

enjoined to exercise the closest supervision in the administration of fixed-fee

contracts in view of "the many difficulties inherent" in them, and each was

urged to supply the Office of the Assistant Secretary with all instructions promulgated for this purpose.5

 Significantly, five months had passed before

the air arm complied with a special directive establishing procedures for supervising fixed-fee contracts. Even then the

instructions were couched almost entirely in vague generalities.6

 Neither the

delay nor the inadequacies of the directive stemmed from want of interest in

the problem. It was rather the inevitable result of an attempt at prospective

rule making in an area beyond the

realm of experience.

Air arm officers had to learn, as their

brethren of the bench and bar have

found, that case law was far more responsive to the infinite complexities of

life than code law ever could hope to be.

The attempt to draft instructions for the

supervision of fixed-fee contracts was an

example of code law, and as such it was

virtually foredoomed to insufficiency.

For the sake of clarity it will be convenient to divide the following highly interrelated problems into separate discussions: the fixed-fee problem; determination of allowable costs; auditing and accounting; property accountability; the

relationship of prime and subcontractors; and, finally, conversion from fixedfee to fixed-price contracts. While by

no means exhaustive, this list of subject

areas should prove adequately representative of the problems encountered in

the administration of CPFF contracts.

The Fixed-Fee Problem

In a CPFF contract the fee corresponds, in theory at least, to the element

of profit in a conventional fixed-price

5

 Memo, Dir, Current Proc, OASW, for CofAC

et al., 29 Jun 40, AFCF 161 CPFF Contracts.

6

 Chief, Mat Div, OCAC, Tech Instruction-425,

25 Nov 40, AFCF 161 CPFF Contracts.
THE COST-PLUS-FIXED-FEE CONTRACT 375

contract. Therefore, to understand the

practice with regard to fixed fees, one

must first appreciate the official stand on

profits in general as worked out for traditional purchasing under fixed-price

contracts. Air arm policy in negotiating lump-sum agreements was to try to

allow manufacturers no more than a

9- to 10-percent profit on estimated costs.

Naturally, this profit range was not invariably applied; special considerations

from time to time made a much lower

return suitable. Where a manufacturer

with a lump-sum arrangement proposed

to subcontract a large portion of the job

to a single outside firm, the negotiators

at Wright Field would try to hold the

profit allowed the prime contractor to

6 or 7 percent on costs. Similarly, where

a manufacturer used government-owned

facilities or working capital from public

sources in excess of his own, these factors were considered by the negotiators

when working out the rate of profit they

wished a manufacturer to retain. In

practice, of course, no matter what profit

margin the negotiators intended to allow, a manufacturer who proved himself

more efficient than contemplated in the

preliminary estimates could realize profits well beyond those anticipated for

him.7

With the CPFF arrangement, a somewhat different pattern emerged. No matter how much a manufacturer exerted

himself to improve efficiency, the savings

attained would not accrue to him as

profit. His take depended almost entirely upon the sum initially fixed as his

fee, and thus much of the energy and

business zeal of a manufacturer's managerial organization tended to be concentrated upon the fee-setting negotiation.

The amount of the fee awarded on

any given CPFF contract depended upon

two variable factors: the estimated total

cost of the work to be done and the

percentage of that total authorized by

statute and allowed by administrative

discretion. The process by which an

approved "estimated cost" figure was obtained need not be elaborated here beyond the observation that the manufacturer had every incentive to make it as

large as possible while the government's

buyers did their best to hold it down.

To this end air arm negotiators employed all the special techniques of close

pricing.8 In this respect negotiations on

CPFF contracts were little different in

principle from the bargaining encountered on conventional fixed-price instruments. On the other hand, the whole

question of the percentage allowable on

the estimated cost raised problems as

novel as they were knotty.

The 1940 statute authorizing use of

the CPFF form of procurement set the

upper limit on fees at 7 percent of estimated cost. Most manufacturers hoped

to secure this maximum figure. The

government's negotiators were equally

anxious to settle for less than the allowable limit. As it turned out, quite unexpected and accidental circumstances

operated to exert a downward pressure

on fees from the very first. The emergency statute of June 1940 explicitly permitted the use of the CPFF form and the

7-percent maximum fee in aircraft pro7

 Negotiation and Administration of Contracts,

Lecture by Scarff. 8

 See ch. XV, above.
376 BUYING AIRCRAFT

curement.9 A subsequent statute, written for a somewhat different purpose,

limited fees payable on "public works"

contracts to 6 percent. Procurement officials at Wright Field professed to be

in doubt as to whethe r or not air

matériel fell within the definition of

"public works." If this was but a subtle

form of leverage devised by the negotiators to lower the ceiling on fixed fees,

there is no evidence to prove the point.

Pending a definitive legal opinion they

persuaded manufacturers to accept the

lower percentage. Although it was eventually determined that contracts for aircraft and other such items of armament

did not constitute "public works," the

Comptroller General refused to allow

any upward amendment of fees on a

conditional basis. Once the pattern of

fees at less than the maximum authorized had been started, it proved easier

to conclude subsequent negotiations at

6 percent and even lower.10

Although a fee of 5 percent of estimated costs appears decidedly modest in

contrast to the expectations of normal

business practice, a number of air arm

contractors managed under this meager

percentage to pile up profits that could

certainly be described as more than generous when equated to the prewar level

of returns. For example, by 1944, four

of the old-line airframe firms—Bell, Boeing, Lockheed, and Republic—had so increased their output that the value of

their unfilled orders had expanded to

100 times their net worth. Under such

circumstances, fees set at a mere 5 percent of estimated costs tended to yield

a return on capital so spectacularly high

as to arouse adverse criticism. Some

manufacturers, as the report of one inspector general noted, in a single year

earned fees that were in excess of their

entire investment.11

As they became aware of the limited

capital invested and the large profits

some manufacturers were reaping, the

buyers at Wright Field undertook to

work out a few rules of thumb for scaling down fee percentages. One such was

the formula limiting a contractor's fee

to 4 percent whenever his volume of

business exceeded four times his invested

capital. Similarly, it was decided to cut

all fees to 4 percent where a firm held

government orders of more than half a

billion dollars. Throughout the war

there was a good deal of agitation for

further reductions in fee percentages, but

procurement officials joined with the

manufacturers in resisting these moves.

They argued that a ceiling of less than

4 percent on fees would make the range

of allowable compensation too narrow.

Negotiators would find it difficult to differentiate between those contractors who

contributed engineering skill, facilities,

or working capital and those who did

not. For the negotiators tried, whenever

possible, to make the size of the fee contingent upon the degree of special contribution made by any given manufacturer. This was doubtlessly wise policy,

9

 Public 671, 76th Cong. 3d sess, June 28, 1940

(54 Stat 676-6). 10

 Public 781, 76th Cong, 3d sess, September 9,

1940 (54 Stat 872-3); Interv with Mr. Schwinn, 25

Jul 55, WF.

11

 ASF Purchases Div, Purchasing Policies and

Practices, p. 259ff. See also, Friedman to IG, 11

Nov 43, AFCF Bulky 333.1 Inspection.
THE COST-PLUS-FIXED-FEE CONTRACT 377

but it led to rather troublesome administrative difficulties.12

Probably no single aspect of the whole

fee problem gave more concern than

the matter of equity. Where differential

rates were applied, disgruntled manufacturers time and again would complain

to higher headquarters that a rival firm

doing substantially similar work had

been flagrantly favored with a higher

fee. The answer was always the same:

beware of easy generalizations; each

CPFF contract represented a case unto

itself. All the facts must be in hand before meaningful or valid comparisons

could be made.13

The most obvious differential in fees

was that between designers and producers. For a long while it was air arm

policy to put an upper limit of 6 percent on the fees granted to firms contributing aircraft designs, while auto

manufacturers who put these designs

into mass production were generally held

to a maximum of 5 percent. Although

the distinction was readily apparent in

this particular instance, there was still

room for jealousy and misunderstanding.14

The Ford Motor Company's charges

of discriminatory treatment offer a case

in point. In November 1942 Ford accepted a 5-percent fee on a large contract. This was the lowest fee percentage

awarded up to that time. Presumably

the Ford management agreed to accept

this fee because it would return an adequate profit. Then, too, the Ford representatives may have been led to believe

that as leaders in the industry they would

set the pace toward lower fees and other

manufacturers would follow suit. It was

with considerable vexation that Ford

saw Chrysler receive a 6-percent fee and

Studebaker a 7-percent fee on seemingly

comparable contracts. At first blush it

might appear that a manufacturer who

was less willing to co-operate and more

zealous in driving a hard bargain had

been rewarded with a higher fee. A full

survey of the facts reveals that it was not

all so simple. At least one of Ford's

5-percent contracts had allowed the corporation to enjoy the interest-free use of

sizable sums of working capital, a concession not written into most subsequent

contracts. Also in at least one of Ford's

contracts there was a clause providing

for reimbursement by the government

for the firm's reconversion costs at the

close of hostilities. Contracts with most

other manufacturers did not include this

feature. Finally, it is relevant that the

negotiators allowed a somewhat higher

fixed fee whenever a manufacturer was

willing to accept over-all price renegotiation or agreed to include repricing

clauses on government business.15

In retrospect it appears that air arm

officials might have found negotiations

on CPFF contracts a good deal smoother

if, as a matter of policy, they had taken

pains to educate and inform the manufacturers concerned of the many and

complex variables that entered into the

computation of fees. In practice, pro- 12

 ASF, Purchases Div, Purchasing Policies and

Practices, p. 259ff. 13

 2d Ind, Hq AAF to IG, 13 Jan 44, reply to IG

Ltr cited in n. 11, above. 14

 Memo, CGAAF for CGASF, 2 Jul 42, AFCF 333.1

Contract Inspection.

15

 TWX, 1766, Contract Sec, WF, to Col Volandt,

11 Jul 42; Memo, Col Browning, Special Representative of USW, for Col Volandt, Asst to CGMC, 18 Jul

42. Both in AFCF 161 CPFF.
378 BUYING AIRCRAFT

curement officers, harassed by the rush

of war work, were sometimes not only

uninformative but downright curt—to

the great damage of harmonious relations with industry. A case in point with

somewhat amusing overtones can be

found in the record of negotiations with

Emerson Electric of St. Louis, an important manufacturer of aircraft gun turrets.

Between the time air arm and Emerson

representatives agreed upon the terms of

a CPFF contract and the time of final

departmental approval of the document,

the War Department changed its policy

on maximum allowable fees. Emerson

was notified that a lower fee percentage

would be used in the contract. Understandably disturbed, the president of the

Emerson turret plant, Mr. W. S. Symington, wrote Wright Field asking for a

copy of the directive reducing fixed fees.

Instead of returning a candid answer, a

colonel in the Contract Section summarily dismissed the request with the bald

assertion that it was contrary to policy

to release such administrative memoranda.16

 Under the circumstances, Mr.

Symington might have been forgiven had

he charged the negotiators at Wright

Field with double dealing. It might be

interesting to speculate on the reactions

of the colonel when Mr. Symington later

became Assistant Secretary of War for

Air and then Secretary of the Air Force.

If, on occasion, some procurement officers were insensitive in their dealings, it

may also be true that some manufacturers tended to put themselves in a bad

light by their intransigent stand against

reductions in fees.17 There were indeed

a number of reasons why fixed fees

should have been retained at relatively

generous levels, but as a matter of good

public relations it might have been

better tactics for the manufacturers to

espouse lower fees with sacrificial and patriotic enthusiasm while assuring themselves the substance of adequate profits

when negotiating the fringe benefits.

This was precisely what French manufacturers had done in a like situation.

Contrary to the common notion that

Frenchmen will debate endlessly over

principle and lose the substance while

their allegedly more expedient AngloSaxon neighbors with their genius for

compromise eschew theory and principle for the substance, at least insofar as

procurement matters were concerned,

the very opposite proved to be true.

Where many manufacturers in the

United States laid themselves open to a

good deal of criticism by resisting every

move to lower fees, French manufacturers accepted a modest fee at face value

but then made sure to protect themselves

against loss by insisting on bookkeeping

arrangements specifying just what would

and what would not be included in the

costs allowed by the government accountants.18

Here was the very essence of the matter of fees. If manufacturers could be

16

 Chief, Contract Sec, to Symington, 21 Nov 41,

and 27 Nov 41, WF Contract files 360.01.

17

 Douglas, for example, invited adverse publicity

in the fall of 1942 by resisting introduction of the 4-

percent fee in CPFF contracts until Air Force officials threatened to employ the coercive mandates

provided in the Selective Service Act. See Lecture,

Mandatory Orders, by Maj L. S. Robinson, AAF

Contracting Officers School, WF, Winter 1944-45,

copy in possession of Mr. Schwinn. 18

 French Aircraft Industry, Lecture by Ward,

AIC, 7 Oct 40.
THE COST-PLUS-FIXED-FEE CONTRACT 379

assured both fair and generous treatment

with regard to their claims for reimbursement of costs under CPFF contracts, they

could afford to accept relatively small

sums in the form of fees. On the other

hand, so long as manufacturers feared

that contracting officers and the auditors

of the General Accounting Office would

disallow numerous items of expense incurred under CPFF contracts, they felt

constrained to demand high fees as a

protective buffer against loss. Thus, no

definitive understanding of the fee question is possible without a contingent

study of the whole problem of just which

costs were to be allowed and which disallowed.

The Determination of

Allowable Costs

In principle, a manufacturer with a

CPFF contract was entitled to reimbursement for his costs. But there lay

the rub. Precisely what items of expenditure were to be classified as legitimate

elements of cost? Were bonus payments

to the executives of a corporation to be

allowed as part of the cost of a bomber

contract? Could a barbecue for the production workers in a parts plant be regarded as reimbursable? By the terms

of the contract all such decisions lay

with the contracting officer. His word

was binding within the War Department

unless a contractor wished to file a protest under the disputes clause and carry

his case to the Board of Contract Appeals. But even where a contracting officer gave final approval to a particular

item presented for reimbursement by a

manufacturer, there was another hurdle

to cross. The General Accounting Office

studied all vouchers submitted for payments, and where disbursements seemed

to have been made contrary to the terms

of the contract or in defiance of existing law, the Comptroller General could

suspend subsequent payments to a manufacturer to cover the contested amounts.

What costs were allowable? Whatever

charges a manufacturer could get both

the contracting officer and the GAO to

accept under the terms of the contract.

The crux of the matter lay in the contract itself; every CPFF contract contained an Article III, which attempted

to cover the question of allowable costs.

One approach—that actually followed by

the Navy and the Ordnance Department

—was to spell out in great detail in Article III all the points of conflict, clearly

labeling the costs allowed and those disallowed. In practice, however, this approach fell short. It proved impossible

to foresee all the many and varied types

of conflicts over costs that cropped up

in the life of most contracts. No matter

how elaborately detailed were the stipulations of Article III, disputes over allowable costs seemed almost unavoidable.19

 When they first undertook to

use the CPFF form, the contract writers

at Wright Field decided that they could

never hope to anticipate all the cost

problems that would surely be met when

aircraft were put into mass production

for the first time. Almost of necessity

they turned to an alternative course

when drafting fixed-fee contracts.

Rather than make any attempt to spell

out the scope of allowable costs in detail, air arm contract drafters simply

wrote into Article III a cross reference

19

 CPFF Contracts, Lecture by Sommers.
380 BUYING AIRCRAFT

to an existing Treasury Department decision, TD-5000. This regulation or directive had been worked out as an accounting guide or procedural manual

for use in the determination of excess

profits under the Vinson-Trammell Act

of 1934. Because it was founded in actual experience and embodied a list of

disallowances based on specific cases arising in the past, TD-5000 promised to

provide a surer guide for contracting

officers' decisions than would any prospective regulation drawn up without

benefit of experience. Moreover, TD5000 laid down several general principles for reimbursements: to be allowed,

a cost must be necessary to the performance of the contract as written, must be

reasonable, and must not be specifically

disallowed by the contract.20

Equipped with a list of specific disallowances and a set of principles, air arm

contracting officers set out to administer

the CPFF contracts that had been written. They soon came to realize that

TD-5000, while helpful, did not provide

the answers they sought. TD-5000 was

designed for use with a profit-limiting

statute, and the criteria it established

were not always suited to the very different function of determining allowable

costs under CPFF contracts. Moreover,

the directive raised as many questions as

it answered. What costs were necessary?

What costs were reasonable? Ultimately

such questions called for the exercise of

discretion, and in this contracting officers found it difficult to agree among

themselves let alone reach decisions acceptable to GAO.

The uncertainties beclouding the

question of allowable costs led to a chain

of unfortunate consequences. Each day's

mail brought in its quota of complaints

from manufacturers protesting a disallowed cost. Often the complaint concerned a relatively insignificant sum of

money, but at a time when managerial

skills in the aircraft industry were spread

woefully thin, every diversion of time

and attention delayed the main job of

production just so much more.

Anxious to meet the problem of allowable costs squarely, the procurement

staff at air arm headquarters invited suggestions from the industry. This was a

move in the right direction. Unfortunately, its execution was somewhat bungled. The manufacturers were requested

to submit their grievances in ten days.

Here was a major question of policy

growing out of a revolutionary shift in

procurement procedure; certain to be

involved were numerous and intricate

questions of accounting calling for the

most concentrated and thoughtful study

if effective supplements to TD-5000

were to be promulgated, yet the manufacturers were expected to respond in

ten days. Some of them, especially those

on the west coast, scarcely had time

enough to receive the request before

their replies were due.21

The pattern reflected in this episode

was uncomfortably characteristic of far

too much air arm administration in the

war years. Pressed to the limits of endurance in their efforts to get production, procurement officers sometimes lost 20

 Ibid. See also, ASF Purchases Div, Purchasing

Policies and Practices, p. 269. For TD-5000, 29 Jul

40, see Code of Federal Regulations, sec. 26.9, ch. 1,

title 26.

21

 Asst to Chief, Mat Div, to all major contractors,

14 Jun 41, AFCF 161 CPFF.
THE COST-PLUS-FIXED-FEE CONTRACT 381

sight of the ultimate in their preoccupation with the immediate, handling questions of high policy in the same way

that they dealt with the day-to-day details of operations. Surely one of the

gravest weaknesses revealed in the air

arm at war was the absence of adequate

staff arrangements for lifting policy problems above the daily round of effort.

For, in the last analysis, sound policies

are often little more than meaningful

generalizations based on operational experience subjected to reflective study.

Where the line operates, the staff

should reflect. But as every experienced

officer knows, staffs have a fatal tendency

to drift into operations at the expense

of reflection. Not all the buyers at

Wright Field were blind to the need for

"procurement doctrines," carefully formulated statements of policy on allowable costs, but the structure of the organization within which they operated

made inadequate distinction between

line and staff. Perceptive officers who

clearly grasped the need for broad and

all-embracing statements of policy found

themselves so heavily engaged in current

negotiations that they were unable to

devote even a fraction of their time and

energy to that mature reflection without

which doctrine cannot be distilled from

practice. That the whole question of

allowable costs in fixed-fee contracts demanded the most careful study by

highly experienced procurement officials

scarcely needs demonstration. Nonetheless, a brief account of a few representative problems should serve to illuminate

the complexities besetting those who

sought to promulgate general rules for

administering CPFF contracts. Most of

the claims for reimbursements that came

into dispute fell into one of three areas

—overhead, salaries, and taxes—and it

will be appropriate to consider some

representative cases arising under each

heading.

Where a manufacturer's plant was entirely devoted to war work on a fixed-fee

contract, overhead costs posed few problems, since virtually all costs could be

charged to the government. On the

other hand, manufacturers operating

plants with several different types of

contracts—one or more fixed-fee jobs under the same roof with some conventional fixed-price contracts—raised many

headaches. In those instances where the

manufacturer combined both fixed-price

and fixed-fee arrangements with the government in the same plant with his regular commercial business, the task of

segregating overhead brought on an accountant's nightmare. Typical in this

respect was the situation encountered

when dealing with the General Motors

Corporation.

Like most other contractors apart from

the old-line aircraft firms, General Motors edged into the field of munitions

production only gradually. Aircraft

parts and engine contracts were initially

a side issue in contrast to the immense

volume of automobile production. In

fact, until 1941, the corporation's policy

was to charge none of the main office

overhead to the government contracts

currently held. As automobile production had to be tapered off, however, and

the corporation gradually moved toward

almost total preoccupation with war orders, this arrangement broke down. The

costs incurred by the central corporate

management had to be absorbed somewhere. How, was the question.
382 BUYING AIRCRAFT

In administering the air arm fixed-fee

contract held by General Motors' Fisher

Body Division, just what element of the

home office overhead should be charged

as its proportionate share? Since this

problem came up after a number of

General Motors contracts had been under way for weeks or months, the contracting officer, in whose hands decisions

of this sort lay, faced a knotty problem.

If he directed the contractor's salaried

employees in the home office to keep

records of the time they spent on each

contract, he knew that no effective audit

was possible, either retrospectively or

currently. Yet without audit there

would be no way of determining to the

satisfaction of the GAO whether or not

charges properly assignable to the manufacturer on his fixed-price jobs had been

slipped off onto the government's shoulders in a fixed-fee contract. On the other

hand, if the contracting officer allocated

overhead salary costs arbitrarily in proportion to direct labor costs on each different contract, he was just as likely to

err in the other direction. Such a course

could work a serious injustice to the

manufacturer since different kinds of

contracts and different phases of the

same contract involve widely varying

amounts of managerial effort. Moreover, the novelties and technical difficulties usually encountered when getting

munitions production started entailed

far more exertion in the front office than

did the regular run of business. Whatever decision he made to resolve this

dilemma, the contractor remained vulnerable to review by GAO.22

Among the many annoying questions

on allowable overhead costs, few were

more frequently raised than those pertaining to advertising. To what extent

should advertising be an allowable

charge against the government? When

a manufacturer devoted 100 percent of

his facilities to war work on public contracts was no institutional advertising to

be allowed? If not, what would become

of the useful and service-rendering trade

association journals that made a genuine

contribution to the war effort but depended almost entirely upon institutional advertising? Was a manufacturer's house organ such as the Douglas

Airview promotional advertising or a

necessary morale builder for the firm's

employees? If it started out as the latter

but drifted toward the former, was the

contracting officer going to impose a

censorship on editorial policy? If he did

not, there was always danger that GAO

would disallow the claim for reimbursement at some later and inconvenient

date after large sums had been spent by

the manufacturers in good faith.23

In the matter of contributions, TD5000 authorized those that were encountered in the ordinary run of business.

A contracting officer might safely approve vouchers for gifts to the Red Cross

and the local Community Chest, but

what about a manufacturer's donation

to a British war relief fund? It lay within the contracting officer's discretion to

pass such a claim if it seemed both "reasonable" and "necessary."

The problem of allowability in regard

22

 Orton, Exec Accountant, AAF, to Fiscal Officer,

Hq AAF, 14 May 42, AFCF 161 CPFF.

23

 Col Volandt to Quigley Publishing Co., AFCF

161 Contract Requirements; Chief, Proc Div, to Air

Inspector, 18 Nov 44, AFCF 333.1-A Douglas.
THE COST-PLUS-FIXED-FEE CONTRACT 383

to contributions illustrates as well as any

other aspect of the overhead problem

the precarious position into which the

discretionary roles of the contracting

officer and GAO thrust a manufacturer

holding a CPFF contract with the government. After a number of disputes

had cropped up over reimbursement for

donations, the War Department issued

an official "interpretation" in December

1942. The directive, or policy statement, held that contracting officers could

approve reasonable charitable contributions under fixed-fee contracts. This they

proceeded to do in the normal course

of business until August 1944, when the

Comptroller General flatly ruled that all

such payments were nonreimbursable.

Contracting officers accordingly began to

reject all vouchers for charitable contributions, leaving the manufacturers, who

had acted in good faith under the War

Department's earlier interpretation, to

foot the bills out of their fixed fees.24

So long as the Comptroller General's

rulings concerned only such marginal

items as donations, there was little cause

for alarm; these pinpricks were annoying, but they could be ignored since the

sums involved were relatively small. In

time, however, GAO suspended so many

vouchers for all manner of overhead

items that several aircraft manufacturers

were seriously affected. Since overhead

vouchers, unlike claims for labor and

materials, were reimbursed only once a

year, after-the-fact disallowances could

be financially embarrassing. In all good

faith and with the formal assent of the

contracting officer in charge, a manufacturer could incur a series of heavy

overhead charges only to wake up one

morning months later to find his claims

disallowed or, if already paid, to find a

like amount withheld from some current and uncontested voucher.25

Quite understandably, some manufacturers felt that they were helplessly

caught between two impersonal bureaucratic grindstones. Air Force officers

never receded from the War Department's contention that the decisions of

a contracting officer were binding unless shown to be arbitrary, in bad faith,

or fraudulent. On the other hand, while

GAO would sometimes back down on a

specific disallowance after a showing of

the facts, the Comptroller General would

never concede any impairment to his

right of independent review of all federal contracts.26

 If GAO had confined

its work to mere auditing—verifying the

accuracy of the accounts rendered, there

would have been no ground for complaint. But the Comptroller General

went far beyond mechanical audits and

undertook not only to interpret individual contracts but to develop a philosophy of procurement considerably at

variance with that held by air arm contracting officers.

During the prolonged dispute on overhead payments the Comptroller General took the stand that many of the

disallowed items were supposed to be

financed as a matter of course by the

contractor out of his fixed fee. At that

very moment the War Department was

engaged in a campaign to force manu24

 ASF Purchases Div, Purchasing Policies and

Practices, p. 270.

25

 Ibid., pp. 271-72; CPFF Administration, Lecture

by Demuth. 26

 ASF Purchases Div, Purchasing Policies and

Practices, p. 272.
384 BUYING AIRCRAFT

facturers to accept lower fixed-fee percentages to prevent the accumulation of

abnormal or excessive profits. Here

were two diametrically opposed conceptions of the fixed fee. If the Comptroller General and his staff at the Accounting Office regarded the fixed fee as a

slush fund to cover miscellaneous operating expenses, how could the Under

Secretary of War talk about fees as

"profits."

 27

 With no little justice, manufacturers caught between these two interpretations might argue that it was

grossly unfair to belabor them as profiteers or to imply a lack of patriotism in

their resistance to lower fees when at

the same time burdening these self-same

fees with all manner of overhead costs.

Although there were numerous other

items of overhead frequently in dispute,

further elaboration would serve little

purpose. On the other hand, the related

problem of salary raises should prove

well worth closer study. To what extent

should salary increases be allowed under fixed-fee contracts? How were contracting officers to curb the understandable temptation of contractors to hand

themselves raises at government expense?

After the air arm's first few CPFF contracts had been in operation for several

months, detailed audits began to turn

up some rather startling statistics. One

leading automobile manufacturer building aircraft engines for the government

had given out raises to certain classes of

supervisory personnel averaging 41 percent over the level of pay prevailing before the firm took on a war contract.

Another manufacturer jumped an official's salary from $12,000 to $19,200

when the corporation signed a CPFF

contract. Reports such as these and

many others like them indicated the

pressing need for a refinement of policy

in this area.28

To be sure, many salary increases were

entirely justified. After the lean depression years the return of full employment

inevitably required a good deal of adjustment regardless of whether the fixedfee or the fixed-price contract was to be

used. Moreover, the rapidly expanded

aircraft industry desperately needed large

numbers of managers and supervisors,

more than could readily be found in the

old-line firms unless relatively junior

men were hastily moved upward. Such

promotions certainly justified marked

increases in salary. But air arm officials

were genuinely concerned when the

president of a west coast aircraft firm

reported his 1942 salary at $50,000, a

figure some $30,000 over that of the

year before.29 Enlarged responsibilities

and the incentives necessary to maximum production must be taken into

account, but it is pertinent to observe

that a considerable number of draftees

were then currently being asked by their

"friends and neighbors" to risk their

lives for a cash incentive of no more

than $50 a month.

The rush of war orders precipitated

by the Japanese attack on Pearl Harbor

made clarification of policy on salary

increases more than ever necessary. Although a number of proposals had been

27

 Ibid., p. 270.

28

 Memo, Dir, Purchasing and Contracting, OUSW,

for CofAC, 16 Jun 41; Lt Col J. M. Rae, IGD, to

IG, 30 Mar 42. Both in AFCF 161 CPFF. 29

 MS sheet showing pay of all officials making

over $5,000 in the aircraft company. 1941-42 AFCF

333.1B.
THE COST-PLUS-FIXED-FEE CONTRACT 385

broached from time to time in the preceding months, none seemed satisfactory.30

 Finally, taking their cue from

some remarks in an address by the President, the buyers at Wright Field set an

entirely arbitrary limit of $25,000 as the

maximum amount reimbursable on salaries paid to fixed-fee contractors.31

 Not

until a number of contracts had been

written with this limitation was it discovered that the President had been

thinking in terms of a posttax salary of

$25,000 rather than a pretax maximum

of $25,000 as written into fixed-fee contracts at Wright Field.32

 This difference

could place the air arm at a distinct disadvantage vis-a-vis the other services

since manufacturers could scarcely be

blamed if they preferred to take advantage of the more generous terms offered

elsewhere.33 Nevertheless, to change policies in midstream threatened to be even

more disadvantageous.

To revert to the simple formula laid

down in TD-5000, as some favored doing, was decidedly inexpedient. To do

this would be to reimburse contractors

for all "reasonable" salary increases

above the $25,000 maximum. Since the

contractors had made their original estimates knowing that all salary costs above

the maximum would have to be derived

from income provided by the fixed fee,

any shift in policy that belatedly permitted them to be reimbursed for these

sums would in effect amount to granting

them a windfall in the form of an enlarged fee.34

 Obviously GAO would

hold such a course utterly unwarranted.

Under the circumstances it is no wonder that contracting officers found the

entire question of allowable costs an exercise in frustration. Men resort to written contracts in a quest for certainty, yet

the broad areas of discretion allowed in

fixed-fee contracts marked the very antithesis of finality. Where they enjoyed

discretion under the terms of a contract,

contracting officers were confronted with

a bewildering and oftentimes conflicting

array of statutes, Executive orders, and

command policies, both advisory and

obligatory. The multiplicity of these

directives alone would make it difficult

to apply them even though their very

purpose was to attain uniformity and

equity. The margin for error and misunderstanding was in no way reduced

by the circumstance that these prescriptions were never fixed and permanent

but remained in a continuing flux that

left neither manufacturers nor government officials with much sense of certainty when they considered salary increase cases or any other facet of the

topic of allowable costs.

Though the matter of salary raises

reduced to dollars and cents gave much

trouble to those who administered CPFF

contracts, appraising the "reasonableness" of such fringe benefit features of

salary as retirement pay and group insurance was even more difficult. Worse

still were all those questions raised as

to the reimbursement of bonus pay30

 See for example, Memo, OUSW for CofAC et al.,

23 Oct 41, and reply, Asst to Chief, Mat Div, to

USW, 1 Nov 41, AFCF 161 CPFF. 31

 Interv with Mr. Schwinn, 25 Jul 55, WF. 32

 CPFF Administration, Lecture by Demuth. 33

 For an instance illustrating the desire of a manufacturer to switch his contract from the air arm to

the Navy "because the Navy was more lenient with

respect to maximum salaries," see Col Rae to IG,

30 Mar 42, AFCF 161 CPFF. 34

 CPFF Administration, Lecture by Demuth.
386 BUYING AIRCRAFT

ments. Although the practice was to allow this kind of costs if they were general in application and clearly a part of

the manufacturer's morale and incentive

scheme, contracting officers knew well

that as a rule bonus payments were almost certain to raise doubts and difficulties with GAO.35

Taxes were yet another field where

the problems of allowable costs could

be knotty for those who administered

CPFF contracts. Once again a few illustrations may suffice to indicate something of the complexity faced.

Consider, for example, the matter of

unemployment insurance payments by

individual manufacturers. Under the

statutes prevailing in most states the

size of the payments made by manufacturers into the unemployment insurance

fund depended upon their experience

rating. Manufacturers with a highly

stable employment record were rewarded

with a lower rate of payment than that

imposed on firms with a record of frequent lay-offs. Aircraft manufacturers

entering fixed-fee contracts kept one eye

on the inevitable decimation of employees expected at the end of the war. Prudently, they demanded protection against

postwar increases in their tax rate

brought on by circumstances entirely

beyond their control. Air arm negotiators responded with an appropriate

contract clause by which the government

obligated itself to save the manufacturer

harmless—as the lawyers put it—by agreeing to assume the burden of any such

tax increase.

At least on the surface a "save harmless" clause applied to the unemployment insurance tax seemed valid enough,

but it raised problems far beyond the

immediate sphere of aircraft procurement. Would such unlimited promise

to pay future increases in "experience

rating" taxes pass scrutiny at GAO? In

so binding the government were not

procurement officers undertaking obligations for which no known appropriation

was earmarked? Then too there was the

question of equity. Would not the manufacturers who held conventional lumpsum contracts also suffer increased unemployment insurance tax rates as a result of war end lay-offs? Why then

should they not receive the same protection granted to fixed-fee contractors?

The subsequent evolution—one cannot

say solution in matters of this sort—of

the unemployment tax problem lies far

beyond the province of this study. Here

it should be sufficient to suggest the character of the tax problems confronting

contracting officers who struggled to determine just which costs were allowable

and which were not under fixed-fee contracts.

Excise taxes offer yet another case in

point. In the prewar years it had been

the settled policy of the government to

refuse payment of all excise taxes on

finished products. Excise taxes on components buried in the finished product

were, however, paid without protest.

Then in January 1942, in the very midst

of the rush of war orders, the Treasury

Department promulgated a new decision, TD-5114, which altered this practice profoundly. Henceforth, it was announced, the government would pay no

excise taxes at all, including those on

component parts buried in the end item. 35

 CPFF Contracts, Lecture by Sommers.
THE COST-PLUS-FIXED-FEE CONTRACT 387

The new tax policy appeared at a

most inopportune time. Manufacturers

were already over their heads in a mass

of intricate contractual details—they already had more paper work to do than

their staffs could handle, they were under intense pressure to get results, and

they were criticized at every turn for

their slowness in signing contracts. Yet

the Treasury, in the peak month of war

order placement, handed down a decision that made manufacturers take one

of two courses, both of them costly. The

manufacturer could shrug his shoulders, sign the contract before him, and

absorb the tax burden in his fixed fee,

or he could insist on conducting a careful study to analyze each taxable element of material in every one of the

hundreds and hundreds of purchase orders and subcontracts comprising his

prime contract, thus delaying for days

or even weeks the signing of the contract.

Manufacturers who chose to absorb

the excise taxes in their own fees and

those who inadvertently failed to identify the tax element in component prices

as such lived to rue the day. Cumulatively the many seemingly trivial federal

imposts ran into very large sums of

money.

Much the same thing could be said

of a whole series of state and local taxes

applied to sales, use, and gross receipts

on transactions between fixed-fee contractors and the federal government. A

3-percent California use tax, for example, applied to a Vega fixed-fee contract

involving about $4,750,000 in taxable

items, ran up a tax of $141,600, which

could make a very big dent in the firm's

so-called profit if subtracted from the

fixed fee.36 And this, it should be observed, was only one of a number of

similar state and local taxes to which the

contractor was subject.

State and local taxes threatened to become so burdensome indeed that War

Department procurement officials began

to cast about for means to avoid them.

One solution, issued as a directive from

the Under Secretary's Office, was to order all procurement officers to purchase

directly, as agents of the United States,

all materials needed by fixed-fee contractors that would be subject to burdensome state taxes. Along the same line,

contracting officers were ordered to make

direct payments from federal funds covering each fixed-fee contractor's entire

payroll wherever states attempted to impose gross receipts taxes on such disbursements.37

 In short, the plan was to

let the manufacturers hide from state

taxation behind federal immunity. Superficially these techniques of tax avoidance may appear to have been ingenious,

but as is so often the case, the proposed

administrative cure threatened to do

more harm than the tax disease itself.

Because full compliance with the order from the Under Secretary threatened

virtually to wreck the rearmament effort,

procurement officers at Wright Field felt

they could not follow the directive received; at the same time they did not

wish to disobey. Instead, they tactfully

reported that they had "delayed compliance" to avoid plunging the procurement program into disastrous turmoil.

The heart of the trouble was this: to

36

 Vega Airplane Co. to Asst Chief, Mat Div, 6 Sep

41, AFCF 161 CPFF. 37

 Memo, OUSW for CofAC et al., 7 May 41; OCAC

TI-742, 12 May 41. Both in AFCF 161 CPFF.
388 BUYING AIRCRAFT

execute the order would be to transfer

a large portion of a manufacturer's responsibility for the timely execution of

his contract to the shoulders of the government's agents. How could the government hold a manufacturer accountable for the delivery of aircraft by a

given date when he was denied control

over the purchase of the materials he

required? Finding enough qualified air

arm personnel to take over the manufacturer's purchasing role would in itself

be difficult. Worse yet, responsible officers at Wright Field felt that air arm

procurement methods with all their

built-in statutory safeguards were "too

slow and cumbersome." Such a course

would inject "confusion, indecision and

slowness" at a time when speed was more

than ever essential.38 This indictment

of governmental procurement procedures was not entirely unconscious, for

it was more or less a matter of settled

policy at Wright Field to make the fullest possible use of the "freedom of initiative and resourcefulness" enjoyed by

private businessmen, who were unhampered by so much of the statutory red

tape that beset governmental procurement operations.

In the view of air arm procurement

officials, there were only two appropriate alternatives insofar as state and local

taxes (or for that matter even federal

excises) were concerned. One was to

pay the tax and settle the matter in the

courts later if need be; the other, decidedly preferable, was to invite Congress to provide a statutory solution. A

problem so complex as taxation obviously can never be entirely resolved, but

it is of interest to observe that the course

eventually taken in handling at least

one of the many tax questions raised

here followed along both alternatives.

Beginning in March 1943, the Air Force

policy was to include all federal excise

taxes on component parts in the cost of

the end product, thus presumably risking GAO refusals to reimburse. At the

same time representations were made to

Congress seeking relief. Eventually, in

the revenue act of June 1944, Congress

complied by authorizing manufacturers

to include excise taxes as a cost of doing

business, and a great many government

agents got off the administrative merrygo-round of tax claims, certificates of exemption, and disallowances that took

money out of one governmental pocket

to put it into another at considerable

expense in paper work.39

In the matter of state taxes, the federal government could, if it wished, hide

behind a long line of precedents, from

Justice Marshall on down, establishing

its immunity to state imposts. Nevertheless, a number of sociological considerations indicated that a doctrinaire insistence upon the rule of other times

and circumstances could lead to grave

local hardships. For example, a California franchise tax on fixed-fee contractors

might be found nonreimbursable, at

least the Army JAG so opined, although

the Navy JAG found otherwise, but the

ruling only avoided the social realities.

The erection of immense new aircraft

plants hiring tens of thousands of peo38

 IOM, Actg Asst Chief, Mat Div, for Chief, Mat

Div, 22 May 41, AFCF 161 CPFF.

39

 Lecture, Taxes and Their Effect on Procurement, by Maj Julian deB. Kops, AAF Contracting

Officers School, WF, Winter 1944-45, WFHO. See

also, Flexible Pricing in Fixed Price Contracts, Lecture by Dinkelspeil, pp. 16-17.
THE COST-PLUS-FIXED-FEE CONTRACT 389

ple sometimes brought waves of suburban growth in one nearby community

after another. Each such wave of expansion imposed costly burdens of fire

and police protection, sewage disposal,

street paving, school construction, and

the like. Somehow these social costs had

to be absorbed. Should the federal government as the exclusive buyer in some

plants refuse to shoulder the cost? If so,

was it reasonable to work toward further reductions in the manufacturer's

fixed fee if this fee had to absorb all

such tax costs as the one described

above?

 40

In groping for answers to these and

similar tax questions, state officials and

legislators, hard-pressed manufacturers,

federal judges, and War Department

lawyers were engaging in a constitutional controversy of considerable significance. Individual contracting officers

could and did play important roles in

this process as they ruled on allowable

costs in particular contracts, but it was

easy to lose sight of these broader implications when confronted with seemingly

impossible questions and when under relentless pressure to hasten on the pace

of production.

Overhead costs, salary increases, and

taxes—these were only a few of the troubles that plagued contracting officers

trying to administer CPFF contracts. A

host of similar matters ranging from

constitutional law to the most technical

questions of production made the determination of allowable costs an endless

challenge. Gradually, as they accumulated experience and found certain repetitious patterns in the cases coming before them, they were able to generalize

some of their experience for the benefit

of the service as a whole. It may be one

of the real tragedies of the procurement

process that more lessons were not

learned from the record of individual

contracts. Unlike the records of common law courts, those of procurement

do not enter a body of formal reports

or case histories, readily accessible, where

they can be studied in depth and with

continuing perspective. Some lessons

were indeed learned from the general

procurement experience, but too many

were lost.41

Although the lessons learned by contracting officers and negotiators were

never collected during the war into a

single grand synthesis, nor summarized

in any comprehensive set of manuals or

casebooks on allowable costs, procurement officers did manage to skim off a

number of individual points for general

application. Some appeared as command

directives to contract writers and administrators. Others took the form of stock

clauses for insertion in Article III of

40

 Congress explicitly recognized a responsibility

for such local costs by the federal government by

authorizing cash relief payments to communities abnormally burdened by war industries; see Public War

Housing (Lanham) Act of October 14, 1940 (54 Stat

1125).

41

 Although procurement officers during World

War II took great pains to see that the record of

experience with CPFF contracts was preserved for

the future, the record has shown an unusual propensity for vanishing. Even where determined efforts were made to distill wartime experience for

postwar instruction, the results have not always

lived up to expectations. Take, for example, the

multivolume study of CPFF administration in the

AAF prepared by Colonel Scarff at Wright Field

during the war. Although dozens of persons devoted a great deal of time over many weeks searching

for this study after the war, both in Washington

and at Wright Field, no copy could be found in the

official record repositories.
390 BUYING AIRCRAFT

fixed-fee contracts, spelling out in detail

just which costs would be allowed and

which disallowed. Still others, those of

broadest application, appeared as official

cost interpretations for the guidance of

buyers throughout the War Department.

Thus it turned out that the air arm,

which had begun the war relying upon

a few general principles in TD-5000

and the discretion of its contracting officers, ended up, very much like the Navy

and the Ordnance Department, with the

cost stipulations of Article III in fixedfee contracts running to as many as forty

subclauses encrusted with legal jargon.42

In a characteristic pattern of government, the simple became complex. And

as experience gradually revealed the infinite variety of facets in fixed-fee contracts, even a most casual observer could

see that the essence of successful supervision lay in adequate procedures for

accounting. Which is to say, no appraisal of fixed-fee administration is possible without an understanding of the

methods and organizations for auditing

and accounting that served the air arm.

Auditing and Accounting

Unfortunately for the cause of effective procurement, the prewar Air Corps

had developed neither the organization

nor the procedures for accounting

needed to cope with the challenge imposed by the use of fixed-fee contracts.

To be sure, a small staff had been established to conduct the audits of manufacturers' books that were authorized by

the Air Corps Act of October 1926, but

for over ten years the work of this group

went along more or less mechanically

with little or no influence on the procurement process. The auditors employed may have been competent

enough, but their conception of the task

assigned to them was sharply limited.

Indeed that of the officers who directed

their work was no wider since they regarded the auditors as watchmen to prevent fraud and collusion. At no time

did the auditors try to summarize the

results of their work or put it in a form

useful to those engaged in the formulation of procurement policy. Until the

rearmament crisis arrived, the air arm

auditors were never regarded as an integral part of the procurement team.43

Not only was the audit staff on the

eve of the war small and narrow in outlook, it was also inadequate in the matter of procedures. It lacked experience

in precisely those problems of accounting that were to prove most troublesome

during the war. The Vinson-Trammell

Act, which Congress passed in 1934 to

limit profits on munitions contracts,

gave the Treasury Department sole

power to administer its terms.44 This

proviso deprived the War and Navy

Departments of an excellent opportunity, for had they been required to administer the act they would have been

forced to perfect their organizations and

procedures for accounting and auditing

along lines that would have been advantageous when the war arrived.

42

 ASF Purchases Div, Purchasing Policies and

Practices, pp. 269-70; CPFF Administration, Lecture

by Demuth.

43

 IOM, Asst Chief, Mat Div, for Gen Brett, OCAC,

9 Nov 40, AFCF, 321.9-D. For evidence of the lag

in exploiting the audit powers of the Air Corps Act,

see SW to CofAC, 24 Oct 36, and Mat Div, GO 6,

9 Dec 36. Both in AHO Plans Div 145.91-391. 44

 ASW to W. W. Parrish, editor of American Aviation, 23 Jul 40, AFCF 132.2 Audits.
THE COST-PLUS-FIXED-FEE CONTRACT 391

The steps by which the small prewar

audit staff finally did grow into an army

of clerks and accountants need not be

related here. Suffice it to say that the

air arm audit staff, along with those of

the other procurement services, gradually fanned out in an elaborate network

of district, regional, and in-plant or resident auditors. Soon, as one Air Corps

officer observed, a vast array of "Government lice" were swarming over contractors' plants reviewing every last voucher.

In some instances not one but several

sets of auditors fell upon a manufacturer

at one time as Air Corps, Ordnance, and

Navy agents worked over his books and

got in each other's way. It takes little

imagination to visualize how seriously

this kind of duplication could impede

a manufacturer's administrative operations.45

Some sort of high level co-ordination

of effort was patently needed. As a matter of fact, as early as 1939 representatives of the War and Navy Departments

had made some effort to avoid duplications, but this only led to the decision

that both Departments would work on

a manufacturer's books at one time so

as to avoid handling the same set of records twice. Not until well into the war,

in the spring of 1943, did the two services finally agree to accept each other's

audits, leaving the whole job in any one

plant to the service with the larger dollar volume in orders.46

 Why, one may

ask, was this obvious expedient put off

so long? There were a number of reasons why it proved so difficult to simplify and co-ordinate the accounting and

auditing done on munitions contracts.

In the first place, nearly every manufacturer had a different system of accounting. To achieve really uniform audits

would require prior agreement on some

standard system of accounting imposed

from above. But against any gain in uniformity would have to be placed the

confusion and lost motion involved in

an attempt to tamper with the manufacturer's system of accounting in the midst

of the hectic rush to rearm, Then too,

even if a high degree of standardization

could be achieved in the contractor's

books, organizational differences in the

services and in the various governmental

agencies themselves made uniformity of

procedure almost impossible to attain.

Air arm procurement districts were not

even coterminous with the districts of the

Ordnance Department, let alone those of

the Navy, and at the beginning of the

emergency GAO maintained no field organization, insisting instead that all its

auditing be centralized in Washington.

Finally, the novel character of so many

of the accounting problems encountered

in each successive fixed-fee contract made

co-ordination and simplification an elusive task. Auditors and contracting officers often made verbal statements on

particular cost problems raised by manufacturers, so that even on individual

contracts the governing rulings were not

45

 A brief published account of military audit organizations may be found in Co-ordination of Procurement Between the War and Navy Departments

(Draper-Strauss Rpt), February 1945, by Col. William H. Draper, Jr., and Capt. Lewis L. Strauss,

USNR. See vol. II, pp. 183ff. See also, CPFF

Administration, Lecture by Demuth; Office of Fiscal Dir (Army), Hist of Fiscal Services, p. 834.

46

 Office of Fiscal Dir (Army), Hist of Fiscal Services, pp. 478-80.
392 BUYING AIRCRAFT

always readily available in writing for

careful study. Virtually the same thing

could be said for the hundreds of unpublished memos that lay scattered

through the contract files of the various

procuring services.47 As a consequence,

improved procedures and interservice

agreements on accounting were perfected very slowly and then only after

the expenditure of an immense amount

of time and effort on the part of officials

whose abilities were already spread far

too thin by the exigencies of the procurement program.

Although continued use of the CPFF

contracts throughout the war years raised

a never-ending series of problems in accounting and auditing, the first CPFF

contract written for air matériel proved

to be one of the most intricate ever entered. As such, it affords an excellent

illustration of the bookkeeping problems confronting air arm officials. The

contract was the three-party agreement

of the British Government (or its agent,

the British Purchasing Commission), the

War Department, and the Packard Motor Car Company calling for some 9,000

Rolls Royce aircraft engines. A threeway allocation of costs was confusing

enough in itself, but it became even

more involved when Packard started

work on the job in the same plant with

the company's regular automobile production line.48

On one point the record of accounting

experience handed down from World

War I was clear: retroactive audits had

but limited validity and were virtually

impossible to conduct.49 Nevertheless,

despite this inherited lesson, there were

a number of instances in World War II

where major aircraft manufacturers

worked for several months before an

audit of their contract was initiated.

However, there were extenuating circumstances. Many of the unaudited contracts were started under letters of intent

long before the opening of negotiations

over terms. Since conventional or lumpsum contracts were not currently audited, the prevailing policy was to refrain from assigning an audit force until

it was definitely decided whether a fixedprice or a fixed-fee instrument would be

used. In those cases where a letter of

intent matured months later into a

fixed-fee contract, the auditors arrived

to find themselves faced with just the

sort of situation inveighed against by

the veterans of World War I air arm

procurement.50

47

 For illustrative examples on this point, see

Lockheed to Mat Div, 21 Jun 41, and Memo, Dir

Fiscal Services, SOS, for Dir, Purchases Div, 3 Sep

42. Both in AFCF 161 CPFF. That the problem

was still unresolved at the end of the war is evident from comments in MB Industrial Advisory

Com on Military Contract Relationships, Rpt to

MB, Review of Major Problems in Military Procurement and Recommendations, Aug 51, pp. 14-15.

Copy in OCMH.

48

 SW to Compt Gen, 6 Dec 40, SW files, Airplanes,

item 1898. See also, Memo, Chief, Finance Div, for

Gen Brett, 7 Nov 40, AFCF 161 CPFF.

One cannot help wondering if the intricate accounting problems growing out of this situation may

not have influenced the much criticized decision to

build entirely new facilities in preference to the

use of intermingled production lines in a number

of plants. 49

 For an explicit recognition of this contention,

see C. E. Orton to Chief, Finance Div, OCAC, 16

Jan 40, AFCF 004.4. See also, Air Service, History

of the Bureau of Aircraft Production, 1919, microfilm copy in ICAF Library. 50

 Memo, Orton, Exec Accountant and Auditor,

Hq AAF, for Gen Echols, 24 Jun 42, AFCF 333.5

Investigation of Contracts.
THE COST-PLUS-FIXED-FEE CONTRACT 393

The muddle resulting from retroactive auditing is typified by the situation

that developed in the Douglas complex

of plants. With over half a billion dollars in orders on seven fixed-fee and

eight fixed-price contracts in three different plants, Douglas pushed production along for eight months before the

accounting staff learned it would be necessary to conduct a retroactive audit on

all CPFF work even though it would

involve locating more than half a million supporting documents. Insofar as

the record was available, it was possible

to do this kind of post facto search although it proved expensive and consumed the energies of a score of clerks.

But some types of audits simply could

not be conducted after the fact. The

normal procedure in current operations

was to send a team out once a week, unannounced, to make an on-the-spot check

of the payroll of a single department

against the time cards punched at the

clock. These in turn could be checked

against the workers actually present.

Since Douglas employed at the time

about 20,000 people in a new and hastily expanded organization, it was obviously imperative that the paper record

be verified against the facts.51 Months

later no such audit would be possible.

There is, of course, a great difference

between recognizing a problem and doing something about it. If they had

sensed the need for audits on all work

done under letters of intent, air arm

officials probably could have done little

to secure them, for trained accountants

were hard to find. Civil service recruiting procedures were painfully slow, and

high-grade accountants were seldom on

the registers in any event. Occasionally,

by shuffling manpower within the federal agencies, it was possible to locate a

few experienced men. Just before Pearl

Harbor, for example, Wright Field officials were delighted when the Unjust

Enrichment Division of PWA disbanded

and released a considerable number of

auditors for duty with the military procurement services. But the supply continually ran behind the demand. Most

serious of all was the shortage of really

imaginative men, outstanding minds capable of formulating the broad outlines

of policy within which others could

carry on the routine chores.52 It may

well be that many of the difficulties encountered with the CPFF contract were

not, as so many critics have charged, inherent in the fixed-fee instrument itself

but a direct outgrowth of faulty accounting, particularly in the early stages of

the war.

Under the circumstances it is not surprising that GAO began to pile up a

huge backlog of exceptions or stopped

vouchers. Until air arm officials could

perfect a really smoothly working system of auditing and accounting for fixedfee contracts, discrepancies were bound

to occur. By the fall of 1942 the Comp51

 Maj L. S. Friedman, IGD, to IG, 24 Oct 41, AFCF

333.1 Contract Inspection.

52

 2d Wrapper Ind, Western Dist Supervisor to

Asst Chief, Mat Div, 24 Dec 41, and Basic IG Rpt,

24 Oct 41, Maj Friedman to IG, 24 Oct 41, both in

AFCF 333.1 Contract Inspection; IOM, Asst Tech

Exec, WF, for Chief, Mat Div, OCAC, 3 Oct 41, AFCF

161 CPFF. See also, for comments on the quality

of auditing personnel available, Rpt of Board, Western Proc Dist, 16 Mar 43, AFCF 004 Bulky. Some

revealing insights can be found in the papers relating to the informer's suit of G. C. Wilbert, Plaintiff,

vs. Douglas . . . et al., filed 14 May 43, AFCF 

Douglas Long Beach, Bulky.
394 BUYING AIRCRAFT

troller General had accumulated more

than 20,000 challenged vouchers representing millions of dollars in unpaid

claims. The contractors involved grew

increasingly disturbed. Would they have

to enter the courts to recover their outlay? It was small comfort to recall that

claims of this sort left over from World

War I still remained in litigation during

World War II. Beset with such fears,

some prudent managers questioned

whether or not to undertake any further

government contracts—this at a time

when procurement officials were straining every resource to exploit the nation's productive capacity to the utmost.53

 In short, the situation was rapidly moving to the absurdity in which

the mighty Arsenal of Democracy was

about to be defeated by a platoon of

bookkeepers.

Soon after Pearl Harbor procurement

officers recognized that drastic action

would be needed to win the war on the

paper work front. Two bookkeeping

bottlenecks in particular offered likely

areas for attack: air arm auditing techniques on the one hand, and the procedures of GAO on the other. Despite the

tremendous increase in volume, air arm

accountants were still conducting 100-

percent audits, verifying and approving

every voucher presented for payment.

Perhaps it would be more accurate to say

they were trying to audit every voucher;

actually, they were falling dangerously

behind. During the summer of 1942 the

War Department as a whole finally resorted to the system of selective auditing

or spot checking normally employed by

commercial accountants. The manpower

released by this simple expedient made

it possible to stretch the limited staff over

more contracts, but this was not the most

significant advantage. Where the 100-

percent audits of peacetime practice

forced military accountants to devote as

much time on minute items of cost as

they did on giant expenditures, they

could now concentrate their efforts in

the most troublesome areas or on those

most commonly vulnerable to abuse.54

The General Accounting Office constituted a bottleneck largely because the

Comptroller General had insisted upon

concentrating his operations in Washington. This committed contractors to

the expensive necessity of sending supporting documents to the central office

to substantiate their claims for reimbursement. Photostatic copies would not do;

only the original documents themselves

were acceptable, which could mean, for

example, sending a bulky payroll for

20,000 employees across the continent

twice. Sometimes, where the records of

subcontractors were included, the supporting evidence backtracked along an

absurd itinerary—in one instance from

Santa Monica, California, to Detroit, then

back to Burbank, California, to Wright

Field, and, finally, to GAO in Washington.55

 Little wonder that the Comptroller's staff accumulated a two-year

backlog of unaudited vouchers that hung

menacingly above every contractor's

head, a continual threat of after-the-fact

disallowances with the possibility of crippling financial loss. Even if the facts of

53

 Office of Fiscal Dir (Army), Hist of Fiscal Services, pp. 485, 829.

54

 Memo, Dir, Fiscal Div, SOS, for CGMC, 27 May

42, AFCF 132.2 Audits. 55

 Orton to Chief, Fiscal Div, OCAC, 17 Jan 42,

AFCF 132.2 Audits.
THE COST-PLUS-FIXED-FEE CONTRACT 395

a given case clearly favored payment of

a contractor's claim, months (and sometimes years) later it was not easy to muster the requisite evidence. Turnover in

personnel and imperfections in the written record tended to obscure the most

valid vouchers. Then, too, even where

there was no question of time lag, the

sheer difficulty of written communication resulted in frequent disallowances

because of simple misunderstandings.

When confronted with the overwhelming evidence of just how unworkable the

system of centralized audits had become,

the Comptroller General agreed to a

change. After a preliminary trial in Detroit during the spring and summer of

1942, GAO set up a series of decentralized or field audit offices in the leading

centers of production, ultimately some

287 in all, throughout the nation. Almost immediately the backlog of contested vouchers began to melt away. By

the end of fiscal year 1943 the number

had been cut from the 1942 high of

20,000 to less than 6,000. By the end of

fiscal 1945 there were only 805 still

outstanding. This represented approximately one-twentieth of 1 percent of the

funds processed for military purposes in

World War II, a figure in sharp contrast to the vouchers still outstanding

four years after the 1918 armistice when

about 12 percent of the Army's expenditures in World War I were still in

contest.56

Decentralized auditing proved highly

effective but did not work the entire

cure. The presence of field audit teams

did make it possible in some instances

to secure final GAO approval on vouchers twenty-four hours after presentation,

but also significant was the procedural

change introduced in 1943 by which

GAO agreed to a system of "informal

exceptions." By this system the GAO

auditor served notice that he intended

to disallow a given voucher unless it

could be justified by further evidence.

If the contractor failed to provide such

evidence within sixty days, the temporary disallowance would automatically

become a formal suspension, which could

only be cleared by the Comptroller General. Since 98 percent of all the exceptions raised by GAO were the result of

pro forma failures of a minor character—

the absence of a necessary signature or a

supporting certificate of one sort or another—much of the work of clearing

up suspensions was purely mechanical

or clerical and readily done when the

voucher stemmed from current operations for which all the pertinent records

were immediately at hand.57

In short, what had begun as a bookkeeper's nightmare threatening to impair

the nation's defense effort ended as a

rather well-oiled administrative machine.

Without question the whole business of

auditing was annoying and costly. Inevitably there were shrill cries from contractors protesting the red tape involved.58

 Yet on balance the effort was

undoubtedly worth the various difficulties encountered.

56

 Office of Fiscal Dir (Army), Hist of Fiscal Services, p. 485; Memo, Dir, Fiscal Div, SOS, for CGMC

et al., 11 May 42, as well as Fiscal Officer, Hq, AAF,

to CGMC, 1 Aug 42, both in AFCF 161 CPFF. See

also, CPFF Administration, Lecture by Demuth.

57

 Office of Fiscal Dir (Army), Hist of Fiscal Services, p. 832; CPFF Administration, Lecture by Demuth. See also, CPFF Contracts, Lecture by Sommers. 58

 See, for example, Curtiss-Wright Airplane Div

to CofAC, 14 Jul 41, AFCF 161 CPFF.
396 BUYING AIRCRAFT

There simply is no way to determine

just how valuable the data derived from

audits were to those who subsequently

made use of them when negotiating, renegotiating, and terminating contracts.

Surely it was not inconsiderable. But

was auditing worth the dollar cost involved? Here, too, no final answer is

possible. A staff study in 1943 revealed

that auditing costs ranged from a low of

$110 for every $100,000 of contract value

to a high of $12,000 in costs on the same

face value.59 These figures, needless to

say, prove nothing. An audit undoubtedly dissuades fraud to some extent by

its mere presence. On the other hand,

the vast bulk of the evidence available

in air arm files suggests that fraud was

far less significant than faulty administration as a source of loss. Thus, it

would appear that if the cost of auditing

is to be justified, it must be largely in

terms of the wealth of information that

audits can make available to the whole

procurement team and only secondarily

in terms of the deterrent effect that audits produce.

In appraising the work of the auditors in connection with fixed-fee contracts, whether dealing with agents of

the air arm or GAO, it is well to remember that a policeman's lot is not a happy

one. The GAO auditors sometimes

seemed to be going out of their way to

look for trouble. Air arm officers repeatedly protested that the Comptroller

General's men were weighing not only

the legality of payments but also their

appropriateness. The GAO auditors,

right or wrong, wielded effective power:

they could bring both contractors and

contracting officers to grief. Procurement

officials learned that it was far wiser to

maintain harmonious relations with the

Comptroller's staff and thereby effect

easy accommodations and adjustments

on contested vouchers whenever possible than it was to engage in bitter controversy on questions of jurisdiction,

which all but defied definition. Contests generally led to antagonisms that

poisoned all working relations and only

served to hasten contractors who sought

reimbursements into the labyrinth of the

courts.60

If the police role was an uncongenial

one, GAO officials at least enjoyed real

power. Their rulings generally held water. When they spoke both the contractor and the contracting officer had to

bow. By contrast, the position of the

auditors on the air arm staff was far from

enviable. Their role was entirely passive. Even when they uncovered abuses

or errors, their sole function was advisory; they informed the responsible

contracting officer, who could take action or not as he saw fit. As a consequence, the job of the air arm auditor

tended to be frustrating or, at best, unrewarding. No doubt this circumstance

contributed significantly to the high turnover that characterized the auditing force

at work on fixed-fee contracts for the

air arm.61

59

 Maj D. B. Lobree, IGD, to Dist Supervisor, Central Proc Dist, 7 May 43, AFCF 004 Contract Audit

Sec (Bulky).

60

 Tangible evidence of War Department recognition of the need for harmony in dealing with GAO

appeared in the publication of TM 14-1004, Relations With the General Accounting Office, 1 Aug

46. See also, CPFF Administration, Lecture by

Demuth. 61

 Maj Lobree, to Dist Supervisor, Central Proc

Dist, 7 May 43, AFCF 004 Contract Audit Sec

(Bulky).
THE COST-PLUS-FIXED-FEE CONTRACT 397

In retrospect it seems clear that the

failure of the auditors and accountants

in the prewar Air Corps was, in a sense,

the sum of their virtues. The auditors

minded their own business; they devoted themselves so exclusively—and so

narrowly—to the mechanics of their job

that they and their supervisors lost sight

of the larger problems of policy arising

from their work. If auditing often proved

frustrating and unrewarding to the many

rank and file accountants and clerks recruited to carry the big wartime burden

of fixed-fee contracts, it was equally true

with respect to those in command of

procurement operations. The accounting organization of the air arm was weak

because it failed to attract the interest

of able officers; it failed to attract able

officers in the prewar years because operations in this functional area had never

been one of the conventional or popular

routes to high command. During the

war the procurement organization desperately needed a substantial number of

accountants with a philosophical turn of

mind, men of broad general experience

and high technical skill. Such men are

hard to recruit at any time, but they

proved particularly hard to secure in the

wartime crisis because, with few exceptions, promotion-minded officers avoided

the field. Men capable of bold and imaginative leadership generally turned elsewhere, to the great detriment of effective

administration in fixed-fee contracts.

Unfortunately, the auditing of dollars

was only one of the accounting problems

plaguing those who tried to administer

fixed-fee contracts.

The Problem of Property

Accountability

In many ways the problem of property accounting on fixed-fee contracts

paralleled that of dollar accounting.

Here, too, as soon as Congress authorized the use of the CPFF instrument,

foresighted staff officers in the Office of

the Assistant Secretary of War directed

the procurement services to draw up appropriate procedural directives. A good

deal of constructive thinking was required to do this, for the fixed-fee contract created a number of situations that

simply did not exist in the conventional

procurement operations of lump-sum or

fixed-price contracts. Since the government paid the bill, did every pound of

raw material purchased by the contractor

with a fixed-fee arrangement become accountable government property? Were

small hand tools bought for use on the

production line to be so treated? And

what of the elaborate jigs and fixtures

so prominent in the fabrication and assembly of airframes? Were these and

similar items to be picked up as "accountable property" on the record books

of an office duly ordered to assume this

responsibility in the public interest?

Such questions as these had to be asked

and answered. Since fixed-fee contractors would have in their possession many

millions of dollars' worth of raw materials, component parts, and special tooling paid for by the government, the

public's interest in the property had

somehow to be safeguarded. The directive from OASW ordering the procurement services to face this burden was

eminently sensible, but that did not

make the order easy to obey.
398 BUYING AIRCRAFT

The complexities of property accounting no less than those of dollar accounting proved difficult to anticipate. A staff

officer behind his desk at headquarters

could scarcely be expected to foresee

the many intricacies subsequent events

would gradually reveal. Little wonder

that five months slipped by before any

procedural directives appeared. And, as

might have been expected, the OASW

directive was expressed in the most general terms suggesting only in broadest

outline the objectives sought and the

administrative steps to be taken in attaining the objectives.62

 At best it was

a skeleton. To flesh out the bones would

require experience—actual operations in

a multitude of plants with all the varying conditions they would afford—and

administrators perceptive enough to see

the significance of local conditions and

aggressive enough to feed them back to

the staff at headquarters, which then

could generalize on the flow of information and arrive at sound decisions on

policy.

The air arm directive on property accountability had scarcely reached the

resident representatives in the field when

experience began to show up its inadequacies. Under the original order, all

items purchased by a fixed-fee contractor and classified as capital assets were

to be considered accountable property

by the responsible officer. It soon developed, however, that the definition of

capital assets differed widely among contractors. One manufacturer classified all

standard tools bought from a catalogue

as expense items or charges to be borne

by the government on a given contract

just as though they were raw materials

and, as such, consumed in use and therefore nonaccountable. In this group would

be found small hand tools such as pneumatic drills. The same manufacturer

designated as special tools all items requiring a special blueprint or drawing

in their fabrication. This group, including dies, patterns, jigs, and fixtures, were

considered nonexpendable items to be

carried on the property account. On the

other hand, another manufacturer used

dollar valuations as a means of classification. All tools, of whatever the use,

costing over $100 were regarded as durable items, capital assets to be carried as

accountable property, while all items

costing less than $100 were treated as

expendable and accordingly dropped

from the property records. Such differences obviously required a clarification of

policy.63

Similarly, operational experience soon

revealed that the salvage of scrap presented a great many headaches for property accounting. Where a manufacturer

held both fixed-fee and fixed-price contracts in the same shop, the responsible

officers had been instructed to see that

the scrap from fixed-fee jobs was segregated from all other scrap in order to

protect the government's salvage interest. In practice this proved just about

impossible. Scrap on adjacent production lines had a way of getting intermixed despite vigorous preventative efforts. The greatest difficulty was not

simple carelessness; under the pressure

62

 Mat Div GO No. 11, 13 Dec 40 (WF), AFCF

161 CPFF. See also the preliminary version drafted

in Washington, Chief, Mat Div, to Asst Chief, Mat

Div, 25 Nov 40, TI-425, AFCF 333.1 Contract Inspection.

63

 Draft copy of proposed Mat Div Office Memo,

26 Feb 41, AFCF 161 CPFF.
THE COST-PLUS-FIXED-FEE CONTRACT 399

of wartime urgency manufacturers undertook to rework scrap whenever possible in order to salvage components

desperately needed to keep the whole

assembly line from stopping. As a consequence, "borrowing" salvageable parts

between contracts was as common as

"borrowing" standard GFE components.

In either event, in factories employing

thousands of workers who handled tens

of thousands of parts, property officers

were driven to distraction by the sheer

impossibility of keeping their accounts

accurate in the face of so many expedient and thoroughly understandable but

administratively irregular transactions.

Annoying as the matter of scrap was

to property officers, it ranked well below tooling as a source of trouble. Frequent modifications and model changes

involved a corresponding flux among the

various jigs and fixtures or special tools

concerned. Sometimes they had to be

replaced entirely; sometimes a previously

scrapped tool could be reworked for use

in an entirely different context. Such

transfers and metamorphoses as these

made endless trouble for property officers. The task of maintaining strict accountability on the vast array of tooling

necessary for airframe production was

thus quite difficult enough when confined to the prime contractor's plant,

yet how much more confusing was the

game when manufacturers began to expand their output by sending portions of

their production to subcontractors, providing them not only with drawings but

often with the requisite tools and tooling

as well.64

Something of the chaos confronting a

property officer may be inferred from the

situation in the Boeing complex. Boeing

held all of the following types of contracts at one time: fixed-fee and fixedprice contracts with the air arm, a fixedprice contract for the Navy, a fixed-fee

contract under Defense Aid or Lend

Lease, and subcontract work on aircraft

assemblies for Douglas. In addition, Boeing held experimental contracts on the

XB-29 Superfortress and production contracts with Pan American and the Canadian Government for flying clippers.

The greater part of the effort involved

the B-17 in production at several

plants.65

Inevitably, there was interplant borrowing of tools, parts, and materials that

doubtlessly facilitated output enormously

but at the same time laid almost insurmountable burdens on the property officers concerned. When a prime contractor shipped several freight cars full of

tooling to a branch plant or a subcontractor several hundred miles away, the

property officer's records might reflect

the consignment, but what happened

thereafter? How was he to keep informed of each subsequent modification

in use? A tool or item of tooling might

be worn out or tossed out as obsolete by

a subcontractor and then subsequently

reworked for use in quite another capacity. Before they insisted upon ineradicable markings, property officers had no

way of knowing whether a manufacturer

was charging the government for a new

tool when he was merely refurbishing an

old one. But even ineradicable markings

64

 See, for example, Maj J. G. Allen, IGD, to IG,

5 Nov 42, and related correspondence, AFCF 333.1

(a) Douglas.

65

 Memo, Asst to Chief, Mat Div, for SW, 8 Sep

41, AFCF 161 CPFF.
400 BUYING AIRCRAFT

were of little use when the property had

been transferred to a remote subcontractor.

Property officers soon found they had

to build up elaborate record systems to

keep track of the elusive property assigned to their care. Since there were

frequently more than a hundred thousand separate items to follow, it began

to look as though every property officer

would need a vast corps of clerks to sustain him unless something were done

promptly to simplify the whole procedure. The nub of the difficulty was

conceptual. When they first set up the

system of accountability on fixed-fee contracts, the staff officers concerned used the

administrative tools they found ready at

hand—notably the procedures for military property accounting prescribed in

Army Regulations. Since the regulations

had stood the test of time, the decision

to use them seemed natural. Unfortunately, the Army system rested upon a

number of assumptions that simply did

not hold true in an industrial context.

A procedure geared to Army depots,

which maintained stock record cards on

every item, was not necessarily adequate

for the production lines at Willow Run,

where dozens of widely separated stockrooms had a turnover so rapid as to defy

simultaneous inventory returns. Disturbed by the numerous reports on the

failure of ever larger clerical staffs to

keep their property accounts up to date

and accurate, headquarters staff officers

reconsidered the whole question.66

Why keep property accounts at all? In

an Army depot such records were necessary in the absence of any others. But

was this true in a fixed-fee contractor's

plant? Since the terms of the contract

required the manufacturer to maintain

his own property accounts, why should

the resident representative or one of his

deputies build up a clerical empire at

government expense to compile records

almost exactly duplicating those kept by

the contractor—also at government expense? The logical solution finally

adopted was to leave the task of property accounting entirely to the manufacturer himself, confining the government's

property officer to the task of auditing

these records, spot checking them from

time to time to ensure compliance. Once

assured that the manufacturer's procedures were sound, the responsible officer could concentrate his energies on

those areas most subject to abuse.67

In property accounting, as in dollar

accounting, staff officers learned how difficult if not impossible it is to foresee all

the eventualities that operations might

turn up. Only experience revealed the

problems. It follows, then, that a staff is

most effective when it is most active in

garnering meaningful experience from

the operational front and distilling that

experience into directives. The wise

commander will see to it tha t his

staff strives unceasingly to perfect its

techniques for gathering significant lessons of the operating echelons and for66

 IOM, Asst Chief, Mat Div, for Chief, Mat Div,

2 Sep 41; Knudsen to Gen Brett, 31 Jul 41; Memo,

Asst to Chief, Mat Div, for SW, 8 Sep 41. All in

AFCF 161 CPFF.

67

 Relationship of the Contracting Officer to the

Accountable Property Officer, Lecture, by Maj R. H.

Demuth, AAF Contracting Officers School, WF, 16

Dec 44, WFHO. Evidence of the new concept of

property accounting may be found in TM-14-910,

16 Feb 43.
THE COST-PLUS-FIXED-FEE CONTRACT 401

mulates from these lessons useful generalizations on policy. But the problem

is not merely one of efficiently channeled information. A staff that could reflect at once broadly and sensitively the

infinite variety of experience encountered

along the operating front might still

promulgate unsound policy if it lacked

appropriate perspectives, if it failed to

see the problem at hand in its proper

conceptual framework. This kind of

shortcoming appears to have been the

cause for much of the difficulty that

plagued property officers on fixed-fee

contracts. So long as they continued to

handle their accountable items as though

they were Army property in a depot,

they floundered further and further into

deep water. But once they visualized the

problem in an entirely new frame of reference, then, armed with a good many

lessons from experience, they rapidly discovered practical solutions for their difficulties.

All of which is to say, perhaps somewhat paradoxically, that the effective

military staff is one which can get the

necessary information and then get above

it. Exploration of yet another aspect of

CPFF administration—the relationship of

prime contractors to their subcontractors—should confirm this contention.

The Relation of Primes to Subs

Among the many problems of administration raised in the wake of the fixedfee contract, certainly none proved more

challenging than the matter of purchasing by prime contractors. What did it

matter if the government's contract negotiators bargained skillfully and kept

down the total of estimated costs and

thus awarded correspondingly low fees

if the contractors had been permitted to

go out and buy freely from subcontractors with little or no regard for cost? To

ignore the prices paid to suppliers and

subcontractors on fixed-fee contracts was

tantamount to exercising meticulous care

in locking the gate while failing to build

a fence along the far side of the pasture.

The very first CPFF contract entered

by the air arm, the one with Packard,

brought the whole question of purchasing by prime contractors into sharp focus.68

 What, asked the Packard management, are the rights and obligations of

primes and subs in their relations with

one another? Though with so much at

stake—no less than the success or failure

of fixed-fee contracting in principle—one

might assume that procurement officials

would prescribe regulations on this point

in minute detail, the chief of the Contract Section at Wright Field resolutely

refused to rule on the matter. The

primes and subs, he believed, should decide for themselves just what the character of their association ought to be,

since this was "largely a matter of good

faith and sound business judgment."

While this declaration may appear to

have been a fatal abdication of responsibility, it actually represented a most

realistic appraisal of the situation. Procurement officials in Washington and at

Wright Field could not possibly know

the infinite variety of circumstances, the

special conditions, the trade or regional

practices that necessarily made virtually

every subcontract and every purchase

68

 Chief, Contract Sec, to Packard Motor Car Co.,

16 Oct 40, AFCF 333.1 Contract Inspection; IOM,

Chief, Contract Sec, for CGMC, 27 Jul 42, AFCF

161 CPFF.
402 BUYING AIRCRAFT

from suppliers or vendors a particular

case. To meddle would be to inject the

hand of government where it was least

competent at a time when the procurement staff at Wright Field was most

swamped with work.69

In short, when the air arm officials entered a contract, they expected to buy

not only the end products on order but

also the managerial skills of the contractors concerned. This was a fundamental

tenet in the procurement philosophy of

the air arm. Procurement officials insisted upon but one caveat: subcontracts

had to include a clause reserving the

right of audit to the government. This

would appear to have been a minimal

protection of the public interest, yet in

practice even this scant safeguard met

opposition.

The old-line firms of the aircraft industry raised no objection to government audits of their books. They had become accustomed to the practice, which

had been authorized ever since the Air

Corps Act of 1926. But subcontractors

were quite another matter. They took

a very dim view of any contractual obligation that permitted government auditors to prowl through their books even

if their work for a fixed-fee contractor

constituted only a small fraction of their

total volume of business. Their reluctance to open their books to investigators was not entirely without reason.70

Few indeed would protest the government's right to detect fraud, but the

contractual clause imposing the right of

audit upon subcontractors implied a

wider activity. It required that access be

granted to "any person designated by the

head of any executive department."

 71

This could mean agents of the Department of Justice on a fishing expedition

for evidence with which to prosecute

antitrust cases. To some extreme antiNew Deal businessmen the mandatory

audit clause seemed like an open invitation to prolabor administrators to hunt

evidence for use in the next round of

union negotiations. Whether or not the

fears were justified is beside the point;

insofar as they were believed, they operated to keep some firms from signing

as subcontractors under fixed-fee manufacturers.

At a time when numerous governmental agencies were making a tremendous

drive to enlist every bit of available productive capacity in the war effort, the

reluctance of the subcontractors to accept audit clauses was used as an argument to persuade air arm officials to drop

the troublesome requirements entirely.

This they could not do. If on the one

hand they insisted on freeing both prime

and sub from minute and detailed supervision in order to take the fullest advantage of the managerial skills inherent

in business, they certainly could not

then relinquish their right to be assured

that this freedom was exercised with

integrity.72

69

 For an effective statement of the air arm position, see Col Volandt to Contract Distribution Div,

OUSW, 12 Jan 42, AFCF 165 Classes of Contract. 70

 See, Roycraft Walsh, United Aircraft, to Chief,

Mat Div, 28 Mar 41, AFCF 161 Contract Requirements.

71

 See standard contract form, Article 23. Copy

filed with correspondence in AFCF 161 Contract Requirements. 72

 Asst to Chief, Mat Div, to United Aircraft, 1

Apr 41, and 4 Apr 41, AFCF 161 Contract Requirements. For an interesting instance of subcontractor

resistance to audit clauses, see W. N. Maguire (legal

representative for the bearing manufacturers) to

IPS, WF, 24 Oct 41, WF Contract files 360.01.
THE COST-PLUS-FIXED-FEE CONTRACT 403

For more than a year after the instrument came into use, fixed-fee contractors were left free, save for an after-thefact audit, to carry out their purchasing

programs as their best judgment dictated.

But just before Pearl Harbor, the practice came under severe fire from the General Accounting Office. In a series of

communications reflecting nothing less

than official horror, GAO auditors reported that they had recently begun to

receive a large number of vouchers on

which payments had been improperly

made. The vouchers, representing purchases by prime contractors, had not, the

GAO officials protested, been signed and

approved by the contracting officer before going out.73

 The Under Secretary's

office picked up the GAO charges and

repeated them: why indeed had air arm

procurement officials permitted this situation to arise? With no little irritation

and a sense of injured innocence, the

contract chief at Wright Field set out

to defend his policies.

In the first place, he pointed out, contracting officers were not required by

the terms of their contracts to give

prior approval to the purchases made

by primes. It might save a good deal

of time, he declared, if the GAO auditors would first read the contracts "they

so frequently seek to criticize." But the

complaints raised by GAO were not

merely a case of carelessness or misapprehension. They represented a totally

different philosophy of procurement

from that held by the air arm. This the

contract chief recognized. Implicit in

the criticisms made by GAO was the view

that the government should exercise a

close supervision and even a decisive

veto over every act of the contractor.

Such a policy was diametrically opposed

to the philosophy and practice of the

air arm. If the GAO view were to prevail, it would prove to be, so the contract chief asserted, "a most efficient

method" for ensuring "a total disruption" of the current procurement program.74

There were many reasons why air arm

officials were convinced that fixed-fee

manufacturers should never be required

to get prior approval from contracting

officers on all their purchases. To begin

with, in giving such approval a contracting officer would inject himself as a

party to the transaction and thus make

it difficult if not impossible for the government to find fault subsequently with

manner of its execution. Some shrewd

manufacturers recognized this opening

and actually urged the introduction of

some scheme calling for the prior official

approval of all contractor decisions.75

A second and probably the most important consideration moving against any

plan to provide for prior approval of all

purchases was none other than the circumstance that led to the adoption of

the policy in the first place—the air arm

simply did not have men qualified to do

the job.

Consider the veritable morass of detail in which a contracting officer would

flounder if he attempted to grant approval on all orders placed by primes. If

he were to grant more than a perfunc73

 Chief, Natl Defense Sec, GAO, to CofAC, n.d.

but received 6 Dec 41; IOM, Chief, Contract Sec, to

Chief, Mat Div, 21 Jan 42. Both in AFCF 161 CPFF.

74

 IOM, Chief, Contract Sec, for Chief, Mat Div,

12 Dec 41 and 21 Jan 42, AFCF 161 CPFF. 75

 IOM, Chief, Contract Sec, for CGMC, 27 Jul 42.

AFCF 161 CPFF.
404 BUYING AIRCRAFT

tory, pro forma approval, if he were to

protect the public's interest in fact, the

contracting officer would have to weigh

the merits of each order. Is the price

fair and reasonable? Is it the lowest

available? Can the subcontractor or vendor deliver on time? Questions such as

these would have to be asked and answered for each outgoing order.

Just how numerous the orders could

be is suggested by the roster of suppliers

for a single Curtiss-Wright contract.

There were 29 CPFF subcontractors in

all, 25 of them doing jobs involving

more than $100,000 each. There were 7

fixed-price subs. Some 25 orders were of

a type in which both purveyor and purchaser contributed to the design of the

item in question. There were approximately 1,300 orders issued to firms fabricating small items to specifications supplied by the prime contractor. And,

finally, there were about 2,000 purchase

orders sent out for standard hardware

items generally available in the open

market. In all, the typical airframe

manufacturer placed anywhere from

2,500 to 3,500 suborders on a single

contract.

Obviously, individual contracting officers did not have the information with

which to approve or disapprove prime

contractor purchases. To assemble such

a mass of data would require the services of a staff of skilled purchasing

agents, who were not available. And

even if they were to be found, the delays imposed while they did their work,

duplicating that of the manufacturer,

might well retard the whole procurement program by weeks or months.76

To put the matter bluntly, neither

the GAO auditors nor the officers in the

Under Secretary's office, who echoed the

GAO criticisms, fully grasped the nature of the problem in hand. But did

they merit the strictures hurled at them

by the contract chief at Wright Field?

The character of his criticisms can be understood if not entirely condoned when

it is recalled that his remarks were made

under dreadful stress in the weeks immediately following Pearl Harbor when

the procurement staff seemed to be fighting against utter collapse from fatigue,

and production seemed far more important than penny pinching. From the

vantage point of Wright Field, the GAO

staff did no doubt seem to consist of

pettifogging auditors, and headquarters

officers in Washington could at times be

most annoyingly ignorant of the situations they sought to control, but this was

no justification for excoriation. If the

auditors and headquarters staff officers

were unfamiliar with the facts, as inevitably they must be by the nature of the

administrative process, the task of subordinate echelons was not to complain but

to educate. And education is a continuing process, not an isolated act.

Instead of protesting at the blindness

or wrongheadedness of officialdom in

Washington, procurement officers at

Wright Field served far better when they

set out to explain—and explain again

and again when necessary—just why the

proposed scheme to require prior approval of all purchases made by fixedfee contractors was "administratively impossible." Headquarters officers were not,

at least for the most part, willfully blind;

they were usually quite willing to be

educated. When, for example, it was

76

 AFMC-4A to USW, 8 Aug 42, AFCF 333.1 Contract Inspection.
THE COST-PLUS-FIXED-FEE CONTRACT 405

explained to them that subcontract prices

could seldom be verified at face value

but had to be pursued down through

tier on tier of sub-subcontracts, they

could readily grasp the administrative

difficulties involved.77

Without question, the procurement

doctrine maintained at Wright Field had

much to commend it. The purchasing

organization could not exercise minute

supervision over a large segment of the

national economy even if it wished to

do so, since a staff adequate to the task

could never be mustered soon enough.

The alternative, it seemed, was to place

responsibility on the contractor, making

it a matter of contractual obligation,

subject to subsequent audit, for him to

exercise sound business judgment in all

his purchasing operations. Clearly this

practice assumed that each prime contractor would be fully staffed with

skilled and experienced purchasing

agents who were, as a matter of course,

capable of exercising sound business

judgment. In the rapid expansion that

characterized the wartime aircraft industry, however, virtually every old-line

firm had to spread its cadre of trained

men woefully thin. Even where they

recognized the difficulty, it was not easy

for manufacturers to do much about it.

The main problem of purchasing by

primes was not one of honesty but of

talent; along with the military services,

manufacturers found it extremely difficult to procure and train competent

purchasing agents.

After conceding that the air arm could

never hope to assemble a staff to verify

or countercheck all purchases before they

were made by fixed-fee contractors, it

did not necessarily follow that no such

checks should be undertaken. As a matter of fact, the very first instructions issued by the air arm for the administration of CPFF contracts had given this

point careful consideration. While prior

approval of the contracting officer for all

purchases was undesirable and indeed

impossible, it was nonetheless anticipated

that the officers administering a fixedfee contract would exercise a general supervisory function, spot checking from

time to time to be sure that the contractor was living up to his contractual

obligation.78

Occasional spot checking was something very different from requiring prior

approval on all purchases. The latter

course would impose an extra step in

the sequence of operations, a step leading outside of the manufacturer's own

chain of command, thus causing a substantial delay in the processing of orders;

spot checking could be accomplished by

leaning over the contractor's shoulder, so

to speak, inspecting his records in process without introducing delay by requiring the records to be regularly routed

through the contracting officer's hands.

In this respect at least, the original instructions issued by the air arm for the

administration of CPFF contracts were

intelligently drafted. Unfortunately,

they were not always explicitly obeyed.

If fixed-fee manufacturers found it

difficult to live up to their contractual

obligations for want of experienced staff,

77

 IOM, Chief, Contract Sec, to Chief, Mat Div, 3

Feb 42, and 2d Ind, Chief, Mat Div, to USW, 5 Mar

42, AFCF 165 Classes of Contract.

78

 Mat Div GO No. 11, 13 Dec 40 (WF), AFCF 161

CPFF. See also the preliminary version drafted in

Washington, Chief, Mat Div, to Asst Chief, Mat Div,

25 Nov 40, TI-425, AFCF 333.1 Contract Inspection.
406 BUYING AIRCRAFT

almost the same thing could be said of

those air arm officials concerned with

contract administration. It was all very

well to draw up orders prescribing a pattern of supervision for prime contractor

purchasing, but getting new, inexperienced, and badly harassed resident representatives to comply was quite another

matter. As might have been expected, a

number of abuses cropped up in the absence of adequate safeguards. Occasionally the auditors uncovered apparent

frauds, cases of duplicate billings, for example, which might have been detected

had contracting officers exercised a closer

supervision.79 But the mistakes in purchasing made by prime contractors were,

in the main, the consequence of haste,

ignorance, and inexperience. Sometimes

primes blundered into writing subcontracts embodying cost-plus-a-percentageof-cost (CPPC) features explicitly forbidden by law as a consequence of the

abuses under this type of instrument in

World War I.80 More often, auditors

found purchase orders that had gone out

before any effort at competitive bidding

or comparison of prices had been made.

Sometimes purchasing agents invited bids

or price quotations from several suppliers

on a first order and thereafter bought

from the same supplier without bothering to invite further quotations on repeat orders. A common practice was for

manufacturers to send out purchase orders saying "Advise price," leaving it to

the supplier to fill in the amount.81 Seldom did the records show that the air

arm resident representative had spot

checked a prime's purchases as contemplated in the command's administrative

instructions to be certain that the manufacturer's purchasing agents were actually employing sound procedures.82

Surely some sort of middle ground

could be found between those who favored a 100-percent prior approval by

the contracting officer on every purchase

by primes and those who argued that

such a course was not only administratively impossible but worked to the government's disadvantage. Under Secretary Patterson himself took an interest

in the question and offered a common

sense suggestion: while fixed-fee contractors did place thousands of individual orders on each contract, by far the

greater dollar volume was attributable to

a very small number of major subcontractors. If 100-percent prior approval

was not possible and perhaps not even

desirable, there was nothing to prevent

contracting officers from insisting upon

prior approval of all major subcontracts

entered by fixed-fee manufacturers.83

79

 See, for example, MC Intelligence Rpt on possible conspiracy to defraud U.S. Govt, 23 Dec 43,

AFCF 004 American Design . . . (Bulky). 80

 TI-1055, 31 Mar 42, AFCF 165 Classes of Contract. 81

 CPFF Administration, Lecture by Demuth.

Typical examples of the slack that can creep into

unsupervised purchasing by primes: material received over or short the quantity invoiced or the

quantity ordered; sales tax not deducted; invoice

price not the same as purchase order price; invoice

cash discount not same shown on purchase order,

etc. Maj Friedman, IGD, to IG, 4 Nov 41, AFCF

333.1. 82

 Col S. H. Ellison, IGD, to IG, 6 Nov 42, AFCF

333.1 Boeing. For extensive discussion of this problem, see Rpt, Inspection of Procurement Operations

at Wright Field, Lt Col Friedman, IGD, to IG, 11

Nov 43, with 2d Ind, Hq AAF to IG, 12 Jan 44, AFCF

333.1 Inspection (Bulky). 83

 Memo, USW for Gen Echols, 7 Apr 42, AFCF

165 Classes of Contract; Memo, CGMC, for Brig

Gen A. W. Vanaman, 29 Jun 42, AFCF 333.5 Investigation of Contracts.
THE COST-PLUS-FIXED-FEE CONTRACT 407

The Under Secretary's proposal set the

pattern the Materiel Command ultimately adopted. Since 100-percent prior

approval was impossible and spot checking by the resident military administrators was not working out in practice, the

more or less obvious solution was to improve the machinery for spot checking.

The original instructions for the administration of CPFF contracts were amended

to establish special price analysis groups

in each procurement district headquarters to be sent into the various manufacturing facilities of the district. Here

they could survey the contractor's purchasing procedures for general suitability and spot check them in operation for

satisfactory compliance.84

Although a thoroughgoing price analysis of even a few purchases made by a

single fixed-fee contractor could absorb

the energies of the district price analysis

team for weeks on end, there were a

number of relatively simple checks that

could quickly be made in a large number of cases. Even a cursory survey of

purchase orders would show whether or

not the manufacturer's agents were actually taking advantage of every available discount for ordering in quantity,

discount for paying cash, or allowance

for salvage. Sometimes a quick phone

call would reveal whether or not a vendor was supplying the same item to another user at a lower figure. Similarly,

it was relatively easy to check the quantities of a given item placed on order by

a manufacturer with the quantities he

specified in the bill of materials submitted with his original estimate. Discrepancies here could mean that a manufacturer was surreptitiously buying materials on his fixed-fee contract to use on

his regular fixed-price jobs.

Because of the acute shortage of men

with accounting or production experience, it was several months before each

of the procurement districts could round

up staffs of ten to twenty competent individuals.85

 Once the teams began to

function, they saved the government far

more than they cost. While no grand

totals are available to demonstrate this

point, it may be indicative of the vast

potential savings possible to cite a few

of the cases handled. One team of price

analysts saved the government $72,000

by spotting a single hitherto neglected

discount on a high volume purchase. Another team scrutinized a selected group

of orders intensively for several months

and found savings amounting to about

$210,000 on a face value of $750,000.

Occasionally the price analysts caught up

with a 100-percent middleman, one who

signed a subcontract with no intention

of performing the work and then subsubcontracted the entire job to someone

else, rendering no legitimate service whatsoever.86

 To eliminate practices of this

84

 MC FO Memo 34 (subsequently reissued as 40),

10 Jul 42, AFCF 333.5 Investigation of Contracts.

85

 Since primes in each procurement district

bought from subs in virtually every other district

across the nation, administration of price analysis

raised some difficult problems. See Capt I. D. Harris,

Dist Contracting Officer, to CGMC, 31 Jul 42, AFCF

333.1 Contract Inspection. Different districts approached the problems of organizing price analysis

teams in different ways with striking variations in

effectiveness. For discussion, see TWX, Vanaman

to Echols, TEX-T-577, 1 Aug 42, AFCF 161 CPFF,

and IOM, CofS, Mat Center, to CGMC, 1 Oct 42,

AFCF 161 Renegotiation. 86

 IOM, Chief, Proc Div, for CGMC, 12 Mar 43,

AFCF 333.1 Misc.
408 BUYING AIRCRAFT

sort was, of course, pure gain for the

government.

All in all the district price analysis

scheme worked out admirably. The use

of analysts did not free the fixed-fee contractor from his legal obligation to exercise sound business judgment in making

purchases, nor did it slow down the manufacturer's operations by injecting extra

steps in the sequence of his purchasing

operations. On the other hand, by specializing in price analysis work, the teams

employed soon acquired a competence

that made their efforts far more effective

than the part-time efforts of a resident

contracting officer could ever hope to be.

Perhaps the most enduring contribution of the price analysts lay in the field

of procedure. For example, one group

drew up a bid summary form requiring

the buyer to list for each purchase the

bids invited, the replies received, and the

basis on which the award was made to a

particular firm. An appropriate space on

the form induced the manufacturer to

indicate just when he had last surveyed

the supplier's plant to be sure that adequate capacity was available and that the

supplier was capable of maintaining the

desired standard of workmanship.87 Simple administrative tools of this sort did

not solve all the problems of purchasing

by fixed-fee contractors, but they simplified the job substantially by showing up

the trouble spots.

Other analysts devised equally useful

administrative tools. For example, by

making manufacturers cite the page, date,

and title of a supplier's catalogue when

they substantiated a purchase order with

the caption "catalogue price," analysts

found they gave company buyers a decided check against carelessness and at

the same time simplified the task of verification for themselves. Similarly, by

requiring all subcontractors to certify officially that they did not sell the same

item to any other user at a lower price,

analysts discovered an easy way to spot

hitherto unsuspected price differentials.88

Although the problem of checking

purchases by fixed-fee manufacturers was

but one of many significant facets in the

administration of CPFF contracts, it nevertheless offers an unusual opportunity to

investigate some of the fundamental difficulties of command on the matériel

front. In retrospect it seems clear that

the various officials who sought to work

out effective procedures for dealing with

fixed-fee contracts fell into two groups

expressing rather divergent philosophies

of administration. For convenience,

these rival schools of thought may be

identified as those favoring a contractual approach to administration and those

who preferred a supervisory approach.

Both deserve careful attention.

The advocates of the contractual ap87

 Prime contractors preoccupied with their own

problems often failed to make adequate surveys to

ascertain whether or not their subs and suppliers

were bona fide concerns qualified to fill the orders

placed with them. In February 1944 a leading airframe builder who had been lax in this respect

finally uncovered one audacious character who had

signed a subcontract with the firm and then contrived to get himself hired as a production worker

so that he could carry semifinished parts into the

plant, machine them on company time, then carry

them home to be delivered back to the firm in his

capacity as subcontractor. Rpt of Study on CurtissBuffalo, 8 Jul 44, AFCF 004 Bulky.

88

 Lecture, Administration of Letter Contracts, by

Maj L. S. Robinson, AAF Contracting Officers School,

WF, 18 Dec 44, WFHO. See also, CPFF Administration, Lecture by Demuth.
THE COST-PLUS-FIXED-FEE CONTRACT 409

proach to procurement administration—

a view most often expressed by procurement officials at Wright Field—took the

position that the most effective means of

procurement was to sign a contract and

then leave the manufacturer more or less

free to get results. This was a legal or

instrumental approach. It was founded

upon the old military axiom that without authority over means one should not

be held responsible for results. To require military approval of a contractor's

purchases or to impose restraints on his

selection of subcontractors, some procurement officers argued, would not only

force the government to duplicate many

of the contractor's administrative functions but would also deny the businessman the free exercise of his managerial

authority. In effect, this would amount

to holding manufacturers responsible

for results while curtailing their executive freedom. The best way to protect

the public's interest, these officers contended, was to write appropriate clauses

into a manufacturer's contract and then

leave him free within these written

stipulations.

The advantages in the contractual approach to contract administration should

be evident, but its disadvantages must

not be overlooked. While it did free

the contracting officer from the awkward

task of matching his business acumen

against that of the manufacturer on every

purchase made and every subcontract entered, the contractual approach to administration was entirely too inflexible.

When using it, one had to assume that a

contracting officer could anticipate every

significant eventuality and write appropriate clauses in the contract to deal with

each. Of course no such assumption

could be made. Even the most prescient

negotiators could not possibly foresee

the infinite variety of problems that experience would reveal.

On the other hand, the advocates of

the supervisory approach to contract administration favored a tight rein. They

wanted a close and personal supervision

of every move made by the contractor

with the government's money. Procurement officers at Wright Field, under constant pressure for results in the form of

airplanes rolling off the production line,

were inclined to regard the supervisory

approach as characteristically bureaucratic, something one might expect of

officials remote from the practical problems encountered at the level of operations. And indeed it was the pennycounting auditors of the Comptroller

General who most insistently called for

closer supervision of fixed-fee manufacturers' purchasing operations. Nonetheless, there was considerable merit to

the contentions of the supervisory school

of thought.

To extract the maximum in initiative

and aggressiveness from private enterprise, the manufacturer must be left as

free as possible from detailed supervision. Yet it is equally clear that the contractual instrument is in itself an inadequate safeguard of the public interest,

even when provided with backstops in

the form of audits. On-the-spot military

supervision is essential in fixed-fee contracts. To be sure, supervision that attempts to duplicate the manufacturer's

decision-making role is patently harmful,

yet it is evident that ad hoc, spot-checking supervision by a contracting officer

genuinely capable of exercising discretion is imperative if the government's in-
410 BUYING AIRCRAFT

terests are to be preserved in fixed-fee

contracts.

In wartime, neither the procurement

officials at Wright Field nor the staff officers in Washington were much inclined

to theorize on procurement doctrine or

to promulgate philosophies of administration. Of necessity they were concerned with immediate results. The

pressure of events seldom afforded them

opportunities to stand back from their

work to take in the grand panorama.

In retrospect it becomes clear that both

the contractual approach and the supervisory approach had merit. Effective

administration of fixed-fee contracts requires a skillful combination of the two,

exploiting the best potentialities of

each. But what is the proper admixture? Here lies the challenge of command; the balance must be decided

anew not only to suit the requirements

of the ever-changing economy in which

contracts are written, but also to accommodate the endless variety of special

circumstances that make virtually every

contract a unique undertaking. There

may be cold comfort in the observation,

but it is nonetheless interesting to note

that in Britain the Ministry of Aircraft

Production faced this very same question. And there, too, the solution was

found, as in this country, by trial and

error, pragmatic groping, as experience

revealed the full complexity of the problem in practice—at best an expensive

undertaking.89

Expensive experience may well be the

necessary route to understanding, but if

the lessons of experience are fully absorbed, even heavy dollar costs may be

justified. Sometimes, however, experience bought at the most prodigious expense refuses to yield any really clear

lesson for the instruction of the future.

This seems to have been the case with

CPFF contracting in principle. Was the

fixed-fee instrument necessary? Was it

economical? Was it really less economical than the fixed-price contract? Procurement officials under the critical scrutiny of congressional watchdogs would

like clear-cut and emphatic answers to

questions such as these. Just why they

have never been entirely gratified is explained by the War Department effort

to rewrite all fixed-fee instruments in

conventional fixed-price form.

The Conversion of Fixed-Fee

Contracts

From the moment Congress first approved the use of CPFF contracts in the

summer of 1940, the officially stated position of the War Department held that

CPFF contracts would be applied only

where absolutely necessary—only as a

last resort where a multitude of unknowns made the drawing of a conventional fixed-price contract unfeasible.

While admitting that the instrument

was highly desirable and even essential

for emergency use, military spokesmen

were usually careful to accompany this

contention with a catalogue of reasons

why its general application would be objectionable. It offered no strong incentive to economy and efficiency; the least

efficient contractor could be paid the

same percentage in fee as the most efficient. Since contractors were in keen

competition with one another for la89

 W. Ashworth, Contracts and Finance (London,

1953), pp. 98-101.
THE COST-PLUS-FIXED-FEE CONTRACT 411

bor, materials, and tools, they could be

entirely irresponsible in paying higher

prices and higher wages and then pass

the increased costs along to the government. With the government footing all

material bills, a contractor could pile up

excessively large inventories as a hedge

against future shortages yet never suffer

from tied up working capital, the normal restraint operating against this kind

of abuse. Finally, as procurement officers repeatedly pointed out, fixed-fee

contracts were both difficult and costly

to administer.90

As is so often the case, however, stated

policy and actual practice were two entirely different things. While the various procurement officials who reiterated

official strictures against CPFF contracts

were undoubtedly sincere, the fact remains that, during the first year the

fixed-fee form was in use, it accounted

for nearly half the money obligated by

the War Department. Approximately

the same thing could be said for all air

arm supply contracts written before

Pearl Harbor.91 Since Congress had authorized the use of fixed-fee contracts in

the first place only with the greatest reluctance, to many legislators this disparity between professions of policy and

actual performance called for corrective

action.92

The harassing fire of criticism to

which the fixed-fee instrument had been

subjected all along became violent

rather abruptly in the summer of 1942

when the House Committee on Military

Affairs issued a highly critical report.

The time had come, the committee declared, when the military contractors'

"honeymoon at the expense of the taxpayers" must end. The Army Air Forces

was especially singled out for censure.

The committee claimed to have found

evidence of "reckless expenditure" in

connection with fixed-fee contracts for

air matériel.93 Statements of this sort

made excellent headlines for the tabloids but left air arm procurement officials in a difficult position.

While generous in condemnation, the

report was rather scanty in documentation. In denouncing CPFF procurement

the report made no distinction between

construction and supply contracts. Actually, different instruments were used

for the two purposes, building camps

and bases on the one hand and procuring munitions on the other. No one

would deny that some abuses were sure

to exist under every kind of contractual instrument, but for all its denunciations the committee report did not

cite a single instance of waste or excessive cost in the administration of Air

Forces fixed-fee supply contracts. This

placed procurement officials in a most

uncomfortable spot, since vague and

general charges made refutation impossible and gave no leads for corrective

action.94

90

 Flexible Pricing in Fixed Price Contracts, Lecture by Dinkelspiel. See also, ASF Purchases Div,

Purchasing Policies and Practices, pp. 235-36. 91

 Annual report of the Under Secretary of War,

30 Jun 41, p. 29; and ASF Purchases Div, Purchasing

Policies and Practices, p. 265. 92

 Smith, The Army and Economic Mobilization,

pp. 302-10. This account contains a valuable survey

of the War Department response to the conversion

problem.

93

 R&R, Brig Gen T. H. Hanley to AFAMC, 24

Jul 42, AFCF 161 CPFF. 94

 Memo by MC Contract Sec on H.R. 2272 (July

24, 1942), 11 Aug 42, AFCF 333.5 Investigation of

Contracts.
412 BUYING AIRCRAFT

The net impression left by the committee report was most unfortunate.

The errors of the few branded the many.

Worse yet, a useful and even necessary

contractual instrument was discredited

without reference to its particular merits; its "fixed-fee" character received less

emphasis than its "cost-plus" features,

which evoked so many memories of the

notorious cost-plus-a-percentage-of-cost

contracts of World War I. A bad press

was serious enough if it induced congressmen beyond the confines of the

Military Affairs Committee to condemn

the CPFF instrument out of hand, but

it was no less harmful if it misled the

public at large. Air arm officers learned

to their chagrin not long afterward just

how far such damage could extend in

an encounter with an official working on

Air Forces cases for the War Labor

Board: he did not realize that there was

any difference at all between the CPFF

form and the outlawed CPPC contract.95

As a consequence of the unfavorable

publicity, the War Department was under heavy pressure to curtail future use

of the fixed-fee form of procurement regardless of its merits or its capacity for

improvement. This pressure was passed

on to the AAF in a directive ordering

conversion of existing fixed-fee contracts

wherever possible and prohibiting use

of the instrument in any future contract

with very few exceptions. Dutifully the

Contract Section at Wright Field wrote

all its fixed-fee contractors urging them

to begin planning for conversion. A

month slipped by, but none of the contractors showed much if any inclination

to move. Somewhat petulantly the contract chief scolded the manufacturers for

showing more interest in how to get the

maximum allowable fee than in ways

and means of effecting rapid conversions

to lump-sum contracts.96 It began to be

clear that the switch from a fixed-fee to

a fixed-price basis was a lot easier to propose than to execute.

As a matter of general policy when

writing CPFF contracts, air arm procurement officers tried to induce manufacturers to accept a clause calling for

conversion to a fixed-price footing at

some predetermined point, usually after

40 percent of the items on order had

been delivered. But even where a manufacturer had consented to the inclusion

of such a clause in his original contract,

it did not force him to accept any particular lump sum as a fixed-price contract, nor for that matter did it obligate

him to reach any agreement at all. The

conversion clause only required a manufacturer to bargain in good faith; it had

no teeth. There could be none, for there

was no way of knowing at the time of

signing the contract what the unit costs

would prove to be when 40 percent of

the deliveries were completed. If such

costs could be determined prospectively,

there would be no occasion for entering

a CPFF contract in the first place since

this was precisely the kind of information that would have made possible the

use of conventional fixed-price contracts.

About all a conversion clause could do

was to exert a moral pressure on a man95

 Gen Arnold to Wilson, WPB, 4 Nov 43, AFCF

452.01-D.

96

 Memo, OUSW (AF Liaison Officer) for CGMC,

17 Sep 42, AFCF 161 CPFF; Chief, Contract Sec, WF,

to manufacturers holding fixed-fee contracts, 14 Nov

42, AFCF 161 Contract Regulations.
THE COST-PLUS-FIXED-FEE CONTRACT 413

ufacturer to try to reach an agreement

on a lump-sum contract at the designated

time on the basis of the information on

costs accumulated by that time.97

The manufacturers' resistance to conversion was certainly not captious nor

was it merely selfish. They had many

valid objections to the War Department

effort to convert existing fixed-fee contracts to fixed-price contracts. Of greatest significance were the many unknowns

still plaguing many fixed-fee contractors

long after they had reached the designated switch-over point.

Probably the most elusive factor inhibiting an orderly estimate of costs was

the matter of design change. The demands of war made the introduction of

modifications in design an unavoidable

necessity. These modifications were totally unpredictable; in any single contract literally thousands of them might

prove necessary. For the most part, modifications involved only slight changes

readily introduced in the production

line without serious dislocation. Some,

however, required a redesign of major

components. On occasion this could

lead to the scrapping of millions of dollars' worth of previously completed assemblies and the complete revision of

large numbers of jigs, fixtures, and

tools, not only in the prime contractor's

plant but also in a multitude of subcontractors' factories. Obviously, modifications of this sort were costly. Under

a conventional fixed-price contract the

introduction of a modification of any

considerable size required the negotiation of a supplemental contract with all

its occasions for wrangling, delay, misunderstanding, and disagreement. On

the other hand, with a CPFF contract,

modifications could be absorbed in almost unlimited number without special

negotiation.

Another unknown that continued to

militate against a firm projection of costs

was the element of labor. As manufacturers in the aircraft industry were

forced to recruit increasing numbers of

inexperienced workers, they found their

wage bills correspondingly harder to anticipate. Training costs were difficult to

estimate, labor productivity proved erratic, and a high rate of turnover further complicated calculations.98

The advantages of the CPFF contract

as a substitute for working capital constituted yet another reason why manufacturers continued to favor this instrument over the more conventional type.

Every one of the nation's major aircraft

manufacturers had been induced to undertake a volume of war business in

marked disproportion to his capital

structure. As a consequence each had

reason to fear lest a small error in estimating costs wipe out the firm's entire

capital. With monthly payrolls in some

instances approaching original capitalization, manufacturers were hard put to

meet current obligations. Advance or

partial payments and V-loans (government-guaranteed loans) minimized this

objection, but the arrangements were

less expeditious and therefore less attractive to manufacturers than the rou97

 Flexible Pricing in Fixed Price Contracts, Lecture by Dinkelspiel.

98

 For an elaborate explanation of the factors militating against conversions, see Gen Arnold to Wilson,

WPB, 4 Nov 43, AFCF 452.01-D.
414 BUYING AIRCRAFT

tine payment of cost vouchers under a

CPFF contract.99

Not least among the objections raised

by manufacturers protesting the conversion of fixed-fee contracts were those

stemming from fears regarding the attitude of the General Accounting Office.

The Comptroller General repeatedly refused to regard conversion agreements

signed by the Air Forces as final. Consequently with good reason contractors

feared there would be retroactive disallowances that would upset the arrangements so laboriously made and produce

destructive losses.100

The fixed-fee contractors were not the

only ones to see objections to the conversion program. From the AAF point

of view, the very same factors that led to

the reluctant use of the CPFF form in the

first place continued to operate against

any uniform policy of conversion across

the board to fixed-price arrangements.

To write a really watertight fixed-price

contract, government negotiators had to

be in a position to arrive at a price high

enough to provide the manufacturer

with a fair profit yet low enough to

force him to be efficient in all his operations. Since there continued to be a

great number of unknowns that persisted

well along in the life of many fixed-fee

contracts, it often proved impossible to

compute a close price when undertaking

to effect a conversion. With the immense volume of war orders stretching

production schedules on single contracts

over as much as twenty-four months,

manufacturers invited to enter fixedprice contracts had no alternative but to

include heavy contingency allowances to

cover possible future increases in labor

and material costs.101

The fear of catastrophic losses stemming from abrupt termination of contracts gave manufacturers another incentive for insisting upon further

allowances when negotiations were afoot

to set the price in a fixed-price contract.

Until Congress passed appropriate termination legislation and administrative

procedures were worked out to ensure

its functioning, contractors contemplating conversions were inclined to demand

generous provision in the fixed price to

cover such contingencies as inventory

losses and the costs of delays in the settlement of claims arising from termination. Doubtlessly the memory of the

chaotic terminations following World

War I did much to condition attitudes

on this point.

In short, AAF officials realized that

there was no use in converting fixedfee contracts into fixed-price contracts

if the manufacturers concerned insisted

on umbrella pricing. If the lump sum

agreed upon were inflated with sums

inserted as protection against every possible contingency, then the whole purpose of conversion would be defeated.102

The net result of the many considerations weighing against conversion was

that very few were made. The annual

report of the Procurement Division for

1944 hopefully noted that there were 99

 TWX, Contract Sec, WF, to Chief, Mat Div,

22 Mar 41, AFCF TWX file, Cong-T-471; North

American Aviation, Brief History, 1945, WFHO, Research Materials. 100

 Smith, The Army and Economic Mobilization,

p. 305.

101

 One possible exception to this generalization

was the escalator clause. See below, pp. 422-28. 102

 Gen Arnold to Wilson, WPB, 4 Nov 43, AFCF

452.01-D.
THE COST-PLUS-FIXED-FEE CONTRACT 415

"only 67" firms still holding fixed-fee

contracts with the Air Forces. This was

disingenuous, to say the least, since

among them the 67 concerns held 218

fixed-fee contracts involving a face value

of some $21,500,000,000, or approximately 70 percent of all airframe contracts and 50 percent of all engine contracts.103

 Nonetheless, the unimpressive

record of accomplishment reflected no

lack of co-operation on the part of AAF

officials looking to the widespread conversion of air arm contracts from a fixedfee to a fixed-price basis; the simple fact

was that such an operation presented

formidable obstacles.

Broadly speaking, there were three

different ways of approaching the job of

conversion, each subject to serious administrative difficulties. The first alternative was to compromise, letting existing fixed-fee contracts run to completion

without change while writing all followon contracts for added quantities of end

items only on a fixed-price basis. Such

a course avoided the normal headaches

of conversion but introduced troubles

of another sort. The simultaneous operation of two production lines in the

same plant under different contracts

raised a host of problems on allowable

costs.104 Moreover, the exigencies of production were such that employees borrowed parts from one contract for another with cavalier disregard for

accountability. As a consequence, the

obligation to maintain separate inventories for each type of contract imposed

heavy clerical costs. By way of illustration, when the North American plant at

Dallas put both its contracts there on a

fixed-price basis, the company was able

to lay off as many as 1,800 employees

who had been engaged in property accounting and inventory work.105

A second technique of conversion

from fixed-fee to a fixed-price footing

was to take a physical inventory and

start off on the new contract with a

clean slate. Unfortunately, it was found

that such an inventory was all but impossible to conduct while a plant continued to operate. The only feasible

course was to shut down production.

When Curtiss-Wright pursued this

course to convert to fixed-price contracts

at the request of the Air Forces in several plants, an eleven-day shutdown resulted—clearly an intolerable interruption in the midst of a war. If for no

other reason, an inventory shutdown was

not feasible because of the protests it

engendered from the representatives of

various labor groups.

The third technique of conversion,

the one most frequently used by the Air

Forces, was to go back to the beginning

of the contract and assume that it had

been a fixed-price arrangement all along

with each paid voucher treated as an advance payment. After cutting off the fee

to cover only work already completed,

the negotiators then tried to establish a

fixed price to cover the undelivered portion of the contract. Naturally all subcontractors on a CPFF basis had to be

converted before the prime contractor

could be considered. It takes little im- 103

 Annual Rpt, Proc Div, ATSC, WF, 1944, WFHO

Research Materials; Negotiation and Administration

of Contracts, Lecture by Scarff; Proc Statistics, Lecture by Tyson. 104

 See above, pp. 379ff.

105

 Negotiation and Administration of Contracts,

Lecture by Scarff.
416 BUYING AIRCRAFT

agination to visualize the staggering accounting problems involved in such a

conversion. When the Fisher B-29 contract was changed to a fixed-price one, it

took 200 girls two weeks just to type up

the record of the transaction. The end

result was a stack of papers fourteen feet

high. Only manufacturers with large

and highly trained accounting staffs

could handle tasks of such dimensions.

And during most of the war aircraft

manufacturers simply did not have accounting organizations capable of this

effort.

All the evidence in the record makes

it clear that inadequate cost accounting

lay at the root of most of the conversion

difficulties. Few if any of the airframe

manufacturers entered the war with costaccounting staffs that could meet the demands imposed by CPFF contracting.

"When we entered our contract," lamented one aircraft manufacturer, "we

had no idea of the tremendous amount

of accounting involved." Nor, he added,

did anyone else.106 This was substantially true for the responsible officials in

the air arm as well as for most manufacturers.107

Even after they came to recognize the

vital importance of adequate accounting, both industry and the AAF were

hard put to obtain a sufficient number

of trained accountants to compile the

cost studies absolutely necessary in any

attempt to convert fixed-fee contracts.

Draft boards found it almost impossible

to understand that accountants might be

as important to the efficient conduct of

the war as skilled mechanics.108 The

subject of accounting manpower and its

proper utilization requires further study

before any final conclusions can be

drawn, but it may just be that the tendency to ignore the importance of "mere

bookkeepers" constituted an Achilles

heel in the over-all procurement effort.

Not until December 1943 did the Air

Forces manage to effect a single major

conversion, and this one, the North

American B-24 contract at Dallas, was

accomplished with the full and willing

co-operation of the manufacturer. During 1944 a substantial number of conversions were completed, but relatively

few were large dollar-volume contracts,

and each required what the negotiators

described as Herculean efforts. Experience revealed that even the smaller contracts required the unremitting effort of

as many as half a dozen skilled negotiators for a matter of weeks to complete

a conversion. Not the least of the reasons for the poor showing of the Air

Forces in effecting conversions was the

scarcity of negotiators. With the regular staff entirely absorbed in writing new

contracts to meet the continuing demands of the war, it is hardly surprising

that existing fixed-fee contracts were allowed to drift along without revision.109

From time to time critics in and out

of Congress were inclined to ask why

the Air Forces did not try to combine

the advantages of the fixed-fee and fixedprice contracts in a single form. Whether

106

 J. R. Kauffmann to Col Volandt, 30 Sep 42,

AFCF 161 CPFF. 107

 For a revealing indication of this, see Executive Accountant, AC, to Chief, Fiscal Div, 9 Dec 41,

AFCF 132.2 Audits.

108

 Gen Arnold to Wilson, WPB, 4 Nov 43, AFCF

452.01-D. 109

 Negotiation and Administration of Contracts,

Lecture by Scarff. ASF Purchases Div, Purchasing

Policies and Practices, p. 233.
THE COST-PLUS-FIXED-FEE CONTRACT 417

described as incentive contracts, targetprice contracts, or bonus contracts, all

the proposals amounted to much the

same thing. If the contractor could hold

his actual costs under the estimated cost

(determined after a trial run), he could

share in the savings in the form of an

addition to his fee; if he ran over the

estimated cost, he would be penalized

by a reduction in fee. Although the

Procurement Regulations contained a

boiler plate form to be used in drafting

such a contract, air arm procurement

officers made no use of it during the

war. Attractive as the scheme may appear in theory, it suffered from a fatal

defect—it required an even more elaborate system of cost accounting than did

the unmodified form of fixed-fee contract actually employed during the war.

The heart of the problem was in fixing

the initial estimated cost. An inaccurate

estimate would reward or penalize a

manufacturer on an utterly fictitious basis. Moreover, even if the parties could

agree on a cost estimate, the introduction of modifications would still lead to

endless difficulties. In addition, contractors would be under a greater than ever

pressure to dispute the allocation of overhead and the contracting officer's decisions on allowable costs.110

At least until better accounting practices could be applied, incentive or

target-price contracts were clearly less

desirable than the existing fixed-fee

contract form used by the Air Forces.

Nevertheless, the record of British experience suggests that, with appropriate

accounting, the bonus scheme could be

used with good effect to stimulate the

economical use of resources by fixed-fee

manufacturers.111

As the complexity of converting CPFF

contracts became more apparent with

each passing month, Air Forces procurement officials began to experience grave

doubts about the fixed-price contract itself as a panacea.112

 In one of the very

first conversions accomplished, the unit

cost under the final fixed-price agreement turned out to be somewhat higher

than it had been in the original fixedfee contract. Admittedly, this particular

instance reflected a rather special set of

circumstances, but it was nevertheless

disturbing to those who had hitherto

assumed without question the inherent

superiority of the fixed-fee form of procurement.113

 The record of CPFF conversions undertaken in World War I,

had it been available, might have shed

a great many insights on this problem

and could have provided forewarning

on the dangers involved. However, for

all practical purposes that valuable body

of experience was not readily accessible.

Once again the officials confronted with

the issue had to blunder painfully while

trying to amass enough information on

the comparative merits of fixed-fee and

110

 ASF Purchases Div, Purchasing Policies and

Practices, pp. 278-79. See also, 8 Federal Register

5210, April 21, 1943.

111

 The British Ministry of Supply found it effective to equate fees to production rather than to

estimated cost to secure maximum incentives. See

Rpt of Secy, Army, Foreign Logistical Organizations

and Methods, 1947, p. 163. See also, Bonus Schemes

and Target Price Mechanisms Employed in British

Armament Procurement Contracts by W. S. Lacey,

NDAC, 4 Dec 40, AFCF 161 Contract Regulations. 112

 ASF Purchases Div, Purchasing Policies and

Practices, p. 246. 113

 Chief, Contract Sec, WF, to Chief, Mat Div,

28 Jan 42, AFCF 161 CPFF.
418 BUYING AIRCRAFT

fixed-price contracts to derive sound

policy.114

An argument often raised against the

CPFF form of contract was that it lacked

incentives. The manufacturer collected

his fee or profit no matter how inefficient

he may have been. This conception of

the instrument is incorrect. The fixed

fee was not a guaranteed profit; it was

a predetermined maximum up to which

a manufacturer could push his earnings.

Fees were not paid out in lump sums

but in increments geared to the contractor's rate of production. The faster he

delivered the end items on order, the

sooner he collected his total fee. The

faster a manufacturer completed a contract and collected his fee, the sooner he

could take on another contract and begin earning another fee.

Patently, then, the fixed-fee form was

not devoid of the profit incentives of the

conventional contracts. But to talk only

of profit incentives was to miss the central point. Although in Congress and

in the press the subject of profits captured by far the larger share of headlines, in terms of the total dollar cost

of air power, profits ranked well down

in the roster of expenses. Of infinitely

greater concern should have been the

incentives to the economical use of resources—manpower, materials, facilities,

and so on. Why be so concerned with

6 percent of profits while virtually ignoring the other 94 percent of price?

Without question, a tightly negotiated

fixed-price contract tended to exert a

greater pressure on a manufacturer to

make the most efficient use of his resources than did a fixed-fee contract in

which he could pass most of his costs

along to the government. But to determine a close price on a conventional

contract, the government's negotiators

had to have a great many detailed figures on costs at their disposal. If such

figures were available, there would be

no need to resort to the fixed-fee form

at all. Thus it is idle to compare the

respective merits of an efficiently drawn

and closely priced conventional or lumpsum contract and a fixed-fee contract,

which by its very nature is only for use

where the facts necessary for close pricing are not available. A more appropriate comparison is to pit the fixed-fee

contract with its admitted shortcomings

against a fixed-price contract drawn in

the dark, without detailed information

—without facts—and therefore almost of

necessity padded with heavy contingency

allowances insisted upon by contractors

understandably anxious to save themselves from loss.

When procurement officers at Wright

Field looked back over the record of

wartime contracting they found a confusing pattern. Some fixed-price contractors showed a better record of efficiency and lower unit costs than their

competitors working under fixed-fee

contracts. On the other hand, there

were instances where exactly the reverse

was true. For example, Studebaker, with

a CPFF contract, turned in a lower unit

cost than did Wright Aeronautical under a fixed-price contract, when both

firms were producing the same engine.

But, in fairness to the firms involved,

it should be pointed out that there were

far too many variables present to permit any direct comparisons.115

 Differ114

 Interv with Mr. Schwinn, 25 Jul 55.

115

 Flexible Pricing in Fixed Price Contracts, Lecture by Dinkelspiel.
THE COST-PLUS-FIXED-FEE CONTRACT 419

ences in tooling, availability of skilled

labor, the timing of design changes and

the like, all conspired to defy easy generalizations. Perhaps the only generalization that could be safely made was that

the evidence did not weigh definitively

for or against either type of contract.

Each contract had its advantages and

disadvantages contingent upon the circumstances to which it was applied.

The absence of a clear decision as to

whether the fixed-fee or fixed-price form

was superior did not mean that the experience of the war years produced no

conclusions whatsoever on the topic.

Those procurement officials who studied

the subject most intensively concluded

that CPFF contracts were probably essential, especially in the early phases of

an emergency, and their use should continue to be authorized. By imposing a

rigorous system of accounting from the

very beginning of every CPFF contract

entered, the whole problem of subsequent conversion to a fixed-price basis

could be simplified if not actually made

mandatory at a predetermined point.116

In short, when properly administered,

the fixed-fee contract, which permits a

more detailed supervision by the government, was certainly to be preferred

to umbrella pricing or a fixed-price contract written without sufficient information at hand to prevent the inclusion

of unjustified contingency allowances.

That air arm procurement officials favored the continued use of CPFF contracts should occasion no surprise. Even

before the instrument had been strengthened by closer administration and improved accounting procedures, they had

urged its use as a necessity of war. Far

more significant, it would seem, was the

appearance of some shift in opinions on

Capitol Hill. Congress had authorized

the fixed-fee contract only with the greatest reluctance, and all through the war

individual congressmen repeatedly

sought to terminate its use. Some even

offered bills looking specifically to that

end. Nonetheless, by the end of 1944,

after careful study a Senate subcommittee reported:

The form of the contract is not the decisive

factor in determining the efficiency or inefficiency with which manpower, materials,

and machinery are put to use in war production. In fact, we found many situations

where highly effective operations were being

conducted under Cost Plus Fixed Fee con- tracts and where any other form of contract

would have contributed to inefficiency.117

A single subcommittee does not speak

for the Senate and certainly not for the

Congress as a whole, but the omen was

favorable. It showed what experience

had so often revealed before: when a

group of conscientious congressmen are

shown the facts in full perspective, they

will legislate soundly on highly technical questions. But the lesson should be

clear: the congressmen must be informed. If procurement officials wish to

operate within workable statutes, they

must see to it that the facts in the record

of experience are not only available but

readily accessible. While this was particularly true with respect to the rival

116

 See especially, ASF Purchases Div, Purchasing

Policies and Practices, p. 286.

117

 Year-End Rpt of the War Contracts Subcom

to the Com on Military Affairs pursuant to S Res 8,

18 Dec 44, p. 1, quoted in Smith, The Army and

Economic Mobilization, p. 306.
420 BUYING AIRCRAFT

claims of the fixed-fee and fixed-price

forms of contract, it was no less essential in all the other facets of contracting

subject to statutory regulation. Certainly of equal importance in this regard was the whole subject of the redetermination of price, a veritablerevolution in the canons of contract law.
CHAPTER XVII

Price Adjustment

Although most of the discussion thus

far has concerned only two forms of procurement contracts—the fixed price and

the cost plus fixed fee—there was a large

middle ground between the two that

embodied neither the rigidly fixed price

of the conventional contract nor the

risk-absorbing cost-plus character of the

form authorized for use during the emergency. The in-between type of contract

cannot be identified by any particular

label or neat package of terminology.

This middle ground was occupied by

contracts based on an initial fixed price

but containing price-adjustment features

—contradictory as the description may

seem.

In many ways the fixed-price contract with price adjustment features was

merely the other side of the coin represented by the fixed-fee contract with

bonus or incentive clauses added. The

former provided incentives in principle

and then added devices to minimize

risks; the latter minimized risks in principle and then sought to add incentives

for efficiency. Each approached the same

goal, but from a different direction.

Both foundered over the same two shortcomings: inadequate accounting and inability to predict the future.

The evolution of price adjustment

features in air arm contracts accurately

reflects the ebb and flow of social and

political pressures besetting the nation

during the years of crisis. In the period

before Pearl Harbor, as long as air arm

officials continued to think and act along

the rigid lines of peacetime buying, aircraft manufacturers continually agitated

for the inclusion of escalator clauses in

their production contracts. They had

good reason to do so. The threat of war

and then war in Europe had a most unsettling effect upon the economy of the

nation; wages and material prices showed

a disconcerting tendency to move upward erratically and unexpectedly.

When air arm buyers insisted on writing fixed-price contracts, the manufacturers felt they had to get whatever protection they could by means of escalator

clauses drafted to cover fluctuations in

the heaviest elements of their costs.

Here price adjustment was primarily designed for the relief of the contractor.

After Pearl Harbor the problem of

price adjustment assumed an entirely

different character. Speed of production had a higher priority than economy.

More and more frequently procurement

officers resorted to CPFF contracts or

sought to hasten the signing of fixed-price

contracts by granting umbrella prices

sufficiently high to allay fears manufacturers might entertain about hidden

costs and possible losses. By 1942 the

inevitable harvest of this policy became
422 BUYING AIRCRAFT

a subject of public concern. One manufacturer after another realized abnormally high profits as the contingencies

allowed for in the contract prices failed

to materialize. In such cases, price adjustment, which is to say adjustment

downward, was required in the public

interest.

Escalator Clauses

During 1939 so many aircraft manufacturers began to express an interest in

including escalator clauses in their production contracts that they presented

an industry-wide proposal through their

trade organization, the Aircraft Chamber of Commerce. The formula they

suggested to make adjustments in material and labor costs according to changes

in the published indices of the Departments of Labor and Commerce looked,

on first glance, like an exercise in

higher mathematics:

Actually the formula is readily understood: M equals materials; L, labor; P,

profit; and X, the adjusted or corrected

price. I stands for the published material index at the time of repricing, i for

the index at the time the contract was

signed. I' and i' stands for the corresponding indices for labor. The 80 percent figure was an arbitrary weighting

assigned to overhead or indirect labor.

Applied every 60 days, the formula

promised relief from unforeseen contingencies and fluctuations in prices that

were fretting a number of aircraft contractors.1

Apparently the Chief of the Air Corps

Materiel Division was not losing any

sleep over threatened price increases.

He found it "extremely improbable"

that labor and material costs, as fixed

at the time of contracting, would "fluctuate materially" before the completion

of deliveries. Evidently he was thinking

exclusively in terms of the tiny job lot

orders for aircraft that had characterized

so much of Air Corps procurement in

the between-war years. The tendency

to look only backward seemed to extend

to foreign affairs as well as domestic, for

the division chief went on to say that

"in the absence of a drastic economic

upheaval, such fluctuations would be

negligible." Many newspaper readers at

the time might have been inclined to

suggest that the course of events gave

every sign of a drastic economic upheaval in the very near future.2

The acting Chief of the Air Corps

mirrored the myopia of the Materiel

Division when in May 1939 he wrote to

the Assistant Secretary of War urging

rejection of the escalator proposal. In

addition, he contributed an objection of

his own: the administration of aircraft

procurement contracts was already "sufficiently complex" without introducing

1

 ACC to ASW, 20 Apr 39, with Incls, AFCF 161

Contract Regulations. 2

 1st Ind, Mat Div to CofAC, 24 May 39, AFCF

161 Contract Regulations. Even the facts were

wrong in the Materiel Division staff paper reporting

that the Navy was not using escalators in aircraft

contracts. Actually, the Bureau of Aeronautics had

begun to write escalator clauses three months earlier.

See Memo, Adm Towers for Gen Arnold, 13 Sep 39,

AFCF 161 Contract Regulations.
PRICE ADJUSTMENT 423

additional clauses unless they were decidedly in the government's interest.3

Contract negotiators in the Navy's

Bureau of Aeronautics took an entirely

different tack. They used escalator

clauses for a brief trial period with positive results. On the basis of this evidence they included similar clauses in

all subsequent production contracts.4

The Navy's decision in favor of escalator clauses forced the War Department

to follow suit. To have done otherwise

would have put Air Corps negotiators

at a decided disadvantage when bargaining with manufacturers at a time when

the competition between the services

for facilities was becoming increasingly

acute. As a consequence, the Chief of

the Air Corps was forced to reverse his

position and accept escalator clauses as

a necessity.

While there were advantages to be

gained from using escalator clauses there

were also disadvantages. Closer pricing

was the most obvious benefit anticipated.

Manufacturers with contracts including

options for large numbers of aircraft

would no longer feel under such heavy

compulsion to include contingency allowances against the unknown cost increases of the future. Then, too, Air

Corps officers recognized that in begging

for the inclusion of escalator clauses, the

aircraft manufacturers were of necessity

condemning themselves to an extremely

burdensome chore of detailed cost accounting. The accurate cost figures essential to the computation of the escalators would also be of very real value to

air arm procurement officers in future

contract negotiations. Had the procurement officers tried to make the preparation of such data a requirement in every

production contract, the manufacturers

would have resisted, but of their own

volition the manufacturers were accepting responsibility in a most involved

area of accounting. When the accounting system subsequently proved both

costly and difficult, the manufacturers

were hardly in a position to protest.

On the negative side, escalator clauses

suffered from a number of administrative defects. Existing law prohibited

contracts incurring obligations beyond

the sums available in current appropriations. Since an escalator constituted

an open-end or uncertain obligation,

the only legal way to apply it was to

write in a maximum or cut-off figure

beyond which the escalator would not

ride. This involved tying up large sums

of appropriated monies on the off chance

that the escalator would ride up to its

maximum allowable amount. Another

objection raised was that manufacturers

would no longer buy all their materials

in bulk directly after signing a contract,

thus losing the customary economies of

quantity procurement. Still more important was the expressed fear that it

might prove difficult in practice to get

useful index figures for labor and material costs. As events were to prove,

the last foreboding was entirely justified.5

When the Air Corps' negotiators ac3

 Memo, Actg CofAC for ASW, 27 May 39, AFCF

161 Contract Regulations. 4

 Memo, Adm Towers for Gen Arnold, 13 Sep 39,

AFCF 161 Contract Regulations.

5

 Memo, CofAC for ASW, 5 Oct 39, AFCF 161

Contract Regulations.
424 BUYING AIRCRAFT

tually sat down with the manufacturers'

representatives during the trying months

of crisis in 1940 and tried to write contracts containing escalator clauses, the

dreadful turn of events in Europe placed

them in a poor position to bargain effectively. Their backs were to the wall;

they had to have aircraft. They could

not wait, and a number of manufacturers

were quite prepared to take full advantage of this opportunity. If only those

in command had shown a little more

initiative in directing their staffs to hammer out the escalator clause as a workable instrument before the emergency

had arrived, they would have been in a

stronger position in their hour of desperation. As it turned out, they had to

flounder about by trial and error, attempting to evolve an intricate contractual clause under pressure, since they

were subject to criticism at the time if

they failed to place orders for airplanes

with the utmost speed and were equally

open to criticism later if they failed to

drive close bargains in their negotiations.

Finding suitable indices on which to

base escalator clauses proved to be the

crux of the problem. The material

price index presented no serious difficulty, but hourly wage rates were another matter. Air Corps officials wished

to use a broad-based index that would

accurately reflect any general movement

in the wage structure of the national

economy and thus protect aircraft manufacturers from increases in cost entirely

beyond their control. On the other

hand, the manufacturers preferred a local index. They were in the midst of a

drive by labor unions to organize their

plants and wanted to be protected

against any wage increases they might

have to grant, so they asked for an index

based on the wage levels prevailing in

their own communities. Needless to say,

the negotiators resisted this move since

it would encourage irresponsible wage

increases by manufacturers in hot competition for a limited pool of skilled aircraft workers. When a number of leading aircraft manufacturers proved adamant on the point, air arm procurement

officials had to relent and accept a compromise. They agreed to a labor escalator clause in aircraft production contracts based on the wage index published

by the Bureau of Labor Statistics (BLS)

for the aircraft industry.6

The compromise was not a happy one.

The wage index published by BLS for

the aircraft industry was actually a very

narrow base on which to adjust escalators. Since some 18 or 20 major firms

more or less constituted the aircraft industry, wage concessions by one or two

leaders in the group were enough to tip

the index. This was obviously unsound;

the escalator became rather too directly

responsive to wage decisions made by

individual manufacturers.

Worse yet, use of the aircraft industry

index placed the Air Corps out of step

with the Navy. Negotiators for the Bureau of Aeronautics had built their escalators upon the BLS index of average

hourly earnings in the durable goods

manufacturing industries of the United

States, a broadly based index patently

not directly subject to the pressure of

6

 TWX, Cont-T-518, Contract Sec, WF, to Contract Sec, OCAC, 7 Mar 41; Memo, Asst to Chief,

Mat Div, for ASW, undated, with 1st Ind, OASW to

CofAC, 13 Mar 41. Both in AFCF 161 Contract

Regulations.
PRICE ADJUSTMENT 425

any individual concern.7 Despite frequent protestations by the two services

that they maintained a high degree of

co-ordination in procurement matters,

here was compelling evidence to the contrary. The Air Corps had accepted the

use of escalator clauses in the first place

only to keep pace with the Navy but had

failed to maintain a united front with

the Navy in its dealings with industry.

When it began to appear that air arm

negotiators had been badly outmaneuvered at the bargaining table, the Under

Secretary of War ordered corrective action. In the future, he directed, they

were to tie all escalator clauses to the

durable goods index used by the Navy.

Further, he wished all existing escalator

clauses to be rewritten to reflect the new

policy.8

Climbing out of the hole into which

they had dug themselves proved embarrassing to the officers involved. To be

sure, about half the manufacturers concerned recognized the merits of the durable goods index and readily accepted

the change-over. The remaining firms

refused to do so. As one of them pointed

out, between mid-February and midMay the durable goods hourly wage index had gone up only two-thirds of one

percent. In the same period, the aircraft industry index rose 4.6 percent.

The manufacturer's own wage rates had

increased 6.1 percent. Since a change

to the durable goods index would leave

him in a less desirable position than

before, he was not inclined to regard his

unwillingness to change indices as unpatriotic conduct.9

When confronted with resistance on

the part of nearly a dozen major manufacturers, the chief of the Contract Section, on whom the task of changing the

indices fell, discovered that a successful

resolution of the matter was virtually

impossible. To make the best of a bad

job, he recommended amending the contracts of all those manufacturers who

were willing to accept the durable goods

index; the contracts of the others he

would let run as written, even if they

were of an inflationary character.10 This

course may have been the only practicable one, but it was nonetheless blatantly inequitable. In essence it

amounted to penalizing those who cooperated willingly while rewarding the

holdouts. At best such a policy could

only have harmful long-run effects,

Manufacturers would be led to infer

that it was better to be hard-boiled than

to be fair minded when negotiating with

the Air Corps.

The fiasco encountered in the first

trial of escalator clauses by the Air

Corps precipitated a decision by the

Assistant Secretary of War to work out

a really viable clause for general use in

War Department contracts. In circulating drafts for discussion and comments,

OASW staff officers uncovered many objections to the whole mechanism that

might far better have been learned during the peacetime years had the escalator clause been tried then on a small

scale in order to search out some of its 7

 J. D. Biggers, Chairman, OPA Tax and Finance

Com, to ASW, 20 Feb 41, AFCF 161 Contract Regulations. 8

 Memo, OUSW for CofAC, 6 Mar 41, AFCF 161

Contract Regulations.

9

 IOM, Chief, Contract Sec, for Chief, Mat Div,

OCAC, 15 May 41, with Incls, AFCF 161 Contract

Regulations. 10

 Ibid.
426 BUYING AIRCRAFT

inherent difficulties. For example, operation of the escalator clause presupposed

the existence of an accurate inventory

by the participating contractor. Few if

any aircraft builders could begin to present such a record, and certainly none

would be willing to shut down a production line for a week or more to take

an inventory, nor would such a course

have been to the advantage of the Air

Corps.

Another objection to the escalator

clause was that it would tend to negate

an important incentive feature built into

fixed-price aircraft production contracts

by air arm negotiators. This was the

practice of plotting costs along an assumed learner curve projected across the

life of a contract. The negotiators allowed relatively high costs in the early

periods of the curve and progressively

lower payments thereafter. Thus contractors were given a powerful incentive

to speed production in order to increase

the number of units delivered during

the period when a higher rate of return

was authorized. The escalator clause

proposed by OASW was conceived in

such a way that the increase it granted

would cancel out the decreases indicated

on the learner curve assumed by the

negotiators.

The most serious objection raised

over the proposed escalator clause, however, was that it appeared to impose excessive administrative burdens. Even the

President of the Aeronautical Chamber

of Commerce, speaking for the industry

as a whole, had come to recognize this,

admitting that it was based upon archaic

accounting theory. In view of the earlier comments of air arm officers on the

problems of accounting, this was something of the pot calling the kettle black.

It was not the fault of the military buyers that escalators might require a great

deal of accounting—it was inherent in the

contractual device itself.

Even so, the escalator clause, as contrived, seemed to ignore a whole series

of vital considerations. It purported to

cover increases in the cost of materials,

but what are materials? The clause defined materials subject to escalation as

anything going into the end item. But

what about jigs and fixtures or tooling?

Modifications late in the life of a contract could require many thousands of

dollars of expenditure for costly tool

steels and the like. Were these not to

be protected by escalators too?

The treatment of labor in the proposed escalator was similarly deceptive.

The clause as drafted would authorize

escalation only for direct labor costs, yet

most manufacturers knew from experience that the line between direct and

indirect labor on an aircraft was extremely difficult to draw. Furthermore,

insofar as indirect labor (guards, clerks,

production expediters, and so on) was

subject to collective bargaining, the

manufacturer had as much need for escalation here as in the case of direct

labor.11

A further cataloguing of the obstacles

encountered in drafting a truly workable escalator clause would serve little

purpose. Suffice it to say, to many both

in industry and in the procurement services, the difficulties to be encountered in

11

 Memo, OUSW for CofAC et al., 14 Mar 41, and

reply, IOM, Asst Chief, Mat Div, WF, for Chief,

Mat Div, OCAC, 22 Mar 41, AFCF 161 Contract

Regulations.
PRICE ADJUSTMENT 427

administering escalators seemed to outweigh the advantages. Since this was

true with respect to prime contractors,

it was even more so when applied to

subcontractors, who protested outspokenly against the prohibitive accounting costs necessarily entailed. Air

arm officers had never been enthusiastic

about the use of escalator clauses, but

by the time of Pearl Harbor they had

come to feel that their use might actually prove more harmful than helpful.

If manufacturers disagreed with the

choice of index or feared that hidden

administrative costs might arise when

applying them, they would find means

in one way or another to inflate their

initial cost estimates to cover themselves.

In so doing they would more than offset

the gains anticipated by the government

in the form of close pricing or realistic

initial estimates of costs.12

The air arm continued to use escalator clauses to a limited extent in 1942

and thereafter, but following Pearl Harbor the question became largely academic. Increased payments adjusted

according to the escalator formula were

generally made only at the completion

of a contract. With the spare parts portion of some airframe contracts running

on for as much as two years, final settlements were often unreasonably delayed.

Moreover, the whole process became absurd when both the manufacturer and

the government tied up valuable negotiators in computing payments under

escalator clauses while most of the manufacturers were at the very same time

making refunds to the government from

excess profits. In their final mutation,

the escalator clauses used by the Air

Forces dropped the formula or index

approach in favor of ad hoc redetermination of price. Which is to say, escalation gave place to repricing by negotiation.13

Despite many failures, the foray into

escalation was not in vain. Even where

the clauses used had been badly drawn,

if their application helped allay the

manufacturers' fears of catastrophic loss,

especially during the summer of 1940,

and thereby hastened the nation's defense, escalation was worth the trouble

involved. In retrospect, many of the

manufacturers' fears proved groundless,

but this does not mean that the anguish

of the manufacturers at the moment of

signing was any less real. Perhaps no

one who has not himself sat down to

sign a multimillion dollar fixed-price

contract in a period of economic upheaval can ever really appreciate the

psychological advantage of escalator

clauses to those who expected so much

from their use.

One final observation remains to be

made. Taken all together, the many

administrative difficulties that plagued

every effort to apply escalator clauses effectively spell out a major reason why

the air arm felt compelled to resort to

the cost-plus-fixed-fee form of procurement for such a large portion of its total

dollar outlay. When seen against the

perspective of the ill-fated escalator 12

 Memo, OUSW for CofAC et al., 17 Sep 41; R&R,

Fiscal Div to Mat Div, 14 Oct 41; Jouett to USW,

27 Nov 41; Memo, C. J. Little, Glenn L. Martin,

for Exec Officer, Legal Branch, Purchases Div, SOS,

8 Sep 42. All in AFCF 161 Contract Regulations.

13

 IOM, Chief, Proc Div to Chief, Price Adjustment Office, WF, 2 Nov 43, AFCF 161 Renegotiation;

Flexible Pricing in Fixed Price Contracts, Lecture

by Dinkelspiel.
428 BUYING AIRCRAFT

clauses, the heavy reliance of the air arm

on fixed-fee contracts during the war is

more easily understood.

Excess Profits and Voluntary

Refunds

With the use of escalators demonstrated to be administratively cumbersome and the use of cost-plus-fixed-fee

contracts still officially frowned upon,

the air arm necessarily turned to the

conventional lump-sum or fixed-price

form of contract for the vast majority of

contracts entered. Unfortunately, for

want of adequate information with

which to achieve close prices, air arm

buyers frequently had to approve contracts they suspected but could not prove

to be inflated with abnormally high contingency allowances—"fib factors" as

some jocular negotiators called them.

The inevitable consequence of this kind

of buying was soon apparent. In the

weeks immediately before Pearl Harbor, one manufacturer after another realized excess profits of surprising magnitude.

Not all excess profits were the result

of faulty initial pricing. Even where

the negotiators had done an excellent

job on the basis of the facts available at

the time, lower costs resulting from the

substitution of nonstrategic materials,

refinements in production techniques,

improved labor efficiency, and the economies generally stemming from larger

orders or longer production runs all

combined to yield lower unit costs and

unanticipated profits. But whatever may

have been the ultimate reason for the

unusual earnings in any particular case,

the mere existence of abnormal profit

levels in public contracts called for corrective action.

One means of recovering excess profits

was to rely on voluntary refunds. In

some instances patriotic manufacturers

actually took the initiative in suggesting

refunds. One airframe builder, for example, late in 1941 volunteered a reduction of $14,000,000 across the board on

the firm's outstanding business.14 More

often than not, however, the voluntary

refunds were made at the suggestion of

air arm officials, whose studies showed

where heavy profits were piling up. Although those manufacturers who responded to the prodding deserve credit

for their co-operation, the record makes

it quite evident that at least some of

those who complied did so in the hope

that they would receive correspondingly

favorable treatment in subsequent negotiations.15

 Whether or not any scheme

of voluntary refunds would have proved

successful on a large scale as a technique

of profit control is now impossible to

say, because, before the voluntary refund program was fairly under way,

Congress stepped in with a major piece

of legislation authorizing compulsory

renegotiation of contracts where excess

profits were evident.

Statutory Renegotiation

The decision of Congress to legislate

against excess profits came as a direct

consequence of the unsavory details

14

 North American Aviation, Brief History, p. 123,

copy in WFHO files. 15

 IOM, Chief, Contract Sec, WF, for CGMC, 26

Sep 42, and related correspondence, AFCF 400.19;

Negotiation and Administration of Contracts, Lecture by Scarff.
PRICE ADJUSTMENT 429

found by a House committee investigating war contracts. Undoubtedly the

most notorious case of profiteering disclosed by the congressmen was that of

Jack and Heintz, Inc., a Cleveland firm

newly organized to manufacture aircraft

engine starters and other accessories. By

charging $750 for starters actually costing about $292 to produce and resisting

every suggestion of price reduction, the

firm in short order piled up spectacular

profits. By the time this company's record of fantastic profits and fabulous employee bonus payments—$40,000 to the

owner's private secretary, for example—

had been aired, Congress was in a mood

to crack down on profiteering with punitive legislation.16

The Renegotiation Act, as the congressional profit curb came to be called,

actually appeared in the form of an

amendment tacked on to an appropriation measure.17

 In essence, it empowered the heads of departments to compel

contractors to renegotiate contract prices

wherever unconscionable profits appeared to exist. The law carried teeth

too. If a contractor refused to agree on

a revised price by renegotiation, the appropriate department head could make

a unilateral decision binding on the contractor concerned. Future contracts in

excess of $100,000 with both sub and

prime contractors were required to include a renegotiation clause, but the act

permitted renegotiation in contracts of

any size when excessive profits appeared

to be present.

The Organization for Renegotiation

To carry out the stipulations of the

1942 Renegotiation Act, the Secretary of

War created a Price Adjustment Board

within the War Department. This

agency not only laid down policy and

formulated procedures but served as a

kind of referee, reviewing determinations made by officers in the several services within the Army to whom the detailed work had been delegated. On

occasion, when the size, complexity, or

novelty of a contract seemed to warrant

such action, the board itself conducted

the renegotiation proceedings, though

the bulk of the task fell to the service

staffs established for that purpose.

In the Air Forces a Price Adjustment

Section located at Wright Field carried

out the work of renegotiation. In short

order this group encountered some trying problems of co-ordination.18

 The

Contract Section at Wright Field, it will

be recalled, already had a Cost Analysis

Branch as one of its component units.

Since price adjustment and cost analysis

groups each conducted cost studies of

selected contracts, it might appear that

the newly added unit was a needless

duplication. Both groups did deal in

contractor costs, but they approached the

subject from different angles. The primary objective of the Contract Section

and its subordinate Cost Analysis Branch

16

 Vinson, Chairman, Naval Affairs Investigating

Com, to SW, 25 Mar 42, AFCF 333.5 Investigation of

Contracts. For a fuller account of this episode, see

Smith, The Army and Economic Mobilization, pp.

351ff. 17

 Sixth Supplemental National Defense Act, April

28, 1942, Public 528, 77th Cong, 2d sess, sec. 403, title

IV.

18

 MC TI-1258 with addendum 1, 16 Sep 42, AFCF

161 Renegotiation; McMurtrie, Hist of AAF MC:

1942, pp. 101-03.
430 BUYING AIRCRAFT

was to negotiate contracts and thus get

production as soon as possible. The implicit objective of the Price Adjustment

Section was to prevent the accumulation

of excess profits. The two groups therefore pulled in more or less opposite directions, and the decision to set them up as

separate entities followed organizational

doctrine in aligning form to function.

To have done otherwise would almost

inevitably have compromised one or another of the objectives sought.

Separate organizations for contracting

and renegotiation at Wright Field were

doubtlessly necessary to ensure an appropriate singleness of purpose in the pursuit of these different ends. But this very

separation made the task of co-ordination

doubly difficult. To avoid needless reworking of a contractor's books, the Price

Adjustment staff had to take pains to exploit the findings of the Cost Analysis

Branch to the utmost. The same was

true of the data compiled by the Contract

Audit Section of the Fiscal Division as

well as the Legal Branch of the Contract

Section. So long as renegotiation operations were conducted at Wright Field,

this kind of co-ordination could be maintained at a high level of effectiveness.

When the several procurement districts

established price adjustment sections,

however, and began to handle the renegotiations delegated to them, co-ordination proved rather more difficult to

achieve.19

Decentralization of renegotiation to

the districts threw the whole problem of

co-ordination into focus. District price

adjustment staffs would plunge into the

record of an individual contract only to

discover that a balanced view of the profit

picture found there would require an

appraisal of the firm's total business volume. Where this included contracts with

the Navy or other governmental agencies,

the renegotiators were blocked, since the

organization established under the 1942

act envisioned the Price Adjustment

Board of each department as a separate

entity. During 1944 Congress rectified

this weakness by creating a single War

Contracts Price Adjustment Board with

jurisdiction over the departmental

boards to handle just such cases.

The creation of a single, centralized

War Contracts Price Adjustment Board

may have solved some problems, but it

generated new ones. Where manufacturers held contracts with two or more

services, the board proposed to assign the

work of renegotiation to the service with

the dominant dollar interest. This appeared logical enough, but such an obvious course had its drawback. An Air

Forces price adjustment officer pointed

out that in many instances the air arm

renegotiation team members had worked

long and hard not only to acquire an intimate knowledge of a manufacturer's special problems and the idiosyncrasies of

his accounting methods but also to establish a close and friendly rapport with the

company personnel. In assigning renegotiations to one or another of the services by formula on the basis of dollar

volume, the board would ignore and perhaps lose the advantage of the delicate

and useful relationship already established. The board subsequently did de19

 Deputy Chief, Price Adjustment Sec, to WDPAB,

10 Dec 43, AFCF 161 Renegotiation; Lecture, Statutory Renegotiation, by Maj S. L. M. McCorskey, AAF

Contracting Officers School, WF, Winter 1944-45,

WFHO.
PRICE ADJUSTMENT 431

velop an elaborate procedure of assignment.20

The lesson for administrators was obvious: a standing operating procedure may

be easy to use and may by its very nature

imply an equity that places the responsible official beyond reproach, but it is no

substitute for the exercise of discretion

based on common sense and a careful appraisal of the evidence in hand for a particular case.

The Administration of Renegotiation

From the outset the directives issued

by the War Department of the subject of

price adjustment reflected a deliberate

intention to rely heavily upon common

sense. Since detailed audits and cost

studies on thousands of individual contracts would be virtually impossible administratively, renegotiators were instructed to consider each contractor's

total business for a whole year then leave

him a "reasonable" return, offsetting

whatever losses may have been incurred

against profits taken. The main objective was to get "uninterrupted, efficient,

and maximum production at a minimum

cost" rather than to try to squeeze out the

"last increment of possible excess profit."

To this end the individual officers concerned were admonished to take a "practical and realistic view" of their work.

They were to maintain a "firm but

friendly" attitude, and to try to make

each final determination a matter of mutual agreement.

Although Congress passed the Renegotiation Act of 1942 in a punitive spirit

and provided coercions for use in recalcitrant cases, the War Department took

the position that the overwhelming majority of contractors had no wish to retain

excessive profits. Moreover, the existence of such profits, the departmental

directive was careful to observe, did not

constitute prima-facie evidence of wrong

doing since manufacturers working on

novel items or in unusually large quantities could in all innocence miscalculate

costs by a wide margin. The directive

was emphatic in ordering renegotiators

at all echelons to make every effort to sell

the price adjustment program as a constructive step in the best interests of the

industry. The return of abnormal profits would help contractors maintain good

public relations by avoiding the nasty

charge of profiteering. Renegotiation

that worked toward closer pricing would

provide an incentive to efficiency, which

would leave contractors in better condition to meet the rigors of postwar competition. And by the same token, every

official step that held down the cost of the

war would redound to the advantage of

industry by retarding inflation and lowering taxes.21

The mere promulgation of a directive

at headquarters did not ensure compliance at the fringe of operations. However farsighted and well thought out the

departmental directive may have been, it

would remain a dead letter until it could

be sold effectively—sold to the officers

who could be expected to apply it to the

contractors affected. The officers assigned

20

 Chief, Price Adjustment Br, Control Office,

MM&D, to Price Adjustment Office, MC, 13 Jan 44,

AFCF 161 Renegotiation. See also, Smith, The Army

and Economic Mobilization, p. 363.

21

 Memo, Col Browning for Maurice Karker, Chairman, WDPAB, 8 Aug 42; WDPAB: Principles, Policy

and Procedure To Be Followed in Renegotiation,

mimeographed instructions, 10 Aug 42, revised 20

Nov 42. Both in AFCF 161 Renegotiation.
432 BUYING AIRCRAFT

to this task showed a good deal of imagination and no little insight in contriving

methods to be sure that the official policies actually did pass on down the line.

The problem in hand was essentially

one of how best to communicate the

spirit in which the law was to be administered. It was easy enough to draw up a

directive telling who was to do what and

when, but official directives have a way

of falling short when it comes to expressing the mood or the attitude intended by

those in authority. One clever remedy

dreamed up by an Air Forces officer to

meet this difficulty was to make use of

the testimony on the profits question

given by the Under Secretary before a

congressional committee.22 Reprints of

this testimony could be sent not only to

interested officers but to the president of

each company about to be subjected to

renegotiation. Inasmuch as the Under

Secretary's remarks explored the full

range of the topic and expressed at length

the philosophy behind the department's

stand, they served as an ideal supplement

to the official renegotiation directive.

The suggestion had particular merit because copies were immediately available

from the Government Printing Office

without the delays that would have been

unavoidable in any attempt to prepare an

explanatory pamphlet from scratch.

The need for communicating top level

policy on renegotiation downward was a

continuing one. The law itself was repeatedly amended, and as the renegotiation process embraced more and more

contractors, the need for passing the word

grew correspondingly. To this end Air

Forces officers resorted to a number of

ingenious expedients. They circulated

the script of a radio debate on renegotiation and compiled rosters of officers whose

experience with the subject qualified

them to speak before industry groups

whenever an appropriate occasion presented itself. In time a great many articles on renegotiation began to appear

in various media. Taken all together,

the literature presented a highly instructive cross section of ideas and experience

on the price adjustment process, but inasmuch as some of the best articles appeared in trade journals and other similar

publications not readily available to a

wide public, AAF officers undertook to

compile and circulate reproduced copies

of these articles to interested persons.23

A general bibliography of articles on renegotiation was yet another useful administrative tool employed.

The importance of communicating the

spirit as well as the letter of the Renegotiation Act would be hard to understate.

The very concept of compulsory renegotiation marked a radical departure from

conventional business and legal practice.

In its way, the 1942 act threatened to be

no less significant than the original federal income tax legislation of 1913, for it

opened administrative vistas down which

even the most farsighted businessman

could not see with certainty. While

fair-minded men might agree that excessive profits should be recaptured by the

government, they might honestly disagree

on the definition of what was "excessive"

and question the methods used to deter22

 Lt Col C. H. Dyson, AFAMC, to Price Adjustment Sec, MC, 20 Oct 42, AFCF 161 Renegotiation.

23

 Actg Chief, Price Adjustment Office, to ACofAS

MM&D, 20 Jun 43; Chief, Price Adjustment Br,

MM&D, to CGMC, 20 Sep 43; AFMM&D to CGMC,

1 Jan 44. All in AFCF 161 Renegotiation.
PRICE ADJUSTMENT 433

mine precisely what constituted a profit.

Thus, even the most patriotic contractors

who approved profit curbs in principle

might be inclined to regard the approach

of the renegotiators with concern, if not

with suspicion. It was highly important

for the price adjustment staffs to make

sure that these fears were minimized by a

full exposition of the departmental policy

on renegotiation. They succeeded only

imperfectly, for the response of the contractors ran the whole gamut from downright refusal to gratifyingly friendly cooperation.

Only a very few firms really resisted

renegotiation. Some raised objections to

the text of the renegotiation clause, suggested alternatives, and then finally

capitulated. In one procurement district, many refusals to co-operate stemmed

from the activities of a single law firm,

which seems to have specialized in drumming up renegotiation cases. Adamant

resistance to renegotiation, however,

was rare.24

At the other extreme were manufacturers who proved almost too willing to

renegotiate. In one case, a firm was refused the privilege of renegotiating despite its request to do so. In this instance

the Department of Justice had a criminal

action pending against the company in

question and felt that a refund of excessive profits might prove fatal to the government's case by prejudicing the jury.

An equally bizarre exception was the corporation that reported a return of 14.1

percent profit on sales only to be told by

the renegotiators working on its books

that because of an accounting error the

margin was only 4.5 percent—scarcely an

excessive profit.25

Excessive profits did not necessarily

connote a greedy or dishonest management. Conveying a realization of this

idea to industry was of the utmost importance, for once the point was made, contractors could co-operate freely without

feeling they were on the defensive. By

way of illustration, consider the case of

an Air Forces contractor fabricating a

tiny item of standard hardware much favored by the leading airframe builders.

The outbreak of war literally swamped

the small firm with orders. After a

number of months of production, procurement officials discovered signs of abnormal profits; on some orders the manufacturer seemed to be making over 50

percent on sales. On the surface this

looked like ruthless gouging, but investigation proved otherwise.

The contractor willingly agreed to

lower his prices and even to do so retroactively. He was willing in spirit but

weak in facts. The truth was, he simply

did not have an adequate cost accounting

system to tell him where he stood. This

was typical of any number of small suppliers where the war brought rapid expansion, spreading management thin and

posing difficult problems of production

that absorbed attention from cost accounting. In the particular case at hand

the excessive profits were readily explained. Even though the contractor had

increased his output many times over and

enjoyed all the economies of high volume

production, his clerks had continued to

bill each purchase order received at rates

24

 MM&D to Western Proc Dist, 19 Apr 44, and

related correspondence, AFCF 161 Renegotiation.

25

 Chief, Price Adjustment Branch, Central Office,

MM&D, to Mid-Central Proc Dist, 3 Aug 43, and

to CGMC, 24 Jun 43, AFCF 161 Renegotiation.
434 BUYING AIRCRAFT

scaled to the size of the individual order.

Since the airframe manufacturers found

it necessary to control the flow of materials into their plants with a series of purchase orders reflecting the need of the

moment rather than total requirements,

they ended up paying what might be

called retail rates.26

In all probability it would be accurate

to say that the typical AAF contractor

accepted renegotiation as a necessary evil.

However little he relished the prospect,

he did agree to renegotiate. But persuading manufacturers to renegotiate in

good faith was only the first hurdle to be

cleared. Getting them to agree on a revised price or a refund was quite another

matter.

What constituted an excessive profit?

Finding an answer to this question was

to be a source of friction. The Renegotiation Act itself gave little help. It held

excessive "any amount of a contract or

subcontract price which is found as a result of renegotiation to represent excessive profits." In the tradition of Gertrude

Stein this was tantamount to saying that

an excessive profit was an excessive profit.

Bewildered AAF officers who wanted

something less cryptic and elusive with

which to work were told the following

story:

A lady shopper one day asked a sales

clerk how she could tell male goldfish from

the females. "That's easy," replied the clerk, "the male goldfish eat male angleworms and

the female goldfish eat female angleworms." "But," asked the lady, "how do I tell the

male worms from the females?" "Sorry," replied the clerk, "that I can't tell you; we

don't sell angleworms."

 27

In short, Congress recognized that

there was no simple formula by which

profits could be uniformly measured for

all industries across the nation. Those

who administered the law were left to

work out an equitable solution as best

they could in accord with the general

spirit of the statute. Unavoidably this

meant that there would have to be a

period of fumbling and groping while

the officers charged with the task of renegotiation acquired enough experience

to formulate sound policy.

Since they had to start somewhere, the

renegotiators decided as a general rule to

aim at leaving contractors approximately

10 percent on sales before taxes. This

was the basic profit margin used by procurement officers at Wright Field when

they negotiated new contracts. The figure was not inflexible; it could be moved

up or down as circumstances seemed to

warrant. For example, where an individual concern or a group of concerns in

a particular industry could show consistently higher earnings during the prewar years, renegotiators were inclined to

permit them to retain a comparably high

percentage of return on all wartime business up to their normal volume while applying the lower basic percentage figure

for all volume above normal.28

In general, the renegotiators tried to

determine profits in such a way as to take

into account all those special considerations that happened to be present in any

particular instance. In a typical case the

following considerations led renegotiators to permit a contractor to retain a

26

 Chief, Procurement Div, to Western Proc Dist,

12 Jan 44, AFCF 161 Renegotiation. 27

 Statutory Renegotiation, Lecture by McCorskey.

28

 Negotiation and Administration of Contracts,

Lecture by Scarff; Col Dyson to Central Proc Dist,

8 Dec 42, AFCF 161 Renegotiation.
PRICE ADJUSTMENT 435

profit of 15 percent on his sales: the end

item he turned out was a high-quality

precision product requiring a good deal

of engineering skill to fabricate; the

manufacturer was virtually a sole source

for the item in question and therefore

carried a heavy responsibility for maintaining production at the level required

by the airframe builders who relied upon

him; finally, because he produced only

this one item, he might expect to suffer

more seriously from postwar dislocation

than would many other manufacturers.29

Manufacturers who had shown a general willingness to co-operate all along

the line were also rewarded with higher

profits in proportion to their contribution. The evidence presented to justify

the generous margin allowed to one firm

in the Western Procurement District will

illustrate what the renegotiators regarded

as unusual co-operation and contribution. The contractor, the Doehler Die

Casting Company, had demonstrated unusual initiative in anticipating and breaking through production bottlenecks. In

1940, at its own expense, the firm expanded to meet the upsurge of war orders

and was ready when the deluge came without having to resort to government financing. Doehler had been liberal in making

the results of its research and development program available to the government. In general, Doehler's prices were

the lowest in its branch of the industry.

What is more, Doehler followed a policy

of consistently cutting prices whenever

the circumstances warranted. Finally, its

deliveries were always on schedule or

ahead of schedule. Obviously, contractors of this stamp deserved every incentive that could be extended to them.30

On the other hand, just because a contractor was co-operative, it did not necessarily follow that he deserved to keep a

high profit margin. Once they learned

that the renegotiators were not practicing

confiscation, contractors would not infrequently turn up in great good humor,

claiming to be fine fellows who had been

anxious to do the right thing all along:

produce at full blast, make deliveries on

time, help win the war, and renegotiate

willingly. This attitude was gratifying,

but the officers involved found they still

had to stick to the facts. Not only did

they try to verify all such claims to virtue

by cross-checking with the procurement

record, but in addition tried to ferret out

every other relevant consideration: Did

the contractor use his own or government-financed facilities? Did he subcontract extensively? To what extent had he

actually assumed risks?

 31

As might have been expected, the problem of allowable costs again and again

plagued renegotiation teams. Whenever

possible the teams turned to the rulings

worked out by the Bureau of Internal

Revenue for income tax purposes. If

there were no such rulings, they had to

exercise their own discretion and this

they had to do over an extremely wide

range of problems. Most often in contest

were questions of executive salaries, reserves set aside for postwar use, bad debts,

abnormal depreciation, and the allocation of overhead between government

contracts and those for private interests.

29

 Col Dyson to Western Proc Dist, 28 Jan 43,

AFCF 161 Renegotiation.

30

 Chief, Price Adjustment Br, MM&D, to CGMD

30 Aug 43, AFCF 161 Renegotiation. 31

 Statutory Renegotiation, Lecture by McCorskey.

See also, Deputy Chief, Price Adjustment Br, MM&D,

to CGMC, 20 Oct 43, AFCF 161 Renegotiation.
436 BUYING AIRCRAFT

Typical of the overhead problem was

the matter of salaries paid to partners in

an unincorporated business. As owners,

partners could pay themselves extravagant salaries and thus have the company

books show only a modest year-end profit.

To forestall this, renegotiators disallowed

all salaries to partners although it could

properly be argued that the compensation

of working partners might be as legitimate an element of cost as the salary of

any corporation manager.32 Here, obviously, was an area where discretion came

into play.

Along the same line was the case of the

corporate officials who paid themselves

generous fees as patent holders for the

company in which they held a major interest. If such payments, however excessive, were regarded as royalties, they became necessary costs of doing business.

On the other hand, some officers regarded

such payments as in the nature of dividends to stockholders and therefore not

deductible as a business expense.33 Here,

too, discretion and not the letter of the

law would have to guide the final decision.

In time, men of good will on both sides

of the renegotiation table might be expected to hammer out wise policies serving the best interests of the contractors

no less than those of the government.

Unfortunately, time was running out.

The Renegotiation Statute of 1942 contained a limiting clause. Unless proceedings were begun within one year after a

manufacturer filed a report of his costs,

no further action could be taken. As a

consequence, the price adjustment teams

at every echelon had to operate at forced

draft, hastening into individual renegotiations even before they were sure what

their general policies should be.34

Of one thing the negotiators were certain—they needed facts before they could

work effectively. After an initial period

of confusion, the Price Adjustment Board

began to compile statistics on sales and

earnings by industry and by product

groups for use as guides in making individual determinations. Renegotiators

working in the field were encouraged to

send to Wright Field whatever data they

could accumulate along this line, but at

best it was slow work. Contractors who

were willing to open their books in private were often reluctant to let their cost

figures be published and circulated for

fear their competitors might use the information to their detriment.35

 Not until

late in 1943 did the War Department

finally start a systematic and periodic publication of price levels and indices useful

to renegotiators.36

While some facts were extremely hard

to obtain, others piled up almost too fast.

To be sure that contractors received full

credit for whatever price reductions they

32

 For an illustrative case, see Col Dyson, to Atlantic Mfg. Co., Philadelphia, 14 Dec 42, AFCF 161 Renegotiation. Refusal to allow the partners' salaries

in this instance was particularly ironic since the

decision to disallow coincided with the award of an

Army-Navy "E" to the firm for excellent performance as a subcontractor to Glenn L. Martin. 33

 Col Dyson to WDPAB, 19 Mar 43, AFCF 161

Renegotiation.

34

 C. Lynde, Asst to Air Inspector, Hq AAF, to

Air Inspector, 22 Dec 42, AFCF 161 Renegotiation;

Col Friedman, IGD, to IG, 11 Nov 43, AFCF 333.1

Inspection (Bulky). 35

 Budget Officer, AFAMC, to CGMC, 28 Jan 43;

Price Adjustment Br, AFAMC, to WDPAB, 26 Jun

43. Both in AFCF 161 Renegotiation. 36

 Deputy Chief, Price Adjustment Br, MM&D, to

Pricing Methods Br, Purchases Div, ASF, 18 Dec 43,

AFCF 400.19; MM&D to CGMC, 31 Jan 44, AFCF

161 Renegotiation.
PRICE ADJUSTMENT 437

made during the life of a contract, they

were instructed to report each price

change as it occurred. This was sound

enough in principle and no great burden

so long as it was confined to airframe

manufacturers or others turning out relatively few categories of end items, but

a firm such as General Electric, for example, posed an entirely different problem. With literally thousands of different types of items on contract at any given

time, many of them subject to rather frequent price changes, the reports of even

a single firm such as General Electric

could grow to a staggering volume. In

short order the Price Adjustment staff

begged for a change in procedure to keep

from being buried under a mountain of

paper.37 Too much information could

be as fatal to good administration as too

little information; to have a crucial bit

of data "lost in the files" when needed

was hardly better than not to have it at

all.

From bitter experience, renegotiators

learned they had to give heed to the qualitative as well as the quantitative aspects

of the information amassed for their use.

They discovered that the most obvious

parallels could turn out to be deceptive.

Before making comparisons—using the

profit ratios of one manufacturer to establish criteria for dealing with another

—price adjustment officers had to be sure

they were comparing the same things. If

one manufacturer computed his profit on

a sales volume including the cost of government-furnished equipment while another excluded all such costs, the two returns would bear little if any relation to

one another.38 The same was true in

comparing seemingly identical end items.

A case in point concerned aircraft engine

starters. When one contractor quoted

unit prices nearly $100 below another to

the apparent detriment of the latter, a

careful investigation revealed that the

items in question were only remotely

comparable since the more expensive one

was fully equipped with all the necessary

accessories while the less expensive one

was not.39

Even where two manufacturers produced the same item according to a common specification, price adjusters found

that it was dangerous to attempt comparisons. Production runs of different

length, among other considerations, could

bring surprisingly wide variations in

price. A Jack and Heintz autopilot at

$2,230 might appear to reflect a closer

price than a Sperry autopilot at $3,215,

but it was highly pertinent to know that

Sperry had had only one-twentieth of

the volume enjoyed by Jack and Heintz.

Moreover, the size of the successive order

increments awarded to Jack and Heintz,

viz., 1,000, then 4,000, and finally 19,500,

was considerably more favorable to production planning and tooling than the

successive orders placed with Sperry—an

initial order of 204, then an order for

921, and finally an order for 166 units.40

37

 Col Dyson, to CGMC, 5 Apr 43, AFCF 161 Renegotiation. For an insight on the difficulties of

record keeping in renegotiation, see also 1st Ind,

Chief, Price Adjustment Br, MM&D, to CGMC, 3

Nov 43, AFCF 161 Renegotiation.

38

 Col Dyson to CGMC, 6 Mar 43, AFCF 161 Contract Regulations. 39

 Memo, Dir, Purchases Div, ASF, for AFMM&D,

29 Apr 43; Chief, Procurement Br, MM&D, to Purchases Div, ASF, 26 May 43 with Incls. Both in

AFCF 400.19. 40

 Ibid. See also, the warnings against unqualified

comparisons in Chief, Price Adjustment Br, MM&D,

to CGMC, 19 Jan 44, AFCF 400.19.
438 BUYING AIRCRAFT

Thus, renegotiation was not a job for

bookkeepers in the narrow sense of the

term. The financial record alone was not

sufficient. Since the determination of

reasonable profit levels was left to discretion rather than to a formula, and since

discretion involved such a wide variety

of considerations, it followed that the

officers who undertook the work of renegotiation had to understand the whole

range of procurement problems—technical, financial, and legal. And what is

more, they had to exercise the greatest

care to be certain that all the pertinent

factors were considered before they drew

comparisons among producers and

drafted settlements accordingly.

The conduct of price adjustment operations would have been complicated even

had Congress seen fit to pass no legislation on the subject beyond the original

Renegotiation Act of 1942. Of course,

no such legislative stability was to be expected. A statute affecting so many individuals and often compelling a return

of profits to the government was certain

to provoke well-nigh endless complaint

to Congress. The departmental renegotiators themselves would have welcomed

a number of useful amendments. Operational experience had pointed out a

number of places where administration

of the act could be substantially improved

by legislative action.41

The initiation of major amendments

to the 1942 statute was not a step to be

undertaken lightly. Once opened, there

was no telling where the measure might

end. Under pressure from outspoken

and disgruntled constituents, Congress

might finally turn out a watered down

law even less satisfactory than the original act. When it appeared, however,

that some form of amendment was probably inevitable, the War Department

Price Adjustment Board decided to seize

the initiative by proposing those changes

that appeared administratively most desirable.

The full story of the War Department

role in relation to the Renegotiation Act

of 1943 lies beyond the compass of this

study.42 Nonetheless, consideration of

one or two aspects of this episode may

afford some insights on the interrelationships of military administration and the

legislative process. Congress, in passing

the original act of 1942, had moved

against profiteering, and the act in many

ways reflected a punitive spirit. This

was all very well so long as the measure

remained a matter only of discussion, but

it became quite another matter when

ordinary businessmen, who certainly did

not regard themselves as unpatriotic profiteers, suddenly found that they too were

expected to renegotiate.

Less than a year after they had been

calling with righteous indignation for

scalps, a number of congressmen qualified their anger by urging more care in

the selection of scalps, especially those of

small business.

The upshot of this congressional sensitivity to the cries of small business was

a proposal to increase the volume of business automatically exempt from renego41

 Smith, The Army and Economic Mobilization,

pp. 354-57.

42

 The renegotiation statute debated during 1943

was actually enacted as a section of the 1943 Revenue

Act, passed February 25, 1944, as Public 235, 78th

Congress. It applied to all war contracts in fiscal

years ending after 30 June 1943. There were numerous minor amendments not mentioned here, enacted

between 28 April 1942 and 25 February 1944.
PRICE ADJUSTMENT 439

tiation. Where the original act freed a

firm from renegotiation if its government

contracts totaled less than $100,000, the

proposed amendment would raise the

exemption to $500,000. Although this

change implied at least the dubious assumption that small business was intrinsically less prone to profiteering than big

business, the War Department actively

supported the move. As the docket of

renegotiation cases mounted steadily and

price adjustment teams fell further and

further behind, they welcomed any

change that would cut the backlog to

manageable proportions. Fully one-third

of the cases in Air Forces files could be

dropped if Congress accepted the higher

exemption level.43

Had Congress moved promptly when

the proposed amendment first came up,

the task of administration undoubtedly

would have been simplified. But Congress did not act promptly; it could not.

By its very nature the legislative process

is ponderous. There were hearings and

debates; the issues involved were argued

for months. Meanwhile, the officers engaged in price administration had to perform their duties against a background

of continual uncertainty.

As soon as word of the impending increase in the exemption limit began to

circulate, many contractors whose volume

fell below the proposed $500,000 level

began to drag their feet when invited to

negotiate on new contracts. If they could

stall off renegotiation until Congress

acted, they reasoned, they might avoid

having to make refunds. Reports of this

kind of trouble began to appear at Wright

Field in early 1943 and continued to

plague the price administrators until

Congress finally passed an amended Renegotiation Act in February 1944.44

While it was easy to blame the legislators, criticism of Congress was bootless.

Administrators had to learn to live within the hazards inherent in self-government. In this case self-criticism would

have been wiser, for the very policy the

War Department had approved and even

sponsored turned out to be most harmful. Manufacturers whose volume

mounted toward the $500,000 limit sometimes showed a reluctance to accept additional orders, which would push them

over the line and make renegotiation unavoidable. As a consequence, procurement officers actually reported instances

where they found it difficult to place certain orders. Furthermore, by the time

Congress raised the exemption level, the

original justification presented by the

War Department for such a move no

longer existed. The discouraging backlog of cases in 1943 melted before an aggressive and determined assault carried

out by price adjustment teams at Wright

Field as well as in the districts. To make

matters worse, a postwar appraisal revealed that some of the most outrageous

and excessive profits were made by manufacturers whose limited volume automatically exempted them from renegotiation.45

To single out one unfortunate aspect

of the 1944 amendment of the Renegotiation Act for analysis while ignoring all

the other facets of that elaborate piece

43

 Actg Control Officer, MM&D, to WDPAB, 18 Dec

43, AFCF 161 Renegotiation.

44

 Col Dyson to WDPAB, 17 Mar 43, AFCF 161

Renegotiation. 45

 Smith, The Army and Economic Mobilization,

ch. XVI, especially pp. 375-78.
440 BUYING AIRCRAFT

of legislation would be grossly unfair.

There were a number of constructive features. Not least among these was the

stipulation requiring all contractors

whose business brought them under the

act to file regular statements on their

finances and general operations for use

by price adjustment personnel. This

simplified the task of administration immensely, since it automatically placed

most of the data necessary for a preliminary screening directly into the hands of

those who needed it.

In a sense, a large part of the 1944

amendment only confirmed by statute

what was already being done administratively. Although the revised measure

refrained, as did the original law, from

attempting the impossible—a uniform

definition of excessive profits—it did list

the factors to be taken into account in

determining such profits. Actually the

list was little more than a recital of the

criteria already used by the negotiators,

yet this was by no means wasted effort.46

By making it compulsory for manufacturers to send in the factual data necessary and by formalizing the criteria to be

used in determining profits, Congress

took a long step forward. Thereafter the

conduct of renegotiations became increasingly routine. Price adjustments could

not be wrought by formula, but as experience was codified in standardized forms

and simplified administrative procedures

were hammered out, more and more

cases could be handled by less skillful and

less imaginative renegotiators. This freed

the abler and more experienced staff

members to deal with the many really

novel problems of policy posed by the

amended Renegotiation Act.47 Among

the most important of these was the task

of accommodating the rather subtle transition in philosophy that characterized

the new legislation, a transition from

profit curbing to price setting.

Renegotiation and Repricing

Congress enacted the Renegotiation

Act of 1942 to recover excess profits and

to prevent profiteering. Nevertheless,

the organization established within the

War Department to carry out the terms

of the act was called the Price Adjustment Board rather than the Profits Control Board. The terminology is significant; it shows that from the very

beginning the Department's policy was

to stress constructive pricing—close pricing in the interest of efficient operations

—rather than the punishment of profiteers.48

 Yet for all these intentions, renegotiation during 1942 was largely a matter of profits recovery. This was probably

inevitable. Umbrella pricing had characterized many of the fixed-price contracts

written during the early period of rearmament, and during 1942 the renegotiation

teams had had to devote most of their time

to rendering the fat that experience had

shown to be present in so many contracts.

By 1943, however, the situation was

46

 Statutory Renegotiation, Lecture by McCorskey.

The criteria included, among other things: efficiency;

similarity of wartime output to peacetime product;

private or public financing; risks involved; and contribution, complexity, and extent of subcontracting.

47

 For a survey of the problems anticipated in

1944, see AFMM&D to WDPAB, 12 Jan 44, AFCF 161

Renegotiation. 48

 AFMM&D, to Mr. Emmons Bryant, jr., 12 Jan

44, AFCF 161 Renegotiation.
PRICE ADJUSTMENT 441

quite different. Profit recovery declined

in importance as the emphasis shifted toward improved pricing, prospective as

well as retrospective. In short, the work

of the renegotiators began to converge

with that of the procurement officers who

negotiated new contracts. While functionally understandable, this convergence

threatened to bring jurisdictional conflicts as the work of the negotiators and

that of the renegotiators came to be in

many respects identical. Moreover, there

was an added difficulty.49 Whatever may

have been their avowed philosophy and

sincere intention, during their first year

of action the renegotiators had become

identified in the business world with the

refunding of profits. From the contractor's point of view this was often a most

unhappy experience. As the renegotiators turned more and more of their attention to repricing, they did so under the

stigma of their past activities as profit

seizers.

Although the term repricing was often

used in a loose sense to describe the work

of the renegotiators, it actually had a

rather narrow technical definition that

should be differentiated from the several

other operations generally comprehended

under the word. To reprice a contract

was to reopen the question of price for

the contract as a whole. This meant renegotiating the price retroactively for the

completed portion of a contract while at

the same time setting a price on the portion yet undelivered. Forward or future

pricing, as it was sometimes called, was

somewhat different. This kind of pricing applied only to the undelivered portion of an existing contract.50

There were both advantages and disadvantages in these pricing techniques.

Future pricing could be initiated at any

point in the life of a contract and was

therefore administratively convenient.

But a contract could be so priced only

once. This meant that the price for the

undelivered portion of a contract would

be set after a trial run, but once set, that

price would remain fixed and any savings

the contractor could effect thereafter

would accrue to him. Repricing, on the

other hand, applied to the whole contract

and thus to the recovery of excess profits

on the completed portions as well as

closer pricing on the remaining deliveries. But repricing had to be accomplished

at some predetermined point in the life

of the contract, usually after completion

of 40 percent of the deliveries or after a

fair trial period for cost determination.

To delay repricing further or to any point

near the end of deliveries would have the

effect of converting the procurement into

a cost-plus-percentage-of-cost contract prohibited by law, since this would amount

to negotiating a profit after the costs were

known.

Still another variety of price adjustment was periodic repricing. Here the

government and the contractor agreed in

advance to reprice the undelivered portion of a contract either at periodic intervals set beforehand or at the option of

either party. Periodic repricing was gen49

 AFMM&D to CGMC, 11 Jan 44; Chief, Price

Adjustment Br, to CGMC, 19 Jan 44. Both in AFCF

161 Renegotiation.

50

 Flexible Pricing in Fixed Price Contracts, Lecture by Dinkelspiel. Forward pricing was first used

by the Air Forces in December 1943. See Davis,

History of AAF Materiel Command: 1943, WFHO,

Jul 44, ch. II.
442 BUYING AIRCRAFT

erally popular with air arm contractors.

Among other features, it offered an alternative to the cumbersome and all but

unworkable escalator clauses, which had

proved to be so difficult to apply during

the early phases of the rearmament program.51

The culminating development in the

field of price adjustment during the war

was the introduction of a practice called

company pricing. Early in 1944 it became clear that neither the procurement

officers who negotiated contracts nor the

renegotiators who tried to reprice them

were really getting the kind of close pricing that would compel manufacturers to

be efficient and economical. Their most

determined efforts frequently proved unsuccessful. Manufacturers continued to

be fearful of losses, and even where they

subsequently made refunds most willingly, they continued to seek umbrella

prices with generous contingency allowances. And so long as this practice persisted, no matter how co-operative contractors were in returning excess profits,

they were not under the continual pressure to seek efficiency that an initially

close price would have exerted. Obviously, some means for arriving at closer

initial pricing were urgently required.

Company pricing appeared to provide an

answer.

Company pricing was nothing more

than a matter of getting an over-all perspective on the total volume handled by

a single manufacturer.52 A great many

firms held contracts with two or more

services, and co-ordination of procurement between the services was notoriously poor.53

 Thus, by arranging a pricing session at which representatives of

all the procurement agencies concerned

sat down with the contractor at one time,

it was possible to arrive at closer prices.

Duplicate charges for overhead, for example, could be eliminated as the renegotiators considered the entire picture of

a manufacturer's operations.

The technique of company pricing can

be illustrated by a single example. Procurement officers at Wright Field worked

for weeks trying to reach agreement with

Beech Aircraft on a fair price in a production contract for the UC-45, a light

utility airplane. The combined efforts

of the price analysis staff, auditors, and

renegotiators at Wright Field indicated

that $33,000 would constitute a fair unit

price. Beech held out for $40,000. This

spread was much too great to compromise, but Beech remained adamant.

Then the negotiators tried the company

pricing approach. In all, some twenty

persons attended the conference called:

fifteen representatives from the Army

and Navy and five company men. After

a good deal of parley, the root of the trouble became clear. The estimated $33,000

figure, the manufacturer admitted, was

probably not far off, but the company

executives were decidedly fearful of the

losses they might have to absorb if this

and the firm's other contracts were to be

terminated abruptly. Here was the joker.

Termination costs were an entirely uncertain factor; they could not be estimated

51

 Flexible Pricing in Fixed Price Contracts, Lecture by Dinkelspiel. 52

 Negotiation and Administration of Contracts.

Lecture by Scarff.

53

 Draper and Strauss, Coordination of Procurement Between the War and Navy Departments, vol.

II, p. 38ff.
PRICE ADJUSTMENT 443

in advance, so the manufacturer had tried

to protect himself in the only way he

knew how—by adding in a "fib factor"

that no amount of price analysis could

justify on a rational basis.

Once he was reassured that his total

workload would be repriced if terminations set in, the manufacturer agreed to

a unit price of $35,000 for the UC-45.

When the contract was finally completed,

an audit revealed that the manufacturer's

unit costs actually turned out to be less

than $35,000 and Beech made a substantial profit even after refunding a large

sum. To be sure, renegotiation at the

end of the contract could have recaptured

any excess profits there may have been

under a $40,000 unit price, but meanwhile the manufacturer would have been

under virtually no pressure to be efficient

and economical in his operations.54

After a trial period during the first half

of 1944, company pricing became a regular AAF policy. Needless to say, since

the Air Forces did business with several

thousand contractors, the tremendous

burden of cost accounting essential to a

successful foray into company pricing

made it imperative to establish some rational system of selection. One screening device used was to pick out all firms

reporting a profit of 20 percent or more

on sales. This gave a list of about a hundred firms, an entirely manageable number. Of course, a high profit did not

always indicate the need for repricing.

For example, one manufacturer of screw

machine products in the Central Procurement District consistently reported profits

well above 20 percent on sales, but with

equal consistency his prices ran well below those of his competitors.55

 The services of the renegotiators would be far better used elsewhere.

Company pricing gave air arm procurement officials a weapon they had long

needed. It opened the manufacturer's

subcontract prices to possible revision.

Hitherto, under a fixed-price contract, no

matter how hard the negotiators worked

to get a close price, they could not reach

the subcontractors who operated through

tier after tier below the prime. Inasmuch

as roughly half of every dollar spent for

air matériel went to suppliers below the

prime contractor, a major portion of most

fixed-price contracts was beyond reach.

The Renegotiation Act of 1942 did make

it possible to take away excess profits

from subs as well as primes. But this was

after-the-fact recovery. So long as the

subs remained free to quote high prices

to primes in the first instance, they executed their contracts under the protection of a price umbrella and without the

pressure of a close price to force them to

be economical in the use of materials,

labor, and so on. Under the company

pricing program, the renegotiators could

study subcontract prices at first hand.

Where the facts seemed to warrant, individual subs could be asked to lower their

prices to the prime.

By the time company pricing got under way in 1944, the procurement services

had acquired an additional weapon of

coercion from Congress. As early as 1940

Congress wrote into the Selective Service

Act a special grant of power to compel

manufacturers to accept military contracts or submit to the seizure of their

54

 Company Pricing Program, lecture, AAF Contracting Officers School, WF, 15 Dec 44, WFHO. 55

 Ibid.
444 BUYING AIRCRAFT

plants. This authority was of no use

whatsoever in dealing with a subcontractor who was only too willing to take on

war work—at a high price. In the Revenue Act of 1943, Congress tried to rectify this weakness. Title VIII of the act

empowered the government to issue compulsory orders or unilateral determinations of contract price where manufacturers refused to quote prices regarded as

reasonable by the government's negotiators.56

Just how effective the compulsory order could be is suggested by the following

example. A well-known supplier quoted

$136,000 for an order of special hand

tools. Investigation revealed that the

firm was actually subcontracting the job

to another firm for $128,000. This second company in turn sub-subcontracted

to a third at $86,000, but a cost study

showed that this company had actually

completed the order for $74,000. Since

the original jobber held the design rights

to the tool in question, a procurement

could not be made directly from the company that had actually done the work.

The alternative, when the original jobber refused to consider price adjustment,

was a mandatory order. This was issued,

and a fair price was worked out.57

With but one exception, as soon as a

mandate was issued, the manufacturers

involved fell into line. The mere threat

of force was usually sufficient to get results. Perhaps "usually" is too strong a

word. The Air Forces resorted to compulsory pricing in no more than seven

cases during the war. There is, however,

no record of the many cases where the

threat of compulsion proved sufficient to

win co-operation.58

A number of safeguards were written

into Title VIII to prevent abuse of the

mandating power. Before a compulsory

order could be issued, it had to be shown

that the company in question could make

the item desired and that the item could

not be procured elsewhere in comparable

quantity and quality in the time allowed. The best guarantee that compulsion would not be overused was the

simple circumstance that the whole process was very cumbersome to apply where

a manufacturer wished to resist tooth and

nail. Compulsory determination of price

touched only a small portion of the total

problem of negotiation. This still left

such matters as license rights and other

contract terms open to debate, so the resort to a mandate most assuredly did not

guarantee the government an easy way

out in difficult cases.

Renegotiation in Review

All together, the Air Forces renegotiators completed 13,344 individual price adjustment cases—17.6 percent of the total

handled by the War Department. During the first year of operations, from April

1942 to April 1943, this brought in recoveries of excess profits amounting to

just less than a billion dollars. By the

end of 1943 the total recovered had

grown to somewhat more than two bil- 56

 Section 801, title VIII, Revenue Act of 1943,

February 25, 1944 (58 Stat 92). 57

 Mandatory Orders, Lecture by Robinson; Negotiation and Administration of Contracts, Lecture by

Scarff.

58

 Ibid. See also, ASF Purchases Div, Purchasing

Policies and Practices, pt. III, sec. II H, Compulsory

Procedures, pp. 350ff.
PRICE ADJUSTMENT 445

lions. The year 1944 saw another billion

and a half added.59

Although big round billion-dollar figures make a splendid impression, they

probably should not be taken too seriously. The billions refunded were important, but the exact totals reported do

not begin to tell the whole story. Voluntary refunds can be added to the profits

recaptured by statutory renegotiation. It

is impossible, however, to compute the

savings made in the form of lower prices

agreed to during renegotiation that applied to future contracts or to the undelivered portions of existing contracts.

Lower prices undoubtedly contributed

a greater proportion of "savings" than

profit recoveries. While dollar recoveries from contractors look impressive, it

should never be forgotten that these dollars were really cheap dollars since the

excess profits taxes would have recovered

about 75 percent of the total anyhow.60

In short, profits do not tell the important

story of savings. The really great contribution of renegotiation lay in the pressure it exerted on costs. Although no

figures are readily at hand, the record implicit in the price adjustment operations

conducted during the war years makes

this clear. Renegotiation led to closer

pricing, which in turn forced manufacturers to be more efficient in their operations if they were to make profits. Since

the general ratio of costs to profits during

the war was approximately nine to one,

it is clear that costs offered a far more

fruitful field for savings than did profits.

Although statutory renegotiation was

one of the truly significant administrative

innovations of the war years, the drawbacks inherent in the use of the tool

should never be overlooked. There was

grave danger that the use of renegotiation would tend to discourage incentive:

"Why work hard? They will take it all

away from you anyhow." To provide

maximum incentives in order to encourage efficient management, price adjustment teams had to award high profits to

those who earned them. But high profit

percentages make bad headlines. They

encouraged the cry of profiteering, for it

was hard to make the public realize that

low costs—not low profits—were the vital

consideration. Renegotiation, to be an

effective instrument for military procurement, required a continuing campaign of

public education. At the very least the

contractors had to be persuaded that efficiency would be rewarded in proportion

to achievement and not according to some

percentage yardstick popularly regarded

as "reasonable."

59

 Smith, The Army and Economic Mobilization,

p. 390, Table 41; AFBFO to CGASF, 12 May 43 and

15 Dec 43, AFCF 161 Renegotiation. See also, Proc

Div Annual Rpt, WF, 1944, WFHO. 60

 Statutory Renegotiation; Lecture by McCorskey,

North American Aviation, Brief History, p. 125.
CHAPTER XVIII

Contract Termination

The Background of Termination

On occasion military contracts had to

be terminated or canceled before the

completion of deliveries. Changing requirements during the period of hostilities as well as the unpredictable date of

the enemy's surrender made large numbers of terminations inevitable. Just as

inevitably, abrupt cancellations gave rise

to an almost endless series of problems:

what was to be done with partially completed work, with untouched inventory

of raw materials, and with materials on

order from suppliers and vendors? What

compensation could the contractor expect for expenses already incurred and

what were his obligations to the government? If the interests of buyer and seller

alike were to be preserved equitably,

these and many other problems had to

be anticipated contractually.

The War Department had ample forewarning on the importance of carefully

drafted termination clauses in military

contracts. For want of such preparation,

the sudden terminations made at the end

of World War I brought chaos. Contractors went bankrupt and thousands of

cases went into litigation in the Court of

Claims. One of the largest of these was

still unsettled when the Japanese struck

Pearl Harbor. In all, the nation paid

a high price for the contracts faultily

drafted during World War I.

Many officers who lived through the

termination fiasco after the armistice in

1918 were anxious to see that it was not

repeated. But the best of plans easily

went astray. Terminations had played

virtually no part in peacetime buying,

and, with many other more immediate

problems pressing for attention, procurement officers gave little thought to the

intricate task of polishing termination

clauses. Some mobilization planners

considered the question of termination

clauses during the between-war years, but

beyond recognizing the importance of

the problem they did little.

Thus it came about, when war again

broke out in Europe, that all six of the

approved or standard contract forms used

by the War Department contained standard or boiler plate termination provisions. Each form represented a stockpile

of clauses that the procurement officers of

the several services were free to use or

not as the peculiar circumstances suggested. Even where they were used, the

approved termination clauses left much

to be desired. They were, to put it

mildly, rather primitive beginnings. Indeed, the thinking of procurement officers on the whole complex question of

terminations was almost totally undeveloped.1

1

 The foregoing paragraphs are based largely on

Smith, The Army and Economic Mobilization, ch.

XXVII.
CONTRACT TERMINATION 447

One small but rather significant bit of

evidence in the files at Wright Field gives

a fair appraisal of the neglect characterizing the matter of contract termination

during the first two years of the emergency. In these early months of rearmament, all papers relating to contract cancellation were placed in decimal file 164,

the conventional file location for cases

of nonperformance. Doubtless this was

merely a continuation of the peacetime

routine when just about the only terminations encountered were those arising

from defaulting contractors. But cancellations for the convenience of the government—the justification for most wartime

or war-end terminations—were something

very different from defaults, which implied a failure of the contractor to perform.

By the eve of Pearl Harbor air arm officers had come to realize the inadequacy

of their thinking on the over-all implications of termination. From all over

the country complaints rolled in from

subcontractors protesting what they regarded as the unjust cancellation clauses

prime contractors were forcing them to

accept.2 The government's termination

clauses with the primes were generous

enough; they made the government liable for all obligations incurred. The

primes, on the other hand, failed to extend the same generosity to their subcontractors. Should the primes be compelled

to do so by contractual mandate? The

air arm procurement staff decided against

such action. Fixed-price contractors

should solve their own problems. If the

air arm tried to dictate the terms of relationship for tier after tier of subs, the

procurement staff would be hopelessly

swamped with work.3

Although much could be said for the

wisdom of the air arm position, it did not

answer the questions raised by the subcontractors. Fearful of the future, they

pressed for further clarification of termination policy. In this they were perfectly

correct; termination in its broadest implications should be explored and policies worked out accordingly. Unfortunately, when the matter came to a head

the moment was scarcely propitious; it

was the week after Pearl Harbor when

every procurement officer in the air arm

had his sights on the immediate goal—

production. Termination seemed as far

away as the end of the war. "There is,"

said the contract chief, "no time for such

legal discussions."

 4 Officers burdened

with current operations could scarcely be

expected to find leisure for speculative

or philosophical reflection on long-range

problems.

The Character of the Termination

Problem

While the end of hostilities would most

certainly produce an enormous wave of

contract cancellations, the termination

problem was by no means so far off. Procurement officers found occasion to cancel individual contracts even before the

2

 Memo, F. W. Ayers, OPM, for M. C. Meigs, 29

Oct 41, AFCF 161 CPFF; Maguire to IPS, WF, undated (Oct 41), WF Contract files, 360.01 and related

correspondence.

3

 Memo, Asst to Chief, Mat Div, for Aircraft Br,

Mfg Sec, OPM, 6 Nov 41, AFCF 161 CPFF; Col Volandt to Chief, Contract Sec, 3 Dec 41, 165 Classes

of Contract. See also, Chief, Contract Sec, to Packard

Motor Car Co., 16 Oct 40, AFCF 333.1 Contract Inspection. 4

 Chief, Contract Sec, to Chief, Mat Div, 18 Dec

41, WF Contract files, 360.01.
448 BUYING AIRCRAFT

nation's forces had fairly engaged the

enemy. For example, a design change

sometimes forced a contractor to cancel

a subcontractor. Where two different

firms supplied the same item to a prime

and one made faster deliveries at a lower

cost than another, it could be wise to

terminate the contract of the least efficient producer. Even airframe builders

whose production became obsolete were

occasionally terminated.5

In short, termination was a current

problem. If the termination procedures

were slow and cumbersome, the manufacturers concerned might be delayed for

weeks and months. Litigation could

drain off managerial energies better spent

in breaking production records. Inventory disputes could tie up tons of material desperately needed for the war effort.

From whatever angle one approached it,

termination was an integral part of current procurement.

On the other hand, while the termination problem was very real, it was not

entirely tangible. In a sense, the very

core of the termination problem was psychological. It was more a question of

what the contractors feared might happen than what actually was happening.

The boiler plate cancellation clause included in all air arm contracts did guarantee to repay all primes and, by extension, their subs too, for all expenditures

made. Nevertheless, as one major engine

manufacturer put it, the contractors lived

in "mortal terror" lest a hasty termination catch them in an overextended position and drive them into bankruptcy.6

The contractors' fears were not entirely

groundless. Besides some old-line firms

who could remember the disasters that

followed World War I, there were others

with long experience in government contracting who knew that after-the-fact disallowances by the General Accounting

Office could turn a generous cancellation

settlement into a serious loss. Finally, as

every company comptroller knew, even

full compensation for every penny of expenditure if long delayed in payment

could wreck an otherwise prosperous concern.

At the root of the contractors' fears

was the knowledge that virtually every

leading manufacturer in the aviation field

was overextended financially. By 1943,

for example, the six largest airframe

builders had outstanding commitments

amounting to ten times their working

capital. Unless promptly reimbursed by

the government, these obligations could

absorb the contractors' working capital in

three weeks.7 One manufacturer stated:

"The payroll is so big and the job of paying off is so complex, . . . the outgo wou

break us before we could finish the task."

 8

As most manufacturers saw the problem, delays rather than disputes over

amounts due offered the greatest threat.

On the other hand, some were loath to

be bound by the decisions of a contracting officer who might not allow many of

the costs the manufacturer believed to be

reasonable. Disagreements of this sort

could be carried to the Court of Claims,

but few if any contractors had illusions

about this remedy. Common law reme5

 Relation of Procurement Activities to Readjustment . . . , Lecture, by Maj R. H. Demuth, AAF

Contracting Officers School, WF, 28 Apr 45, WFHO. 6

 See, for example, Wilson, Slipstream, p. 256.

7

 Callery, "Review of American Aircraft Finance,"

Air Affairs (Summer 1947), p. 489. 8

 Wilson, Slipstream, pp. 261-62.
CONTRACT TERMINATION 449

dies were almost certain to be slow and

costly, so much so as to make administrative solutions preferable.9

In the final analysis, a successful resolution of the termination problem would

hinge upon the attitudes of the contractors. And this in turn would depend not

so much upon the letter of the law—upon

the wording of individual termination

clauses—as upon the attitude of those who

administered them. What was Air Forces

policy on termination? How was it to

be administered, and who would meet

this special responsibility? Merely to ask

such questions was to recognize how unprepared the procurement staff was in

this important respect.

The termination problem came up

again and again during the early months

of the rearmament rush and was as often

brushed aside. Other difficulties seemed

more urgent. Then, during the fall of

1942, air arm procurement officers met a

termination controversy too big to ignore.

The company concerned was the Bendix

Aviation Corporation, a major producer

of aircraft accessories holding literally

dozens of separate contracts. The problem at hand was to devise a termination

article that would provide realistic protection for the company as well as the

government.

The staff officers who sat down to work

out solutions for the many issues raised

by the Bendix case realized full well that

whatever they did would be of more than

immediate significance. The Bendix termination article would establish not only

an administrative pattern but also set important precedents for policy.10

 Accordingly, they moved with caution. For

weeks they conferred with Bendix representatives to hammer out successive

drafts of a termination agreement describing both the procedures to be followed and the terms of settlement. They

were careful to circulate each revision to

the several echelons concerned. It was

especially important to keep the Under

Secretary informed. His approval would

be necessary on the policies reflected in

the final product, and the safest way to

win his assent was to educate him, sharing with him the successive stages in the

evolution of a paper. Then, they hoped,

when the final draft came up for signature, he would be predisposed to sign it.

By the same token the headquarters

staff officers in Washington who actually

worked out the details with Bendix found

it expedient to circulate the several drafts

of their agreement to the working echelon at Wright Field. Procurement officers at Wright Field, with their wide experience, ought to be able to criticize

the drafts with constructive discernment;

moreover, they would be the individuals

who would actually apply the termination policies finally agreed upon. Getting their criticisms in advance might

save endless complaints later. As the

sage old colonel said in November 1918,

when asked if he had learned anything

from the war: "Find out how your subordinates expect to tackle the job you

assign, then write their orders accordingly."

A glance at a few of the questions

raised by the Bendix settlement will sug9

 See, for example, Michigan Tool Co., to Chief,

Proc Br, MM&D, 26 Apr 43, and to OCofOrd, 25 Jun

43, AFCF 164 Non Performance.

10

 Maj G. B. Brophy to Col Volandt, 21 Sep 42,

AFCF 164 Non Performance; Volandt to Chief Contract Sec, WF, 19 Oct 42, AFCF 161 Renegotiation.
450 BUYING AIRCRAFT

gest why the termination clauses used

when war came marked only the beginning of the matter. Should the manufacturer be awarded a profit on partially

finished work or work in process at the

time of cancellation? If the final settlement were long delayed, should the

government pay interest on the sums

awarded; if so, what should be the rate?

If the contractor accepted an agreement

and Congress subsequently extended

more generous terms, should the contractor benefit accordingly? These and dozens of similar questions convinced everybody concerned that contract termination

was an extremely complex subject not

to be brushed off as a remote postwar

worry.11

Without prompt agreement on terminations, the Bendix representatives contended, the company would be forced to

curtail its production program. The

trouble stemmed largely from the dual

position Bendix occupied as both prime

and subcontractor. As a manufacturer

of various accessory items and instruments purchased directly by the AAF as

government-furnished equipment, Bendix was a prime contractor. But as the

manufacturer of a variety of accessories

in general use by airframe and engine

builders, Bendix was a supplier and subcontractor to scores of firms throughout

the industry. Taken all together, the

hundreds of contracts Bendix had entered, both as prime and as sub, extended

the corporation's obligations far beyond

the point justified by its capital structure.

Fearful lest the existing contract clauses

prove entirely inadequate to prevent

bankruptcy in the wake of large-scale terminations, the company managers were

reluctant to enter any new contracts until their position was reinforced.12

The Bendix threat—for it amounted to

that whether delivered as an ultimatum

or not—put AAF policy makers in a difficult position. Bendix products were absolutely vital to the war effort. Any interruption in the placement of contracts

could be disastrous. The only alternative was to produce a sound termination

agreement. The months of preliminary

discussion that had already taken place

made it relatively easy to narrow the areas

of disagreement. Bendix' role as a prime

contractor raised no insurmountable difficulties since the cancellation terms offered to primes by the government were

generally favorable. But Bendix the subcontractor was an entirely different matter. Here the company representatives

claimed that they were inadequately protected and that a sudden wave of cancellations would leave them with crippling

inventory losses.

With the remaining issue thus narrowly focused, the air arm staff cast about

for specific solutions. They first considered a plan whereby the government

would agree to acquire all Bendix' inventory of subcontract items and to assume all its obligations as a supplier. In

addition, the proposal included a 2-percent margin on all work in progress. The

2 percent would serve more as a contingency allowance or cushion against overhead costs than as a profit. These terms

looked generous, but they suffered from

certain drawbacks. The 2-percent return

was less than Bendix would receive un- 11

 Col Volandt to CGMC, 29 Oct 42, AFCF 161

Renegotiation.

12

 Memo, CGMC for USW, 4 Feb 43, 164 Non Performance.
CONTRACT TERMINATION 451

der many of its existing contracts as a

supplier. Moreover, in taking over the

entire Bendix inventory, the government

would acquire a host of problems for

which it was ill prepared. As an alternative, the procurement staff suggested letting Bendix, in an eighteen-month period, try to dispose of the inventory

through conventional channels, then applying the 2-percent rate to the remainder. Bendix preferred the alternative

offer. Nonetheless, when the agreement

went to the Under Secretary's office, it

was returned without approval.13 The

negotiators had taken the precaution of

keeping the upper echelons informed of

every step along the way, but to no avail.

The trouble was that six months had

elapsed between the time the Bendix

case first came up and the day the settlement emerged. During the six months

the whole complex picture of termination had come into focus. By the time

the AAF negotiators were ready with

their one prototype case, it had become

clear that termination, like renegotiation,

should be handled across the board, encompassing a manufacturer's entire workload in precisely the same fashion as company pricing.14

In sum, leadership in the field of termination was not for the individual procurement services within the Army nor

even for the War Department alone, but

for every department engaged in the war

effort. The determination of broad outlines of policy passed more and more into

the hands of a special joint organization

established for the sole purpose of coping

with the termination problem. The full

story of how this organization evolved is

a study in itself and quite beyond the

scope of the present volume. Here it

will be sufficient to indicate in briefest

outline the structures erected and the policies worked out for general application.

The Organization for Termination

During November 1943 the six major

contracting agencies of the war period—

the Army, the Navy, the Maritime Commission, the Treasury, the Reconstruction

Finance Corporation, and the Foreign

Economic Administration—established a

Joint Contract Termination Board to

lay down over-all principles and procedures governing all war contracts. Although not fully appreciated as such at

the time, the establishment of the board

marked a major advance in the direction

of co-ordination.

The first job before the board was to

draft a uniform contract termination

clause to simplify administration and

bring equity in dealing with industry.

This was only the beginning, since the

procurement services had already learned

that applying the law in particular instances posed the really difficult problems. The board had to work out standards of allowable costs, procedures for

dealing with subcontractors, and techniques for company-wide terminations.

Two matters of the utmost importance

to contractors were plant clearance and

interim financing. If manufacturers were

to get back into useful production

promptly, the board would have to de13

 Memo, CGMC for USW, 15 Mar 43; Col Volandt

to CGMC, 25 Mar 43. Both in AFCF 164 Non Performance. 14

 For an excellent review and appreciation of this

situation, see Agenda for Meeting With General

Echols, 23 Feb 44, unsigned study in the reading

file of Chief, Resources Div, MM&D, filed in AAG

(AGAW-J) Rcd Group 506 (A-50-21).
452 BUYING AIRCRAFT

vise means of removing and disposing of

the government property—materials, special tooling, work in progress, and the

like—that cluttered contractors' plants at

the end of every job. Moreover, if the

national economy were to avoid serious

dislocation when the mass of war-end terminations arrived, some means of ensuring adequate financing for contractors in

the throes of reconversion would also

have to be found. Finally, the board

would have to take steps to see that appropriate administrative procedures were

worked out by the several services to ensure compliance all down the line.15

During the first half of 1944 the work

of the board was vigorously debated in

the press and on the Hill. Since a very

large percentage of the nation's industries was concerned with military contracts, the debate attracted widespread

public interest. Finally in July 1944

Congress passed a Contract Settlement

Act, which not only gave legislative sanction to much of the work already done

by the board but strengthened the existing establishment.16

 In general the act

had one major objective—it sought to

minimize dislocations of the national

economy when mass terminations began.

Speed in conducting termination proceedings was imperative. To this end

the act specifically authorized negotiated

settlements. Termination teams could

sit down with industry representatives

and write termination agreements just as

though they were writing amendments or

change orders to existing contracts in the

normal course of business. Settlements

reached in this way would be final, subject to review by the General Accounting

Office only for the presence of fraud and

for conformity with the terms of the settlement agreed upon.

Finality of settlement was crucially

important to industry. Had they been

subjected to the continuing threat of disallowances and reversals by the Comptroller General, few contractors could

have moved boldly into the future. Instead of putting capital to work and increasing employment, they would have

been induced to hold assets in reserve

against contingencies.17

The Contract Settlement Act had other

provisions for speeding the pace of termination. By authorizing negotiated settlements, the act minimized the enormous

job of auditing that would have been necessary under the settlements by formula

provided for in the boiler plate termination clause. But this still left the problem of physical assets. Here the act ensured speed by requiring the government

to remove all property from a contractor's

plant within sixty days after the contractor filed an inventory statement.18

Taken together, the Contract Settlement Act of 1944 and the administrative

context in which it appeared—the work

of the board as well as the regulations

15

 Memo, Chief, Contract Termination Br, for

Chief, Resources Div, MM&D, 24 Dec 43, gives a

rather full summary of the evolving termination

organization. Resources Div reading file. See also,

Smith, The Army and Economic Mobilization, ch.

XXVII, especially pp. 628ff. 16

 Public 395, 78th Cong, 2d sess, July 1, 1944 (58

Stat 651).

17

 The contribution of Air Forces termination

officials in defining the department's stand against

the Comptroller General is clearly indicated in

Memo, Charlton MacVeagh, Chairman, AAF Settlement Review Com, for Chief, Mat Div, MM&D, 5

Oct 43, AFCF 164 Non Performance. 18

 Memo, Chief, Contract Termination Br, for

Chief, Resources Div, MM&D, 13 Dec 43, Resources

Div reading file.
CONTRACT TERMINATION 453

and procedures it perfected—stand as a

stimulating example of the high degree

of co-operation that could be achieved

among widely differing services when

men of energy and imagination put their

hearts into the effort. What was possible

in unwinding contracts might equally

well be possible when making them in

the first place. But whatever influence

the termination experience was to wield

over those who looked toward improved

co-ordination in the initial procurement

process, lay in the future. This account

deals only with the experience of the war

years. Moreover, although an unusual

degree of centralization was achieved in

matters of policy formulation, the actual

conduct of termination operations remained largely decentralized.

Within the War Department, the flow

of policy downward from the interdepartmental apparatus of the Contract Settlement Act requires little explanation.

The Under Secretary assigned primary

responsibility for termination matters to

a newly established Readjustment Division in the Army Service Forces. Since

ASF and the Army Air Forces were separate but parallel commands, this created

something of an anomaly by making the

commanding general of the Air Forces

look to a subordinate agency within ASF

for policy in termination matters. An

Air Forces representative was therefore

made deputy director of the Readjustment Division, ASF, to ensure continual

liaison.19

At Headquarters, AAF, a Settlement

Review Committee officially handled all

termination matters but actually delegated its operating functions to a Settlement Review Board at Wright Field.

The organizations subsequently changed

names from time to time, but the pattern

of their operations remained substantially the same.

Implementing the joint termination

operation proved to be anything but a

routine task of administration. In view

of the air arm struggles to build up a suitable staff of contract negotiators and renegotiators, the staggering problems encountered in lining up the necessary

personnel for handling terminations can

be appreciated. The negotiated contract

authorized under the Settlement Act

would prove a timesaver only if a skilled

staff could be found to negotiate. When

the war ended, virtually the entire force

of negotiators and renegotiators could

turn to termination work, but to wait

until then would defeat the objectives of

the Contract Settlement Act. Unless contracts were terminated promptly as the

occasion demanded during the war, the

backlog of unsettled cases would doubly

compound the postwar rush. The only

alternative was to recruit an entirely new

staff of specialists to deal with terminations, though during 1944 the procurement organization was itself still recruiting personnel.20

 Here was the ultimate

contradiction—the mobilizers and the demobilizers were in open competition in

the midst of the war.

By the summer 1944, when the full implications of the task at hand became

apparent, the Materiel Command was

19

 See ch. XIX, below, for further treatment of the

Readjustment Division.

20

 Memo, Chief, Contract Termination Br, for

Chief, Resources Div, MM&D, 4 Feb 44, Resources

Div reading file; Study, prepared by Lt Col R. B.

Murray, jr., Exec, Special Projects, Hq AAF, AFCF

164 Non Performance.
454 BUYING AIRCRAFT

already building a large organization to

specialize in this work. Termination activities were removed from the Procurement Division and entrusted to a newly

formed Readjustment Division of equal

status. Instead of the 300 terminators

originally sought, the target was raised

to 3,000. The new Readjustment Division hastily organized courses in a number of schools and began to teach contract

termination. In all, 1,836 officers, 438

enlisted men, and 196 civilians took the

training before fanning out into the procurement districts to form termination

teams working with individual contractors.

Equally important was the need to

make industry aware of the termination

problem. To do this, the Readjustment

Division helped conduct mass meetings

attended by a total of more than 27,000

people representing contractors and subcontractors. Contractors in particular

were urged to set up their own termination teams to meet the government's men

halfway. By the end of 1944, 1,513 prime

contractors had complied. Since the

AAF at that time had only 1,562 prime

contractors doing jobs in excess of $10,-

000, these crews more or less blanketed

the field.

As usual, getting the proper information to the right people posed many problems. An information bulletin distributed to 2,500 Air Forces personnel and

14,000 manufacturers helped in some

measure, and because a large portion of

the termination burden lay in the tiers of

subcontractors below the primes, the Readjustment Division made a special effort

to persuade the primes to set up independent training programs for subs.

Training kits were sent to primes willing

to conduct classes of this sort. Wherever

possible, the emphasis with primes and

subs alike was on "pretermination"—

lining up claims before the day of final

termination arrived.21 Spreading the

word was important, but in the last analysis, the main job was to find the right

people—and to find them without interfering with current procurement operations.

In a sense, the conflict of interests seen

in the competition between the negotiators and the terminators reflected one of

the basic dilemmas of the whole procurement problem. Those who made contracts and those who "unmade" them

both served in the public interest. But

they were to discover that the phrase "in

the public interest" was a deceptively

simple generalization. It tended to conceal the underlying reality. The public

interest is not a single end; it is an enormously complex bundle of interests, often

conflicting. Measures sincerely aimed at

one portion of this interest may prove

harmful to another. From hard experience officers learned that the real art of

administration lies in the successful reconciliation of these conflicting pulls.

Some Illustrative Aspects

of Administration

The business of war, it has been said,

is much too important to be left to the

generals. In a sense this might be said

more pointedly of air arm procurement.

War contracts have far too much impact

on the national economy to be left exclusively to contracting officers. In

theory, of course, these buyers were sup21

 Readjustment Div, ATSC, Annual Rpt, 1944,

WFHO files.
CONTRACT TERMINATION 455

posed to take the broad view. As written,

the procurement regulations gave weight

to a great many social and economic considerations well beyond the minimum of

bare military necessity. For example, the

procurement regulations specifically directed contracting officers whenever possible to negotiate detailed termination

provisions when entering new agreements. In practice the air arm buyer did

no such thing. In haste to get production

under way, both parties to the contract

usually agreed to include the simple

boiler plate termination clause and let

the matter drop without further ado.22

In short, regardless of what the book

said, the men who wrote contracts at

Wright Field looked for immediate results. With considerable justice, they

might argue that there would have been

no weapons bought had they stopped to

tie up all the loose ends in tidy contractual language. This attitude was entirely

justified in the early days of the rush to

rearm; far better an imperfect contract

than defeat in the field for want of arms.

But, once rooted, the idea persisted. Contract negotiators continued, more or less

unconsciously perhaps, to ignore or minimize the social and economic implications of any given purchase. The whole

termination apparatus, as one able procurement officer at Wright Field put it,

was regarded by AAF buyers as something drawn up by the "termination

brain trust in Washington" rather than

as an integral part of the procurement

process conceived by contracting officers

in the field.23

The problem, then, confronting the

high command of the air arm was the

reconciliation of the conflicting interests

present. To lessen the impact of cancellations on the economy, the terminators tried to favor areas of low labor utilization. Given two manufacturers of the

same item, they would urge cancellation

of the one in the area with the least unemployment even if that contractor were

the more efficient of the two. Similarly,

the terminators favored small business

over large business. The Air Forces buyers, on the other hand, favored the most

efficient contractors. Other things being

equal, they preferred to terminate costplus-fixed-fee contracts before fixed-price

contracts. And with one eye on longrange strategic considerations, they

wished also to consider such factors as

geographic dispersal and transportation.24

The task of accommodating the conflicting objectives of the negotiators and

the terminators was by no means impossible. Once again, as the experience of

the renegotiators had suggested earlier,

the secret of sound and effective administration lay in having all the relevant considerations at hand before reaching a

decision. Given the almost endless ramifications of any large contract, this might

seem a counsel of perfection. At the very

least, it suggests that the job required men

of broad experience and wide-ranging

imagination.

A typical wartime termination will

illustrate something of the problem involved. During the fall of 1944 the output of B-22 turbosuperchargers ran

ahead of requirements; a cutback was

necessary. Three firms manufactured the

22

 Negotiation and Administration of Contracts,

Lecture by Scarff. 23

 Ibid.

24

 Termination Activities of the Procurement Division, Lecture, by Maj J. Beattie, AAF Contracting

Officers School, WF, Winter 1944-45, WFHO.
456 BUYING AIRCRAFT

item: General Electric, with a capacity

of 6,500 a month; Ford with a capacity of

3,500, and Allis-Chalmers with a capacity

of 4,500. When demand dropped to approximately 11,000 units a month, what

action was to be taken? All three firms

were efficient producers with comparable

prices. A cut across the board would be

equitable but would release a substantial

number of skilled workers. Both General Electric and Allis-Chalmers were expected to begin production on a new

model turbo in the near future, but until

then they could not absorb the surplus

labor. Rather than permit the trained

force to drift into other jobs between

contracts, it seemed wise to continue production of the B-22 turbo in these two

plants at the normal rate.

The situation with Ford was quite different. The labor made available by a

cutback on the B-22 turbo could be absorbed on existing contracts elsewhere in

the plant. In addition, the labor shortage was currently more acute in the Detroit area than in the vicinity of the other

two plants. Finally, since Ford was about

to take on a subcontract from General

Electric to work on jet engine parts, even

more employees would be needed. But

labor was not the only consideration involved. Where Ford had only two engineers working exclusively on turbo

designs, both General Electric and AllisChalmers maintained large staffs for this

purpose alone. Inasmuch as further

modifications in the B-22 turbo were

planned before the line was terminated

entirely, it seemed wiser to make the

whole cutback at Ford, leaving the firms

with the larger engineering staffs to handle the modifications.25

The foregoing illustration should

make it clear that there was nothing

arcane about the technique of reconciling

procurement with termination. The job

simply called for first-rate staff work. No

formula could possibly be devised to encompass the many variables present; this

kind of problem called for zealous application and imagination, not more elaborate regulations.

The entire termination operation conducted by the Air Forces offers fertile

fields for those seeking lessons in administration. Of these, one of the most difficult was the peculiar problem of inventory disposal or plant clearance. In Army

circles during the war, it was customary

to write off the claim of "problems peculiar to the Air Force" as special pleading for separatism. These gibes were

probably often merited; nonetheless,

property disposal really did pose abnormal difficulties throughout the aircraft

industry, and the administrative problems growing out of this situation merit

close attention because they illustrate

once again how hard it is to accommodate

all the conflicting elements of the public

interest with general statutes.

Long before the termination question

began to take the center of the stage, prudent staff officers at Air Forces headquarters recognized that accumulated inventory in the hands of contractors would

become a major termination stumbling

block. Tighter inventory control imposed contractually would minimize the

difficulty. Seen in the abstract, this was

a perfectly logical course to follow, but

at Wright Field the solution was rejected

out of hand. Production control officers

were doing everything they could to encourage manufacturers to order materials 25

 Ibid.
CONTRACT TERMINATION 457

in advance, and the proposed action

would only increase the contractors' fears

of termination disallowances for inventories "unreasonably incurred."

 26

Here was the classic pattern of conflict.

On the one hand were the dollar savers,

on the other the production men who

saw the main goal as speed of output.

Both worked in the public interest.

Sound administration lay somewhere between the two, but the complexity of the

inventory problem made sound administration extremely difficult if not impossible to achieve.

There were a number of reasons why

the inventory problem was abnormally

complex in the aircraft industry,27 but

the root of the problem was that the demands of war forced the industry to expand more explosively than the industries

on which the other arms and services were

dependent. Output jumped from a total

of approximately 6,000 aircraft in 1939

to nearly 100,000 in 1944. A carriage

trade, job-shop industry leaped forward

overnight, as it were, into an advanced

stage of conveyer-belt mass production.

The implications of such rapid growth

become clear when one recalls that even

a single-engine fighter may require as

many as 10,000 different types of parts,

each subject to all the ramifications implicit in the design changes so frequently

introduced to meet the fierce competition

of an aggressive and resourceful enemy.

One major airframe manufacturer reported a total of 300,000 separate purchase orders outstanding at all times during the war. The stock clerks of the typical airframe firm posted an average of

5,000 entries a day; 20,000 postings a day

were not unknown. Newly trained and

inexperienced clerks, all knowing their

jobs were only temporary, introduced

further headaches, while absenteeism and

a high turnover scarcely improved the accuracy with which the inventory records

were kept.

In short, the aircraft manufacturers

had neither time nor personnel during

the war to take inventory. Even if they

had done so, their findings would have

been obsolete before they were reported,

so rapid was the pace of production. For

the most part they were so busy trying to

catch up with themselves, so busy trying

to perfect their records to the minimum

required for efficient mass production,

that inventory taking was out of the question.

The inventory control problem inherent in the expanded scale of wartime production was bad enough; worse yet were

the difficulties growing out of critical

shortages. Sometimes as many as 1,500

shortage reports would reach the Air

Scheduling Unit at Wright Field in a

single day. To keep production rolling,

it was common practice to arrange exchanges of parts and materials between

separate manufacturers or the different

plants of a single firm. In five years 50,-

000 transfers of this type took place. In

similar fashion, the widespread use of inexperienced subcontractors led to abnormally high wastage factors impossible to

anticipate with accuracy.28

26

 Acting Chief, Procurement Div, to ACofAS

MM&D, 20 Oct 43, AFCF 164 Non Performance. 27

 Monthly Progress Report, Readjustment Div,

ATSC, 1944 (Annual Review for 1944), WFHO files;

Agenda for Meeting With General Echols, 23 Feb 44,

cited in unsigned study in the reading file of Chief,

Resources Div, MM&D, AAG (AGAW-J) Rcd Group

506 (A50-21).

28

 J. K. Boyle, ACC, to Charlton MacVeagh, 29

Sep 44, AAG, AF Rcds, Rcds Group 506 (A51-66).
458 BUYING AIRCRAFT

Under such circumstances, exact inventory control over each part and piece

in every single contract was out of the

question. Thousands of stock clerks and

accountants might conceivably have allocated every item of expense to its appropriate contract, but to do so would have

consumed much time, delayed reconversion, and proved prohibitively costly to

boot. The only feasible alternative was

to authorize termination teams to make

company-wide settlements, sweeping all

inventories into a single pot, so to speak,

without waiting for an item-by-item allocation.29

 This was the Air Forces answer

to the Under Secretary of War when he

called for a "courageous" exercise of authority in disposing of excess property.30

That real courage was required to negotiate inventory settlements across the

board is no exaggeration. The policy was

entirely in accord with the spirit that had

characterized so much of the work done

by the aircraft industry during the war.

It stressed speed and expediency rather

than contractual exactitude. Speedy and

expedient settlements were possible, however, only where negotiators were willing

to exercise discretion boldly, and every

termination negotiated in the latter part

of the war took place in the shadow of the

Detroit tool scandal, which could scarcely

serve as an inducement to action unhampered by petty regulations that so often

ensured precision of detail while defeating the larger objectives sought.

The essential facts of the Detroit tool

case can be stated briefly. During 1941

air arm procurement officers decided to

switch Studebaker from work on the R2600 engine to the more urgently needed

R-1820 engine. Large numbers of tools

purchased for the first job but unsuited

to the second remained on the contractor's hands. Although a number of firms

working on similar projects were invited

to pick them over and buy what they

could use, a majority of the excess tools—

valued at $1,750,000—were shipped to a

government warehouse. Of this total,

only about $250,000 worth represented

standard tools, items such as bits and

broaches or milling cutters that could be

ordered directly from suppliers' catalogues. Officials at the Central Procurement District tool shortage warehouse in

Detroit began a campaign to dispose of

the items wherever possible. The tools

were advertised in various media, offered

to several Air Forces agencies, and one

official even undertook to solicit orders

by telephone from manufacturers in the

Detroit area who might be interested.

None of these efforts proved successful.

There remained several thousand items

ranging from small tools to heavy jigs and

fixtures. Lacking trained tool men, the

warehouse staff made slow progress in

identifying and segregating the mass of

material. The job became no easier

when the warehouse staff sent their only

set of blueprints to the War Production

Board in Washington to get advice on

disposal of the items.

The War Production Board suggested

selling the special tooling as scrap. The

Material Command then ordered disposal

as salvage. Apparently there was a misunderstanding somewhere in the course

29

 For a concise account of the whole termination

operation and property disposal techniques, see

Training Section, Readjustment Division, Materiel

Command, Readjustment Training Course Manual,

1945, especially Part IV, copy in ICAF Library. 30

 Memo, USW for CGs, AAF and ASF, n.d. (6 Jan

44), AFCF 164 Non Performance.
CONTRACT TERMINATION 459

of the telephone calls between Wright

Field and Detroit. Somewhere along the

line the recommendation of WPB relating only to the special tools was assumed

to apply to all the items.

Down at the end of the long chain of

command a second lieutenant began to

dispose of the tools in the Detroit warehouse. Although the disposition was advertised as a sale at cost, the lieutenant in

charge seems to have sold most of the

tools as scrap. Unsorted lots of unidentified tools were trundled into trucks,

weighed on the scales of a nearby coal

dealer and sold at $18 a ton.31

A Detroit manufacturer who had come

to the sale in search of standard tools,

horrified by what he saw, reported the

whole affair to WPB. Soon a local newspaper was howling for scalps, and the

story went out to the nation at large. A

local editorial writer raged at "maladministration, muddleheadedness, and apparent venality" and called for "appropriate

punishment" of those responsible. The

facts reported did indeed look bad; the

newspapers indicated that the great bulk

of the ninety tons of tools sold as scrap

were actually general-purpose tools that

could be absorbed by industry.32

The Air Forces reaction to this violent

attack was just about what might have

been expected. Several of the officers

concerned were punished after an investigation. A lieutenant colonel was permitted to resign, one lieutenant was reclassified and another was dismissed from

the Army only to be drafted into service

again as an enlisted man. But the investigation also showed that the charges

were not entirely warranted by the facts.

That there had been mistakes was undeniable; nonetheless, it was also true that

only about 10 or 12 percent of the material sold as scrap could be identified as

general-purpose tools useful to manufacturers at large. Furthermore, it could not

be said that the Air Forces had not made

a determined effort to return the tools to

use directly through commercial channels before selling them as junk.

At this distance, of course, censure and

defense are relatively meaningless. The

real significance of the Detroit tool case

lies in the influence it had thereafter on

Air Forces administration. Property disposal thereafter became a highly unpopular assignment among AAF officers.

Boldness in the exercise of discretion

might be the philosophy of the Under

Secretary, but the officers who read the

headlines, "Procurement Chief To Be

Replaced," would think twice before they

pursued a common-sense course if it involved any relaxation of the conventional

regulations.33 It was far safer to keep the

record clear, even if it cost the taxpayers

more.

The "play-it-safe" reaction of the Air

Forces took the form of a Cutting Tools

Warehouse centrally located in Chicago.

To protect themselves from criticism, the

officers in charge of this enterprise invited

a panel of four well-known toolmen from

industry to suggest procedures for dealing with the disposal of general-purpose

tools. Subpanels of specialists on all the

various categories of tools—drills, ream31

 Rpt of investigation of disposition of government-owned tools and equipment at GFE Warehouse

No. 1 in Detroit, Mich., 27 Nov 43, AFCF 412.4

Bulky. 32

 The case was reported in the press generally, but

see especially Detroit Free Press, October 30, 1943. 33 Detroit Free Press, November 1, 1943.
460 BUYING AIRCRAFT

ers, milling cutters, broaches, taps, dies,

were called in to deal with whatever technical problems seemed to lie beyond the

competence of the warehouse staff. In

sum, the Cutting Tools Warehouse

would absorb excess tools from all over

the country and use skilled labor to inspect them, segregate them according to

class, and catalogue them appropriately

in an effort to feed as many tools as possible back into industrial channels.

The Cutting Tools Warehouse plan

was certainly a safe one. There would

be no more inexperienced second lieutenants selling off tools as scrap. But to

play safe is expensive. The central warehouse cost the government $30,000 a year

in rent and $74,000 to equip with bins to

hold the tools stored. The cost of the

military staff running the warehouse cannot be readily computed, but the civilians

employed there cost the government $89,-

000 in a period of 15 months, and this

figure does not include the fees paid to

consultants.

There were still other expenses involved in running the warehouse. Cutting tools had to be wrapped carefully

when shipped any great distance. The

government had to absorb this expense.

When experience showed that the single

warehouse in Chicago was too remote,

operations were started at new centers in

Fresno, California, and Elyria, Ohio.

A final computation of the cost of playing safe with the Chicago Cutting Tools

Warehouse makes disheartening reading.

Industrial buyers could be induced to

purchase only a minute percentage of the

tools sent to the warehouse. The industrialists were hardly to be blamed for

showing so little enthusiasm. All purchases had to be accompanied by a certified check. Purchases from regular tool

sources, on the other hand, could be made

by phone, and in addition they carried

the guarantee of the seller's reputation.

As a consequence, the total return from

tools sold amounted to less than $75,000,

or a mere 2.65 percent of the total value

of the tools sent to the Chicago warehouse

for disposal. Set against the administrative cost of the warehouse, computed at

$222,000, it cost three dollars in overhead

expense for every dollar realized in sales.

Even at that, the administrative cost included neither office equipment and supplies nor the charges incurred in clearing

and packing the tools for shipment to the

central warehouse.34

The point scarcely needs belaboring.

The taxpayers can have every contract

supervised down to the last penny, if they

wish to pay the price. But how many taxpayers want to pay three dollars for every

dollar they save? Perhaps one of the real

heroes of the Materiel Command was that

lieutenant, possibly apocryphal, who

shortly after V-J Day deliberately drove

a tractor over a B-17 wing section to convert it into scrap rather than force the

taxpayers to spend more than the item

cost in crating and shipping it to a disposal depot.

An Afterword

If one accepts as evidence the absence

of postwar litigation and the failure of a

postwar depression to materialize, it can

34

 Capt E. O. Porter, History of the Cutting Tools

Warehouse, Monograph prepared by historical officer in the Central Proc Dist, n.d. (Jun 45), WFHO.

See also, Lt Col R. E. Cook to CGMC, 19 Aug 43,

AFCF 412.4 Bulky.
CONTRACT TERMINATION 461

be argued that the termination operations conducted by the War Department

during and immediately following World

War II were signally successful. Few

would deny that the job done in 1944 and

1945 was superior to that of 1918 and

1919. In some respects it might be

argued that the task of terminating contracts was more effectively accomplished

than the writing of contracts in the beginning. If at first glance this seems

paradoxical, it is worth recalling that termination policy was developed almost

from scratch during the war. Nearly the

whole debate took place over a period in

which thousands upon thousands of business firms were vitally interested in the

subject since they already held contracts

with the military services. As a consequence, a vast literature grew up around

the topic of terminations—indeed, far

more has been written about the termination than about the negotiation of

military contracts. Much, if not most of

the technique of negotiating military contracts evolved during the prewar years of

peace when relatively few businessmen

gave any serious attention to military procurement or during the early days of the

war when there was little or no time for

public discussion over the means and

methods employed. Thus, in retrospect,

the whole termination operation conducted by the War Department appears

far more effective, not only in principle

but in detail, than were the original negotiations resulting in the contracts subsequently terminated.
CHAPTER XIX

Organization for Procurement

Many and perhaps most of the changes

that seemed to be the continual lot of

military agencies during the war reflected

nothing more than an effort of those in

command to accommodate organizations

to the individuals available to man them.

To record the successive mutations in

structure stemming from this cause is a

waste of time. On the other hand, some

of the changes represented fundamental

shifts in policy of crucial importance to

the procurement process.

Although the various problems selected

for discussion here represent rather distinct aspects of the over-all question of

organization, all share one trait in common—they have suffered from a dangerous tendency to oversimplification. Military leaders no less than journalists and

political figures have sometimes been inclined to see cures in catch phrases. During the war there was always someone

ready to urge the merits of centralized

or unified command while ignoring the

costs of attaining that end. The same can

be said of the continual cry for the "elimination of duplication." So, too, "centralized procurement" had its perpetual advocates. Would-be reformers have

sometimes exploited the deep-rooted national adherence to the principle of civilian control by advocating and justifying

centralized procurement of military supplies by some sort of civilian agency as a

cure for the "red tape" of military procurement. Finally, decentralized operations has been a perennial catch phrase

too often used in disregard of its broader

implications and ultimate consequences.

What follows should shed some light,

admittedly at the risk of repetition, on

the nature of the problems of organization and some insight into the solutions

wrought to cope with them.

Co-ordination, Control, and Command

Expanding the Procurement

Organization for War

During most of the years between the

formation of the Air Corps in 1926 and

the coming of war in 1939, the Materiel

Division operated as a subordinate bureau of the Washington headquarters—

the Office of the Chief of Air Corps—and

was physically located at Wright Field,

Ohio.1 There, six major agencies carried

on the functions of the division. The

Experimental Engineering Section monitored the research and development program, which explored the hither edge of

aeronautical science. The Contract Section invited bids, wrote contracts, and

administered them. The Production Engineering Section rode herd on the manufacturers who secured contracts for air1

 See above, pp. 93-101.
ORGANIZATION FOR PROCUREMENT 463

craft in quantity. The Inspection Section

ensured compliance with the standards

laid down in the procurement specifications. The Field Service Section supervised the supply and maintenance operations carried out at depots widely

dispersed about the country and in the

outlying possessions. The Industrial

Planning Section prepared mobilization

plans.2

The arrangements by which six such

varied and complex staff functions were

carried out so far from the rest of the

Washington headquarters were not entirely satisfactory. For many years it had

seemed expedient to locate the chief of

the Materiel Division at Wright Field,

where he could supervise his operational

force personally, but there were decided

disadvantages in this. So long as the chief

of the Materiel Division remained outside of Washington, he had to make his

decisions without the benefit of the easy

co-ordination with the other divisions of

OCAC that residence at headquarters

would have afforded. By the same token,

the Chief of the Air Corps did not have

the ready and frequent access to his principal advisor on matériel matters that he

enjoyed with his other division heads.

The problem was the subject of staff

studies for many months, and the coming

of war in 1939 led the Chief of the Air

Corps to move the chief of the Materiel

Division to Washington, leaving the operating echelon at Wright Field in charge

of an assistant chief.

Such a fundamental organizational

shift brought all sorts of difficulties in its

wake. In Washington the chief of the

Materiel Division found himself bereft

of the advisors upon whom he had relied

when making decisions at Wright Field.

Without their continuing support, he became progressively less useful as a well-informed source of technical information

upon whom the Chief of the Air Corps

could rely—the very reason for his transfer from Wright Field in the first place.

His escape from this dilemma was to

build up a personal staff patterned on the

several operating activities at Wright

Field. Although it had originally been

contemplated that a very small staff

would suffice, an elaborate organization

gradually grew up around the chief of

the Materiel Division in Washington as

he drew one trusted subordinate after

another from Wright Field to the OCAC

headquarters.3

The Materiel Division at Wright Field

could ill afford to lose the officers being

drawn to Washington. Even before the

migration to headquarters began, an investigating board in 1939 had found "an

appalling lack of qualified personnel . . 

particularly in the key positions" at

Wright Field. At the same time, another

study of the "pitifully inadequate" technical staff effectively underlined the

point by observing that a single project

officer with one civilian assistant was currently expected to perform the "manifestly impossible" job of co-ordinating

three or four different production contracts for bombardment aircraft under

construction in plants several thousand

miles apart.4 If the Materiel Division

2

 See the organization chart for the Materiel Division as of 18 August 1939, McMurtrie and Davis,

Hist of AAF MC: 1926-41, app. A-7.

3

 AAF Hist Study 10, pp. 34-37. 4

 Rpt of com to study revision of Mat Div organization, 10 Jan 39, and civilian personnel study by

Capt C. S. Irvine, 26 Jan 39, AC Project Rcds (Lyon

Papers), bks. 18 and 19.
464 BUYING AIRCRAFT

was to procure the immense quantities of

equipment essential to a wartime air

force, it would have to launch an aggressive program to recruit a vastly larger

technical staff. During the two years before Pearl Harbor, this is what did happen.5

Explosive growth under any circumstances leads to organizational difficulties.

With so slight a cadre to build upon,

sound organization and effective administration proved hard to obtain in the

rapidly growing Materiel Division. More

than ever, the quality of the leadership

available would determine whether or

not the sprawling and hastily enlarged establishment would get results in the form

of finished aircraft ready for the tactical

units facing the enemy or become totally

embroiled in its own housekeeping problems. The unimpressive record of production achieved by the procurement organization in World War I suggested, to

some at least, that the latter outcome was

not entirely beyond the realm of possibility.6

Despite the acute shortage of technical

staff, the Materiel Division was fortunate

in having at least a handful of officers

whose peacetime service had given them

a wide range of experience in the various

activities of the division. In one sense

the very paucity of staff was an advantage;

for want of personnel, the few officers

available had never been allowed to develop into specialists. Instead, they had

been forced to take a turn at virtually

every job in the division, and as a consequence many of them had acquired just

the sort of general training necessary to

equip general officers for the leadership

expected of their rank.

One of the handful of officers at Wright

Field who had acquired a broad knowledge of matériel problems was Lt. Col.

Oliver P. Echols. In addition to a variety

of lesser assignments, his apprenticeship

had included duty as the technical executive at Wright Field and the post of assistant chief, Materiel Division, which he

assumed shortly after war broke out in

Europe. A year later, promoted to brigadier general, he was called to Washington

to take over as the division chief. He

remained at headquarters as the topranking officer in charge of matériel matters throughout the war, although his

title and the organization he managed

passed through a succession of mutations.7

If the transfer of the matériel chief to

Washington was disturbing to the procurement organization, no less so was

the War Department reorganization of

March 1942. This epoch-making change

swept away much of the military structure devised following World War I and

established in its place a tripartite organization in which three separate commands

—ground, air, and service—reported directly to the Chief of Staff. The impact

of this departmental reorganization extended far down into the internal structure of the air arm.

Under the commanding general of the

Army Air Forces, General H. H. Arnold,

there were three distinct echelons of activity. Reporting directly to him was the

Air Staff charged with policy formulation. 5

 McMurtrie and Davis, Hist of AAF MC: 1926-

41, app. E, and p. 6a of the text. 6

 See, for example, David Lloyd George, War

Memoirs (6 vols.; Boston: Little, Brown and Co.,

1933-37), V, 451.

7

 McMurtrie and Davis, Hist of AAF MC: 1926-

41, pp. 103ff.
ORGANIZATION FOR PROCUREMENT 465

Next came the directorates or so-called

operating staff. This group, including

directors of personnel, requirements,

management control, and technical services, was intended to serve as a co-ordinating staff that grouped problems along

functional lines. At the next echelon

came the operating commands, embracing not only such activities as technical

training, flying training, ferrying, matériel, and the like but also the numbered

Air Forces or tactical units in the field.

However impressive the new title of

Materiel Command may appear, the

"command" was really little more than

the old Materiel Division staff within

OCAC. In fact, during the first few days

of its existence the infant command was

in danger of being eclipsed altogether as

the newly formed directorates in the

echelon above began to build up a staff

of technical specialists—in armament,

power plants, communications, and so on

—paralleling those already established in

the Materiel Command headquarters

staff. Although an agreement was finally

worked out that left responsibility for

technical advice to the Materiel Command and thus avoided an unseemly

scramble for scarce specialists, the episode

clearly indicated the prevailing confusion

as to the precise division of functions

among the Air Staff, the directorates, and

the operating commands.8

When a full year of trial failed to clear

up the confusion among the various staffs,

the whole scheme of directorates had to

be eliminated. Thus in March 1943 the

policy-making air staff and the operating

directorates were combined into a single

echelon of six sections: personnel; intelligence; training; operations commitments

and requirements; plans; and matériel,

maintenance, and distribution. Each of

these was headed by an assistant chief of

Air Staff who played a dual role. In their

relations with the Commanding General,

AAF, these officers acted individually as

his personal advisors and collectively as

his air staff. When facing in the other

direction, each of the men presided over

his specialized operating staff as its chief

executive and in this capacity kept himself intimately informed of the details he

needed in his role as advisor to the commanding general.9

As chief of the Materiel Division at the

time of the March 1942 reorganization of

the War Department, General Echols became commanding general of the Materiel Command then established. The

position of assistant chief of the Materiel

Division, Wright Field, was redesignated,

Commanding General, Materiel Center,

and Brig. Gen. A. W. Vanaman received

the assignment. He remained there until

the reorganization of March 1943, when

General Echols became assistant chief of

Air Staff for Materiel, Maintenance, and

Distribution. At that time the title of

Commanding General, Materiel Command, moved out to Wright Field where

it was assumed by Brig. Gen. Charles E.

Branshaw. This officer came to Wright

Field from the Western Procurement District, where he had been serving as district supervisor, a circumstance that was

to have a considerable influence on the

line of policy he subsequently pursued.

The transfer of the title, Commanding

8

 AAF Hist Study 10, pp. 53-55; McMurtrie, Hist

of AAF MC: 1942, pp. 2-3.

9

 For a discussion of the shortcomings in the direc- torates, see AAF Hist Study 10, pp. 46-51, 92-107.
466 BUYING AIRCRAFT

GENERAL BRANSHAW

General, Materiel Command, to Wright

Field did not mean that any large migration of command personnel from Washington took place. The headquarters organization of the old Materiel Command

simply combined with the former policy

and operating staff and stayed in the

capital.10

During all the months of 1942 and 1943

when the Air Forces headquarters staffs

were being shuffled and reshuffled in an

effort to find a workable and efficient arrangement, the organization at Wright

Field was equally subject to change. The

successive permutations of structure introduced to keep the ever-growing organization manageable would be far too

tedious to recount here, but by the fall of

1942 the major activities of the Materiel

Command had been concentrated in

three main divisions reporting to the

commanding general. For the most part

these divisions—engineering, production,

and procurement—were composed of sections and units already in operation but

now regrouped to provide more effective

functional control.

While the matériel organization at

Wright Field grew rapidly during the defense period, doubling and redoubling

in the two years before Pearl Harbor,

thereafter it grew at a rate that career officers thinking in terms of the scanty peacetime budget regarded as nothing less

than phenomenal. During 1942 officer

strength at Wright Field increased from

627 to 1,684. This growth was almost

entirely made up of reservists, since the

number of Regular Army officers on duty

remained virtually constant at 90-odd

men throughout the year. Civilian personnel strength increased from 7,828 in

January 1942 to 11,226 at the end of the

year. And this figure excludes those civilians working in the procurement districts. Counting these, the command employed 28,673 civilians in December 1942.

By the end of 1943 the combined total

reached 34,270 civilians along with 3,742

officers and 5,658 enlisted men. Although

still more manpower was added to the

command in the following year, by then

the rate of growth was much slower.11

This was certainly fortunate, since staggering growth had long since begun to

compound the normal difficulties of coordination and control experienced by

10

 McMurtrie, Hist of AAF MC: 1942, p. 172; and

Russel, Hist of AAF ATSC: 1944, p. 48, n. 8.

11

 McMurtrie, Hist of AAF MC: 1942, app. 7;

Davis, Hist of AAF MC: 1943, app. 3; Russel, History

of AAF ATSC: 1944, app. 3.
ORGANIZATION FOR PROCUREMENT 467

those who tried to direct the multifarious activities of the Matériel Command.

Problems of Co-ordination

and Control

Although the statistics of personnel increases in the Materiel Command after

Pearl Harbor may look impressive in retrospect, it would be a mistake to assume

that these thousands upon thousands of

inexperienced and untrained employees

were all promptly absorbed and put to

work efficiently. To begin with, they

soon outstripped the available floor space

despite additions from an extensive building program. The post garage and a

number of other buildings including

some storage sheds were hurriedly converted into offices. Even these expedients failed to meet the need, and finally

some units had to set up their offices in

the corridors of existing structures. With

anywhere from 600 to 800 visitors coming to Wright Field on business every

day during 1942, little imagination is required to understand how hard it was to

perfect a smoothly functioning procurement organization under such circumstances.12

 Nevertheless, the difficulties,

while aggravating, were no more than

those to be expected by any rapidly growing force, and in time many of them were

eliminated. More fundamental were the

difficulties actually inherent in the structure or form of the organizations erected

to encompass the added thousands of employees at Wright Field.

As the functions performed by the several divisions increased not only in volume but also in complexity, extensive

subdivision of operating sections was not

only desirable but necessary. Inexperienced staff members could often be

trained to handle a narrow range of jobs

effectively in a relatively short time, and

each further subdivision made it possible to deal expeditiously with the continually mounting mass of details. Thus,

for example, what had started out in October 1942 as the Production Division

with four internal sections (production

engineering, production control, industrial planning, and special projects) had

been subdivided three months later into

five sections, which included some

twenty-five branches. These in turn were

broken down into smaller units and subunits.

By way of illustration, consider a single section within the Production Division. By July 1943 it had parceled its

functions out to 4 branches that contained in all sixteen units and sixty-three

subunits. This meant that even within

this section alone an officer in one of the

subunits who sought to co-ordinate some

matter of significance was confronted

with an array of 70-odd organizations and

more than a hundred officers to whom he

might address an inquiry—all within his

own immediate operational area. If his

problem extended beyond his own section, he might have to approach any one

of more than 400 officers in the Production Division as a whole. If it involved

co-ordination with one of the other divisions his difficulties mounted still further,

for there were over 800 officers in the Engineering Division and over 100 in the

Procurement Division.13

Inevitably there was a good deal of

12

 McMurtrie, Hist of AAF MC: 1942, p. 168ff. 13

 Hist of Materiel Command: 1943, app. 3.
468 BUYING AIRCRAFT

overlapping activity and lost motion in

this hurriedly assembled multitude.

Sometimes section and branch chiefs set

up units and subunits to do jobs that,

unbeknown to them, were already being

attacked somewhere else in the sprawling

matériel organization.

While the multiplication of branches,

units, and subunits was indeed an important factor in causing confusion and in

complicating the task of co-ordination

within the operating divisions, it was by

no means the only source of difficulty.

In a large measure the trouble stemmed

from the character of the task at hand.

In peacetime the engineering staff supervised the development of aircraft and the

procurement staff bought them, but even

before the outbreak of war those in command recognized the need for a substantial measure of separation between production engineering on the one hand and

experimental or developmental engineering on the other, lest the endless strivings

after perfection of the experimental engineers delay production.14

 Some went

so far as to believe—erroneously as it

turned out—that experimental and production engineering could be entirely

separated. General Arnold, for instance,

as Chief of the Air Corps, had urged his

matériel staff to build a "Chinese wall"

between the two.15 What he wanted was

a staff of production engineers who would

make quick decisions on changes in design or specifications proposed by contractors trying to step up output or eliminate critical materials in short supply.

Out of this beginning grew the organization that in time became the Production

Division.

The very existence of a Production

Division raised formidable problems of

co-ordination. In the first place, the division would have to maintain the very

closest kind of relationship with the Engineering Division if the airplanes turned

out in quantity were to incorporate the

latest improvements perfected under the

supervision of experimental engineers.

Inevitably there were misunderstandings

between the two groups. The research

staff complained that the production men

did not consult it often enough and frequently ignored the advice it gave. The

production men replied that the experimental engineers were too slow and too

concerned with minor refinements. At

this, the research men pointed out that

the production men too often went ahead

and made decisions on inadequate technical knowledge and then came running

to the Engineering Division for help

when changes did not work out.16 Obviously only a highly efficient system of

co-ordination and co-operative effort

would avoid such conflicts.

In addition to co-operating with the

Engineering Division, the production

men had to work in the utmost harmony

with the officers of the Procurement Division, since their work dovetailed at a

great many points. In practice such relationships proved hard to achieve.

A number of circumstances contributed to the want of accord between the

two divisions. Maj. K. B. Wolfe, the offi- 14

 Russel, Hist of AAF ATSC: 1944, p. 7. 15

 The conflicts of continuing development versus

mass production are treated in Chapter XX, below.

For General Arnold's view, see Memo, CofAC for

Gen Brett, 17 Feb 39, WFCF 400.12.

16

 This paragraph is taken almost verbatim from

the brief but excellent summary of the problem presented in Russel, Hist of AAF ATSC: 1944, pages

31-37.
ORGANIZATION FOR PROCUREMENT 469

GENERAL WOLFE. (Picture taken in

1947.)

cer who built up the Production Division

and ultimately rose to the rank of major

general for his efforts, was an unusually

aggressive leader and a masterful personality. He saw clearly that no matter

what other considerations were involved,

in the final analysis the Production Division would be judged on the speed with

which it sent large numbers of aircraft to

the tactical units in combat. Surrounding himself with a strong staff of able production engineers and business executives, he imbued them with one goal:

production. Following his contagious

leadership, these men repeatedly seized

the initiative in taking on new functions

and creating new organizations to cope

with them as opportunity presented.

The Procurement Division, on the

other hand, was far less aggressive. Perhaps this was because so many of its officers were lawyers and less inclined to

boldness than the production men recruited from industry. In any event, the

Production Division gradually absorbed

all sorts of activities that might logically

have fallen to others. This was particularly true with respect to the contractual

adjustments stemming from the deviations authorized by production engineers.17

Undoubtedly General Wolfe and his

hard-working staff deserve well of the nation. They provided much of the power

behind the drive that ultimately sent aircraft output to the spectacular levels

achieved during the war. But the bulldozing methods that brought these results left a lot of casualties along the way.

Contractors in particular found it difficult to know just where to turn for decisions or assistance at Wright Field. Sometimes they made changes in delivery

schedules or design details on the verbal

assurance of project engineers in the Production Division only to discover subsequently that the changes had been cleared

neither by Procurement Division nor by

Engineering Division personnel. Sometimes contractors were able to exploit this

lack of co-ordination to play one division 17

 Ibid., pp. 8-10.
470 BUYING AIRCRAFT

off against another. More often it led

only to confusion, overlapping activity,

and hot-tempered disputes.18

Typical of the overlapping effort that

characterized the hastily erected matériel

organization was the multiplication of

agencies performing more or less identical contract follow-up functions. A control section in the Procurement Division

pursued this line as did a similar section

in the Production Division. And to complicate matters still further, so did a section in the Air Service Command (ASC),

the supply and maintenance organization that had been formed as a separate

command from the old prewar Field

Service Section of the Materiel Division. As the supply service of the Air

Forces, ASC was responsible for initiating all spare parts purchases. Inasmuch

as the tactical units required spares as

soon as they received their aircraft, ASC

put heavy pressure on the Procurement

Division to order spares at the same time

as the aircraft needing them. It frequently happened, however, that in trying to turn out spares concurrently, manufacturers had to cut down on their

output of finished aircraft or other end

items. This brought ASC into conflict

with the Production Division.19

A few other instances of the contrary

interests that led to misunderstandings

among the divisions of the Materiel Command and between the Materiel and Air

Service Commands may be worth considering. In addition to aircraft, the Engineering Division was forever perfecting

many new and different items of personal

equipment such as flying suits, oxygen

outfits, and escape kits. Naturally the

engineers doing this work wanted the latest and most improved items procured for

issue to the units in combat. The supply

and maintenance people in ASC, however, were faced with some rather different objectives. They had to satisfy the

tactical units with an immediate flow of

items in quantity. Furthermore, they

had to resist the introduction of too

many models if they hoped to simplify

maintenance and training as well as provide up-to-date technical orders and instruction manuals for the equipment

they sent out. To attain these ends, ASC

sometimes refused to order a newly developed item or asked for it only in small

quantities. This vexed not only the engineers but the production men as well.

Understandably enough, the latter found

it easier to plan for the production of

large quantities all at once than to deal

with a succession of lesser purchases.

Caught in this web of conflicting interests, officers in the Procurement Division

found it hard to please anyone.20

Where so many entirely different agencies did business with individual contractors, conflicts were almost impossible

to avoid. When, for example, ASC officers learned from their supply organization that a certain spare part was no

longer required, they wired the manufacturer to discontinue production. Because this action was not properly cleared

with the Procurement and Production

Divisions in the Matériel Command, a

whole train of misfortunes followed. Unaware of the cancellation, a contract com- 18

 McMurtrie, Hist of AAF MC: 1942, p. 28. 19

 Ibid., pp. 59-79. See also, MC Letter of Instruction, 9 Mar 42, AFCF 400.12 Methods and Program of Proc.

20

 Russel, Admin Hist of AAF ATSC: 1944, pp.

78-80.
ORGANIZATION FOR PROCUREMENT 471

pliance unit continued to follow up the

initial order, and a production expediter

continued to urge the baffled manufacturer on to greater effort. Here was the

epitome of un-co-ordinated action. The

bad impression such a situation made on

contractors only served to emphasize what

those in command already knew: co-ordination within the matériel organization

was faltering at a great many points.21

Eventually, late in 1944, the top Air

Forces command undertook a major overhaul of the matériel system in an effort

to eliminate some of its more serious

weaknesses. The Materiel Command

and the Air Service Command were

combined into a single Air Technical

Service Command (ATSC), and within

this new command the procurement and

production functions were combined

into a single division. The intent of this

rearrangement was to concentrate, insofar as possible, the points of contact between the manufacturers and the matériel

staff along a narrow front and thus eliminate conflicting decisions.

There were many advantages to be derived from gathering all the matériel

functions within a single command, but

perceptive officers realized that putting a

number of activities under a single head

by no means guaranteed that conflicting decisions would thereafter disappear.

Even where two activities were merged

within a single division, officers were still

confronted with the same formidable

problems of co-ordination that had

plagued matériel operations throughout

the war.22

In a large measure the proliferation of

overlapping subunits and the repeated

instances of faulty co-ordination were a

direct product of the isolation of command from day-to-day operations. Successive commanders at Wright Field during the war struggled hard to maintain

contact with their burgeoning divisions.

General Branshaw in particular kept his

door open to all comers, making a valiant

effort, ultimately at the cost of his health,

not to lose the personal touch in exercising his command.

In the peacetime years the chief of the

old Materiel Division at Wright Field

was able to keep in touch more or less

effectively with all the important operations going on under his supervision.

All papers going up or down the chain of

command flowed through his office, and

by conscientious effort he could keep

himself rather well informed. His office

and those of his section chiefs were conveniently adjacent. Effective co-ordination could be achieved by the most informal of contacts.

In wartime the comfortable ways of

peace were no longer possible. As sections and branches grew more numerous,

and each in succession spawned units and

subunits, the officer in top command at

Wright Field soon found himself four,

five, or even six echelons above the level

where many operations were being per21

 McMurtrie, Hist of AAF MC: 1942, pp. 78-79.

For elaboration of the problems raised here, see

IOM, MC Comptroller to CofS MC, 12 May 44, in

Analysis of AAF Proc and Shipment Rcds, 12 May

44, by MC Comptroller, WFHO files.

22

 Russel, Hist of AAF ATSC: 1944, p. 89ff. For

an illustration of the difficulties encountered in

achieving internal co-ordination even after merging

the commands in ATSC, see the B-29 tools controversy described in Study of Proc of Special Tools,

Supply Div, ATSC, 5 Dec 44, WFHO Research file,

Tools and Equipment.
472 BUYING AIRCRAFT

formed. To have insisted on routing all

correspondence through his office would

have swamped him with details and set

up a fearful bottleneck. Much the same

thing applied to the division and section

chiefs. To avoid the delays encountered

in passing communications up and down

the chain—the practice of "layering" as

Donald Nelson described it—subordinate

units were authorized to communicate

directly with their opposite numbers in

other organizations. This proved expeditious, but the saving in time was paid

for with a loss of personal contact that

the commanding general and his division

heads found progressively more detrimental as the months wore on.

To save themselves from complete loss

of contact with the teeming organizations

below them, those in command positions

gradually came to realize that they had

to create elaborate administrative instruments to control and co-ordinate the operations that had grown too vast for personal supervision. These new tools of

command took many forms, of course,

but it was not uncommon to find officers in policy-making positions served by

three different kinds of staff agencies.

Almost always there was an administrative unit to handle housekeeping details

such as running a typing pool and a system of files. There was usually an executive staff to distribute the workload carried on by the organization and ensure

internal co-ordination as well as to provide for liaison with other services or

commands. And, finally, especially in

larger organizations, there was likely to

be a control unit serving the officer in

command. The control unit imposed

standards of record keeping on the subordinate units, established follow-up procedures, studied workloads, backlogs, staff

loading, and personnel requirements,

collected statistics and recurring reports,

and compiled summaries for the use of

command.

Without a doubt the expansion of the

upper echelon administrative staff was

necessary if officers in command positions

were to keep positive control over the

operations going on within their purview. Nonetheless, as time wore on,

some critics were inclined to feel that

these special staffs had become top-heavy

monsters out of proportion to actual

need, even outweighing the operating

activities they were designed to serve.

Whether such charges were valid could

only be determined by a close study of

individual cases. Nonetheless, it was

certainly true that by the end of 1943

these administrative staffs had flowered

luxuriantly within the Matériel Command.

Just how large the special administrative staffs could become may be suggested

by a brief resume of the establishment

maintained for this purpose by the Procurement Division in March 1944. The

division chief had four clerks in his immediate office. His two technical assistants were served by a total of 18 people.

The administrative staff for housekeeping employed 80 persons. Some 60 of

these performed the highly important

work of keeping the central file of all

contracts written and all correspondence

relating to the contracts. In addition,

there was a Procurement Control Section

with 108 people working to keep a current situation report on the status of all

contracts. Altogether, this made a total

of over 200 people in the upper echelon

of the division performing housekeeping
ORGANIZATION FOR PROCUREMENT 473

and supervisory jobs. And below this top

layer at the level of operations, the purchasing, contracting, and terminating sections all had similar staffs under a variety

of guises such as administrative units,

record units, or control units. Taken all

together, upward of one-third of the total strength of the Procurement Division

was absorbed in the function of providing tools for the use of command.23

Even as the explosive and often illdigested organizational growth of 1942

had led those in command to appreciate

the need for improved tools in the form

of special staffs for co-ordination and

control, by 1944 they had come to realize that the cures might have been carried too far. Admittedly, some of the

specialists in organizational planning

seemed to believe the heavy top staffs

were justified. They pointed out that

whereas in January 1943 it took 6.79 persons in the Materiel Command for every

aircraft turned out by Air Force contractors, in November 1943 only 4.87 persons

were required.24 But, like so many seemingly impressive statistics, these figures

may have been utterly meaningless since

such an infinite variety of factors quite

apart from the organization at Wright

Field entered into the acceleration of aircraft production. The doubts of those

who actually shouldered the burdens of

command were mirrored in the annual

report of the Procurement Division in

1944:

The necessary early policy of getting the

job done by "expedient" methods has been

supplanted by accomplishing the job properly through planning and control. The impact of the change on responsible operating

personnel accustomed to considerable inde- pendence of decision was quite noticeable.

With the advent of new (and) exacting administrative controls—forms controls, reports controls, project controls, classified

data controls, and correspondence controls

—considerably more manpower hours were

required away from primary functions.

While undoubtedly these mechanisms will

result in getting the administrative job done

better, they do conflict with the technical

jobs—those of getting material produced as

fast as possible for combat. Overemphasis

should not be placed on burdensome con- trol mechanisms which do not result in improvement in efficiency.25

Whether or not the Materiel Command overemphasized and overbuilt control mechanism is now beside the point.

Nevertheless, to recognize the lessons implicit in the experience of the war years

is very much to the point. Clearly, the

manual techniques of record keeping and

the informal methods of administration

(especially in the matter of co-ordination)

that worked well enough with the lowvolume characteristic of peacetime were

no longer feasible when the rush of war

work prohibited personal surveillance.

Special staffs for co-ordination, control,

and administration could be and were

erected to keep command from being

swamped in a mass of details, but these

staffs themselves got out of hand. The

continuing task of command, then, was

to keep the administrative mechanisms,

the overhead staff for co-ordination and

control, sensitively adjusted to the volume of business handled and to the size

or complexity of the organization controlled. 23

 Russel, Hist of AAF ATSC: 1944, p. 73ff. 24

 Office of Organizational Planning, Materiel

Command Operational Problems; Appraisal as of 1

Dec 43, WFHO Research file.

25

 Quoted in Russel, Hist of AAF ATSC: 1944.

p. 74.
474 BUYING AIRCRAFT

While the problems of co-ordination

and control within the air matériel organization were indeed highly involved,

they were hardly unique. Almost exactly

the same pattern of difficulties beset the

officials of the War Department who tried

to exercise their supervisory responsibility over the procurement effected for the

Army's air arm.

The Army and the Air Arm

The epochal Defense Act of 1920

placed two major responsibilities on the

Assistant Secretary of War. He was to

plan for the mobilization of the national

economy in the event of hostilities and

supervise current Army procurement.

The actual mechanics of buying, of

course, were left to the technical services

—Ordnance, Quartermaster, Air Corps,

and the others—but the Assistant Secretary was expected to police their operations and hold them to an acceptable

standard of performance. Above all, he

was supposed to prevent the unseemly

scramble that had marred the procurement record in World War I when contracting officers within the Army actually

bid against one another for the services of

industry. To prevent this, the Assistant

Secretary laid down standard contract

forms, drew up uniform procurement

regulations, and then set out to maintain

a comprehensive view of the far-flung

procurement activities of the services to

insure adequate co-ordination among

them.26

In December 1940, Congress created a

new position—the Under Secretary of

War (USW)—which absorbed all the

procurement functions formerly assigned to the Assistant Secretary. The

incumbent Assistant Secretary, Robert P.

Patterson, became the first Under Secretary. Soon thereafter the President appointed Robert A. Lovett to fill the post

of Assistant Secretary of War for Air,

which had remained vacant since the

early thirties. Although this position

carried no statutory power to direct procurement matters in the sense that the

Under Secretary's did, Mr. Lovett took

an active interest in air arm production

problems.27 While the precise character

of Mr. Lovett's duties was never clearly

defined by statute during the war, his

very presence opened a direct and personal line of communication to the Secretary of War that could prove useful

in the event of misunderstandings or disagreements between the Under Secretary

and the air arm. Few such end runs

around the Under Secretary proved necessary, largely because of the tactful leadership of Mr. Patterson and his principal

subordinates throughout the war years.

On the other hand, the Assistant Secretary's effectiveness was further enhanced

by the personal access he enjoyed in the

Office of the Chief of Staff by virtue of

his intimate relationship with General

Arnold. From October 1940 until the

time of the War Department reorganization of 1942, General Arnold served as

Deputy Chief of Staff for Air, and thus

readily bridged the gap between Assistant Secretary Lovett and General Mar- 26

 Defense Act of June 4, 1920, sec. 5a, as amplified

in 5 series Army Regulations and Handbook for the

War Department General Staff, Oct 23, ch. 8. See

also, Act of December 16, 1940 (54 Stat 1224).

27

 44 Stat 784, sec. 9. See also, Craven and Cate,

eds., Plans and Early Operations, p. 115.
ORGANIZATION FOR PROCUREMENT 475

shall, the Chief of Staff, when procurement matters required the latter's attention.

In actual practice there was a wide

field open for disputes between the Office of the Under Secretary (OUSW) and

the technical services. By the terms of the

Defense Act of 1920 as amended, the technical services were left in the ambiguous

position of serving two masters: the Chief

of Staff on matters military and the Under Secretary on matters relating to procurement. Inasmuch as the distinction

between "military" and "procurement"

questions was frequently impossible to

make, collisions of authority were increasingly frequent as the rearmament program gathered momentum. Of the various reorganizations considered to rectify

this situation, one in particular found

ready adherents. The scheme called for

the establishment of a single military business manager over all the technical services, somewhat along the lines of the Purchase, Storage, and Traffic Division commanded by Maj. Gen. George Goethals

in World War I.28

The agitation for a single military supervisor to co-ordinate procurement matters was considerably stimulated by the

increasing frequency with which the technical services met obstacles and delays in

their dealing with OUSW. Needless to

say, the Under Secretary's staff was suffering from the usual pangs of wartime

expansion.29 In less than a year it grew

from its peacetime strength of about 80

to nearly 500. The old familiar techniques of personal and informal co-ordination broke down just as they had at

Wright Field when rapid organizational

growth set in. But OUSW suffered from

a still more grievous malady according to

a firm of management consultants called

in to study the office at work. No one,

declared the consultants, really understood the purpose for which OUSW existed—neither the personnel of that organization itself nor those in the technical

services subject to the Under Secretary's

supervision.30 Criticisms of this sort

helped bring to a head the agitation that

led to the major overhauling of the War

Department in March 1942.

The reorganization of March 1942 divided the Army into three separate forces:

air, ground, and service—Army Air

Forces, Army Ground Forces, and Army

Service Forces—each under a commanding general reporting to the Chief of Staff.

To overcome the criticisms made by the

technical services before the reorganization that they served two masters in reporting to the Under Secretary as well as

the Chief of Staff, the details of the

policy-making and co-ordinating functions hitherto carried out by OUSW in

regard to procurement were moved

downward and assigned to the service

force under the command of Lt. Gen.

Brehon B. Somervell. Originally designated as Services of Supply (SOS), General

Somervell's command was subsequently

and more popularly known as the Army

Service Forces (ASF).

The plan of reorganization for 1942

spelled out in War Department Circular

28

 This whole problem is treated at length in John

D. Millett, The Organization and Role of the Army

Service Forces, UNITED STATES ARMY IN

WORLD WAR II (Washington, 1954). 29

 Anderson, Hist of OUSW: 1914-41, ch. 6, especially sec. 3, The Organization and Working of the

Office. 30

 Millet, Organization and Role of ASF, p. 27.
476 BUYING AIRCRAFT

59 placed procurement responsibility for

the Army on the Commanding General,

ASF, with one significant exception. The

mission of the ASF was to provide services and supplies to meet all requirements

"except those peculiar to the Army Air

Forces." This meant that while Ordnance, Quartermaster, Chemical Warfare, and the other technical services

would report to Commanding General,

ASF, the Materiel Command would remain a part of the AAF. Any other arrangement was scarcely possible. The

thinking of responsible air arm officers in

the upper echelons of command had been

thoroughly conditioned by the struggle

for autonomy. At the eleventh hour it

was hardly to be expected that they would

relinquish direct control over the procurement of the equipment vital to their

mission. Nevertheless, the available evidence suggests that the decision to leave

air arm procurement with the AAF was

as much a matter of political compromise

as it was deference to the desires of the

air officers. The officials who planned the

reorganization of 1942 apparently felt

that the vociferous advocates of air arm

autonomy on Capitol Hill would launch

an immediate drive for a separate air

force unless some such compromise were

made. And in the chaotic months following Pearl Harbor the administrative

delays inevitable in effecting complete

autonomy might well have proved disastrous.31

While there were sound arguments for

leaving air arm procurement entirely

within the AAF, the arrangement would

have raised a number of difficulties.

When the Under Secretary relinquished

to the Commanding General, ASF, the

task of imposing uniform procurement

procedures on all Army procurement, the

responsibility then resided in an echelon

parallel to the AAF. The three forces,

AGF, ASF, and AAF were coequal; each

reported independently to the Chief of

Staff. How, then, could ASF impose uniform procurement policies on the Army

as a whole? The difficulty plagued the

staff planners for some time until finally

they resolved the matter by leaving the

job of supervising air arm procurement

to the Under Secretary, as had been the

case before the reorganization. This expedient they showed on their organizational charts as a dotted line running

from the AAF Materiel Command directly to OUSW rather than through ASF.

When Under Secretary Patterson saw

the scheme proposed by the planners, he

immediately sensed its inherent weakness.

It was, he said, "awkward and unsound."

He could not exercise effective supervision over Air Force procurement without

a staff; authority to control policy without an adequate staff organization to follow up the details gave only the form and

not the substance of power. This was

axiomatic. But the March 1942 reorganization stripped most of the Under Secretary's staff from him and placed it under

the Commanding General, ASF. Moreover, unless both the AAF and the ASF

pursued a uniform course in procurement matters, there was real danger of a

return to the confusion and interbranch

competition that had discredited Army

contracting in World War I.

To escape from the dilemma confronting him, the Under Secretary finally hit

31

 Ibid., pp. 30-34; Memo, G. H. Dorr, Notes on

the Activities of an Informal Group in Connection

With Supply Reorganization in the War Dept, JanMay 1942, OCMH files.
ORGANIZATION FOR PROCUREMENT 477

CO-ORDINATION BETWEEN USW AND

MATERIEL COMMAND

Organizational chart showing the expedient

arrangement by which the USW retained direct

policy control over the Materiel Command, AAF,

after the War Department reorganization of March

1942 placed responsibility for procurement procedures

within the ASF.

upon an expedient solution. It was natural for him to work with the officers of

his old. staff who had moved into the

ASF. He knew them as individuals and

understood something of their activities.

So he continued to use them, instructing

them to impose uniformity in contract

procedures on the AAF Materiel Command as well as the technical services

within ASF. But when dealing with air

arm matters they were to do so "for the

Under Secretary personally" and not in

their capacity as ASF officers. In practice,

this bit of fiction actually involved one

man, Col. A. J. Browning, an industrialist newly commissioned from private life.

Colonel Browning as chief of the Purchase Division, ASF, was the officer to

whom the Commanding General, ASF

had delegated most matters of procurement policy. Thus, when dealing with

the AAF Materiel Command, Colonel

Browning acted as the "Special Representative of the Under Secretary of War."

In dealing with the other technical services he acted as the chief of the Purchases

Division, ASF, down the normal chain of

command, even when sending out directives identical to those issued to the

AAF.32

While expedient, the Under Secretary's

"Special Representative" formula for using the ASF to impose policy on the air

arm was not without its shortcomings.

Even among the men who drew up the

reorganization in 1942 the subterfuge

was regarded as "not particularly dignified,"

 33

 and from the point of view of

procurement officers at Wright Field,

still more serious objections could be

raised. No matter how much it was

sugar coated with fictions, the arrangement still left the formulation of procurement policy in the hands of ground

force officers. To minimize resistance on

this score, the Under Secretary provided

two built-in safeguards. He directed ASF

to establish an Air Forces liaison office to

clear all proposed directives with the

AAF Materiel Command before issue.

Where agreement could not be reached

on a proposed procurement regulation or

similar matter, air arm officers were empowered to carry appeals personally to

the Under Secretary for a decision.34

The officers in charge of Air Forces

matériel were quite willing to go along

with the Under Secretary's polite fiction,

32

 Dorr Memo, cited n. 31; Millett, Organization

and Role of ASF, p. 125. 33

 Dorr Memo, cited n. 31.

34

 USW to CGs, ASF and AAF, 9 Apr 42, AFCF

400.12 Method and Program of Proc; Function of

Proc Function of the AAF, Lecture by Swatland.
478 BUYING AIRCRAFT

GENERAL SOMERVELL

since they recognized the need for uniform procurement regulations. Three

months later they were even willing to

acquiesce silently when he delegated his

job of approving certain classes of Air

Forces contracts to Colonel Browning as

his special representative. In effect this

meant that contracts for air matériel involving the largest dollar volume could

not be officially approved by a major general in the AAF but had to await the signature of a colonel in the ASF who was

actually two echelons below the Under

Secretary. Colonel Browning's promotion to brigadier general scarcely altered

the incongruity. And when he in turn

redelegated the authority for granting

deviations in standard contract forms to

Mr. W. C. Marbury, a Baltimore lawyer

serving in the Purchases Division, ASF,

Air Forces officers began to wonder if the

fiction had been carried too far.35

The matter came to a head during the

major reorganization of the AAF headquarters staff in March 1943.36

 The staff

planners in the management control office who worked out the details of the reorganization discovered in studying their

little boxes and black lines of authority

that the arrangement contrived a year

before in the reorganization of March

1942 was really quite impossible. The

unique relationship of the air arm and

the Under Secretary was symbolized on

the organizational charts by a dotted line

running from the Commanding General,

Materiel Command to the Under Secretary. But the reshuffling of the AAF

headquarters in March 1943 saw the title

Commanding General, Materiel Command, move out to Wright Field. General Echols, who had held that position,

became Assistant Chief of Air Staff, Materiel, Maintenance and Distribution, on

the Air Staff.

To leave the relationship of the Under Secretary (or his special representative) and the Commanding General, Materiel Command, unchanged, would be to

cut the whole Washington headquarters

organization of the AAF from consideration of matériel questions. On further reflection the staff planners realized that for

the whole year, or so long as the "dotted

line" had run directly from the Commanding General, Materiel Command,

to the Under Secretary on the official

organizational charts, the Commanding

General, AAF, himself, had been entirely

left out of the procurement picture.37

By rephrasing a few directives, the

lines of authority could be straightened 35

 Memo, Maj R. G. Storey for ACofAS Management Control, 1 Oct 42; Memo, Col G. R. Perera for

Lt Col G. A. Brownell, 17 Oct 42. Both in AFCF

400.12 Method and Program of Proc.

36

 See above, p. 265. 37

 Memo, Chief, Management Control, for CofAS,

30 Apr 43, AFCF 161 Renegotiation.
ORGANIZATION FOR PROCUREMENT 479

GENERAL BROWNING ROBERT P. PATTERSON GENERAL ECHOLS

out, but the mere fact that the "impossible" pattern laid down in the reorganization of 1942 had worked for a whole

year suggests how little it mattered what

the organizational charts and directives

said. The really important consideration

was how the system actually worked. And

it did work despite the absurdities and

incongruities. The AAF got what its

partisans wanted: its procurement operations were not swallowed up by ASF as

some had feared would happen; and for

all practical purposes, Air Forces officers

retained substantial control over the procurement of air matériel even while the

Under Secretary met his statutory obligation to maintain uniformity in the procurement practices of the Army.

In establishing the relationship of the

air arm to the rest of the Army, it would

seem that the precise form of the organizations employed was less important than

the attitudes of the men who ran them.

Fortunately, Under Secretary Patterson,

General Browning, and General Echols

were all men of good will who worked

together in harmony. The special representative arrangement employed by the

Under Secretary may have horrified the

experts who drew up neat and symmetrical

organizational charts, but it worked so

well it was subsequently taken over more

or less intact and applied again at least

twice in other situations.38

Seen in retrospect, the command requirement of co-ordination and control

presents a surprisingly similar pattern at

any echelon. Whether one views the

problem within the matériel organization

at Wright Field, within the larger framework of the AAF, or within the still

larger structure of the Military Establishment as a whole, the necessity for ever

larger staffs at the supervisory level is

clear. As the size of every operating organization mounted, officers in respon38

 The special representative device was used to

co-ordinate price adjustment and termination policies of both the Renegotiation Division and the

Readjustment Division, ASF, with the AAF. Perhaps the best evidence of the broad latitude ASF

left to the AAF is in the almost total neglect of AAF

problems in the Purchases Division. ASF Purchases

Div, Purchasing Policies and Practices, especially pp.

91-92.
480 BUYING AIRCRAFT

sible positions found a comprehensive

over-all view progressively more difficult

to maintain. They had to resort to larger

staffs, yet these staffs themselves generated

problems that in turn had to be resolved.

Nevertheless, the experience of the war

years demonstrated beyond question that

few of these difficulties defied solution if

the officers concerned made a genuine

effort to take a broad view, striving conscientiously to perceive the interests of

every echelon concerned with a particular question. Admittedly, that broad view

was often difficult to take. Few aspects of

matériel procurement revealed more vexing features of control and co-ordination

than did the efforts at cross procurement

undertaken within the Military Establishment.

Cross Procurement

The terms of the 1942 reorganization

of War Department placed responsibility for Army procurement on ASF, except for items "peculiar to Army Air

Forces." This was clear enough so long

as the planners thought in terms of aircraft and other such obvious end items.

But what about the borderline cases that

might or might not be regarded as "peculiar to the AAF"? Who was going to

draw the line? Here was a test of precisely that kind of supervision and overall leadership envisioned for the Assistant Secretary of War in the Defense Act

of 1920. By March 1942 the Assistant

Secretary's procurement duties had been

absorbed by the newly established office

of Under Secretary, but the principle remained the same. To prevent duplication of effort where two or more of the

technical services used an item in common, the Under Secretary could assign

procurement responsibility to a single

service, which would then buy in quantity for all users, a procedure known as

single service procurement or cross procurement.

Jurisdictional disputes between the

services were almost inevitable in any

program of cross procurement. The job

of the Under Secretary was to resolve

them, but could he do so to the satisfaction of all the parties concerned? To attempt an answer is to come firmly to grips

with the knotty problem of procurement

assignment.

Procurement Assignment

In 1942 procurement assignment was

not new to the War Department—at least

in theory. As far back as 1934 the Assistant Secretary had set up the Procurement

Assignment Board to make assignments

for cross procurement by a single service.

In practice, the board virtually dried up

for want of cases referred to it. There

were indeed many instances of overlapping, but the technical services repeatedly found that cross procurement was

slower than direct procurement and involved a good deal of tedious administrative effort to boot.39

The Procurement Assignment Board

continued to exist, but the technical services often managed to circumvent cross

procurement by the simple expedient of

ignoring the board. Typical of this pattern was the case of the Graflex camera.

In 1940 the Signal Corps and the Air

Corps each signed a large contract for ex39

 See, for example, IOM, Asst Chief, Mat Div,

for Chief, Mat Div, 11 Oct 40, AFCF 400.12.
ORGANIZATION FOR PROCUREMENT 481

actly the same model Graflex; the only

difference in their orders was that the

Air Corps specification called for a leather

carrying case while the Signal Corps required one of plastic.40

 If ever there was

an opportunity for cross procurement,

this was it. Such bald evasions led some

to feel that the main purpose of the

Procurement Assignment Board was to

stand as a monument that could be

pointed to during congressional hearings

as evidence that "duplication" had been

eliminated from military buying.

One might well argue that the frequent

evasion of procurement assignment in

peacetime caused no great damage and

might even have been beneficial. A

great deal could be said for maintaining

the closest possible ties between the using service and the manufacturer. Moreover, it could also be shown that in some

cases the costs of duplication in contracting were no greater than the cost of administering the interservice transfers resulting from cross procurement. On the

other hand, by avoiding cross procurement in peacetime the Army entered the

war with only limited experience in its

administration. Scarcity of materials and

acute competition for production facilities in wartime made the elimination of

minor differences in specifications and

the consolidation of departmental requirements for common items nothing

less than mandatory. To fail to use cross

procurement was to invite justifiable criticism from industry and open the way

for a civilian superagency to impose cross

procurement forcefully from outside the

Military Establishment.41

The flood of buying that followed

Pearl Harbor produced so many instances

of duplicate buying among the services

that the Under Secretary resolved to take

vigorous corrective action. But since a

large part of his organization had been

transferred to ASF, he had no staff of his

own to handle this kind of problem and

thus had to delegate the job to the ASF.

There, at his behest, the Director of the

Purchases Division set up a new Procurement Assignment Board and laid out a

set of operating procedures for it to follow. The new regulations called for

cross procurement whenever there was

significant competition over a common

item, the dollar value was of consequence, one service was the predominant

user, or confusion existed within the

Army as to just where procurement responsibility should be for any given

item.42

Looking back at a later date, the chairman of the new board was inclined to

believe that a number of substantial benefits had flowed from the board's operations. Among other gains, the board had

eliminated "priority competition" among

the services, simplified the planning of

facility expansions, guaranteed a uniform price on common items, and cut

costs by reducing administrative overhead.43

 In some measure these contentions were true, but to accept them at

face value would be to succumb to the

old refrain, "we have eliminated dupli40

 Col Volandt to Asst Chief, Mat Div, 18 Oct 42,

AFCF 400.12. 41

 For illustration of appreciation for this point

within the military organization, see OCAC, Letter

of Instruction No. 79, 4 Oct 40, AFCF 400.12. 42

 Draper-Strauss Rpt, II, 61-62. For further information on joint Army-Navy procurement and the

Draper-Strauss Rpt, see Millett, Organization and

Role of ASF, ch. 18. 43

 Ibid.
482 BUYING AIRCRAFT

cation" without counting the costs along

the way.

Problems of Cross Procurement

Although the historian of the ASF has

observed that the AAF was "favorably

disposed" toward the work of the new

Procurement Assignment Board, in doing so he rather generously overlooked

the considerable opposition to the board

initially offered by the air arm.44 At first

AAF resistance followed the traditional

pattern of evasion that had helped sidetrack the earlier assignment board. When

ASF requested a list of AAF items that

might be regarded as suitable candidates

for procurement assignment, the Air

Forces blandly denied using any such

items and declined to make recommendations for possible action by the board.45

There were a number of reasons why

many Air Forces officers resisted cross

procurement. To many the growth of

ASF represented a real threat. They did

not deny the importance of and need for

centralized, Army-wide supervision over

procurement and the elimination of the

more egregious examples of overlapping

effort. And so long as the Assistant Secretary or the Under Secretary had performed this supervisory role at the departmental level, they were inclined to

be co-operative. But when the Under

Secretary passed many of his functions

down to ASF, Air Forces officers feared

they would be left at the mercy of a

board dominated by the ground arms.

Some AAF officers believed, moreover,

that cross procurement was only a camel's nose under the tent. Would the Procurement Assignment Board stop with

common items, or would it go on eventually to take over the whole range of

air matériel procurement including even

airplanes and engines? Whether justified

or not, views such as these were expressed

during 1942 when ASF, under General

Somervell's aggressive leadership, was expanding rapidly in many directions.46

By no means all of the Air Forces resistance to cross procurement was attributable to the impetus toward autonomy

or mere branch consciousness; there were

very real disadvantages in any scheme

that placed procurement of any AAF

item in the hands of another service. To

appreciate this, AAF officers had only to

look at what happened when they themselves controlled procurement and another service looked to them for supplies.

The North American AT-6 two-place

trainer offered a case in point. Although

the AAF was the sole military agent in

contracting with the manufacturer for

this aircraft in quantity, a portion of the

order was on cross procurement for the

Navy. When the Navy asked for some

modifications on its portion of the order

to make the aircraft suitable for naval

use, the production staff at Wright Field

resisted on the grounds that any tampering with production would reduce the 44

 Millett, Organization and Role of ASF, p. 126. 45 Memo, Dir, Proc and Distribution Div, SOS, for

CGMC, 3 Jun 42, and reply, 18 Jun 42, AFCF 400.12

Method and Program of Proc. Compare this evasion

with the same practice a year earlier, Memo, Chairman, Proc Assignment Board, OUSW, for CofAC, 8

Aug 41, and 1st Ind, 26 Aug 41, in reply, AFCF

400.12.

46

 For illustrative examples of opposition within

the AAF to cross procurement in principle, see R&R,

Comment 5, AFASC to AFDAS thru AFAMC, 18 Dec

42, and Comment 6, AFAMC 4A to AFDAS, 31 Dec

42, AFCF, 161 Purchasing and Contracting Officers.
ORGANIZATION FOR PROCUREMENT 483

total number of units turned out.47 If

the AAF could do this to the Navy—or

any of the services—the same practice

might be expected in return.

Probably the most important single

factor in generating resistance to the

cross procurement idea was the fear that

assignment to another service would result in loss of control over the design

characteristics and production output of

the equipment being purchased. By injecting a third party—often one with decided interests of his own—between the

manufacturer and the user, the resort to

cross procurement could stimulate conflicts. If Air Forces officers in 1942 were

reluctant to move into an extensive program of cross procurement, it is well to

recall that their attitudes were conditioned by a number of unhappy episodes

arising from an essay in cross procurement the previous year.

The case of the Norden bombsight offers an excellent example of the difficulties attending any attempt at cross procurement involving highly technical

apparatus. Although the AAF was the

major user of the precision device, absorbing up to 90 percent of output at the

time of Pearl Harbor, all procurement

took place through the Navy. Norden

had developed the sight for the Navy in

the early thirties, and the Norden plant

had been under Navy cognizance ever

since. If the sight had been of static design, most of the trouble might have been

avoided. But the design was far from

static. Like the bombers in which it was

employed, the Norden sight was subject

to continuous modification that left a

trail of related changes in its wake. Instruction manuals got out of date, but

complaints could only be forwarded to

the Navy. Parts lists and drawings of use

in planning spares orders and training

programs took more than a year to reach

Army air arm users through Navy channels. The manufacturer was quite willing to communicate directly with air officers, but, to maintain effective control,

the Navy prohibited this with only a few

exceptions.48

Officers in the Navy Department were

not deliberately sabotaging the interests

of the Army air arm. The delays and inconveniences that marked the cross procurement of the Norden sight were simply those inherent in any procurement

system that injected a third party between

the maker and user. Because of the inadequacies in the existing arrangements,

a number of officers holding important

positions in AAF headquarters were persuaded that cross procurement was unsound in principle and especially undesirable when applied to equipment of

any considerable complexity.49 Nevertheless, after extensive consideration matériel officers on the air staff had to concede

that single service procurement was imperative in many instances in order to

prevent unseemly competition within

47

 TWX, Tech Exec (WF) to Tech Exec (OCAC),

16 Sep 40, WF Contract files, 360.01.

48

 Craven and Cate, eds., Plans and Early Operations, p. 598; R&R, Chief, Inspection Div, to Mat

Div, 29 Apr 41, AFCF 452.1 Airplanes, Gen; ASW

to USN, 11 Jul 41, AFCF 400.12 Proc; Asst Tech

Exec (WF) to Chief, Mat Div, OCAC, 17 Dec 41,

AFCF 319.1 Misc Rpts. 49

 For an illustration of AAF resistance to the assignment of procurement responsibility to other services, see Memo, Chief, Aircraft Sec, Hq, SOS, for

CGMC, 1 May 42, and undated 1st Ind, Hq AAF,

to CG, Armored Forces; Chief, Supply Div, ASC,

to Chief, Field Services, ASC, 20 May 42. All in

AFCF 400.12 Method and Program of Proc.
484 BUYING AIRCRAFT

the Military Establishment.50 Any attempt to put AAF interests ahead of all

others was to take a position manifestly

untenable. Cross procurement raised

many grave difficulties in operation, but

abandoning the principle would only

bring about another set of problems.

Obviously, the sensible course was to recognize the new Procurement Assignment

Board and make its work effective by reconciling conflicts of interest with the utmost good will.

Cross Procurement in Action

Despite the initial resistance of the AAF

to cross procurement, a great many classes

of matériel were successfully subjected to

single service assignment once it became

AAF policy. In addition to such obvious

items as food and clothing, the list included an incredible array ranging from

insecticides, locomotives, and dry cells to

flags, fuels, and fork lifts. Of course, cross

procurement did not invariably mean

that some other service purchased for the

air arm; sometimes the reverse was true,

most notably in the matter of aircraft. In

1942, for example, 34.7 percent of all airframes ordered by the Navy were procured through Air Forces channels.51

As procurement officers in the several

services acquired experience in co-operating with one another, they modified

and improved the techniques of cross

procurement and introduced novel forms

of collaboration. Typical of these was

the Army-Navy Petroleum Board established in October 1943 as a joint agency

to co-ordinate the procurement activities

of all military users of petroleum products. Although the board left the actual

mechanics of contracting with the several

services, it consolidated requirements,

set up common specifications, and agreed

on maximum prices to be paid. Since

some 62 percent of the nation's 200 major suppliers of petroleum products sold

to both the Army and the Navy, including the various using services within each

department, this form of collaboration

was obviously of great advantage.52

While the numerous experiments in

co-operation undertaken by military buyers during the war gradually won adherents as successful practice led to mutual

confidence, there were some areas of

procurement that remained trouble spots

throughout the war. Special tools offer a

case in point. Even in October 1945,

after the war was over, the Army and the

Navy were still in open competition

when purchasing aircraft tools despite the

efforts of several boards and commissions

to settle the matter.53 Although the available evidence is inconclusive, it seems

clear that the character of the problem

rather than any want of good will lay behind this failure.

By their very nature, tools, especially

small hand tools, were bound to pose difficulties for procurement officers. In the

first place, infinite variety in design and

use in widely different environments under rapidly changing conditions com50

 R&R, ACofAS-4 to AAG, 26 Feb 43, AFCF 161

Purchasing and Contracting Officers. 51

 Millett, Organization and Role of ASF, p. 127;

Draper-Strauss Rpt, III, 143. In 1943 the figure fell

to 26.8 percent and in 1944 to 13.3 percent.

52

 Draper-Strauss Rpt, III, 43. 53

 Supply of Tools, one of several miscellaneous

unsigned reports complied 25 October 1945 in response to a directive from T-5 (Management Control

and Plans), WFHO Research file, AMC, Experience

in Wartime Expansion. See also, Draper-Strauss

Rpt, III, 155-57.
ORGANIZATION FOR PROCUREMENT 485

bined to make seemingly simple tools as

unsuited to cross procurement as the

highly complex apparatus on which the

tools were to be used. While a single

service such as the Quartermaster Corps

might successfully procure carpenter's

hammers for all the Army technical services including the AAF, and the Navy

too for that matter, this was hardly true

of the tools used in maintaining aircraft and aeronautical accessories. Virtually every new aircraft engine, instrument, and accessory of any complexity

required from one to a multitude of special tools for maintenance. In a sense,

the tools were really a part of the equipment on which they were to be used.

Under these circumstances, even though

a certain amount of duplication resulted,

direct procurement by the using service

was probably justified. To have insisted

on the "economies" of cross procurement in such a situation might well have

turned out to be penny wise and pound

foolish.

In any dispute over a proposed candidate for cross procurement, Air Forces officers always held one important trump

card: if they believed emphatically that

it would be in the best interest of the

service to procure directly a certain item

of equipment, they could declare it "peculiar to the AAF"—they could write up a

specification that would put the item beyond the jurisdiction of the Procurement

Assignment Board. Since direct procurement was generally quicker than cross

procurement, air arm buyers were sometimes tempted to declare borderline cases

"peculiar to the AAF" in the interests of

speed. At Wright Field, so some humorists claimed, contracting officers in a hurry

even went so far as to buy "technical

broomsticks." Although this particular

taunt was probably a canard, the method

was nevertheless occasionally used to

evade cross procurement.54

Evasion of cross procurement was not

always possible, even when it may have

seemed desirable in particular instances

to air arm officials. Some items of equipment of absolutely vital significance to

the air arm, especially in the communications and ordnance categories, clearly fell

within the jurisdiction of other technical

services. There was substantial justification for cross procurement in these cases.

Both the Ordnance Department and the

Signal Corps had built up large staffs of

specialists as well as impressive laboratories and testing sites that would have

had to be duplicated to some extent if

the air arm had attempted direct procurement. On the other hand, cross procurement of equipment so obviously complex

as the Ordnance and Signal items was

bound to raise endless difficulties of coordination.

In a very real sense, both communications and ordnance items are intrinsic

elements of military aircraft. Air arm

doctrine tirelessly reiterated that the

combat airplane was nothing more than

a gun platform. To achieve maximum

effectiveness the airplane had to be designed around the weapons it mounted—

whether these be machine guns, cannon,

rocket launchers, or bomb racks. And

the same applied to communications

equipment, a broad category that extended far beyond radio apparatus to

embrace a whole series of radar devices

for navigation, target identification, and

electronic gun-laying. Although cross

54

 Pringle Papers, item 22, Tab: AAF.
486 BUYING AIRCRAFT

procurement under such circumstances

was an open door to conflicts, at least

down to the beginning of guided missile

development the Ordnance Department

and the Air Forces were able to resolve

their problems without serious delay.55

Relations between the Air Forces and

the Signal Corps proved rather more turbulent. During each year of the war, the

procurement of radio and radar items for

the AAF led to administrative difficulties. Even before the outbreak of hostilities in 1939, air arm officers had studied

the possibility of assuming responsibility

for the procurement of such items but rejected the idea on its merits. They were

anxious not to "precipitate a fight" with

the Signal Corps on the eve of war, and

they recognized that the technical specialists required to do the job might be

hard to find.56 As a compromise, the Signal Corps agreed to establish a procurement organization at Wright Field to

handle all signal equipment relating to

aviation.

Physical proximity of the Signal Corps

procurement staff to the laboratories of

the Engineering Division at Wright Field

proved immensely helpful in simplifying

the task of co-ordination. Nevertheless,

the relationship remained an awkward

one, especially as each successive year of

the war witnessed great strides forward

in the technology of electronics.57 Radioradar devices became more than ever an

integral part of aircraft and a proportionately higher percentage of their total cost.

After months of study General Marshall,

as Chief of Staff, finally decided in July

1944 that the AAF was indeed entitled to

direct control over procurement of aviation communications equipment. Although the official transfer of responsibility was set for April 1945, the procurement omelet proved hard to unscramble,

and some details were still being worked

out when the war ended.58

In looking back upon the experience

of the war years it seems clear that the

problem of overlapping or duplication

of effort admitted of no simple or clearcut solutions. On the one hand it is evident that the purchase of common items

could not be left entirely to the individual services, for un-co-ordinated buying

leads to competitive chaos, costly to the

taxpayers and harmful to the best interests of the military users. Nor, on the

other hand, was procurement assignment

a full and sufficient answer to every case

of duplication and conflict. As the record of the war reveals, there were some

types of equipment for which the administrative inconvenience and the loss of

sensitive control over technical details

attendant upon cross procurement were

too high a price to pay for the elimination of duplication. Whenever possible

the avoidance of overlapping effort was

desirable, but there was grave danger in

reducing this objective to a formula.

55

 Constance McL. Green, Harry C. Thomson, and

Peter C. Roots, The Ordnance Department: Planning Munitions for War, UNITED STATES ARMY

IN WORLD WAR II (Washington, 1955), p. 233. 56

 Rpt of com to study Mat Div organization, 10

Jan 39, AC Project Rcds (Lyon Papers), bk. 18. 57

 The dissatisfaction was not all one-sided. For

evidence that the Signal Corps found the air arm

a most difficult customer to satisfy, see Dulany Terrett, The Signal Corps: The Emergency, THE

UNITED STATES ARMY IN WORLD WAR II

(Washington, 1956) ch. X, passim. 58

 AAF Hist Study 10, pp. 100-101. See also, Millett, Organization and Role of ASF, p. 128, and Russel, History of AAF ATSC: 1944, pp. 132-35.
ORGANIZATION FOR PROCUREMENT 487

CHART 5—ARMY AIR FORCES ORGANIZATION: 9 MARCH 1942

Source: Based on Chart 4, AAF Hist Study 10.

The selection of an appropriate pattern

of procurement—single-service purchasing by assignment, collaborative buying

through the establishment of some joint

central agency, or out-and-out duplication of effort by several services—rested

upon the circumstances prevailing in

each particular case.

Centralization and

Decentralization

Administrative organizations in the

field of military procurement have two

main purposes. On the one hand, they

must provide those in authority with the

information, the facts and figures, neces-
CHART 6—ORGANIZATION OF THE MATERIEL COMMAND: 19 OCTOBER 1942

Source: Based on chart in Appendix 56, McMurtrie, History of Materiel Command: 1942.
ORGANIZATION FOR PROCUREMENT 489

CHART 7—ORGANIZATION OF THE RESOURCES CONTROL SECTION OF THE

PRODUCTION DIVISION, MATERIEL COMMAND: JULY 1943

*In some instances units were still further subdivided.

Source: Based on Appendixes 37 and 38, History of the Materiel Command: 1943.

sary to exercise the decision-making functions of command. And on the other

hand, they must provide the nation's

manufacturers, the thousands of contractors who produce the equipment purchased by the government, with all those

services they require to do the jobs expected of them. By and large, the foregoing pages of this chapter have been

concerned with the former of these two

functions: they have dealt with the problems implicit in the successive steps by

which the threads of control were concentrated in the upper echelons of command. No less essential was the need for

organizations to provide an effective relationship with industry.

What kind of a procurement organization would best serve the needs of industry in wartime? Ever since the passage of

the Air Corps Act in 1926, this question

had been debated by air arm planners.

In peace, of course, the relatively small

volume of business transacted made it

feasible to centralize all procurement at

Wright Field, but from time to time proposals to decentralize the procurement

function to outlying district offices in the

ORGANIZATION FOR PROCUREMENT 491

event of hostilities received consideration.59

The issue was still under discussion

when war broke out in Europe and the

rearmament program got under way at

home. Since the nation was still technically at peace, it was natural for those

in command to continue using the existing procurement organization. Thus, by

the time the country actually began fighting after Pearl Harbor, the buying operation was already so far advanced at Wright

Field that the decision between a centralized and a decentralized organization had

already been decided by default in favor

of the former.60

Centralized Procurement

When the rearmament program began, the procurement districts as such

did not exist. From the establishment of

the Air Corps in 1926 through 1939, the

so-called districts were actually two entirely separate entities, one to provide local centers to inspect the supplies purchased and the other for industrial

mobilization planning purposes. Not until the very end of 1939 were these functions combined to form three new procurement districts, the Eastern, the

Central, and the Western, with offices in

New York City, Detroit, and Santa Monica, California. Even then the caption

Procurement District was something of a

misnomer, since the functions of the districts were almost entirely limited to the

administration of contracts written at

Wright Field, and none of them built up

elaborate staffs to negotiate large contracts.61

A number of other considerations

made centralized procurement a logical

course to pursue. In the first place, by

far the largest dollar volume of air arm

expenditures during the war went into

aircraft contracts. This meant that most

of the money would go to a limited number of firms, not more than seventy-five

at the outside, including engine and propeller manufacturers as well as airframe

builders.62 Since only a handful of men

were trained to undertake the enormously

complex business of negotiating aircraft

contracts for the government, it was of

obvious advantage to have the few available do the whole job at Wright Field.

The big manufacturers expected to negotiate there as they always had. Indeed,

many of them maintained nearby offices

especially for this purpose.63 Moreover,

since virtually every tactical aircraft ordered during the emergency was still in

the process of development and subject

to frequent changes in design, it was of

the utmost importance for procurement

59

 See, for example, Exec, OCAC, to Chief, Mat

Div, 6 Feb 28, and related Inds, WFCF 381 Mobilization, 1939. 60

 For a discussion of this problem, see Russel,

Hist of AAF ATSC: 1944, p. 141ff.

61

 McMurtrie and Davis, Hist of AAF MC: 1926-

41, ch. III. 62

 H. G. Silverman, Central Office, MM&D, to Col

S. A. Rosenblatt, 11 Jun 43, AFCF 400 Small Plants.

A Wright Field study showed the following distribution during the Korean War: only 5 percent of the

contracts written exceeded a million dollars, but

this 5 percent accounted for over 90 percent of the

money obligated. See Decentralization Presentation

for Area Commanders, AMC, 17 Apr 52, WFHO Research file. 63

 Some have been inclined to regard these offices

as the "Dayton lobby" for use in subverting weakwilled contracting officers. While a few of them

may have been so misused at times, some such local

offices were certainly needed to handle the mass of

detailed business a number of firms carried on at

Wright Field.
492 BUYING AIRCRAFT

officers to maintain the closest sort of coordination with the technical staff of the

Engineering and Production Divisions.

Finally, the myriad details arising in connection with facility expansions, the provision of machine tools, and other matters

of this sort requiring co-ordination with

the national superagencies, afforded still

further justification, if any were needed,

for concentrating aircraft procurement

at Wright Field.

However justifiable it may have been

in terms of efficiency and economy to negotiate contracts at a single center, in

concentrating the entire purchasing operation there, air arm officials left themselves wide open for criticism. The officials of large aircraft or engine firms

dickering for multimillion dollar orders

might find it no great hardship to fly

across the country for this purpose, but to

thousands of small businessmen who

wished to bid on lesser items this was

hardly the case. And while the lion's

share of the matériel dollar went into a

few contracts calling for complete aircraft

and other major end products, by far the

larger number of contracts drawn at

Wright Field went to relatively small

firms supplying minor but important

items of equipment. In this category were

to be found most of those firms supplying

small accessories and personal equipment

such as flying suits, as well as the host of

concerns providing all the servicing and

maintenance equipment required by

modern aircraft. With few exceptions,

manufacturers in this group relied upon

correspondence and mailed bids when

seeking contracts from the air arm.

The difficulties of trying to initiate a

contract by mail with a military procurement agency scarcely need elaboration.

In the first place, thousands of small companies anxious to get government orders

found it difficult to locate the right buyer.

For example, a ceramics manufacturer

specializing in porcelain eggs for homing

pigeons who wrote vaguely to "the Aviation Department" had to be referred to

the Signal Corps. Another would-be supplier who wrote to the "Air Corps, Maritime Commission, Treasury Procurement

Division" all in one breath, as it were,

had to be shown that this shotgun approach was quite unnecessary. In fact,

whenever the President made a radio

address mentioning the aircraft program,

officials all over Washington had to devote untold hours for weeks thereafter

referring misdirected letters into the

proper channels. Out of this confusing

welter of correspondence, those few who

could supply items of interest to air arm

buyers were put on the appropriate advertising registers at Wright Field to

await subsequent invitations to bid.64

Unfortunately, as many hopeful manufacturers were to discover, listing on

one of the Wright Field advertising registers did not in itself solve the problem

of bringing buyer and seller together.

When Contract Section officials sent out

circular proposals to the manufacturers

on the list, the need for equipment was

so urgent that they could seldom allow

more than two weeks before opening the

bids. In this short time, even old-line

suppliers, manufacturers who had been

doing business at Wright Field for years,

sometimes found it difficult to prepare

and return bids. For manufacturers with

no experience in military contracts or in

64

 AFCF 163 Bids, Alphabetical file, especially for

1940-41, passim.
ORGANIZATION FOR PROCUREMENT 493

working to government specifications,

two weeks were often entirely inadequate.

Suppliers on the west coast in particular suffered a disadvantage in trying to

get their bids in on time. As one manufacturer in California complained, it

took anywhere from five to seven days

for circular proposals to reach the coast

from Wright Field. The invitations were

not always mailed the day they were issued, and even then they traveled by regular post rather than by air, sometimes

leaving the manufacturers a scant four

days to prepare bids. Moreover, since it

was obviously impractical to send out

bulky specifications and blueprints to

every firm listed on the advertising register, would-be bidders often had to visit

the nearest procurement district office

and vie with one another for an opportunity to study them there—provided the

appropriate papers had arrived at the

procurement district office, which was not

always the case.65

In time, as administrative procedures

were refined and the staff strengthened at

Wright Field, many of the difficulties encountered by bidders on supply contracts

were overcome. To be sure, the fundamental disadvantage of centralized procurement—the lack of direct personal

contact between buyer and seller—remained. Nonetheless, while this did lead

to a number of complaints from individual contractors, in general their remarks

looked to improved administration rather

than any basic change in the existing organization.66

The loudest criticism of the procurement system came not from those who

found it difficult to do business with the

government but from those who found

they could get no business at all. During

1940 each successive month had seen the

supply of critical raw materials grow

scarcer as the rearmament program at

home and exports to foreign nations absorbed an ever larger share of the national

economy. As the system of priorities established by the civilian superagencies

began to pinch tighter, one manufacturer

after another found himself forced to

make a choice: he must either secure a

military contract and the priority rating

on materials that went with it or go out

of business.67 Thus confronted, droves

of manufacturers who had hitherto never

dreamed of looking for government contracts descended upon the military services. Regrettably, most of those who

found their way to Wright Field came

away empty-handed, though some who

could convert their plants to manufacture one or another of the items purchased directly by the air arm did get

contracts.

The reasons for not securing contracts

are not hard to perceive. Since by far the

greater part of the sums spent at Wright

Field went to the relatively small number of firms capable of producing major

end items such as bombers, fighters,

power plants, gun turrets, superchargers,

and the like, all but the strongest firms

65

 A. T. Case Co., Los Angeles, to Chief, Contract

Sec, WF, 10 Jul 41; Case to Senator Hiram Bingham,

10 Jul 41; SW to Senator Bingham, 4 Aug 41. All

in AFCF 163 Bids. 66

 For a typical example of the kind of problems

raised by disgruntled bidders, see SW to Compt Gen,

16 Jan 41, AFCF 016. 67

 For an illustration of this trend, see J. C. Paddock Co., Spartanburg, S.C., to Representative J. R.

Bryson, 13 Nov 41, along with numerous similar letters, in AFCF 163 Bids. See also, Business Week

(August 16, 1941), p. 7, "It's Shut Down or Show

Down Now."
494 BUYING AIRCRAFT

were virtually precluded from entering

such contracts because of their cost and

complexity. If small business concerns

wished to share in the millions of dollars

being spent on this category of air matériel, they would have to do so as subcontractors. This meant that they would

have to look to the few manufacturers

holding prime contracts for major end

items rather than to the contracting officers at Wright Field if they were to find

work.

From the point of view of the air arm

buyers, this surrender of power to the

primes appeared as useful as it was unavoidable. It was useful because passing

responsibility for the selection of subcontractors to the prime contractors freed

procurement officers at Wright Field of

a tremendous burden they were ill

equipped to handle; at no time throughout the war were there ever enough

really skilled negotiators available in the

Matériel Command even to do the work

required.68 It was unavoidable for another reason. If the manufacturers who

signed prime contracts were to be held

responsible for the timely delivery of

large quantities of intricate equipment

made to exacting specifications, then they

had to be left free to select the means

they would employ to attain the desired

results, and the means included the subcontractor they chose to help them.

While air arm officers might recommend

a potential sub to a prime, they could not

compel the prime to accept their suggestions.69

 At best they could stipulate in

a prime contract that a certain percentage

of the total cost was to be subcontracted.

To intrude further would be to destroy

the whole concept of contractual responsibility upon which the procurement

program was erected.70

On the other hand, there were a number of desperate manufacturers who regarded the matter in an entirely different

light. Because they were unable to see

the problem in full perspective, they felt

they were being squeezed into bankruptcy

by the priorities pinch and found it difficult to understand why they were unable

to get supply contracts. In the newspapers they read almost daily accounts of

the acute shortage of productive capacity, yet when they offered their own at

Wright Field their facilitie s were

spurned. To some at least, this pattern

of events seemed to be the rankest kind

of inequity: if the contracting officers at

Wright Field were not personally guilty

of favoring big business, then surely the

procurement system itself must be unsound. Protests of this sort reached Congress with increasing frequency and a

political response followed.

68

 See above, pp. 343-48. Something of the staggering burden of detailed purchasing that air arm

officers would have had to handle if all subcontracts

were channeled through Wright Field may be suggested by the 965 suppliers located in 287 cities in

38 states required to serve the B-24 facility at Willow

Run alone. ATSC Industrial Planning Project Case

History: Ford Willow Run, 1946, WFHO.

69

 Memo, Asst Chief, Mat Div, for J. H. Amberg,

OSW, 4 Sep 41, with Incl, Utilization of Small Manufacturers in the Aircraft Industry, AFCF 335.5 House

and Senate Investigations. 70

 In 1940 airframe primes subcontracted an average of about 5 percent of the face value of their

contracts; by 1944 they subcontracted about 37 percent. See ATSC Industrial Planning study, Analysis

of the Aircraft Industry, undated (1945), WFHO research file. By April 1944 Air Force prime contractors were passing an estimated 50 percent of every

contract dollar on to subcontractors and suppliers.

Proc Function of the AAF, Lecture by Swatland.
ORGANIZATION FOR PROCUREMENT 495

Military Buying Under Fire

The political reaction stirred up by

the protests of unhappy manufacturers

lies somewhat beyond the scope of this

volume. The air arm was only one of a

number of procurement agencies within

the military services, and criticism by the

manufacturers was by no means confined

to the activities centering at Wright Field.

The problem was thus a general one and

as such has been treated at length by the

historian of Army procurement as a

whole.71 Nonetheless, the various steps

taken by Congress and the civilian superagencies to reform military buying cannot be entirely ignored here, for they had

a profound influence upon the subsequent structure of the air arm procurement organization.

In general, political criticism of military agencies tended to concentrate on

the charge that the services favored big

business over small business. The bulk

of the air arm procurement dollar had

to go to big business. This, the civilian

mobilizers recognized, but continuing

complaints from all over the country convinced them that even where the buyers

at Wright Field and the other service

centers could deal with small firms they

continued to award contracts to the larger

concerns with which they had long done

business. To be sure, the Under Secretary of War repeatedly admonished the

technical services about "spreading the

load" and "broadening the production

base," but the exhortations did not seem

to produce practical reforms in procedure.72

 Contracting officers in the military services were judged by their ability

to get results—delivery of essential war

matériel—and not by the effect their

work had on the national economy. Confronted with a choice of two manufacturers, one large, financially powerful,

and of known reputation, the other an

unknown small business concern, the

buyer under pressure for immediate results made the obvious selection. The

civilian mobilizers, first in the National

Defense Advisory Commission and later

in the Office of Production Management,

were convinced that military buyers

would persist in this pattern in the face

of endless directives to the contrary.

They decided, therefore, to take corrective action on their own account.

To rectify the alleged preference shown

by military buyers for big business, the

civilian mobilizers required all contracts

over a given dollar value to be routed

through their hands in Washington. Ostensibly, no contract would be approved,

or granted clearance as the current jargon called it, until the agency officials

had satisfied themselves that the military

buyers had complied with all the necessary requirements with regard to priorities, use of small business, special consideration to distressed areas, and so on.

Unfortunately, the clearance system

proved awkward. In effect, it injected

the civilian agency into the military

chain of command. Moreover, it gave the

agency a responsibility it was ill equipped

to meet; to pass judgment on a contract

the civilian officials had to have access to

information not evident in the body of

71

 Smith, The Army and Economic Mobilization,

pt. IV.

72

 Exec, OUSW, to Chiefs of Supply Arms and

Services, 10 Sep 41, AFCF 400.12.
496 BUYING AIRCRAFT

the contract itself. To assemble such information involved delays that jeopardized the military procurement program.73

After Pearl Harbor the whole scheme

of contract clearance was thoroughly

overhauled, but long before that happened the civilian mobilizers had come

to realize that contract clearance, or afterthe-fact supervision, was not ensuring

small business an adequate share of the

defense dollar. As they saw it, the problem was simply one of bridging the gap

between the contracting officers of the

military services and would-be contractors. And since they believed the military were not doing the job effectively,

they proposed to provide a remedy themselves. To this end, in February 1941,

the Office of Production Management established a Defense Contract Service of

its own.74

In order to reach the small businessmen who had been ignored by the military buyers, the OPM Defense Contract

Service opened suboffices in each of the

Federal Reserve's twelve banks and twenty-four branch banks scattered about the

country. By calling on the staff members

of the Federal Reserve system with their

wide knowledge of local conditions, regional OPM officials could size up the

capabilities of potential suppliers with

considerable accuracy. Informed appraisals of this sort, they felt, would go

far to offset the objections raised by military buyers to placing important orders

with untried firms. At the same time the

regional OPM staff could help channel

orders to small business by publicizing

invitations to bid and other procurement

information they could obtain from the

military services and by helping inexperienced firms surmount the technicalities

encountered when preparing bids on government business.75

The official histories of the civilian

superagencies have charged that the War

Department made only grudging use of

the OPM Defense Contract Service.76 At

least insofar as the air arm is concerned,

this contention does not appear justified.

Officers at Wright Field actually welcomed the new service as a useful adjunct

and frequently sought its help. But the

best of intentions and endless well wishing could not in themselves make the

OPM agency accomplish all that was expected by its proponents.77

As might have been expected, it was

the intrinsic difficulty of bringing small

business into the defense program rather

than the attitude of the military buyers

that thwarted the high hopes of OPM

officials. In a sense, the OPM service was

parallel to the regular air arm procure73

 An excellent discussion of the general administrative difficulties attending contract clearance by

the civilian superagencies will be found in Smith,

The Army and Economic Mobilization, ch. IX. See

also, Anderson, Hist of OUSW: 1914-41, ch. VI, pp.

122-27. For evidence of the air arm reaction to

contract clearance, see Memo, Exec, OCAC, for ASW,

11 Oct 40, AFCF 400.112. 74

 Memo, USW for Chiefs of Supply Arms and

Services, 17 Feb 41, AFCF 165 Classes of Contract.

For the background of this organization in NDAC,

see, Civilian Production Administration, "Industrial

Mobilization for War," vol. I, History of the War

Production Board and Predecessor Agencies: 1940-

1945 (Washington, 1947), pp. 63, 145-46.

75

 Organization of Defense Contract Service, manual prepared by OPM, Feb 41, copy in AFCF 334.8

OPM. On 4 September the organization was renamed, somewhat more functionally, the Contract

Distribution Division. See Executive Order 8891. 76

 CPA, History of WPB, pp. 145-46. 77

 R&R, Maj F. C. Langmead to Col Lyon, 4 Apr

41, AFCF 004.4, and other items in this file. See

also, A. R. Griswold, OPM, to Chief, Mat Div, 18

Dec 41, and reply 24 Dec 41, AFCF 163 Bids; Chief,

Contract Sec, to CGMC, 6 Oct 42, AFCF 004.
ORGANIZATION FOR PROCUREMENT 497

ment system and because of this it suffered from many of the same shortcomings. There was the same initial period

of confusion as the new service built up

its staff and gained recognition from the

various organizations and individuals

with whom it had to do business. But

even after this shakedown period was

substantially over, the Defense Contract

Service's troubles were by no means past.

The same old problem of time-lag that

had plagued air arm relations with small

business in the past continued even after

OPM undertook to improve on the job

being done by military buyers.

One need not go very far into the problem to understand why the elaborate administrative structure created by the Defense Contract Service did not entirely

succeed in closing the gap between small

business and the military contracting officers. The general practice was for the

military services to forward to OPM, insofar as practical, copies of all invitations

to bid and all plans for negotiated procurements. The OPM staff then disseminated this information through its regional outposts where the local officials

would do what they could to bring contractual opportunities to the attention of

appropriate manufacturers in the locality. Meanwhile, the buyers at Wright

Field were circularizing the firms already

on their mailing lists. Thus it turned out

time and again that while the OPM staff

did an excellent job in lining up potential bidders with suitable facilities, financing, and the like, they did so too late to

win contracts. The time lost in getting

the information on outstanding orders

analyzed, reproduced, and distributed to

the field offices was so great that the offering sometimes actually expired before the

manufacturers located by OPM could

even begin to prepare their bids.78

A single example, admittedly an extreme case, will be useful not only to illustrate the difficulties confronting the

Defense Contract Service but also to suggest the political heat it brought down

on the air arm procurement system. Just

before Pearl Harbor, on 3 December

1941, an invitation went out from Wright

Field calling for bids on a small piece of

equipment. The official opening was to

be on the 19th of the month. On 11 December a manufacturer in Texas learned

of this opportunity from a notice that had

been sent out by the OPM service on

the 9th. He immediately wired Wright

Field asking for particulars: blueprints,

specifications, and the like. These were

mailed on 15 December but did not

reach his plant in Texas until the eighteenth, or the day before the invitation

expired. After spending all day and most

of the night preparing his bid, the manufacturer sent it off to Wright Field for

evaluation. A week later it was back

again marked "not considered." The

Post Office cancellation mark showed an

hour later than the prescribed deadline

on bids. On investigation the manufacturer found that while his bid had actually gone in before the deadline, his local

postmaster had set his cancelling machine

for a time just before the train went out

when he ran off all the accumulated mail

at once.

78

 IOM, Chief, Contract Sec, for CGMC, 2 Oct 42,

explaining policy in response to WPB, Production

Service Dept, to Chief, Mat Div, AC, 25 Sep 42.

Both in AFCF 161 Renegotiation. See also, CPA

Special Study 25, Field Organization and Administration of the War Production Board and Predecessor Agencies: May 1940-May 1945, 1945, pp. 7-14.
498 BUYING AIRCRAFT

The irate manufacturer, understandably furious, availed himself of the great

American privilege and dashed off a red

hot letter to his congressman. He poured

out his pent-up frustrations, blaming all

and sundry for this miscarriage. "Does

the government really want small business to have military contracts?" he asked.

"If they don't want us in and have set

up the [OPM Contract Service] merely

as a front to stall us along until we shall

have discovered for ourselves the hollowness of it all, why then, in common decency, don't they have the guts to come

out flatfootedly and tell us that the best

thing for us to do is to close up for duration and seek employment where we

might be able to buy it from some union."

For the sake of hundreds of small businessmen, he urged, "somebody up the

line better get going."

 79

Although one can only sympathize

with the small manufacturer who saw

himself being squeezed out of business,

the evidence suggests that the situation

was nowhere near as sinister as he pictured it. On his own showing of the facts,

by any reasonable standard of judgment,

the OPM Contract Service appears to

have done a rather creditable job in passing the word on anticipated procurements down the line. In view of all the

inevitable delays in reproducing and distributing such notices, the elapsed time

between the date the original invitation

was issued and the date it was received

by the manufacturer in Texas seems surprisingly short, especially when one recalls that this particular invitation was

only one of thousands issued at Wright

Field every month. Under such circumstances, to get nationwide distribution of

information on an offering within about

a week, the OPM organization must have

been remarkably effective.

A further investigation of the case in

question dredged up facts clearly indicating that procurement officials at Wright

Field were making a determined effort to

include small business firms in the supply program. The invitation, which had

seemed so unfair to the angry Texan, actually brought no less than 85 replies

to Wright Field. Moreover, instead of

awarding the entire contract to a single

firm—which would have been less trouble—it was broken into increments and

given to 3 of the 85 bidders.80 Surely any

system garnering 85 bids in 16 days could

not have been as bad as its critics alleged.

The real trouble was that tens of thousands of small concerns simply did not

know how to do business with the government. The irate Texan would have

served himself far better had he spent

more energy in learning the ropes and

less in complaining to Congress. Once a

manufacturer was listed on the appropriate advertising registers and had indicated his financial and technical reliability, he would find contracting officers far

more inclined to negotiate. This educational process took time, and all too often,

as in the case of the Texan, the disappointed manufacturer rushed off to tell

his troubles to Congress. Without all the

facts, he saw the matter entirely as heartless discrimination against small business.

There was no absolute solution to the

problem of enlarging the volume of con79

 Letter to Representative M. H. West, 29 Dec

41, AFCF 004.4.

80

 AAF draft reply for SW to Representative M. H.

West, 14 Jan 42, AFCF 004.4; SW to West, 26 Feb 42,

SW files, Airplanes, item 2122.
ORGANIZATION FOR PROCUREMENT 499

tracts for air matériel going to small business. At the beginning of 1941 many civilian mobilizers and political leaders

were convinced that the military buyers

were doing a bad job upon which they

could improve. Some of the critics felt

certain that a civilian agency could do far

better. Nevertheless, the experience of the

OPM Defense Contract Service during the

year showed that their attempt to build

up a contract distribution system had not

brought the results desired. Instead of

improving the existing bridge between

the military buyers and small business,

OPM had merely built another bridge

parallel to that maintained by the military, and in some respects the new structure was inferior to the existing one. Mr.

Donald Nelson seems to have grasped this

point when he took charge of the newly

formed War Production Board soon after

Pearl Harbor. He abandoned the old

pattern of contract clearance and distribution by separate and parallel civilian

agencies in favor of a scheme placing responsibility for these objectives on the

military buyers themselves. Nelson transferred the civilian staff that had been engaged in this work to positions within the

several military procurement organizations. Instead of dispersing its energies

building up parallel and competitive

schemes, the civilian agency could then

concentrate on supervision, policing the

policies and operations of the military

buyers—not least with respect to placing

contracts with small business.81

Before the new WPB policy of supervision from within could get in motion,

the whole problem of contracts for small

business suddenly grew to enormous proportions. Once the nation was actually

engaged in a shooting war, procurement

by negotiation rather than by invitation

to bid became the order of the day, and

negotiation worked to the advantage of

those manufacturers already doing business at Wright Field. The desperate

plight of the military forces falling back

before the enemy in the Pacific gave contracting officers every incentive to place

their orders with firms they knew they

could trust to deliver the goods on time

and without deviation in the quality required. In practice this meant all too

often that the larger and stronger manufacturers got the orders. At the same

time, the increased demand for all kinds

of munitions absorbed more scarce raw

materials and the resulting squeeze in

priorities drove further hordes of manufacturers to seek government contracts as

their only means of remaining in business. When this new wave of contract

seekers encountered the usual difficulties in landing military orders, Congress

echoed with their protests.

The congressional reaction to the cries

of the manufacturers left out of the armament program was the Small Business

Act of June 11, 1942.82 To "mobilize aggressively the productive capacity of all

small business concerns," the measure

provided for action along several different fronts. For example, by exempting

them from the antitrust laws, it encouraged small firms to form pools that could

handle contracts too large for any of the

81

 Smith, The Army and Economic Mobilization;

D. Nelson, Arsenal of Democracy, pp. 198ff.; and

CPA, History of WPB, p. 216.

82

 Public 603, 77th Cong, 2d sess (56 Stat 351),

sometimes called the Smaller War Plants Act. A

small plant was defined as "an independently owned

concern employing less than 500 wage earners." See

WD PR 35, par. 225.
500 BUYING AIRCRAFT

member firms acting individually. To

offset the higher costs resulting from

lower volume, the measure authorized

contracting officers to place orders with

small firms even when they quoted prices

somewhat higher than those of large producers.

The Small Business Act was by no

means limited to passive or permissive

features, some of its provisions carried

teeth. Specifically, the measure set up a

novel governmental entity, the Smaller

War Plants Corporation (SWPC) to act,

among other things, as a prime contractor to the military services. In effect, the

SWPC was to serve as a kind of official

middleman. The corporation would contract to supply the services with items of

military equipment that it could then

procure from small business concerns.

The coercion entered at this point; if

the chairman of WPB so directed, the

military services were required to place

with SWPC any contract he specified.

From the military point of view, the

discretionary power placed in the hands

of the civilian mobilizers by the Small

Business Act represented a serious threat.

Used aggressively, the coercive powers

might prove to be a fatal encroachment

upon the authority traditionally exercised by military officials. The military

buyers felt that if they were to be held

responsible for the nation's defense, they

had a right to retain immediate supervision over the means employed. Above

all, they feared that the civilian officials

of SWPC in their zeal to help small business would hand over vitally important

contracts to unqualified firms. From sad

experience all too frequently repeated,

procurement officers knew what havoc

resulted when a single supplier failed to

come through with equipment manufactured to the desired specifications on

schedule. For want of one essential component, a whole production line might

be shut down.

For several months after Congress

acted, the activities of SWPC gave military officials little reason to believe they

could trust the new agency with important munitions contracts.83

 At Wright

Field in particular the organization got

off to a poor start. Because the authorities in Washington were slow to hammer

out policies and procedures, few directives arrived to guide the SWPC staff assigned to open a branch office in the

Materiel Command. In fact, almost everything the SWPC men knew about

their own organization they learned

through the courtesy of the Air Force

liaison officers assigned to work with

them. The civilian officials representing

SWPC were conscientious men, but they

lacked guidance; in their enthusiasm to

get things started, they tended to duplicate each other's efforts and get in one

another's way.84 Given enough time, the

SWPC staff might have eliminated most

of these procedural kinks, but the new

agency was not left to build soundly at

its own pace. Congress, impatient for results and goaded by small business constituents, urged immediate action. The

results were most unfortunate. In order

to make a showing for political purposes

the SWPC hurried into some ill-advised

contracts that it compelled the Air Force

83

 The organizational confusion that marked the

early months of the SWPC is described at length in

CPA Special Study 25, ch. IX. 84

 These harsh judgments are not those of Air

Force critics but of SWPC staff members themselves.

See J. K. Weddell, SWPC History, 2 Apr 46, an

account of the AAF Branch of SWPC filed in WFHO.
ORGANIZATION FOR PROCUREMENT 501

to accept. Then when the small firms

working for SWPC failed to produce the

desired equipment on time, the organization was discredited.85

In spite of the mistrust inspired by its

early operations, the local branch of the

SWPC eventually managed to co-operate

harmoniously with the procurement staff

at Wright Field. After working together

for some months the two groups came to

appreciate each other's problems somewhat better. Thus informed, they drew

up a series of operating agreements that

defined their relationship and laid down

procedures for working together. For

their part, Materiel Command officials

made an honest effort to place more orders with small business, and wherever

possible they gave administrative help to

SWPC. For example, they had blueprints converted to isometric projections

to simplify their use by inexperienced

suppliers, and they brought pressure to

bear on big patent holders to release their

patents to SWPC, which could then cultivate new sources at will. On the other

hand, the local SWPC staff at Wright

Field made substantial concessions too.

The staff virtually abandoned the coercive powers given to their organization.

Moreover, they agreed never to seek contracts for certain items admittedly too

complex and too technical to be entrusted

to untried or unproved sources. Included

on this so-called waiver list were such

things as aircraft spares and accessories.

Freed from the fear that the aircraft procurement program might be wrecked by

enthusiastic but inexperienced outsiders,

procurement officers at Wright Field were

far more inclined to co-operate with the

SWPC in those areas where co-operation

was feasible.86

Although the various representatives

of SWPC and the Materiel Command

learned to pull together in harness by the

end of 1943, to dwell upon their ultimately harmonious relations would be to

mask the profoundly disturbing impact

the passage of the Small Business Act had

upon the Air Force procurement organization during the first year or so after it

was passed by Congress. As it subsequently came about, the SWPC did not

build up an elaborate procurement system more or less parallel to the existing

military structure. What is more, its representatives at Wright Field had the good

sense to realize that they would only

breed opposition by invoking their power

to compel the Air Force to award contracts to them. But during the summer

and fall of 1942, all this was not clear.

Then the threat of a civilian agency seizing control over large segments of the

military procurement program seemed

very real indeed, and the leaders of the

Materiel Command responded accordingly. Hastily they set about getting their

house in order to meet the criticism that

they were not giving small business its

fair share of Air Force contracts.

How could the Air Forces give more

contracts to small business, especially to

firms not already working on war orders?

Under the pressure of outside criticism,

85

 Ibid. An example of a contract placed at the

insistence of SWPC with disastrous results is recited

with full details in 2d Ind, MC (Chief, Proc Div),

to CGAAF (ACofAS MM&D), 1 Oct 43, AGO files,

Rcd Group 205.03, Purchase Div, ASF 334 SWPC.

Others may be found in Maj B. H. White to Lt

Col E. McD. Kintz, 20 May 43, AFCF 004 Small

Plants.

86

 Weddell, SWPC Hist; Proc Function of the AAF,

Lecture by Swatland.
502 BUYING AIRCRAFT

responsible officials in the Materiel Command began to sense the true character

of the difficulty. Most of the manufacturing jobs that small firms were able to perform fell in the area of subcontracts

passed out by the major primes. For all

practical purposes this put the problem

virtually beyond reach for Materiel Command officials. They could cajole the

prime contractors to place more work

with small subs; they could encourage

the primes in this by suggesting qualified

subs uncovered for them by the production staff at Wright Field; and, finally,

they could force the primes contractually to subcontract a certain percentage

of the total cost. All these courses the

air arm buyers did pursue.87 At best,

however, the steps constituted only an

indirect approach to the problem. And

no matter how beneficial these efforts may

have been in getting work for small concerns, they did not provide a politically

persuasive reply to the charge that the

overwhelming dollar value in the prime

contracts written by the Air Force went

to big business.

If the air arm was to meet its critics,

no matter how unfair or uninformed

many of them were, somehow means had

to be found to increase the number of

prime contracts given to small business.

Contracting officers at Wright Field were

not congenitally prejudiced against small

business. In fact, many suppliers who received important contracts for air matériel could be classed as very small business by any yardstick. Contracting officers

were not guilty of malevolent discrimination; rather they were victims of an inability to deal with the unknown. There

were thousands of small firms scattered

across the country of whose very existence air arm buyers were unaware. But

even where one of the small manufacturers succeeded in bringing his facilities to

the contracting officers' attention, they

could not safely deal with him until they

knew a great deal about his capabilities.

Before contracting officials dared entrust a contract to some newly discovered

supplier, they had to inform themselves

on a number of points: could a given

firm undertake an intricate technical job

to close tolerances with every assurance

of success? Was the firm's management

capable and reliable? Could it be trusted

with confidential specifications? Did the

firm have adequate capital to carry a job

to completion? If not, did it have a credit

rating that would permit it to borrow

freely? These and many similar questions were thoroughly justified by military necessity and prudent business practice, yet so long as air arm procurement

remained centralized at Wright Field, it

operated to the disadvantage of small

business.

If they were to increase the flow of

prime contracts to small business, Materiel Command leaders realized that they

must somehow make good the lack of

information that kept contracting officers

at Wright Field from dealing with unknown or inexperienced concerns. The

heart of the difficulty was the remoteness

87

 For evidence of the Materiel Command role in

finding subs and urging them on primes and in encouraging primes to give more work to subs, see FO

Memo 50, Mat Center, 5 Oct 42; Chief, Contract

Sec, WF, to CGMC, 6 Oct 42; Small Industrial Concerns, Brought Into the AAF Procurement Program,

list prepared by Industrial Planning Sec, Prod Div,

Mat Center, 10 Nov 42; and Deputy ACofAS MM&D

to Senator J. E. Murray, Chairman, Special Com

to study problems of small business, 5 Apr 43. All

in AFCF 004 Small Plants.
ORGANIZATION FOR PROCUREMENT 503

of the buyers centralized at Wright Field

from the many small potential suppliers

scattered across the nation. The OPM

Defense Contract Service had tried to

overcome this difficulty by building up

an organization that would, in effect,

bring the small business man to the contracting officers of the Materiel Command. Although better than nothing,

this approach failed to solve the problem.

The mechanics of liaison between the

military and the hastily erected civilian

agency proved unwieldy. An obvious alternative was to carry the buyers to small

business by decentralizing contracting

operations to the procurement districts.88

Decentralized Procurement

The directive on decentralized procurement, which appeared in December

1942, clearly reflected the considerations

that had motivated adoption of the new

policy.89 The chief of the Contract Section at Wright Field was to review all

authorizations for purchases sent from

the headquarters in Washington to determine which could be sent out to the

procurement districts and negotiated by

contracting officers located there. At first,

only relatively uncomplicated items were

to be considered for decentralized procurement. And in making assignments,

the contract chief was specifically instructed to stress the utilization of small

business and hitherto untapped sources

of supply. To ensure compliance with

the spirit of the directive, periodic reports were required showing the number

and value of all contracts placed with

firms employing fewer than 100 persons,

500 persons, and so on.

Despite the emphatic directive from

command, the districts were slow to begin writing contracts. Never was the

spread between giving an order and getting it carried out more evident. But the

districts were not to blame. They could

not negotiate contracts until they received specific assignments from Wright

Field, and few could be sent until the

districts built up staffs fully competent

to carry on this difficult work. The procurement chief at Wright Field was ordered to send out cadres for the purpose,

but he was slow to move. Few officers

wished to be uprooted from Wright

Field. Civilian employees who were ordered to go could resign and accept wellpaid positions with industry. What is

more, individual branch, section, and

unit chiefs were little inclined to be enthusiastic about reducing their own importance by releasing the members of

their staff to other organizations. Under

the circumstances, it is hardly surprising

that the people they did send out not infrequently were the least experienced,

the culls and the misfits.90

Even after the districts had built up

elaborate contracting organizations, they

received only a trickle of purchasing assignments from the Materiel Command.

Quite apart from any considerations of

rivalry or ambition, contracting officers

at Wright Field were genuinely reluctant

to place any great number of negotiations

in district hands. In the first place, they

believed the district staffs were still unready to assume major responsibilities; 88

 McMurtrie, Hist of AAF MC: 1942, ch. VIII,

passim. 89

 FO Memo 61, Mat Center, 24 Dec 42, app. 20;

McMurtrie, Hist of AAF MC: 1942. 90

 Russel, Hist of AAF ATSC: 1944, pp. 145-46.
504 BUYING AIRCRAFT

the difficulties of co-ordination raised as

objections against decentralized procurement when the war began were no less

valid a year later. As a consequence,

during the first three months of 1943, of

the 10,000-odd purchase directives received at Wright Field, fewer than 500

were passed on to the districts—less than

2 percent of the funds obligated in that

quarter.91

The negotiation of contracts in the districts seemed destined to continue at a

limping pace until April 1943 when General Branshaw became the commanding

general of the Materiel Command. If the

leaders of the Air Force really wished to

exploit a policy of decentralization, General Branshaw was an excellent choice.

Coming to his new position from a tour

of duty as supervisor of the Western Procurement District, he had great faith in

the district organizations and believed

them quite capable of shouldering large

responsibilities. As if to prove this, soon

after taking over at Wright Field he

launched an aggressive program of decentralization.

General Branshaw made "decentralized operations with centralized control"

the cornerstone of his command.92 He

identified himself with the policy personally. In so doing he may have hoped

to inspire ready compliance, but at the

same time he assumed certain liabilities;

if the policy failed, he would be inextricably linked to it. Although he intended

to apply his policy generally to all the

functions of the Materiel Command,

General Branshaw was particularly concerned about placing the mechanics of

contracting out in the districts wherever

possible. He aimed to have them negotiate 50 percent of all contracts if at all

feasible, and because 50 percent by dollar value would be impossible so long as

all major end items were purchased at

Wright Field, he even undertook to send

aircraft contracts out for the districts to

negotiate.93

General Branshaw's vigorous program

to decentralize procurement was as forthright as it was aggressive. The critics who

had protested the military neglect of

small business could not question the sincerity with which his campaign was

launched. Unfortunately, sincerity was

no guarantee of success. The best of intentions on the part of command could

not escape the formidable array of problems raised by the effort.

The Difficulties of Decentralization

Perhaps the biggest challenge confronting the officers who were assigned

to work out the details of the decentralization was to overcome the objection that

district procurement would lead to a seri91

 J. P. Walsh, History of the Eastern Procurement

District, Materiel Command, Army Air Forces: 1943,

(hereinafter cited as Walsh, Hist of Eastern Proc

Dist: 1943), 1945, pp. 321-27, filed at Air University.

See also, Office for Organizational Planning, MC,

Report on Decentralization of Procurement Division, 11 Sep 43, Exhibit F, WFHO Research file.

For the arguments against decentralization presented following Pearl Harbor, see Chief, Mat Div,

to USW, 20 Dec 41, and 2d Ind, Asst Chief, Mat

Div, to USW, 7 Jan 42, AFCF 400.12 Method and

Program of Proc. 92

 CO 40, MC, 5 Aug 43, cited in Davis Hist of

AAF MC: 1943, p. 3, n. 6.

93

 Office for Organizational Planning, MC, Rpt on

Decentralization of Proc Div. As it ultimately

turned out, the districts negotiated not a single aircraft contract to the point of approval during the

war. Negotiation and Administration of Contracts.

Lecture by Scarff.
ORGANIZATION FOR PROCUREMENT 505

ous loss of co-ordination. Their answer

to this was to prescribe a rigid parallelism between the organization at Wright

Field and the organizations in the district

offices. The districts were ordered to establish what amounted to a mirror image

of the Wright Field counterpart. Thus

where the central organization divided

a procurement branch into seven offices,

each of which was subdivided into units,

the districts were expected to do likewise.

The rationale behind this parallelism was

that it would facilitate the flow of papers

between the field and the central staff and

thus eliminate confusion.94 There was a

certain advantage in this arrangement,

but it carried with it many contingent

liabilities.

The trouble with trying to sustain an

organizational parallelism between

Wright Field and the districts was that

every time the former changed, the latter

had to change too. This kept the district

offices in continual chaos, a result all the

more absurd because the organizational

changes at Wright Field often reflected

nothing more than an effort to accommodate the personalities occupying positions

of command there. Thus, to impose an

organization that mirrored Wright Field,

the districts had to ignore the personal

traits and talents of their own officers.

When a district supervisor protested this

elevation of mere organization charts

over human considerations, General

Branshaw vigorously defended the principle of parallelism. If "rank or personalities" made the charts unworkable, he

said, arrange to transfer the individuals

concerned so the charts would work.95

In the long run, the attempt to maintain an organizational parallelism between Wright Field and the districts

turned out to be more harmful than

helpful in co-ordinating procurement activities. The endless effort to juggle the

people available in the districts to fit the

master organizational charts kept the district staff from concentrating on the work

in hand. As one officer complained, "the

District has been organized to death."

As a consequence, the scheme designed

to simplify the channels of communication turned them into mazes instead.96

The task of getting the district procurement organizations in working order

was complicated immeasurably by the

continuing shortage of experienced personnel. After Pearl Harbor, when patriotic motivations operated rather more

forcefully, a number of really able businessmen were induced to accept commissions and work in the procurement field.

But for every experienced executive thus

acquired, two or three new positions were

created and had to be filled. The demand

for talent seemed insatiable. By way of

illustration, one district contract section

in January 1943 had a staff of thirteen.

By September there were seventy-four

people at work in the section and over

sixty more were needed to fill the available job openings.97

The importance of the procurement

role played by reservists—businessmen in 94

 Office for Organizational Planning, MC. Progress Rpt on Decentralization of Proc Div, 30 Sep 43,

WFHO Research file, Proc Div; Proc Div Office

Memo, 43-99, 1 Jun 43, Organization and Functions

of Dist Proc, app. 20, Davis Hist of AAF MC: 1943.

See also, Russel, Hist of AAF ATSC: 1944, p. 141ff.

95

 Walsh, Hist of Eastern Proc Dist: 1943, pp. 59-

66.

96

 Ibid., pp. 58, 116. 97

 Office for Organizational Planning, MC, Progress

Rpt on Decentralization of Proc Div.
506 BUYING AIRCRAFT

uniform—would be hard to overstate. In

the Eastern Procurement District office

in New York, to take but one example,

during 1943 the civilian staff of more

than 6,000 employees was led by approximately 400 officers, of whom only about

a half dozen were Regular Army. Most

branches and sections of the decentralized

procurement organizations were built

around the abilities of key reservists,

many of whom were recruited in the

large cities where the district offices were

located. Unfortunately, many of these

men had hardly begun to pull their

weight when the General Staff ruled that

reservists must be assigned to stations

away from their homes.98 There was

nothing to do but uproot them and start

over again to build up a new staff.

The shortage of competent officer and

civilian personnel to carry on decentralized procurement was further aggravated

when the districts themselves were subdivided and the district staffs were called

upon to provide cadres for the new organizations. It will be recalled that there

were originally three procurement districts, East, Central, and West. The theory of these district offices was that they

would overcome the evil effects of centralized procurement at Wright Field by

providing local and personal contact with

small business men. However, so long as

there were only three districts for the entire United States, the theory was hardly

tenable. The Eastern Procurement District stretched from Maine to Florida.

Its office in New York City was hardly

"local" to a manufacturer in North Carolina.

The solution to the problem of making the districts truly local was to break

them down into smaller geographical

units. This was done in a succession of

steps until eventually there were six districts in all including the Midwestern

(Wichita), the Midcentral (Chicago), and

the Southeastern (Atlanta) carved out of

the original three. Even these subdivisions covered immense geographical areas

embracing many states in each instance,

and each district had to be still further

broken into areas, each with a local office.

For example, the Eastern District, before

the Southeastern District was established,

maintained area offices at Binghamton,

Rochester, Philadelphia, Newark, New

Haven, Worcester, Boston, Baltimore,

and Atlanta, each manned with a staff of

three, six, or sometimes more officers.

And every time the existing districts were

required to drain off staff to set up new

district or area offices their own organizations were left reeling from the shock.99

Questions of organization and personnel seriously interfered with the decentralization of procurement, but even

without these complications the job was

fundamentally difficult. The role of district officers in the procurement process

was such that they had to work almost

continually in two areas of uncertainty:

they were seldom fully informed as to

precisely what was wanted or whom they

could find to supply it.

Just why the districts found it hard to

learn what the procurement staff at

Wright Field wanted them to buy needs

a word of explanation. On the surface

the procedure appeared routine enough.

98

 Walsh, Hist of Eastern Proc Dist: 1943, pp. 3,

67, 86-88.

99

 Mimeograph pamphlet, Procurement Field Organization: 1920-1948, WFHO Research file; Walsh,

Hist of Eastern Proc Dist: 1943, pp. 72, 78.
ORGANIZATION FOR PROCUREMENT 507

When Procurement Division officers at

Wright Field decided that a given item

could be conveniently purchased in a district, they wrote out an Authority for

District Purchase (ADP) and sent it out

to one or more of the districts. The ADP

indicated the required number of items,

the specifications, the time and place of

delivery, packaging, and so on. In theory, all the district officers had to do was

locate one or more suppliers with whom

to negotiate. In practice the game was

never so simple.

By way of illustration, consider the example of an ADP calling for an electrically operated hand tool, a power drill,

or some such implement. When approached by district officers with an order, one manufacturer offered to supply

the item promptly at a very favorable

price, provided a deviation in the specification could be arranged to permit him

to use a model he already had in production for commercial sales. Could the district officers grant such a deviation? If

they stopped to find out by writing to

Wright Field, the procurement would be

delayed. In this instance, to play safe,

they did seek approval first. Protracted

correspondence finally revealed that a

commercial item definitely would not do;

the order, although placed through the

Air Force, was for a foreign aid account

and the ultimate user operated on a 240-

volt, 50-cycle system rather than the domestic 110-volt, 60-cycle system for which

the tools were wired.100

In trying to function in the field without all the relevant facts, district procurement officers suffered a serious disadvantage. Even though they were free to

negotiate individual contracts, almost unavoidably they were tied to the central

organization where their orders initiated.

And this dependence, so obvious to the

manufacturers with whom the district

officers had to deal, brought district procurement into contempt. The original

Wright Field directive authorizing decentralized procurement had specifically

stated that the district contracting officers were to enjoy plenary authority to

negotiate, but the facts of the situation

ruled otherwise. Power without information to guide its use was ineffectual.

Even when district contracting officers

knew precisely what was required on an

ADP, they still had to find a suitable

source of supply. The whole raison

d'être of decentralized procurement was

to increase the flow of contracts to small

business and hitherto untapped facilities.

This meant that insofar as possible district contracting officers had to avoid suppliers already familiar to them and go

out of their way to cultivate new sources.

The district officers deliberately had to

take the hard way.

The task of uncovering new suppliers

among the smaller firms in any of the districts was by no means simple. Prewar

surveys by industrial planning officers

gave only limited help. The war extended the variety as well as the number

of items purchased far beyond the scope

anticipated by the mobilization planners.

At peak, the districts purchased up to

200,000 different kinds of items for the

Air Force. Obviously, to compile and

maintain an up-to-date list of sources capable of turning out all these items was

in itself an immense administrative undertaking.

100

 Walsh, Hist of Eastern Proc Dist: 1943, pp.

329-31.
508 BUYING AIRCRAFT

Various devices were employed to find

new sources. A vigorous campaign of

advertising and the missionary work of

individual officers sent into the major industrial centers uncovered a number of

leads. Even more effective was a continuing study of the subcontractors listed

in the contract status report submitted

periodically by all Air Forces prime contractors. Although some of these secondary sources were already swamped with

orders from the primes, others welcomed

the opportunity to take on contracts let

by the procurement districts. Just how

necessary this proselytizing was is suggested by the results of a survey conducted by one of the districts during the

summer of 1943. When interviewed, no

less than 8,400 of the firms working in

the district as subcontractors to major

AAF suppliers admitted that they had

never even heard of the district organization and did not realize they could seek

contracts from the procurement officers

there.101

The lists of subcontractors abstracted

from the reports prepared by the Materiel Command Statistical Control Office,

while exceedingly helpful, did not provide a thoroughgoing survey of every

manufacturer in the districts. In the first

place, the lists covered only Air Forces

contracts and thus ignored the suppliers

and their subs holding contracts from the

other services. Secondly, each prime contractor reported only those subs with

whom he dealt directly. This meant that

all the sub-subcontractors, tier on tier of

them, remained yet unidentified.

Some of the many obstacles besetting

the district officers who tried to locate and

serve sub-subcontractors and suppliers

may be seen from the case of a manufacturer of precision gears with a plant located in New York state. The concern

was turning out parts for a Detroit manufacturer of aircraft gun turrets purchased by the Air Forces as governmentfurnished equipment. When the New

York manufacturer failed to keep up to

schedule, a Wright Field official wrote a

letter lacerating the district staff for failing to follow up on this critical procurement with sufficient attention. The bewildered district officer had never even

heard of the gear maker. Since the firm

in question supplied a manufacturer in

a different district, the Eastern District

had no record of him as a subcontractor.

What is more, subsequent inquiry revealed that the manufacturer himself did

not realize that his gears were to be used

in an item of Air Forces equipment. He

made his products to the specifications

provided with no questions asked, so he

had no way of knowing that he could

turn to the district office not only for help

in getting needed priorities on tools and

materials, but also for possible contracts.

Under such circumstances district officers

were understandably annoyed when

Wright Field officials criticized them for

not knowing what was going on under

their very noses.102

At best, the effort to decentralize procurement never achieved the goals anticipated. Even at a time when the

commanding general of the Materiel

Command was exerting the utmost pressure to this end, the results achieved were

not impressive. In August 1943, for example, only 27.4 percent of all Air Forces

101

 Ibid., pp. 171-73. 102

 Ibid., pp. 169-70.
ORGANIZATION FOR PROCUREMENT 509

purchases were negotiated by the districts. This represented not more than

14 percent of the total dollar value involved.103

By the summer of 1944 the Materiel

Command program of decentralized procurement had run into so many snags that

a reappraisal of policy seemed called for.

After a year and a half of trial, the disadvantages of district procurement seemed

to outweigh the advantages. Nevertheless, since the commanding general had

identified himself so emphatically and so

personally with the policy of decentralization, any proposal to return all procurement to Wright Field threatened to

be a rather delicate matter. There is evidence extant that at least some officers,

fully aware of the commanding general's

predilections, were inclined to be wary

in writing on the question.104 General

Branshaw's relief for reasons of health in

July 1944 after a long illness simplified

the task considerably, for then the decision could be made with no loss of face

by the new commander, Brig. Gen. K. B.

Wolfe.

To procurement officials at Wright

Field it seemed clear that the attempt to

decentralize had been unwise. There

were, of course, many functions that

would always be performed most advantageously in the districts. As a general

rule these included all the myriad details of contract administration—inspection, production expediting, on-the-spot

studies of costs, and so on—wherever a

close and continuing personal contact was

required at the local level between buyer

and seller. On the other hand, experience showed that the negotiation of contracts in the districts had led to serious

delays in the production and delivery of

vital military equipment. And in wartime, from the military point of view, this

was reason enough to abandon the attempt and return Air Forces buying to

Wright Field.105

For students of military command the

whole episode merits careful attention

for several reasons. To begin with, almost without exception time and trial

validated the objections raised to decentralized procurement by Wright Field

officers long before the policy was attempted. Their fears that district procurement would lead to difficulties in

co-ordinating complex engineering details were entirely justified, as were their

forebodings on the difficulties of maintaining uniform and equitable procedures when buying through a number of

centers. Moreover, although decentralized procurement was initially undertaken to increase the share of Air Forces

contracts going to small business and

otherwise untapped facilities, these objectives were scarcely mentioned when

the decision was made to return procurement to Wright Field.106

 All of which

suggests that the original decision to decentralize procurement to the districts

103

 Russel, Hist of AAF ATSC: 1944, p. 158. 104

 Walsh, Hist of Eastern Proc Dist: 1943, p. 116,

especially the following comment: "The tendency of

some to remove from the files what was derogatory

or, what was more common, the tendency to prevent

what was derogatory from becoming a matter of

record, leaves only the favorable or mildly critical

for evaluation. Rumors, off-the-record comments of

persons engaged in the work of decentralization,

modify any conclusions . . . which a . . . scrutiny of

district directives and letters indicates."

105

 Ibid., p. 82; see also Russel, Hist of AAF ATSC:

1944, pp.151-58. 106

 Negotiation and Administration of Contracts,

Lecture by Scarff.
510 BUYING AIRCRAFT

was not so much the result of careful

planning as it was a hasty change of front

made under considerable political pressure.

In retrospect, procurement officials at

Wright Field ruefully admitted that they

had been forced to learn the hard way

the important distinction between control and operation.107

 There was a certain irony in the circumstance that even

while reiterating axioms about "centralized control and decentralized operations" the command directives had proceeded to order just the opposite. Instead

of confining district procurement staff

officers to the role of honest brokers, finders, or middlemen without commission,

dedicated to the task of bringing in more

small business firms to share in Air Forces

orders, the command directives ordering

decentralized procurement turned them

into contracting officers with all the ultimate responsibilities that function entailed. As a consequence, control at the

level of command was seriously weakened, and the main objective, aid to

small business, was lost in the welter of

administrative difficulties that district

buying entailed. A better example of

the grave dangers awaiting those who resort to glib formulas would be hard to

find. Axiomatic simplicity all too often

merely conceals complex realities.

107

 Proc Div Annual Rpt, 1944, WFHO Research

file.
CHAPTER XX

Production

The Problem Defined

The term production is an omnibus

word; it conveys a host of meanings. To

use it is to conjure visions of long assembly lines crowded with workers, machine

tools turning out precision parts, heavy

presses forming intricate shapes, hundreds of draftsmen bending over drawing

boards, and thousands of clerks posting

entries in endless records of parts and

materials to keep them flowing in uninterrupted succession to the point of need.

Production also describes the sum of the

parts, the end product turned out in large

quantities.

To tell the complete story of aircraft

production in World War II would require a history of industrial America as

a whole during the war years, for the aircraft industry in its complexity embraced

a very large portion of the national economy. True, a handful of major airframe

builders received most of the publicity,

but behind them lay the subcontractors

and the suppliers or vendors, tier after

tier, spreading out into every state in the

union. Each firm, from the giant industrial complex to the tiny three-man backyard job-shop turning out bits and pieces,

played a significant role in the collective

enterprise called aircraft production.

Large or small, every manufacturer

participating in the aircraft program was

confronted with new and baffling problems imposed by the demands of war.

Until these were resolved and output was

accelerated, air arm leaders knew that air

power would remain a concept rather

than a reality.

Though Air Forces officers were of necessity interested in every aspect of aircraft production, the full range of this

far-flung story cannot be recited in a study

such as this.1 Within its prescribed limits, this chapter can only analyze some of

the factors of peculiar importance to military officers—those concerned with day-today administration as well as those in

command—who work for large-scale mass

production when haste is all essential.

The point of view taken is that of the

officer, not that of the businessman. Another consideration has influenced the

selection of the topics discussed. Almost

1

 Because the term production covers planning

and control functions as well as manufacturing, a

bibliography of the subject tends to spread out, like

spokes from a hub, along specialized lines. Much of

the best material in each of these lines is to be

found in periodicals of the time. In addition to the

general periodicals of the aviation industry as a

whole, there are the trade journals of all the contributory industries. Typical of the monographic

literature in this area is T. Lilly et al., Problems of

Accelerating Aircraft Production During World War

II (Boston: Harvard University Graduate School of

Business Administration, 30 January 1946). For a

general study of wartime labor that touches upon

the special problems of the aircraft industry, see

Byron Fairchild and Jonathan Grossman, The Army

and Industrial Manpower, UNITED STATES

ARMY IN WORLD WAR II (Washington, 1959).
512 BUYING AIRCRAFT

without exception they represent problems that recurred again and again, not

only in World War II but in World War

I as well, since the record of aircraft production in World War I reflects a striking similarity to the pattern of problems

encountered in World War II.2

The Dilemma of Mass Production

More Airplanes or Better?

The military force that can put more

and better weapons into the field holds

a long leg on victory. Quantity combined

with quality, larger numbers, and superior performance, to say the very least,

give a decided advantage. But this is an

ideal combination hard to obtain.

Continuing superiority requires continual change. Every innovation introduced by the enemy must be outmatched.

Superior performance in aircraft is the

sum total of many components—range,

speed, climb, maneuverability, fire power,

and the like—each conditioned by thousands of features of design: here a change

in engine cowling to improve cooling and

increase horsepower, there a better gun

mount to enlarge the field of fire, and so

on in an endless procession suggested by

experience in the field and innovations

on the drawing board. When one is

pitted against an aggressive and determined foe, to maintain superiority is to

accept the absolute necessity of frequent

change, modification of existing designs

to incorporate improvements whenever

possible and, ultimately, replacement of

old models with new ones. Fluidity of

design is a requisite for superior weapons.

Mass production, on the other hand, lies

at the opposite extreme.

Mass production and design stabilization are complementary concepts. To

freeze design is to facilitate production.

Mass production involves a good deal

more than just an enlarged scale of operation. The economies that stem from

bulk purchase, long production runs

without retooling, and the wider use of

jigs and fixtures that permit more extensive employment of semiskilled labor, all

require stability of design as well as sheer

quantitative increase. When design is

repeatedly subject to alteration, bulk purchasing of materials can be hazardous,

production planning more complicated,

and retooling continual. What is more,

in such circumstances every significant

shift in design may necessitate a program

for retraining labor. In short, only by

minimizing design change is it possible

to obtain maximum production.

Possibly no other single problem posed

air arm officials such hard choices on so

many occasions as the eternal equation of

quantity and quality. Repeatedly, officers concerned with the production of

weapons faced the question: to freeze or

not to freeze? Which was more important at any given moment: a higher volume of output or changes in design that

would sharpen the cutting edge? In the

staff school exercise it may be possible to

resolve this equation neatly, but to those

actually in command, especially in wartime, the imponderables were hard to

count.

2

 See, for example, Report on Aircraft Supply of

Great Britain, extract from a study by the British

War Cabinet, 1917, in Smithsonian Misc Collection,

vol. 69, No. 7, Jun 18. See also, Maj H. H. Arnold,

Analysis of Aircraft Production in World War I,

Jan 22, WFHO. This study perfectly illustrates

how superficial was the study given the production

experience of World War I.
PRODUCTION 513

In retrospect, the quantity-quality

equation is clear: aircraft output must

reflect a skillful compromise between

maximum output and maximum performance made possible by continual innovations in design. To the officers who

faced this problem in the months leading

into the war, this commonplace was never

so clear. They were certainly aware of

the tug-of-war between quantity and quality, but they saw the issue in different

terms.

In place of continuing compromise,

they tended to think in terms of successive phases. For them, aircraft procurement followed orderly programs: first a

design and development phase, then a

production phase. In October 1939, for

example, when the 5,500 program loomed

as the biggest rush project of the year,

the General Staff ordered the Chief of

the Air Corps to be sure that the experimental and service test phases were completed before production orders went out

for the equipment to be used by tactical

units.3

The General Staff directive cannot be

dismissed as a failure of ground officers

to appreciate the peculiar problems of

the air arm; Air Corps officers themselves

had been thinking in terms of freezing

designs before going into mass production. In working out their mobilization

plans, they expected to separate engineering from procurement. This would entail turning over complete control to the

procurement organization once the decision to freeze a given aircraft design had

been made.4 The staff planners feared

that the engineering officers would never

relinquish an aircraft for production unless they did this. Project engineers always had "one more really vital improvement" just over the horizon.

The conception of a production freeze

was not confined to military circles. Aircraft manufacturers were equally prone

to talk about freezing designs to get maximum production.5

 But always the freeze

was to take place at some point in the future, presumably on some distant M-day,

when all-out production became mandatory. Meanwhile, the engineers at Wright

Field went on working with the airframe

firms all over the country, continually

injecting design changes in production

model airplanes.

During the summer of 1940 the realization gradually dawned that there would

be no M-day in the accepted sense of the

term. The nation was already in the

midst of a creeping M-day in many respects. And in the light of this circumstance, many air arm officers became increasingly disturbed at the faltering pace

of aircraft output. They believed that

designs should be frozen immediately

without waiting for a declaration of war.

One headquarters staff officer returned

from a tour of the industrial front convinced that "drastic action" was necessary

if the pace of output was ever to increase

significantly. He urged the Chief of the 3

 TAG to CofAC, 30 Oct 39, AFCF 452.1 Aircraft

Requirements Program. The General Staff directive

was in line with the prevailing concept of "standardizing" before entering production. On the whole

subject of standardization, see USAF Hist Study 67,

Standardization of Air Materiel, 1939-1944: Controls, Policies and Procedures, by Dr. M. P. Claussen,

Air University Hist Div, Nov 51.

4

 Notes on Detailed Plans for Execution of Emergency Program, 1 Dec 38, staff paper, AC Project

Rcds (A. J. Lyon Papers). 5

 See, for example, Donald Douglas, "Speeding

Aircraft Production," Aviation (August 1940), p.

44ff.
514 BUYING AIRCRAFT

Air Corps to set up a board of officers

who thoroughly appreciated the importance of "production rather than perfection." He wanted "full authority" for

the board to determine the changes to

be permitted in aircraft already on the

production line. The plan for a board

as such was rejected, but the spirit of the

scheme received approval as a matter of

general Air Corps policy.6

A few days later the Assistant Secretary of War circulated a letter reinforcing the policy laid down for the Air

Corps. Quoting from the dispatch of a

military attache in London, he wrote:

It has been reported that one of the factors contributing to the present desperate

position of the British is the failure to

freeze designs. The technical services are

never satisfied with anything less than a perfection which is always unobtainable. The

best is the enemy of the good. If we are

to avoid the catastrophe of "too little and

too late," there must be a decision as to

production types. Germany has demonstrated that thousands of imperfect tanks

on the battlefield are better than scores of

perfect tanks on the testing ground.

"Failure to freeze designs," admonished

the Assistant Secretary, "must be constantly guarded against." For maximum

impact, this message was reproduced and

distributed down through every echelon

at Wright Field, so that the officers and

civilian engineers who worked on design

changes could reflect on its significance.7

At no time, of course, could it be said

that the Air Corps actually prohibited

change in production airplanes. No

freeze could be absolute. Modifications

found necessary to safe and effective operation and those that could be introduced with little or no trouble continued

to be made. But this circumstance in no

way negated the significance of the decision to freeze. Modifications that were

desirable but difficult to accomplish

would not be undertaken, and, perhaps

of even greater moment, the manufacturers were instructed to give all experimental work a priority lower than that assigned to the problems of production.8

So long as output lagged, there was undoubtedly a good deal to be said for giving

top priority to production, but the policy

had its dangers. Would it be wise for the

Air Corps to order Douglas to drop all

work on the four-engine C-54 transport

in order to press production on the twinengine C-47? Such a step was seriously

considered.9 The C-47 did turn out to

be the indispensable work horse of the

war, but it could never make the longrange ocean hops that war in the Pacific

would subsequently make so necessary.

If to freeze designs was to perpetuate the

production of yesterday's weapons, the

decision to freeze might prove fatal.

When the Chief of the Air Corps decided to freeze the designs of production

model airplanes during the summer of

1940, he presumably believed that such

a freeze was possible. A year later he

must have been less certain. There was 6

 R&R, Inspection Div, OCAC, to CofAC, 14 Aug

40; Mat Div to CofAC, 6 Sep 40. Both in AHO Plans

Div 145.91-246. See also, R&R, CofAC to Chief, Mat

Div, 30 Aug 40, AFCF 452.1 Airplanes, Gen. 7

 Memo, ASW for CofAC, 26 Aug 40; OCAC, CTI96, 7 Sep 40. Both in AFCF 452.1 Airplanes, Gen.

See also, Military Attache, London, Rpt 41,443, 31

Jul 40, CADO WF, Doc 70/146.

8

 Mat Div Memo Rpt, Exp-M-50-476, 17 Oct 40,

AFCF 452.1 (Bulky) Means of Accelerating Aircraft

Production. 9

 Memo, Maj Langmead for Chief, Mat Div, 8 Jul

40, AFCF 452.1 Airplanes, Gen.
PRODUCTION 515

still a tremendous public and political

pressure on the Air Corps for large numbers of aircraft.10

 Qualitative superiority

involved considerations far too subtle for

easy comprehension by the general public; numbers, on the other hand, made

obvious headlines and even the uninformed could count. Nevertheless, in the

fall of 1941 the nation was not yet at war,

and counteracting the pressure for more

airplanes was the natural desire of all Air

Corps officers to get the very best airplanes they could. Thus, despite the

freeze order of August 1940, all sorts of

changes continued to be made on production aircraft.

The turn of events in Europe during

1941 was one of the factors helping to

melt the freeze order of the previous summer. The Battle of Britain had been

fought and won. The few "to whom so

many owed so much" had demonstrated

that a marked superiority in performance

was a consideration not to be ignored.

Fifty-two fighter squadrons and a chain

of radar sets had helped to hold the Luftwaffe at bay. Air Corps observers stationed in England sensed the change that

had taken place in the year following the

disaster at Dunkerque. At the time of

Dunkerque all-out production had been

the cry; now the emphasis was shifting

back to superior performance. One of

the observers made a special point of

warning those in command in the United

States to avoid "political production" or

sheer numbers for the record. "This

war," another observer added, "cannot

be won by producing great numbers of

airplanes that are not up to combat

standards."

 11

The pendulum was swinging back

from quantity to quality. Then came

Pearl Harbor. The shift in emphasis

noted by the observers in Britain was accurately reported, but it was, after all, a

British policy; it reflected the needs of

a particular situation. After Pearl Harbor numbers again loomed in importance and all-out production took first

priority.12

To trace each pulse beat of the war,

each surge in priority from more aircraft

to better aircraft and back again to more

aircraft would serve no purpose. On the

other hand, a single illustration may epitomize the problem. By the middle of

1943 the military forces of the United

States were engaged on a truly world-wide

front. In the Pacific the amphibious

campaigns were soon to be in full swing.

The troops in North Africa had moved

across the Mediterranean and invaded

Sicily, while in Britain the build-up for

a cross-Channel attack had begun. Moreover, by this time the Air Forces was

deeply committed to the strategic assault

on Germany with heavy bombers. Month

after month, each of these operations

called for ever larger numbers of airplanes. Manufacturers in the United

States were breaking all records with

their output, but still there were not

enough. Demand exceeded supply. As

always, the continual temptation to get

10

 The continuing political pressure for increased

output is reflected in Memo, USW for CofAC, 10

Sep 41, AFCF 161 Contract Regulations.

11

 Gen Brett to "Dear Hap" (Maj Gen H. H.

Arnold), 10 Nov 41; Lt Col E. M. Powers to Chief,

Mat Div, 4 Nov 41. Both in AFCF 452.1 Sales

Abroad. 12

 For a revealing appreciation of this situation,

see Memo, CGMC (WF) for ACofAS MM&D, 4 Jun

43, AFCF 452.01-B Production.
516 BUYING AIRCRAFT

better aircraft had led to design changes

that slowed production.

In desperation, the Chief of the Air

Staff finally decided that only drastic action would keep the engineers from retarding output by their eternal quest for

improvements. In September 1943 he

ordered all production aircraft to be

frozen on an "as is" basis. Even modifications deemed absolutely essential for

safe operation were not to be undertaken

without express approval from the Office

of the Chief of Air Staff.13 As might have

been expected, the order raised a quick

cry of protest.

Materiel officers on the air staff were

quite willing to admit that there had been

a tendency to permit an excessive number

of changes on the production lines. They

realized that in seeking "nothing but the

best" they had sometimes incorporated

relatively minor improvements that

slowed production far beyond the point

where the qualitative gain justified the

quantitative loss. On the other hand, it

would be dangerous to ignore the urgent

requests for design changes sent from

tactical units confronting the enemy in

the field. For example, where a theater

commander reported that gunners found

the field of vision from a certain turret

inadequate, immediate modification was

the only acceptable course, even if it involved extensive structural changes. The

alternative was to lose bombers for want

of effective defensive fire.

At long last the concept of freezing

production lines was changing. Few responsible officers still thought it would

ever be literally possible to freeze production. The Chief of the Air Staff recognized this implicitly when he ordered

all exceptions to clear through his office.

The question, then, was no longer to

freeze or not to freeze at all; it had now

become a matter of degree. This in turn

resolved itself into a question of procedure. What was the best way to handle

decisions as to which changes were to be

allowed and which rejected?

There were serious drawbacks to the

directive that put the final decision on

all production line modifications into the

hands of the Chief of Air Staff. In the

first place, the time element militated

against such a scheme. Delays were inevitable in the headquarters paper mill,

and even vital changes could be delayed

for weeks awaiting pro forma approval.

Then, too, with over a dozen different

aircraft in production status, each one

involving thousands of intricate technical considerations, the Chief of Air

Staff and his immediate entourage were

scarcely in a position to make sound decisions on such matters of detail. As the

matériel staff pointed out, air staff would

soon be swamped with hundreds of requests awaiting decision. And just how,

for example, would the Chief of the Air

Staff know whether or not a request for

closer riveting to strengthen the engine

cowling of a particular aircraft was really

justified?

As a counterproposal, the matériel staff

suggested that it would be wiser to let

the engineers at Wright Field decide on

all minor points, sending suggested major changes—armament, structural design,

and the like—to Washington for approval.

Since the matériel specialists at Air Forces

headquarters were obviously more famil13

 R&R, DCofAS to ACofAS MM&D, 22 Sep 43,

AFCF 452.01-C Production. The only exception to

the freeze order was the B-29, which was then being

pushed into production under a special program.
PRODUCTION 517

iar than the Chief of the Air Staff with

the technical details of production, they

preferred to keep all decisions on changes

in their own hands. But the staff chief

was adamant. He insisted that every design change on all important production

contracts had to clear through his office.

He was absolutely determined to speed

up production, and he knew that every

earlier freeze order had been vitiated by

just such concessions to the engineers.

Still persuaded that their position was

the wiser one, the matériel staff returned

with a compromise that the Chief of the

Air Staff finally accepted. A true freeze

was unrealistic. Perhaps the most convincing argument was the obvious one:

freezing production designs would accomplish little indeed if it subsequently

turned out that the proposed changes

were essential after all and had to be

tacked on to the airplanes out in the field

at great inconvenience and expense.

Here was the gist of the problem.

There was to be no more talk of freezing

design; it was a matter of improving procedures to minimize changes. In short,

the compromise plan aimed at an appropriate balance between more aircraft and

better aircraft. The engineers at Wright

Field were empowered to approve any

change made necessary by faulty operation or the dictates of safety as well as

any that might actually speed up the

pace of production. All other suggested

changes were to be sent to Washington

for study by the matériel specialists. They

in turn could present each major modification to the Chief of Air Staff for a

decision.

Most significantly, the new procedure

required the engineers at Wright Field

to buttress each request with facts: Who

asked for the change and why? When

could the proposed change be injected

into the production line, and what would

be the estimated impact of the proposal

upon deliveries? Facts plus a carefully

planned system for dealing with them

would help make it possible to balance

the quantity-quality equation.14 There

need be no more unrealistic swings of the

pendulum, no more impossible freeze orders—provided the system could be made

to work.

Making the system work was by no

means easy. The new directive had been

in force hardly more than a month when

the matériel staff at the headquarters in

Washington found occasion to chide the

engineers at Wright Field for continuing

to permit changes that did not lie "within the spirit" of the directive. In this

short period, it seems, the Materiel Command had authorized 75 changes on the

P-38 alone. In addition, there had been

43 on the A-20 and 94 on the P-63.

Theater commanders were beginning to

complain that the multitude of design

changes injected on the production line

were flooding the tactical units with a

heterogeneous collection of equipment.

With every few aircraft in a given production sequence different in numerous

particulars, supply and maintenance became unduly complicated.

There was a certain grim irony in this

turn of events. In the case of the P-40,

for example, unit commanders sent back

frantic messages demanding modifications in production models to make them

tactically suitable. The threat of enemy

14

 R&R Comment 2, ACofAS MM&D, to CofAS, 23

Sep 43, and successive replies, 30 Sep, 2 Oct, and

16 Oct, AFCF 452.01-B Production. See also, Memo,

Actg ACofAS MM&D for CofAS, 29 Oct 43, same file.
518 BUYING AIRCRAFT

superiority made such changes imperative. But after the improvements had

been incorporated at the cost of a considerable slowdown in total output, the

unit commanders in the theater complained that the logistical difficulties imposed by these changes nullified the gains

anticipated.15 Since the distribution of

revised technical orders and instruction

manuals lagged well behind the pace of

modification, the complications of supply and maintenance under such circumstances defied imagination.

In short, the quantity-quality equation

was paralleled by another one that balanced qualitative improvement against

the resulting complexity of supply and

maintenance. Neither permitted all-ornothing solutions. Both required compromises. And to be truly effective, the

compromises had to derive from a careful

consideration of the relevant facts in each

instance. Mustering these facts required

staff work of a high order. And good staff

work was possible only when it rested

upon a foundation of sound administration. For the keenest of officers was helpless in the face of an administrative system that failed to provide him with a

timely and adequate flow of information

on which to premise decisions.

Better staff work brought results. On

that point the record is clear. Nonetheless, while the details of administration

were gradually being perfected, the need

for ever larger output continued. The

decision makers remained under heavy

pressure for results. Under the circumstances, those in command were repeatedly tempted to take short cuts that

promised to pay big dividends in the

form of increased production. Sometimes, of course, the short cuts contained

pitfalls that negated the gains they seemed

to promise. In this respect the whole experiment in maximum tooling for mass

production at Willow Run is peculiarly

well worth investigation.

Willow Run: A Tooling Triumph?

June 1940 was probably the most disastrous month of the war. Almost in desperation, Air Corps officers cast about for

alternatives and expedients to speed the

pace of production. Among other things,

they looked to Detroit, the very symbol

of mass production in the United States

if not the world.

A conference with the top management

at the Ford Motor Company brought results. After the Ford staff expert had

studied a P-40 flown to Detroit for the

purpose, Henry and Edsel Ford and C. E.

Sorensen declared that they saw "no difficulty" in adapting such an aircraft to mass

production. They suggested further that

production at the rate of one an hour was

not an unreasonable anticipation, provided the aircraft design were frozen before they began. On this point they were

emphatic. Changes "would have to be

tabooed" to get the promised output.16

The Ford offer was indeed tempting.

Airplanes at the rate of one an hour after

a tooling-up period of eight months,

while not exactly fantastic, certainly exceeded anything planned by the regular

aircraft industry. And the enormous prestige of the Ford empire gave credence to

15

 Chief, Mat Div, MM&D, to CGMC, 13 Dec 43,

AFCF 452.01-D Production.

16

 TWX, EES to Chief, Mat Div, 13 Jun 40, AC

Project Rcds (Lyon Papers), vol. 33.
PRODUCTION 519

the predicted achievement. Nonetheless,

on reflection, the matériel staff concluded

that the Ford scheme could not be executed.

The Ford proposition was not feasible

if only because none of the military aircraft needed in large numbers could

really be frozen. Almost without exception the designs chosen had been earmarked for production while still in the

experimental stage. In an effort to get

the newest and the best equipment as

soon as possible, the customary service

tests had been telescoped so that production planning in many instances coincided with the development of the original experimental model. In a few instances, the manufacturers had started

production planning even before the designs had come off the drawing board.

Under such circumstances, a true design

freeze was patently impossible. But the

dream of mass-produced airplanes was

difficult to kill.

The idea of military aircraft rolling off

the end of a Ford assembly line stirred

up a good deal of public enthusiasm.

Soon queries from political leaders on

the Hill began to reach the War Department. Why not turn out fighters and

bombers in Detroit? The answers sent

back reflected the stand that had been

official policy ever since 1938.17 "Military aircraft of combat type are not adaptable to mass production techniques." So

wrote the Assistant Secretary of War, who

went on to explain that where automobiles might be standardized for a full year

at a time, aircraft had to be modified at

entirely "unpredictable intervals." Mass

production on a Detroit scale would only

result in large numbers of obsolete aircraft unsuited for combat—a "poor bargain" at best, the Assistant Secretary declared.18

The demise of the Ford proposal to

mass-produce airplanes did not, of course,

mean that the capacity of the automobile

industry would not be used. Negotiations proceeded, albeit haltingly, for aircraft engines, and the vast potential of

Detroit held considerable promise as a

source of parts and subassemblies for the

old-line aircraft industry. To this end

negotiators continued through the latter

part of 1940 and into early 1941. Finally,

in May 1941, Ford agreed to sign as a

major subcontractor supplying sets of

knocked-down parts or components for

the four-engine B-24 heavy bomber to be

assembled by Consolidated and Douglas.

But Ford had little interest in remaining

a secondary producer of parts for others.

Once captivated by the dream of massproduced aircraft, the Ford management

could never rest content with making

parts. Intentions are hard to document,

but every shred of evidence in the War

Department files makes it clear that from

the very beginning of the negotiations

leading to the B-24 parts contract, the

Ford management hoped to turn out

bombers on its own account as soon as

possible. Not the least significant evidence of this intention is the Willow

Run plant itself.19

Ostensibly erected as a parts plant, the

17

 See ch. XV, above.

18

 Actg SW (Louis Johnson) to Senator Sheppard,

26 Jun 40, SW files, Air Corps Gen Questions, item

1019. 19

 Except where otherwise indicated, the description of the Willow Run operation is based on ATSC

Industrial Planning Project Case Hist: Ford Willow

Run.
520 BUYING AIRCRAFT

Willow Run facility had all the earmarks

of an assembly plant. The main structure—there were ultimately 16 in all

counting hangars, offices, warehouses, and

so forth—covered some 67 acres, one of

the largest single industrial buildings in

the world. The main production areas

under this roof embraced two major bays

150 feet wide, 30 feet high, and 2,000 feet

long. Overhead cranes with capacities

running to 19 tons served this expanse.

Taken all together, the building, its dimensions, and its equipment clearly signified that Ford intended to do far more

than turn out a couple of hundred sets

of knocked-down parts per month.

Even before it signed as a subcontractor for parts, the Ford Company had succeeded in getting a contract for one B-24

as an "educational order." And around

this single airplane the Ford team began

planning for mass production on their

own account. They virtually ignored the

original schedules for parts deliveries laid

down by the military planners and from

the very beginning set their eyes on a target of one bomber per hour. All their

production plans were premised upon

this ultimate goal.

Such planning was costly; since it went

far beyond what the contract authorized,

the company had to use its own funds to

carry on. The gamble paid off. While

other manufacturers dutifully accepted

the official schedules and planned to meet

them, only to complain at the dislocations inevitable when the schedules were

subsequently enlarged repeatedly, Ford

planned initially far in excess of schedule

and took each successive increase in stride.

In October 1941, the Ford management got a contract authorizing the production of complete bombers at Willow

Run.20 The contract regularized the Ford

position. By absorbing all the advance

outlays made by the company from its

own funds, it rewarded Ford's initial

boldness. But of greater moment, it gave

official sanction to the Ford dream of

mass-produced military aircraft.

The Ford empire possessed in depth

the resources required for large-scale production. An old and experienced purchasing organization understood the art

of close pricing when dealing with vendors and suppliers. A large staff of production men, tool designers, engineers,

expediters, and machinists was already at

hand. So too were the hundreds of machine tools in the Ford pool, ready and

waiting to supplement the new equipment installed at Willow Run by the

Defense Plant Corporation. These were

important aspects of the Ford plan, but

the key to the one-an-hour pace of mass

production can be summed up in a single word: tooling.

The very essence of Ford's dream for

Willow Run was production tooling.

Here was a technique the automobile industry had carried further than any other

industry in the world, a technique that

the aircraft industry was only beginning

to comprehend. The disparity between

the levels of tooling employed by the two

industries is readily demonstrated. For

example, in a single prewar year when

a leading automobile manufacturer spent

$10,000,000 in tooling up for a year's output, one of the most production-minded

aircraft builders spent only $150,000.

Airplanes were still built mostly by hand.

Rivets, generally speaking, were ham20

 Although the contract was not signed until

October 1941, negotiations had been under way since

the previous June.
PRODUCTION 521

mered in one at a time—and there were

more than 250,000 rivets in a bomber.

At this rate it was easy to understand why

aircraft production costs were estimated

to range from $5.00 to $8.00 a pound

against the 15 or 20 cents average experienced by the automobile industry.21

Admittedly, even then airplanes were far

more intricate than automobiles, but

these figures suggest how slight was the

tooling used by the old-line aircraft firms.

Production tools are of two kinds:

those designed to simplify and speed the

pace of production and thereby cut costs

and those designed to ensure accuracy

and interchangeability. Typical of the

first group is a fixture permitting the use

of a gang drill where one employee controlling a single spindle runs a whole

bank of drills performing identical operations. Tooling for accuracy and interchangeability includes a wide variety of

jigs and fixtures for holding work and

ensuring perfect matings when separately

fabricated parts are brought together for

final assembly. Increased use of tooling

can speed production along a geometric

curve. As more tooling is added, the level

of skills required falls and trained labor

becomes less important as a limiting factor. A steel die in a press turning out

intricately shaped cowlings or fuselage

fillets can obviously outstrip the most

skillful workman making the same items

by hand on a drop hammer—once the die

is completed.

The over-all Ford production program

called for maximum use of both kinds of

tooling. In fact, the Ford plan was premised upon mechanization at every feasible point. The B-24 was to be broken

into 70 major component sections. These

were to be completely prefabricated in

their own special areas and then moved

on conveyors to the final point of integration on the main assembly line. Like

the whole Ford undertaking, this scheme

of production was bold in conception and

exciting in promise. It was to prove immensely difficult in execution.

The Willow Run story began even before Ford signed the original contract as

a parts supplier. Two months earlier,

during March and April of 1941, a team

of Ford representatives, ultimately numbering 200, spent weeks at the main Consolidated plant in San Diego making careful studies. They photographed every

one of the 30,000 detailed drawings of

every different part and assembly going

into the bomber. They struck off copies

of all blueprints, bills of materials, and

engineering releases and made reproductions of the loft boards used by Consolidated. When they returned to Detroit,

it took two freight cars to transport the

records and materials they had accumulated. They believed they had enough

information to get bomber production

under way, but they were soon to be disillusioned. No sooner had the engineers

returned to Detroit than their real troubles began.

A large part of the difficulty lay in the

B-24 itself. The bomber simply was not

ready for mass production. Conceived in

1938, the XB-24 was built and flown in

1939. Although Consolidated had turned

out 139 of the craft on a British contract,

a "production order" by prewar standards, the B-24 was still a "shop engineered" aircraft. It had not been designed

21

 J. H. Kindelberger, President, North American

Aviation, The Aircraft Industry, Lecture, 19 Nov 37,

AIC. See also, C. T. Gilliam to SW, 8 Nov 40, ASF

Planning Br files 452.11 Aircraft, AGO Rcds 205.04.
522 BUYING AIRCRAFT

initially with an eye to mass production,

at least not in the sense that Detroit used

that phrase.

Then too, the transfer of drawings from

Consolidated to Ford turned out to be

more difficult than anticipated. The automobile manufacturers and the airframe

builders found they spoke different languages, and translation injected its inevitable obscurities. Where Consolidated

used fractional dimensions—the survival

of a cruder age of aircraft construction—

Ford used decimal notations entirely.

Moreover, the Consolidated draftsmen

all presumed that their drawings would

be interpreted by experienced foremen.

They made use of all sorts of signs and

symbols without amplification. Worse

yet, the Ford engineers found numerous

discrepancies between the duplicate loft

boards and the detailed drawings of parts

they had brought from San Diego. The

Consolidated engineers knew of these

errors in many cases, but under tremendous pressure, they customarily left it to

the skill of their production men to reconcile them on the line.

For the engineers in Detroit who were

trying to prepare precision tools for mass

production, the discrepancies in the

Consolidated drawings were devastating.

They decided they would have to re-do

the drawings—30,000 in all. Before they

were through, what with the many design

changes introduced along the way, they

had to turn out twice that number, work

enough to occupy a whole regiment of

draftsmen for several years.

Sometimes the engineers working on

a particular part could discover no drawing for it among the reams of paper

brought from San Diego to Detroit. On

one occasion, when a Ford draftsman was

unable to locate an adequate drawing for

the B-24 toilet paper container, he wired

to the west coast requesting further details. To his surprise the reply came back

that there were no drawings. Consolidated had found it cheaper to buy the

item in a local dime store.

The difficulties initially encountered

in transferring the Consolidated designs

to Ford tended to compound as they ramified through the whole operation in Detroit.22

 During the year after the Consolidated drawings were first brought

back, a tool design group with upward

of a thousand men worked continually

to prepare the jigs, fixtures, and dies—

the tooling—with which they hoped to

achieve wonders of production. The

Ford management knew there were risks

in planning tools while the aircraft itself

was still being engineered for production.

Subsequent design changes would force

them to scrap production tools already

made up, but the risks seemed worth

taking in the interest of speed. Consequently, by April 1942 one whole set of

production tools was ready for use.

As it turned out, the decision to tool

up without waiting for the B-24 to be

thoroughly engineered for production

was a wise one even though it cost a good

deal of lost motion at first. Some 15 percent of the tools originally made had to

be scrapped or reworked because of design changes. Nonetheless, it was only

because Ford had fabricated a large number of tools well before the assembly line

was scheduled to start that the production

men had time to discover in their tools

some of the serious shortcomings that had

22

 Not until the spring of 1942 did the production

staff move out to the new plant under construction

at Willow Run.
PRODUCTION 523

to be worked out before production could

begin. Above all, this forehandedness

gave them time to learn how faulty their

basic assumption had been. Ford's whole

program rested on the premise that the

production techniques of the automobile

industry could be applied directly to aircraft. Experience showed this was not

quite true.

The Ford engineers had planned to use

dies far more extensively than was customary among the old-line aircraft firms.

By using dies for blanking, piercing,

forming, and drawing, the production

men hoped to reach hitherto undreamed

of levels of output. Once set up, tested,

gauged, and put into action, high-speed

presses manned by relatively unskilled

employees could turn out extremely accurate parts in large quantities in very

little time. Dies were expensive and hard

to make. They required the services of

highly skilled die-sinkers and the use of

special machine tools. But in these resources the Ford empire was rich. The

Ford toolmakers were world famous and

the Ford tool room no less so. For example, in the main toolroom the B-24 engineers had, in addition to the usual array of standard machine tools, a battery

of 23 hard-to-get Kellett profilers, each

worth $80,000, ready to cut the dies

needed for the bomber program. Here

were resources far beyond those possessed

by any of the aircraft manufacturers.

The Ford plan to make maximum use

of dies proved disappointing. To begin

with, the production men had to learn

from bitter experience that aluminum is

not the same thing as steel. When they

began using their forming dies on aluminum sheets, they discovered that the

dies scratched and defaced the surface of

the stock, which was considerably softer

than steel. Scarred surfaces cannot be

tolerated on aircraft exteriors for aerodynamic reasons, so it was absolutely essential to correct this difficulty. A trial

of chrome plated dies proved abortive.

After considerable experimentation, it

turned out that highly polished steel dies

would work acceptably. But all this took

time, the very item the production engineers had hoped to save by the use of dies.

Still more troublesome was the matter

of spring-back. The Ford engineers discovered that unlike steel, aluminum

would not retain the exact shape given

it by a forming die. To correct this they

had to design a sequence of two or more

dies to perform deep draws in successive

steps where a single pass would have sufficed with steel. As a consequence of

these discoveries, the Ford engineers

ended up by making 29,000 dies although not more than 15,000 were actually used. Moreover, about 2,400 of these

had to be reworked, some of them repeatedly, before they were satisfactory.

The use of dies proved disappointing

in other respects. The automobile men

had originally expected to effect economies by the widespread use of presswork.

Where the airframe builders laboriously

drilled holes, one at a time, or sometimes

faster with gang drills, the automotive

men planned to punch out the holes for

an entire skin section with one pass of a

press. The idea was alluring but it did

not always work. Aluminum skin sheets

showed a distressing propensity for

stretching irregularly and thereby failing

to mate properly when they reached the

point of assembly.

Finally, the inevitable problem of design change militated against the use of
524 BUYING AIRCRAFT

dies. One of the major economies anticipated was the long production run with

semiskilled labor. A single tool setting,

the engineers hoped, would suffice for the

full number of items on any given contract. But the high frequency of design

change destroyed this economy entirely.

The planners found it was unwise to

stamp out more than a 60-day supply of

any part since beyond that point the introduction of a design change could make

scrap losses extremely serious. Furthermore, it often turned out that shortages

of critical materials made even a limited

60-day run impossible. Here, too, the expected economies failed to materialize.

Although the Ford engineers made extensive use of tooling to speed up the

fabrication of individual parts, it was in

jigging up for final assembly that they

carried their ideas on tooling to the ultimate. They built fixtures for every single assembly operation. Often these were

sturdy frames or benches of welded steel

to ensure stability and rigidity while the

work of assembly was in process.

One of the most important—and impressive—assembly jigs was the massive

device used in assembling the B-24 center wing section, the wing root on either

side, and the heavy structure where these

roots joined the fuselage. A predrilled

and precut aluminum sheet to make the

top wing was placed in Fixture No. 1,

where rivets were inserted in the holes.

Fixture No. 2 then closed down on this

skin to hold it in place. Fixture No. 3

held splicer bars in position while they

were riveted to the skin. The next two

fixtures passed up stringers and locked

them into place while they too were riveted to the skin, and a sixth fixture held

both stringers and splicers while they

were riveted to each other. Finally, an

overhead conveyor moved in, lifted out

the finished component, and carried it

off to the assembly line.

When production finally reached its

peak at Willow Run, there were seven

banks of wing assembly fixtures, each

bank holding five separate wings. Thus

thirty-five individual wing center sections

were under construction simultaneously.

Each fixture was sixty feet long and fifteen feet high, a mass of cast iron and

steel. They were costly and required

months to build, but once in operation,

they needed only one-sixth the labor required by conventional methods of aircraft construction.

If the center section jig was impressive,

even more so was the huge milling apparatus installed to machine the finished

subassembly. This special machine tool,

conceived by Ford engineers, was constructed by the Ingersoll Milling Machine

Company at a cost of $168,000. Using it,

a seven-man crew did some forty-two machining operations in three and one half

man-hours. With conventional tools the

same job would have required 500 manhours. But the major advantage of this

heavy tool was less the saving in labor

than the gain in accuracy that it permitted. With the device, all four-engine

mounting pads could be milled and

drilled simultaneously in perfect alignment. So too were the landing-gear bearing holes. Thus, at one stroke, the Ford

engineers contrived to master the immensely taxing problem of alignment.

The other tooling along the Willow

Run production line need not be described. Suffice it to say that the main

center section passed on down through

a long succession of stations where fuel
PRODUCTION 525

ASSEMBLY JIG, B-24 CENTER WING SECTION, WILLOW RUN

tanks, electrical gear, nose section, fuselage, and so on were added until the completed bomber rolled off the end of the

line on its own wheels. The whole process represented a remarkable example of

production engineering. It was bold in

conception and dramatic, even breathtaking, to watch in operation. Nevertheless, it too suffered from the fundamental error of premise that underlay so

much of the Ford experiment.

The whole Ford production plan rested

upon two major assumptions. One was

that the B-24 design would be reasonably stable; the other was that there

would be a continuous flow of parts and

semifinished components to the assembly

line. In the event, both of these assumptions proved to be unfounded. Frequent,

almost continual changes in design characterized the whole production life of the

B-24. Many if not most of the changes

required revisions in the elaborate tooling devised to speed production at each

step along the way. And every time a

major change in tooling proved unavoidable, the whole production line had to

stop. Continuous fabrication on the final
526 BUYING AIRCRAFT

B-24 ASSEMBLY LINE AT WILLOW RUN

assembly line involved a careful interlocking of every adjacent item. Since

there were 152,000 separate parts in the

B-24, 30,000 of them entirely different,

the implications of the continual flux in

design are not hard to imagine. All together, the Ford production men built

21,000 jigs and fixtures, but only about

11,000 were finally put to use. Little

wonder then that the total cost of tooling

Willow Run—dies, jigs, and all—ranged

between $75,000,000 and $100,000,000.

The realization that the B-24 design

could never be frozen came hard to the

Ford engineers. Only gradually did they

begin to understand that design change

was a perfectly normal attribute of military aircraft even at a time when production had been accelerated to the scheduled level. It is no exaggeration to say

that the last B-24 turned off the Willow

Run production line was an entirely different aircraft from the initial item. The

original Ford educational order called

for one B-24E. The last production

model, 18 contracts later, was designated

the B-24L. In between, 130 major

changes and thousands of minor ones
PRODUCTION 527

had been introduced. And the original

aircraft design had burgeoned from a

gross weight of 41,000 pounds to 60,000

pounds as operations in combat showed

the need for adding turbosuperchargers,

self-sealing fuel tanks, full-feathering constant-speed propellers, three heavily armored power-operated gun turrets, and

camouflage paint—a not inconsiderable

weight—to mention but a few of the

many changes made during the life of

the airplane.23

Was the Willow Run attempt at mass

production really a success? Did the

whole undertaking vindicate the automobile engineers' conception of production tooling? Or did it only prove that

the automobile makers' approach was unsuited to military aircraft in general?

Clear-cut answers to questions such as

these are hard to find.

In some respects the Willow Run project was a success. If success is measured

in terms of more airframe pounds produced with the least cost in dollars and

man-hours, there is much to be said for

the Ford B-24. At its best, toward the

end of 1944, the Willow Run plant

turned out one airframe pound with 0.30

man-hours of labor. This was a decided

margin of superiority over the industry

average of 0.47 man-hours. Economy in

the matter of dollar costs is somewhat

harder to compute. Assuming a total of

approximately 9,000 items, including

completed airplanes and equivalent sets

of knocked-down parts, and dividing this

number into the outlay (not forgetting

the cost of tooling) of approximately a

billion and a half dollars, the unit cost

averages approximately $167,000. This

too compares very favorably with the industry as a whole. Of course, such comparisons are not necessarily definitive.

Far too many variables impinge upon the

picture to permit mathematically exact

and scientifically objective evaluations.

No accurate evaluation of the Willow

Run operation will ever be possible since

the Ford plant was never really run at

maximum capacity. In part this stemmed

from the labor shortage that plagued the

undertaking from beginning to end. At

peak, 42,500 people were employed.

About 10,000 of these were transferred

from other Ford units, but the rest had

to be drawn from outside the Ford orbit.

When the labor shortage was most acute,

Ford recruiters went as far afield as Tennessee and Texas to find workers. Those

they found may have been willing, but

they were certainly untrained. Thus inexperienced labor and the chronic shortage of labor both operated to retard production at Willow Run entirely without

reference to the feasibility of the tooling

provided there.

Willow Run was not operated at maximum capacity for yet another reason. By

the time the plant hit its stride, the Air

Forces no longer needed B-24 bombers

in unlimited quantities. By March 1944

the monthly output amounted to 309

units plus parts equivalent to 112 units or

a computed total of 421 bombers. Thereafter increases in output up to 600 a

month would have been technically possible, but the tactical units in the field

were unable to absorb anything like that

quantity. As it was, the long rows of completed but unused bombers that began to

accumulate became a matter of acute embarrassment to the Air Forces. Had Ford

23

 For an itemized description of each master

change in the B-24, see ATSC, Model Designations:

Army Aircraft, 11th ed., Jan 46.
528 BUYING AIRCRAFT

been permitted to operate at maximum

capacity to the end of the war, the ratio

of airframe pounds to man-hours and the

ratio of units to dollar costs would undoubtedly have been improved markedly

in the company's favor. But these ratios

are not definitive either.

If the real test of success in military

aircraft is the production of tactically

suitable weapons at the time required,

then the Willow Run record may not appear in such a favorable light. Compared

with some of the old-line aircraft manufacturers, Ford's rate of acceleration was

only fair. From the start of the project,

three years elapsed before the assembly

line reached peak production. From the

day the project began to the day the first

production item was accepted in July

1942, seventeen months elapsed. This

was somewhat better than average for

airframe builders as a group, but Ford's

production acceleration thereafter was

decidedly below average for at least six

months. Here, too, external variables

such as Ford's unavoidable subservience

to Consolidated in matters of aeronautical design make final judgments impossible.

At the end of the war a group of officers

was assigned the task of appraising the

Willow Run operation as a whole for

future reference. In their report they

recognized how seriously the delay in getting adequate design data had retarded

the acceleration of output. But they

went on to observe that the Ford system

was "not flexible enough" to use on a

product that had not been "completely

engineered and ready for mass production." Was there ever such an aircraft in

wartime? The high rate of flux characterizing the B-24 was far from exceptional; indeed, it might be said that the

aircraft design that remained relatively

stable during the war was the real exception. The following figures showing total direct engineering hours expended in

the war years on another typical production bomber, the North American B-25,

should suggest how normal continual

change in design actually was:

 24

Year Hours

1940 ......... . 329,415

1941 ......... . 419,060

1942 ......... . 695,488

1943 ......... . 461,213

1944 ......... . 200,321

Surely, then, it is useless to talk of the

levels of mass production attainable with

a completely engineered aircraft ready

for production. Such an aircraft will

probably never exist.

To debate the "success" or "failure"

of the Willow Run program is hardly

useful. The Ford management may have

been in error in assuming that a design

freeze was possible. Certainly the air arm

officers who let them go ahead on that

assumption were then equally in error.

Yet, in a sense, both these errors, if they

were such, combined to produce an exceedingly worthwhile experiment. If the

automobile makers came to the realization that military aircraft could not be

slapped out like so many passenger vehicles, so too the old-line airframe builders

were given some substantial lessons in

techniques of mass production hitherto

unknown to them.

Above all, the Willow Run experiment

demonstrated the necessity of compromise in the quantity-quality equation.

The automobile makers tended to em24

 North American Aviation, Brief History, p. 62.
PRODUCTION 529

phasize quantity. The engineering staffs

of the old-line aircraft builders were primarily concerned with quality; at heart

they were designers rather than producers. Their tendency was to work toward

aircraft of high performance, even to the

neglect of such vital considerations as

armament. But the dreadful urgency of

war demonstrated once and for all that

both quantity and quality were necessary. Both the production-minded automobile makers and the performanceminded aircraft designers came to realize

that the real test of success lay in the ability of the industry to incorporate design

changes on the production line with the

least reduction in output.

Resolving the Dilemma

The dilemma of mass production is

implicit in the quantity-quality equation.

Clearly, these conflicting objectives can

never be entirely reconciled, but during

World War II the Air Forces did contrive

a working compromise between the two.

The compromise was called modification.

Modification: A Working

Compromise

Like so many other aspects of wartime

procurement, the techniques of modification did not spring into operation full

born; they evolved slowly, in part from

accidents of circumstance and in part as

an outgrowth of hard experience. Although the necessity of finding an accommodation between more and better airplanes was to become grimly urgent in

the fight for survival after Pearl Harbor,

the practice of modification actually began nearly two years earlier when the

joint Anglo-French purchasing missions

began buying equipment in the United

States.25

American-built aircraft such as the

B-17 and the B-24 bombers when sold

abroad required a good many changes to

make them acceptable to foreign users.

Communications equipment, armament,

oxygen systems, and other such accessory

items had to be altered to French and

British specifications. To make these

changes on the assembly lines in the

United States would delay production.

And this, of course, was out of the question; export sales of aircraft built to U.S.

specifications were already in serious competition with deliveries to the Air Corps.26

The solution was to establish modification centers abroad, where production

aircraft from the United States could be

refitted as the occasion required. Such

a scheme had proved workable in World

War I and could be used again.

After Pearl Harbor the situation was

almost exactly reversed. Hundreds of

military aircraft ordered by foreign customers, from Sweden to Siam, were taken

over in haste by the air arm. Many of the

items had to be reworked before they

could be used with standard Air Corps

accessories,27 but the aircraft manufacturers concerned showed no interest in

undertaking the job. They were under

heavy pressure to turn out still more air25

 USAF Hist Study 62, The Modification of Army

Aircraft in the United States: 1939-1945, by V. G.

Toole and R. W. Ackerman, Aug 47, p. 11. Except

where otherwise documented, the following section

is based on this study. 26

 See above, ch. IX. 27

 Sometimes the aircraft diverted from foreign

buyers were pressed into service without change.

The author recalls the somewhat disconcerting experience of flying during 1942 in an airplane with

Swedish instrument markings and instruction plates.
530 BUYING AIRCRAFT

planes at top speed. And, needless to add,

they were already swamped with problems inevitable in the rapid expansion of

an entire industry. Here again the modification center idea seemed to offer a

workable solution to the problem.

Another consideration leading to the

decision to open modification centers in

the United States was the need to free the

airframe manufacturers of the large numbers of aircraft that began to pile up at

the end of their production lines. In the

rush after the outbreak of war it frequently happened that vital components

or accessories were not available in sufficient numbers to keep pace with the flow

of production. Rather than slow down or

stop the assembly lines, nearly completed

aircraft were hauled outside to await the

arrival of the missing parts. Soon dozens

and even hundreds of units cluttered the

open areas around most major airframe

plants. These seemingly completed aircraft had a depressing effect upon the

employees, who were constantly being

exhorted to redouble their efforts to increase output.28

 Sending the airplanes to

separate modification centers, the morale

problem would be solved and the missing

parts could be installed without delaying

production.

The formal decision to open modification centers in the United States not unlike those set up earlier in Britain came

in January 1942. Although the manufacturers themselves at that hectic moment

were far too busy to take on any additional problems, the repair and maintenance shops of the nation's major airlines

seemed to offer a convenient alternative.

They had hangars, airfields, machinery,

and a nucleus of skilled mechanics who

could be employed immediately. Within a week plans were afoot to make use

of the American Airlines base at El Paso,

the United Airlines base at Cheyenne,

and the TWA shops at Kansas City and

Los Angeles, as well as numerous others.

By May 1942, some ten airline maintenance bases were in full swing doing

modification work for the Air Forces.

As 1942 wore on, the broader implications of the modification problem gradually became apparent. Modification was

far more than a matter of reconditioning

aircraft originally ordered for foreign

purchasers or adding parts left off on the

assembly line because of a momentary

shortage. Operations by tactical units in

the field began to show up all sorts of

deficiencies and malfunctionings in the

aircraft currently being turned out. But

the need for more airplanes was desperate, and maximum production was then

possible only by stabilizing designs. To

undertake corrective action by introducing changes on the production line itself

would be to buy qualitative improvement

at too great a cost in terms of the total

number of units produced. Modification

offered the only feasible middle course.

The production lines could continue

their output unabated, yet the tactical

units at the front need not be denied

those modifications they regarded essential.

About twenty permanent modification

centers were opened during the war although not all were in operation at any

one time. Some were so near the production lines they served that aircraft could

be towed to them. Others required a

28

 AAF Hist Study 40, p. 158. See also, Maj Friedman, IGD, to IG, 24 Oct 41, AFCF 333.1 Contract

Inspection.
PRODUCTION 531

ferry flight of hundreds of miles from

the assembly plant to the modification

area. The Birmingham, Alabama, center, for example, was primarily engaged

in modifying B-24 bombers coming from

the Willow Run plant in Michigan.

Weather considerations weighed heavily

in the selection of the center sites. The

more southerly locations not only offered

more flying days per year, but permitted

a great deal of work to be done out of

doors.

In a sense, good weather was one of

the nation's secret weapons. A warm

sunny climate made it possible to enlarge

floor space and productive area at no

greater expense than the cost of constructing hardstands. With nightlighting and

portable canvas "nose hangars," the outdoor capacity was enhanced still further.

The importance of this supplementary

space is evident: against 5,000,000 square

feet of covered floor space in the modification centers as a whole, outside working areas totaled approximately 12,000,-

000 square feet.

Modification centers may have been a

necessary wartime compromise, but to

say the very least that compromise was

purchased dearly. The $75,000,000 spent

on facilities at the various centers was

only a small part of the total outlay. Inevitably, operating costs were abnormally

large. By its very nature modification

was makeshift and expedient work. Improvisation was the order of the day.

Drawings and detailed instructions were

seldom available. Installations frequently

had to be made with "tin snips and stove

bolts." Speed rather than polish was the

prevailing criterion; so long as a modification was safe and functional, it was

generally acceptable. In the jargon of

the time, this kind of job had to be "quick

and dirty."

 29

Modifications were normally made

with hand tools rather than production

jigs, and labor costs soared accordingly.

Several centers ran up charges for more

than a million man-hours a month doing

by hand what might better have been

done by machines. Installing an extra

fuel tank in the leading edge of a P-38

wing, to cite but one example, absorbed

300 man-hours at a modification center;

the same installation on the production

line could have been done in a matter of

minutes. During the initial rush of 1942,

makeshift arrangements of this sort were

entirely understandable, but as time wore

on they showed no sign of diminishing.

On the contrary, in 1943 the modification

load grew larger.30

By the middle of 1943 it was sometimes

difficult to tell where the production line

left off and modification began. One

center reported an expenditure of 8,000

man-hours to complete a miscellaneous

lot of modifications on an aircraft that

had required only 9,000 man-hours to

build in the first place.31 As long as this

expenditure was directed toward making

last-minute changes found necessary by

the tactical units in the field, no one could

justly complain. But some officers were

inclined to believe that too often the

manufacturers were using the centers to

accomplish work that should have been

29

 For a contemporary account, see Paul Gallico,

"Quick and Dirty," Saturday Evening Post (October

10, 1943), p. 9ff. 30

 B. Kinsey and J. V. C. Gregory, Modification

Centers and Tactical Availability, Lecture, AFSC

Project Officers School, WF, 18 Sep 45, copy in ICAF

file.

31

 Materiel Command, Proc Div, Decentralization

Progress Rpt, 30 Sep 43, WFHO.
532 BUYING AIRCRAFT

done on the production line. The airplanes some of the prime contractors

turned out, as one officer protested, were

hardly recognizable as such. "They send

them over to the modification center,"

he complained, "and build themselves an

airplane at Government expense."

 32

This charge was not quite fair. It was

true that anywhere from 25 to 50 percent

of the total labor spent in turning out

military aircraft was actually performed

at the centers. But in theory at least the

original prime contractors were charged

for all work required to make good deficiencies stemming from shortages along

the production line. In practice, of

course, it was extremely difficult to keep

such accounts straight. The line between

deficiencies in assembly on the one hand

and modification directed by demands

from the field on the other was not always

easy to define. Moreover, the paper record was difficult to keep in phase with the

facts. A heterogeneous array of items in

job-lot quantities flown in from all over

the map in great haste posed acute difficulties of property accounting. The lack

of adequate storage bins caused trouble,

and the outdoor operations characterizing

so many centers only aggravated the problem. In one way or another, unless the

closest sort of supervision could be exercised, the government would end up paying nearly twice over for many of the aircraft it received.33

At Wright Field, where a Modification

Section had been set up in the Production

Division to ride herd on the various centers, the officer in charge put his finger on

the heart of the trouble. The existing

system gave no real incentive to the airframe manufacturers to absorb the work

of the centers by incorporating as many

modifications as possible on the production line. Aircraft coming out of the

factories were inspected, then "accepted"

or officially credited for payment, and

then ferried to a center for modification.

After being reworked there, they were

again "accepted" from the center contractor, who was duly credited for payment also. So long as the prime contractor and the modifier were separate firms,

the prime had no economic incentive to

incorporate modifications on the production line since he was paid for the number

of units he produced whether they were

modified or not.

If the existing pattern of "double acceptance" operated to delay the incorporation of changes on the assembly line, the

production officers at Wright Field believed that the way out was to make each

prime contractor responsible for the

modification center where his aircraft

were reworked. No aircraft would then

be "accepted" or credited for payment

until it had been completely modified

and was ready to ferry off to a tactical

unit. Single acceptance would encourage

both fixed-price and cost-plus-fixed-fee

contractors to absorb changes on the line

whenever possible inasmuch as their respective lump sum payments and proportionate fees were paid on the basis of deliveries.

By the middle of 1944, most of the centers had been put under the management

of the prime contractors whose airplanes

were being reworked. The arrangement

was not without its drawbacks. When

each center was identified with a particular production line, it proved to be rather

32

 Walsh, Hist of Eastern Proc Dist: 1943, p. 298. 33

 Ibid., pp. 272-73.
PRODUCTION 533

more difficult than formerly to distribute

the load. By its very nature modification

was feast or famine work. Hurry calls

from the strategic planners in Washington frequently demanded deliveries

beyond the capabilities of the center assigned to the particular aircraft in question. To spill the load over into another

center assigned to another contractor at

work on a different model would only

lead to the confusion that had prevailed

before the centers had been specialized

and placed under the control of the prime

contractors. Nevertheless, the problem

of rush orders and peak loads had to be

faced.

The solution finally worked out was to

earmark two big centers, the United Airlines shop at Cheyenne and the BechtelMcCone-Parsons base at Birmingham, as

overflow facilities to handle rush orders

beyond the capabilities of the specialized

centers. When these resources proved

inadequate, it was always possible to call

upon the repair and maintenance depots

operated by the Air Service Command.

In fact, by 1944 approximately 25 percent

of the total modification load was actually

being done in the air depots along with

the normal maintenance and repair work

regularly performed there. In the main,

the depots concentrated on the job of

adding modifications to aircraft already

accepted and put into service by the Air

Forces.

Not every modification could have

been made in the factory. Even where

the contractor was entirely willing and

co-operative, there were some changes

that did not lend themselves to mass production. Although the term modification is often used loosely to describe all

the changes made in a "completed" aircraft, there were actually several rather

different categories of work encompassed

by the word.

Some modifications were minor alterations of the "tin snip and stove bolt"

variety. If an escape hatch showed a

tendency to fly open in flight, it was a relatively easy matter to rivet on an extra

latch at a center. Or when operations in

North Africa indicated the need to relocate the P-38 rear vision mirror to widen

the field of vision, this too could be accomplished at a center. In time, of

course, such trivial additions or adjustments could easily be performed on the

production line with little trouble. But

there were other more basic changes that

gave greater difficulty.

Basic modifications were those requiring a great deal of careful engineering.34

These involved major structural changes

in the airframe or the design and installation of an entirely new assembly or component. When fighter pilots complained

of high stick forces in flying the P-38, it

proved necessary to install hydraulic

boosters on the ailerons.35 Similarly,

when Luftwaffe attacks on Air Forces

bombers making deep penetrations over

Germany became too costly to bear, there

came a hurry call for escort fighters with

greater fuel capacity for longer ranges.

Difficult modifications such as these could

be performed at the centers, but it would

have been less costly and far more desirable, from an engineering standpoint, to

make the modifications on the production

line as soon as feasible. 34

 See ATSC Regulation 152-3, 24 Feb 45, for definitions of the various classes of modifications. 35

 For a typical cross section of modifications suggested by tactical units in the field, see Actg Chief,

PES, to CGAAF, 11 Sep 43, AFCF 452.01-D Production.
534 BUYING AIRCRAFT

On the other hand, there were still

other modifications, both major and

minor, that would always be done at the

centers. Included in this category were

all those modifications undertaken to

equip aircraft for special missions or to

make them suitable for operations in a

particular theater. Typical of the former

was the conversion of a standard fighter

into a weather reconnaissance aircraft.

Theater modifications included "desert

proofing" aircraft for operation in North

Africa and "winterizing" aircraft destined

for the Soviet Union via the AlaskaSiberia route. These were highly specialized conversions required on a relatively

small portion of the total number of aircraft produced and thus entirely unsuited

for introduction on the contractors' assembly lines.

Even where it was highly desirable to

make a modification or group of modifications in the factory, it was not easily

accomplished. Most prime contractors

resisted the efforts of Air Forces officers in

this direction. Until the single acceptance scheme was inaugurated, they actually had an economic incentive to delay

since the introduction of substantial

modifications on the line almost invariably cut down on the number of finished aircraft being turned out and thus

affected their rate of compensation.36 But

this was not the only reason the manufacturers were slow to incorporate modifications on their assembly lines. The truth

of the matter was that they simply could

not do so without serious loss of output

until they had brought the whole production process into complete control with

every part and process so perfectly scheduled that the cost in dollars and in the

rate of output for any proposed change

could be predicted with reasonable accuracy.

The following figures showing some of

the time and dollar costs encountered

when making seventy-three modifications

in a group of 1,000 P-38's should give at

least a general impression of why it was

that airframe contractors had such a hard

time mastering their production lines:

 37

Only an extremely proficient and wellorganized production staff could hope to

co-ordinate the multiplicity of details evident in changes such as these to the point

where they could be incorporated on the

line without disrupting the whole assembly process.

In some ways it was actually harmful

for a manufacturer to insert modifications

in the assembly line before his production

organization was sufficiently skilled to

handle them properly. The Martin B-26

facility in Omaha offers a case in point.

This government-built assembly plant

was a war baby; its management had been

built around a cadre drawn from the already badly overextended Martin home

plant near Baltimore. Under pressure

from Air Forces officers, the managerial

staff at the Omaha plant did try to move

36

 For an unusually clear statement by a manufacturer of the impact modifications had on output,

see G. F. Smith of Lockheed to AAF Resident Representative (Lockheed), 22 Oct 43, AFCF 452.01-D

Production. 37 Ibid.
PRODUCTION 535

a number of modifications from the centers to the production line, but the attempt misfired. No distinction was made

between minor changes and "must" items

—between the desirable and the necessary.

What is more, there was no master plan

controlling the point in the production

line at which any given modification was

made. The changes were tacked on haphazardly whenever it seemed convenient

rather than at fixed stations planned in

advance. As a consequence, once an airplane left the factory no one knew just

what equipment it did or did not have.

Under such circumstances repair and

maintenance in the field was certain to

become a nightmare. Nor was this an

isolated example.38 Other airframe

manufacturers experienced a similar confusion.

The effective answer to the problem of

incorporating modifications on the assembly line itself lay in improved production control. During the spring of 1944

the Production Division at Wright Field

finally established a more or less standard

procedure by which all modifications

were actually scheduled down to the last

rivet on the production line. The heart

of this scheme was the so-called block system, which had been evolved earlier by

some of the more proficient airframe

builders.

The block system was nothing more

than an arbitrary pattern of model identification. Thus a B-24J, after being

equipped with a different type of life raft

and improved sights on the waist guns,

might be designated the B-24J-15 to distinguish it from the B-24J-10, the last

previous block without these additions.

The series letter "J" would be changed

only when there were modifications affecting major alterations in structure or

the primary armament of the aircraft.

Thus the B-17F became the B-17G after

the chin turret was added. The B-17,

which was finally to be the most modified

aircraft in the Air Forces during the war,

went through eight different series from

the B-17A to the B-17G, and each of

these series had many different blocks.

For example, the B-17F had 56 blocks

and the B-17G had 48.39

By lumping many small modifications

into a single change and by running a

pilot model to spot potential production

bugs, it was possible to eliminate some of

the confusion.40 But not until the production staff in any given facility could

obtain accurate information on inventory, machine loading, labor availability,

and the like, was it possible to maintain

a truly positive control over the incorporation of modifications into the production line. As machine records replaced

manual techniques of accounting and

inventory control, manufacturers found

they could effect modifications with a

minimum of dislocation.41

What this meant in terms of aircraft

output may be suggested by the hypothetical learner curve in Chart 9. Modifications introduced along the assembly

38

 Chief, Prod Div to CGMD, 26 Jan 43, AFCF

452.01-A Production.

39

 USAF Hist Study 62, p. 3. See also, ATSC,

Model Designations: Army Aircraft, 11th ed., Jan

46.

40

 See Memo, ACofAS MM&D for CGMC, 4 Jun

43, AFCF 452.01-B Production; and North American

Aviation, Annual Report, 1942, p. 33, AFCF 452.01

(Bulky). 41

 See for example, descriptions in North American Aviation, Brief History, pp. 64-65, and ATSC

Industrial Planning Project Case History: Ford Willow Run, pp. 67-68.
536 BUYING AIRCRAFT

CHART 9—HYPOTHETICAL LEARNER CURVE

line (at A, B, etc.) before the manufacturer had close control over all the factors

of production resulted in rather abrupt

and substantial increases in the number

of man-hours required to complete each

aircraft (A-A1, B-B1 etc.). Moreover,

the recovery rate was slow (A1 to B etc.).

But modifications introduced after the

manufacturer's production engineers had

established adequate systems of control

(as at C and D), imposed only relatively

small increases in man-hours (C-C1,

D-D1, etc.) and the recovery rate was

rapid (as in C1-D, etc.). Consequently,

only a slight loss in the rate of production

resulted.

Table 7 gives a panoramic view of the

modifications spread across the block system of the B-24 bombers produced at

Willow Run up to March 1944, the point

of peak production. Although all the

early blocks show a large number of

changes, it was not until the beginning of

the H series that the most difficult modifications were introduced. At this point

more than 50 master changes were made.

These included the installation of a nose

turret, a retractable lower ball turret, a

crew passage through the bomb bay, a

central fuel transfer system and numerous

others. Despite the complexity of these

modifications, it will be observed from a

comparison of the number of aircraft delivered, the dates of delivery and the
PRODUCTION 537

TABLE 7—B-24 MODIFICATIONS AT WILLOW RUN

Source: ATSC Industrial Planning Project Case History: Ford Willow Run, 1946, p. 58.

number of changes involved that improved production control made it possible to introduce a relatively large

number of modifications while still maintaining a high level of output.

At Wright Field, the Chief of the Production Division regarded the whole program for incorporating modifications in

the factories on a regularly scheduled

basis as one of the outstanding achievements of 1944. It virtually put an end to

the buck passing that had previously

marked the relations of the primes and

the center contractors. This kind of

scheduling not only saved man-hours of

labor but also cut down materially on the

flow time between the beginning of fabrication and delivery of a completed and

tactically suitable aircraft to the combat

theater.42 All in all, the whole modification center scheme was an important

mechanism for bridging the gap between

the stability of design essential for mass

production and the flexibility of design

essential to tactical suitability. During

the course of the war the twenty centers

and the twelve air depots (which devoted

anywhere from 30 to 45 percent of their

"repair" time to modifications) reworked

a total of 58,741 aircraft as follows: 1942,

4,038; 1943, 22,007; 1944, 25,048; 1945,

7,218. Experience showed that nearly all

of the bombers and cargo aircraft produced had to be sent off to modification

centers before entering service; only 30

to 50 percent of the fighter output had

to be modified before use.

To be sure, the centers were staggeringly expensive to operate. To retain a

sufficient degree of flexibility they had to

be run on "open end" cost-plus-fixed-fee

contracts so loosely drawn as to permit the

contractors in charge to cope with whatever rush program chanced to come along.

42

 Production Div, ATSC, WF, Annual Rpt, 1944,

WFHO files, pp. 11-12. For evidence on flow time

through centers, see Kinsey and Gregory, Modification Centers and Tactical Availability.
538 BUYING AIRCRAFT

Such an arrangement was scarcely conducive to economy, but what was the alternative? Fixed-price contractors could

not undertake to incorporate substantial

modifications on the production line

without entering supplementary contracts, and such contracts took time to

negotiate. Aircraft manufacturers with

CPFF contracts could introduce modifications with fewer financial difficulties,

but in either case the manufacturers concerned could not begin to incorporate

modification on the line as a matter of

smoothly operating routine until the aircraft industry had begun to master the

arts of production control.

In short, the modification centers of

World War II were a necessary evil. They

served as an expedient stopgap until the

managerial skills of the prewar job-shop

airframe builders caught up with the industrial giant that the war had made of

the airplane business.43 If they did no

more than win time for the aircraft manufacturers to grow up to their responsibilities, the modification centers of the war

years were probably worth their cost.

Modification centers were indeed important in reconciling the quantityquality equation during World War II.

However, as the foregoing account has

suggested, the experience of the war years

clearly demonstrated that improved production control contained the ultimate

solution to the problem. For this reason,

the role of the military—of staff and command—in the perfection of production

control devices throughout the aircraft

industry takes on particular significance.

It is patently impossible to describe

here all the many mechanisms by which

a high degree of control was finally

achieved over the enormous manufacturing enterprise sponsored by the Air

Forces in the course of the war. Many of

the most successful were those contrived

by the production engineers and managerial staffs of the manufacturers themselves. Others were the work of the civilian agencies such as OPM and WPB and

their subordinate branches working in

close collaboration with officers in the

procurement services of the Army and

Navy. Needless to say, any and every

refinement in production control techniques, by whomever evolved, was of interest to air arm officers. But in one area

in particular their interest and participation contributed substantially to one of

the more important administrative innovations of the war: the co-ordinating committees for joint production programs.

Co-ordinating Committees:

An Effective Solution

If the introduction of effective systems

of production control within a single factory posed staggering tasks for management, how much more difficult were the

problems raised by the need to co-ordinate the construction of identical aircraft

in a number of factories at a great distance from one another and run by different companies. But difficult or not,

during World War II such a course

proved necessary. The techniques

evolved to co-ordinate these enormously

complex joint manufacturing undertakings deserve close study. To begin with,

43

 How well the aircraft builders profited from

this respite may be indicated by the remarkable

speed with which they incorporated production line

changes when the Korean emergency came along.

Republic, for example, averaged 315 modifications

a week in the P-84.
PRODUCTION 539

however, it may be useful to understand

just how the problem came about.

Before the war, the Air Corps officers

engaged in mobilization planning found

themselves in a difficult position. They

knew that the aircraft manufacturers were

bitterly opposed to any policy that would

permit the government to take their proprietary designs, the fruits of their research and development, and hand them

over to a rival firm to put into mass production. Ever since the 1920's the aircraft

manufacturers had vigorously fought

against any scheme along this line. The

decision of 1938 not to use the automobile manufacturers to mass-produce aircraft in wartime was a typical reflection

of their opposition.44 On the other hand,

the Air Corps planners knew full well

that in wartime it would be foolish to

mass-produce any aircraft other than the

best. To keep four or five different airframe firms at work, each building bombers of its own design after experience had

demonstrated that one or two of the designs were markedly superior might satisfy the manufacturers but would scarcely

turn out the best aircraft in the largest

numbers.

Down to the very eve of World War II,

the mobilization planners had been unable to resolve this conflict of interests.45

Little wonder then that they entered the

emergency with no detailed plans for coordinating the production of identical

items in remotely situated factories under

different managements. The interplant

production control systems perfected during the war had to be evolved from the

beginning.

The character of the difficulties encountered when the air arm finally did

decide to produce identical airplanes of

the best available design in several different factories has already been foreshadowed in the account of the Willow

Run operation. And what was true there

was true elsewhere. In fact, there is a

certain irony in the complaints the management at the North American plant in

Dallas leveled against Ford in the course

of their mutual effort to mass-produce the

Consolidated B-24. The North American engineers made almost the same criticisms of Ford that Ford was making of

Consolidated: production in Dallas was

hindered by faulty liaison. The drawings provided by Ford arrived in unsatisfactory condition. As experienced

airframe builders, the North American

engineers fully expected changes in design, but they were disturbed by the laggard pace at which the 180,000-odd

change notifications had cleared through

Ford during the first few months of production. And just as the Ford staff before

them had reworked all the drawings received from Consolidated, the North

American engineers finally decided to redraw all the prints sent them from Willow

Run.46

The difficulties besetting the joint production effort on the B-24 recurred again

and again elsewhere. In fact, every company attempting to step up production by

subcontracting the fabrication of major

components encountered many similar

troubles. For the problems of co-ordinat- 44

 See chs. V, VI, VII, and XIV, above. 45

 See, for example, Chief, Mat Div, to CofAC,

14 Dec 38, on Boeing's reluctance to have Consolidated build the B-17, AC Project Rcds (Lyon Papers),

bk. 1.

46

 North American Aviation, Annual Rpt, 1942,

AFCF 452.01 Bulky.
540 BUYING AIRCRAFT

ing a prime with a number of key subs

were much the same as those encountered

in a joint production effort. The Martin

B-26 program offers a case in point.

The B-26 twin-engine Marauder was

developed and originally produced at the

Martin Baltimore plant. When the Martin Omaha plant was completed, a parallel production line opened there. The

new facility was to be supplied with major

components from the automotive industry. Chrysler, Goodyear, and J. L. Case

were to fabricate wings; Hudson would

turn out other structural items. Soon the

inevitable complaints began to roll into

Wright Field from the major subcontractors. Martin in Baltimore was slow

sending out engineering change notifications. Drawings for modifications scheduled on the line for October were not

even received until December. Production expeditors at Wright Field began to

doubt whether the wings and other assemblies turned out by the several different major subcontractors would actually

be interchangeable when they arrived in

Omaha.47

Some sort of system to co-ordinate those

diffuse activities had to be concocted before the whole aircraft production program bogged down in a hopeless chaos of

delays, misunderstandings, and mutual

recriminations. Fortunately, a practical

solution was already at hand—the coordinating committee system that had

been devised to speed production of the

Boeing B-17 long before the disaster at

Pearl Harbor. The origin, organization,

and operation of this committee merit

careful attention, for the committee idea

as such was to have a profound influence

on aircraft output in the United States

during the war.

Early in 1941 President Roosevelt

ordered the Air Corps to initiate a program looking to the production of 500

heavy bombers a month. Air arm officials

hurriedly cast about for ways and means

to meet such a tremendous schedule.

After numerous conferences with the

leading aircraft and accessory firms, they

decided that a joint production project

would be absolutely necessary if they

were to meet the goal demanded by the

President. No individual manufacturer

could hope to achieve this level of output

singlehandedly. Since the Boeing B-17

and the Consolidated B-24 seemed to be

the most promising heavy bombers available at the time, the two were selected for

mass production by half a dozen firms.

The combination of contractors who

agreed to work on the B-24 has already

been described. For the B-17, Douglas

and Lockheed were persuaded to enter

the joint endeavor with Boeing.48

The B-17 co-ordinating committee established in May 1941 to unify the activities of the three contractors working on

the Flying Fortress seems to have developed more by accident than as a result of

planning. A group of Douglas engineers

and production men were just leaving

Washington after a conference when an

air arm officer suggested that it might be

47

 IOM, Col Mulligan for Chief, Prod Div, 30 Dec

42, AFCF 452.01-A Production.

48

 This paragraph and a substantial portion of

the factual basis for the account that follows are

based upon Maj P. H. Breuckner, Joint Airplane

Production Programs, Lecture, ATSC Project Officers

Training School, WF, 1945. A somewhat superficial but readable account of the joint production

programs will be found in S. A. Zimmerman, Procurement in the United States Air Forces: 1938-

1948, WFHO, Aug 50, vol. II, ch. VI.
PRODUCTION 541

BOEING B-17 ASSEMBLY LINE under joint production program at Douglas Long Beach plant.

well if they returned to California by way

of Seattle to discuss their common problems in person with the staff at Boeing.

They followed the suggestion and soon

afterward the three interested contractors

formed a joint production organization

that came to be known as the BDV Committee—for Boeing, Douglas, and Vega,

the latter being the subsidiary of Lockheed that was actually going to work on

the B-17 program.

What brought on this new-found harmony after so many years of opposition

to any and every proposal to hand over

the aircraft designs of one company for

mass production by another? Undoubtedly the military and diplomatic disasters

of the previous months played some part.

But it may also be true that the air arm

decision to bring Detroit into the aircraft

program was not without its effect. Were

the old-line aircraft firms suddenly converted to the desirability of close co-operation only when confronted with an

alternative such as Willow Run, even

then well on its way to realization?

Broadly speaking, the function of the

BDV Committee was to co-ordinate all

the production activities of the member

contractors, their related subcontractors,

and the various air arm organizations

with which they had dealings. This in-
542 BUYING AIRCRAFT

volved a wide variety of specialized activities. The committee undertook to review

all material purchases, to regulate the

selection and assignment of subcontractors, to prepare master production schedules (on which nearly every other decision

hinged), to control the release and distribution of engineering drawings and

other technical information, and to establish uniform inspection criteria. In general, the committee was to serve as a

clearinghouse for information and a

check point or control station on all decisions affecting the joint production program.

In time, the BDV Committee came to

be a rather elaborate organization. The

committee proper was a small group with

one representative from each of the prime

contractors concerned and one air arm

spokesman, but below this top level group

were a number of working subcommittees

established to execute the details of coordination. At the peak of its activity,

the committee, its subcommittees, and

their associated clerical helpers numbered

approximately two hundred people. The

whole group was located in a downtown

office building in Seattle not far from the

Boeing home plant.

The secret of the BDV Committee's

effectiveness seems to have been in its

authority to act decisively. Each member

of the main committee came to it with the

power to act for the organization appointing him. The contractors' representatives

were responsible corporate officials; the

air arm representative was the chief of

the Production Division at Wright Field

or his alternate. This arrangement in itself afforded the committee a considerable measure of power, but its position

was still further enhanced by a special

charter giving official sanction to the committee as such. The charter, agreed to

by the participants and approved by the

Chief of the Air Corps, was officially authorized by the Assistant Secretary of War

for Air.

Since the Assistant Secretary enjoyed

broad, if somewhat nebulous, statutory

powers for mobilizing the national economy for war, his authorization gave legal

sanction to what might otherwise have

proved a most elusive relationship. Certainly the contracts drawn with the several member firms never provided the

necessary machinery of co-ordination in

legally binding terms. In the final analysis, however, legal sanctions probably

played a far less significant role than did

good will. If the contractors concerned

had not entered into the scheme with a

spirit of co-operative enthusiasm, the

whole idea of a joint committee to coordinate production would undoubtedly

have come to nought.

The imperative necessity of willing cooperation was implicit in virtually every

action of the BDV Committee. Even so,

it would be a mistake to assume that

the committee functioned on any simple

principle of majority rule. To be sure,

the committee members did try to find

common ground for agreement, but in a

showdown the air arm representative

held, as the chief of the Production Division expressed it, "one more vote than

the combined contractors."

 49

 Nevertheless, coercion was foreign to the whole

spirit of the committee and could only

be exercised with the utmost restraint if

the committee system were to thrive.

49

 Ibid., p. 9.
PRODUCTION 543

To understand the organization and

functioning of the BDV Committee, one

must first be aware of the unique contractual relationship that lay behind it.

Although Boeing had designed and developed the B-17 and was required by

contract to provide the other two participating firms with all the necessary drawings, engineering data, lofts, templates,

and so on, these companies did not assume the role of subcontractors to Boeing.

Instead, both Lockheed and Douglas held

prime contracts from the government

calling for the B-17 in production quantities. To avoid confusion, Boeing was

designated the design prime contractor

while the other two firms were called participating prime contractors.

The existence of three primes on one

project created a somewhat anomalous

situation. In the normal course of events

when a design firm sought assistance in

production, it did so by calling in subcontractors, who undertook to manufacture

components to specifications provided by

the design firm. The relationship of the

sub to the prime was a contractual one:

the prime provided engineering services

and designs while the sub returned finished components. Since the prime's output hinged upon the performance of his

subs, he was under pressure to see to it

that his subs performed effectively. On

the other hand, under a joint production arrangement, while the participating

primes looked to the design prime for

engineering information (and in some instances actually negotiated a contract for

these services), they delivered their final

output to the government and not to the

prime.

The drawback in the novel joint production arrangement was that the design

prime was under no great pressure to see

to it that the participating primes were

informed with the utmost speed of every

design change and alteration of tooling

made on the B-17. The design prime's

output and his level of profit were not

connected with the performance of the

participating primes. For this reason, the

creation of a co-ordinating group such as

the BDV Committee assumed especial

importance. In effect, it was an effort

to provide administratively what would

ordinarily have been supplied contractually.

Just how the BDV Committee functioned should be clear from a brief description of its operating procedures.

During its first four months of life, the

committee met daily. For the rest of

1941 it met weekly and thereafter only on

call. The minutes of the committee's

deliberations were recorded and published for circulation to serve as guides

for subcommittees, contractors, and various governmental agencies concerned. A

few subjects chosen from the bulletins

issued by the committee early in its life

give a fair picture of the nature and scope

of its operations. Bulletin No. 1 covered

the organization and functions of the committee itself. No. 2 dealt with channels

of communications. Numbers 3 to 5

dealt with policy in regard to tooling,

purchasing, and subcontractor facilities.

No. 9 set up a procedure for instituting

committee action on a problem. No. 10,

appearing in August 1941 after three

months of experience, laid down a series

of standard definitions. Subsequent

issues spelled out a wide variety of procedures for the most part concerned with

engineering changes—No. 20, changes in

specifications; No. 22, drawing release
544 BUYING AIRCRAFT

schedules; No. 24, tooling data release

schedules; No. 26, schedules for master

gages.50

Although the formal BDV Committee

itself exercised the final power of decision, it was in the working subcommittees

that the practical details were first hammered out. Probably the most important

of these was the engineering subcommittee. The very heart of the joint production program was the engineering and

design data provided by the design prime

contractor. But the transmission of such

information, even between the engineers

of two old-line aircraft firms, inevitably

raised problems of interpretation as well

as problems of timing with respect to design changes and the distribution of

drawings.

In the matter of interpretation especially, the engineering subcommittee

more than proved its worth. No two aircraft firms turned out precisely the same

kind of drawings or used the same format

in issuing engineering releases.51 Some

were more complete than others, depending upon the level of skills known to exist

in the shop. Moreover, the character of

the drawings issued reflected in large

measure the particular kinds of supplementary media employed to convey information. Practices differed according

to the extent they relied upon parts lists,

dimensional layouts, templates, and plaster patterns of contoured surfaces.

Every transfer of information from one

contractor to another provided an opportunity for misunderstanding or confusion. The job of the engineering subcommittee was to ensure uniformity of

interpretation. Sometimes supplementary information of one sort or another

had to be issued to bring positive results;

at others, the subcommittee anticipated

difficulties and saw to it that the data

initially released by the design prime was

sufficiently detailed to permit of no confusion.

Another function of the engineering

subcommittee was to serve as a clearinghouse on deviations in design. The drawings turned out by the design prime contractor often reflected the production

practices commonly employed in his

plant. The mere fact that certain types

of machine tools happened to be available

there often determined the form given to

a particular part on the drawing board

whereas another manufacturer with a

somewhat different array of tools might

turn out the same part much more readily

if permitted to alter the design in some

measure. Such requests were readily

processed by the subcommittee, which

could weigh manufacturing feasibility

against the need for design uniformity or

standardization and interchangeability to

the best interests of all parties. In this

respect the work of the subcommittee was

considerably enhanced by the presence of

Boeing engineers. Since they had laid

out the aircraft originally, they were able

to give firsthand interpretations of whatever design features came into question.

The engineering subcommittee helped

keep the bomber design from becoming

needlessly rigid in other ways as well.

The normal flow of information was from

50

 BDV Committee Bulletins, WFHO files. See

also, ATSC Industrial Planning Project Case History: Ford Willow Run, p. ix. 51

 For interesting evidence on this point, see Chief,

EES, to General Lofting Corp., Van Nuys, Calif.,

7 Nov 40, AFCF 452.1 Production; Chief EES, to

Lockheed, 11 Dec 40, and TWX, PES to Production

Engr Br, OCAS, 30 Jun 41, both in WFCF 412.5

(1941).
PRODUCTION 545

the design prime to the participating

primes. But it did not invariably follow

that the designer's way of constructing

any given part or component was necessarily the only way or even the best way

of doing the job. Sometimes the participating primes or one of their subcontractors came up with a revised design that

simplified production, cut down on the

use of critical materials, or resulted in

superior performance. Where the idea

warranted such action, the engineering

subcommittee might recommend the revised design as standard for all concerned

including the design prime. In this way

the subcommittee helped good ideas flow

up as well as down.

One of the more important continuing

functions of the engineering subcommittee was the determination of the effective

point at which modifications would be

introduced on the assembly line of the

various primes. In fact, it was the pioneering work of the BDV engineering

subcommittee in this subject that led to

the development of the master change

record system, which subsequently became more or less standard practice on all

Air Forces contracts. Where shortages of

engineering talent threatened to delay

the introduction of modifications at the

appropriate time by one or another of

the primes, the subcommittee even went

so far as to arrange for loans of engineers

between plants or for transfer of design

tasks to subcontractors.

The operation of all the other subcommittees need not be described in detail.

Suffice it to say that other working groups

dealt with problems of tooling to insure

uniformity and interchangeability, with

procurement scheduling to synchronize

purchases from vendors and suppliers for

all the primes, and so on. In bringing

face to face representatives of the various

primes (and sometimes their subs as well),

these subcommittees evolved a large number of effective devices for improved coordination and used the experience of

one contractor to save the others from

grief. The tooling subcommittee, for instance, found that it was often wise to

have a single subcontractor manufacture

all the tooling required for an assembly

operation performed by each of the

primes. Again, the procurement subcommittee discovered that it was often

possible to solve temporary shortages of

critical raw materials or machine tools by

transfers within the participating contractor and subcontractor group without

recourse to the formal channels through

governmental agencies such as the Air

Scheduling Unit, the Aircraft Resources

Control Office, or the War Production

Board.52 This was creative imagination

at work exploring the outer limits of industrial co-operation.

The work of the BDV Committee and

its several subcommittees in time became

so effective that Air Forces officers began

to urge the committee system on other

manufacturers engaged in joint production programs. All in all, six other committees were set up after the BDV precedent. Not until nearly a year after the

BDV Committee began to function was a

similar one established for the B-24 program. And that was precisely the period

in which the services of such a co-ordinating committee were most desperately

needed as the account of the Willow Run

operation revealed. The other joint production programs subsequently utilizing

52

 See above, ch. XII.
546 BUYING AIRCRAFT

the committee system involved the B-26,

the PT-13 and PT-23, the C-46, the

AT-21, and the B-29.

The committee system did not always

prove successful. With the B-26 in particular, the committee system failed to

bring immediate results. A production

expediter at Wright Field was inclined to

blame the design prime contractor for

failing to provide adequate leadership,

but he overlooked one vital consideration. When Hudson and Chrysler dealt

with Martin, it was in their capacity of

subcontractors. They felt constrained by

their legal or contractual obligation to

the design prime. No such restriction affected Lockheed or Douglas in their dealings with Boeing on the BDV Committee.

A more important consideration may

have been the fact that they spoke on aircraft problems with the assurance of oldline design firms. On the other hand, as

automobile builders, Hudson and Chrysler felt themselves on uncertain ground

when discussing aircraft problems with

an experienced design firm such as Martin. Moreover, while Chrysler and

Hudson were obliged to deliver components acceptable to Martin's inspection, Douglas and Lockheed did not have

to get Boeing approval on the bombers

they delivered to the government. The

two situations were hardly comparable.

Genuine co-operation thrives better in

the company of equals than it does in a

master and servant relationship.

The Production Division expediter at

Wright Field put his finger on another

weakness in the B-26 committee. The

experience of every other joint production program seemed to indicate that

successful operations were possible only

where working subcommittees actively

engaged the problems of production as

they appeared. After four months of life,

the Wright Field critic complained, the

B-26 committee had only one subcommittee—the one on engineering. This

group had met only once, he said, and

then had "consumed itself in parliamentary debate on questions of membership

and jurisdiction." What is more, the

minutes showed that no discussion of engineering problems had taken place.53

Even the best of the co-ordinating committees had their weaknesses. The BDV

Committee, for example, early recognized

that it would have been helpful if somewhat more control had been exercised

in the organization of subcommittees and

the evolution of their operating procedures. Sometimes the subcommittees were

rather too "loosely woven" and this made

it difficult to harmonize their operations

with one another as well as with the committee proper. By creating an executive

organization to ride herd on the working

subcommittees, the later joint production

programs took advantage of the lessons

learned from experience acquired by the

pioneer BDV group.

One consideration loomed above all

others in determining the success or failure of the committee system. It would

not work unless the committee and its

subcommittees were staffed with men of

the highest caliber. They had to be men

with a considerable grasp of technical

skills and wide production experience,

but even more, they had to be men who

could speak with authority for the organizations they represented. The experience of the war years demonstrated the

53

 IOM, Col Mulligan for Chief, Prod Div, 30 Dec

42, AFCF 452.01-A Production.
PRODUCTION 547

importance of this point repeatedly. In

those instances where the member contractors replaced their top caliber men

with underlings after the most challenging initial period of getting production

under way had passed, the committee

system was less effective. The heart of

the system was the speed with which authoritative decisions could be reached

and accommodations arranged to the mutual convenience and advantage of the

participating firms. Whenever top corporate officials withdrew in favor of less

decisive subordinates, the committee system began to suffer a stifling paralysis.54

The committee system met its severest

test in the Boeing B-29 program. The

B-29 Superfortress, a four-engine bomber

twice as heavy as the earlier B-17, was

originally to have been manufactured

entirely by Boeing. But soon after Pearl

Harbor, when the strategic planners assigned it a vastly larger role, the matériel

staff decided that only by a joint production program would it be possible to turn

out the required number of bombers in

time. In addition to Boeing, the Fisher

Body Division of General Motors, Bell

Aircraft, and North American Aviation

were drawn in as participating contractors. By the summer of 1942 North

American had to leave the program in

order to concentrate on other commitments and the Boeing-Renton facility

took up this slack. A year later Martin

of Omaha replaced Fisher Body as a participating prime, although Fisher continued on as a parts supplier. There were,

in addition to these assembly plants, five

participating primes—Chrysler, Hudson,

Goodyear, McDonnell, and Republic—

supplying major components and assemblies to the others.55

The B-29 program was the most complex joint production undertaking of the

war. This in itself made effective co-ordination a requisite of the utmost importance. The many changes in contractors

along the way only served to emphasize

the need for the closest kind of production control. So too did the highly experimental character of the bomber itself, which meant that design changes

were numerous in every stage of the program. There were, for example, 1,174

engineering changes introduced even before the first item was officially accepted

by the Air Forces. Some 900 of these had

to be rushed through at the last minute

as a result of findings made during flight

tests.

Before the end of the war the various

participating contractors turned out 3,898

B-29 Superforts for the sustained aerial

assault on Japan,56 one of them carrying

"the" bomb that finally precipitated victory. All this was possible only because

tens of thousands of diverse details in

factories all over the country were successfully harmonized into a single effective program. 54

 ATSC Industrial Planning Project Case History:

Boeing-Seattle: B-17, 1946, p. xi, WFHO. See also,

comments of Chief, Prod Div, on committee system,

in Gen Wolfe to Fairchild et al., 23 Dec 42, AT-21

case history, Doc 26, WFHO.

55

 ATSC Industrial Planning Project Case History:

Boeing B-29, WFHO, 1946, p. xii. 56

 Smith, The Army and Economic Mobilization.

Table 11.
CHAPTER XXI

The Procurement Record

A Statistical Summation

The forces of the United Nations assaulting Hitler's troops across the beaches

of Normandy in 1944 were magnificently

equipped. The Arsenal of Democracy

had come a long way since the awful summer of 1940. Under Secretary of War

Robert P. Patterson made this point dramatically when he rephrased Churchill's

famous words to say "never were so many

provided with so much."

 l Certainly this

statement was true with regard to air

power. During the years 1939 through

1945 the nation's manufacturers turned

out a total of 324,750 aircraft:

 2

U.S. Military

Year Services Others

1939 .......... . 921 4,935

1940 .......... . 6,019 6,785

1941 .......... . 19,433 6,844

1942 .......... . 47,836 None

1943 .......... . 85,898 None

1944 .......... . 96,318 None

1945 .......... . 47,714 2,047

Of the 304,139 aircraft procured by the

military services over the years 1939-45,

the lion's share or more than 231,000

were actually purchased under AAF auspices. While impressive, this total somewhat obscures the true character of the

production triumph it represents by

making no distinction between massive

bombers and tiny puddle jumpers or between single-place fighters and fourengine transports. The same statistics

expressed in terms of airframe pounds

procured by the AAF provide a far more

accurate summary of the ascending curve

of output:

 3

Year Pounds

1940 ......... . 20,279,000

1941 ......... . 68,064,000

1942 ......... . 239,858,000

1943 ......... . 542,397,000

1944 ......... . 797,120,000

1945 ......... . 421,718,000

Total ..... . 2,089,436,000

No less impressive was the record of

engine production. Table 8 shows Air

Forces and Navy purchases. Because so

many engines were bought on cross procurement, AAF acceptances alone would

not begin to reflect the scale of the industrial effort actually required to build

power plants for aircraft. The table excludes aircraft engines manufactured for

use in tanks.

1

 OASW annual report, 30 Jun 44, p. 6. 2

 CAA, Statistical Handbook, 1948, p. 43. The

U.S. military aircraft include those built in Canada

but financed in the United States. Deliveries under

"Others" for 1939 include both civil and military

aircraft built for export. Thereafter during the

war all aircraft sales, including civilian transports,

were made through the military services.

3

 Abstracted from R. H. Crawford and L. F. Cook,

Statistics: Procurement, OCMH, Table PR-16, pp.

78-79.
THE PROCUREMENT RECORD 549

TABLE 8—ENGINE PRODUCTION BY TYPE : 1940-45

Source: Abstracted from Table PR-18, Crawford and Cook, Statistics: Procurement, p. 80. The source table gives the figures by

quarters as well as annually.

TABLE 9—ENGINE PRODUCTION BY HORSEPOWER: 1940-45

Source: CAA, Statistical Handbook 1948, p. 47.

TABLE 10—PROPELLER PRODUCTION:

1940-45

Source: Abstracted from Table PR-17, Crawford and Cook,

Statistics: Procurement, p. 79. The figures are for controllablepitch types only.

Just as aircraft acceptance statistics

must be read against the record of airframe pounds produced to be truly meaningful, the figures for engine output presented in Table 8 should be qualified by

a breakdown into horsepower groups.

In Table 9 all jet engines are excluded.

Nevertheless, across the war years the

trend is clearly discernible from the lower

powered engines used in trainers to the

higher powered engines at the hither

edge of development used in the most

advanced tactical aircraft.

Propellers were no less essential to air

power than engines. Table 10 reflects
550 BUYING AIRCRAFT

TABLE 11—NUMBER OF AIRPLANES PROCURED BY ARMY AIR FORCES, BY TYPE AND BY

YEAR OF ACCEPTANCE: JANUARY 1940-DECEMBER 1945a
THE PROCUREMENT RECORD 551

TABLE 11—NUMBER OF AIRPLANES PROCURED BY ARMY AIR FORCES:

JANUARY 1940-DECEMBER 1945

 a

—Continued

a

 Compiled from Army Air Forces Statistical Digest, 1946, p. 100, published Jun 47 by Director, Statistical Services, Comptroller, Hq,

U.S. Air Force. Procurement data represent factory acceptances or receipt of legal title by resident factory representative of procuring

agency. Includes all airplanes procured by the AAF regardless of subsequent distribution to Army, Navy, recipients of lend-lease, or others.

Also includes United States-financed Canadian and experimental models.

Source: Table PR-14, Crawford and Cook, Statistics: Procurement, pp. 76-77.
552 BUYING AIRCRAFT

only the production of the highly complex and difficult-to-manufacture controllable pitch propellers. All others,

from the simple wooden blades used on

puddle jumpers or liaison aircraft to the

rather more expensive steel or dural

fixed-pitch blades fitted to some trainers,

are excluded. Here, as with engines, the

widespread use of cross procurement

makes it imperative to show AAF and

Navy acceptances combined.

The foregoing statistics may accurately

chronicle the pace at which the vital ingredients of air power were assembled,

but they do not in themselves bespeak

that power. However valuable airframe

pounds or delivered horsepower may be

as indices of productivity, they are no

substitute for the end product itself.

The soldier who wields the sword would

rather see the blade than be told of its

metallurgy to five decimal places of accuracy. Table 11 presents in one grand

panorama the story of how the cutting

edge of the Air Forces grew larger and

stronger. Here, with their popular

names, are shown the airplanes familiar

to millions as they became available in

increasing numbers through the successive years of the war.

Although some have charged that the

production triumphs of the aircraft industry were achieved only by padding the

record with large numbers of small inexpensive liaison aircraft to inflate the

total, a careful perusal of Table 11 will

show that this was not the case. Moreover, the figures in the table do not reflect the productive effort that went into

the construction of gliders. Many different types of gliders were turned out during the war: bomb, power, training, and

the like, to a total of 15,697 units. Of

these, the overwhelming majority, 14,583,

were troop-carrying gliders, almost all of

them of the CG-4 design, a model capable of carrying 15 fully equipped men or

a 75-mm. pack howitzer and 5 men in

addition to a glider crew of 2. The total

number of gliders accepted was as follows:

 4

Year Number

1940 ......... . 0

1941 ......... . 4

1942 ......... . 1,601

1943 ......... . 6,243

1944 ......... . 4,410

1945 ......... . 3,439

The Measure of Success

The grand totals of aircraft, engine,

and glider production spread out in the

several tables above make an impressive

showing, especially when they are interpreted against the miniscule levels of

procurement that characterized the military buying of prewar years. But sheer

quantities are never enough. In war,

timely delivery is also crucial. Therefore, any summary of air power to be

meaningful must consider the pace at

which those quantities became available.

How soon did the air arm buyers manage to provide the weapons required in

the volume desired? A study of Table 12

should go far to answer this question.

Shown here is the record of deliveries to

the AAF from July 1940 through December 1945.

Readily apparent in the figures of

Table 12 will be the gradual shift of emphasis of types from training through de4

 Abstracted from Table PR-15, Crawford and

Cook, Statistics: Procurement, p. 77.
THE PROCUREMENT RECORD 553

fense to offense. During 1940 and 1941

deliveries of training aircraft far outnumbered the other categories. Even in 1942,

after the nation had entered the war,

trainers constituted almost half of the

total produced. Not until after the disaster at Pearl Harbor did the United States

even begin to receive heavy bombers in

quantity. Indeed, the figures make it

quite clear that the whole idea of strategic air power was little more than a paper doctrine, insofar as the AAF was

concerned, until late 1942 or early 1943.

Moreover, with the immensely long

ranges required to reach Japan from most

island bases in the Pacific, land-based

strategic air power in that theater had to

await the appearance of very heavy bombers, the Boeing B-29's, and deliveries of

that aircraft had hardly begun by the

first quarter of 1944, more than twentyfour months after the nation had begun

to fight.

The time consumed in accelerating

production to the levels required for application of strategic air power is expressed somewhat more simply and in

rather more generalized terms in Table

13. The figures indicate once again that

accelerating bomber output involves not

a few months but years. Despite the prolonged period of limited emergency or

cold war before Pearl Harbor, twentysix months from the outbreak of war in

Europe and nearly eighteen months from

the fall of France, it will be noted that

the major increase in the number of

bombers produced still did not come until after the nation began fighting. March,

1944, was the month of maximum output

for the war period. In that one month

the AAF alone accepted 6,800 aircraft of

all categories. Navy acceptance for the

same thirty-day period brought the national total to 9,113 aircraft.5

Perhaps the most significant yardstick

by which the air arm procurement effort

can be measured is to be found by comparing the nation's strength in air power

with that of its allies and enemies. (Table

14) This, however, is more easily suggested than done. Production figures,

whether labeled acceptances or actual

deliveries, are highly deceptive. Acceptance, as this study has had occasion to reveal, does not always mean that a given

aircraft is available for delivery. Even

delivery by flight does not invariably indicate that an aircraft is ready for use.6

From the point of view of the strategic

planner, tactical availability is the only

statistic that really counts. But tactical

availability depends upon many considerations that not only lie well beyond the

scope of this study but also defy objective

statistical presentation. For this reason,

even while recognizing the limited validity of bare production figures in making

international evaluations, Table 15 compares total military aircraft production

by four of the five major powers. No reliable figures are available for Russian

output.

From 1941 onward aircraft production

in the United States exceeded the combined output of both its major enemies

by a generous margin. The implications

of this disparity become more pointed

when one probes behind the bare figures.

Over the years shown, both Germany and

Japan turned out progressively fewer

heavy bombers as they were driven step

5

 Table PR-13, Crawford and Cook, Statistics: Procurement, p. 75, and CAA, Statistical Handbook,

1948, p. 45. 6

 See above, ch. XI, p. 245.
554 BUYING AIRCRAFT

TABLE 12—AIRCRAFT DELIVERIES TO THE AAF: JULY 1940-DECEMBER 1945a

a

 Compiled from United States Air Force Statistical Digest, 1947, p. 120, and errata sheets for same, published by Director of Statistical

Services, Comptroller, Hq, U.S. Air Force, Aug 48. Data represent transfer of possession of airplanes from resident factory representative

of procuring agency to representative of the Air Transport Command or other transporting agency for delivery to Army Air Forces. Includes

all military airplanes designated for delivery to the Army Air Forces regardless of their procurement by Army Air Forces or U.S. Navy.

Data are not adjusted deliveries to compensate for any subsequent reallocations to other recipients such as the U.S. Navy, other Government

agencies, or recipients of lend-lease or others. Data also include United States-financed Canadian production and experimental airplanes.

Source: Table PR-19, Crawford and Cook, Statistics: Procurement, p. 81.
THE PROCUREMENT RECORD 555

TABLE 13—HEAVY BOMBERS ACCEPTED BY THE AAF

Source: Abstracted from table in Craven and Cate, eds., Men and Planes, p. 359.

TABLE 14—TOTAL MILITARY AIRCRAFT PRODUCTION OF FOUR MAJOR POWERS: 1939-44

Source Craven and Cate, eds., Men and Planes, p. 350. The figures credited to the United States for 1939 do not agree with the totals

shown in the first table of this chapter, because the compiler included military aircraft for export. The discrepancy of sixty-seven items in

the total for 1940 in the source cited above has been adjusted to agree with the totals given in the CAA, Statistical Handbook, 1948, page 43,

and Civilian Production Administration special release of 1 May 1947, Official Munitions Production of the United States, pages 1 and 54.

by step to take the defensive. By 1944

more than 50 percent of the production

reported for Japan and 75 percent of that

for Germany consisted of fighter aircraft.7

In the United States, on the other hand,

the trend was in the opposite direction

with increasing emphasis on the construction of heavy bombers. These big aircraft required up to four times as many

engines and propellers as fighters and absorbed far larger allocations of all other

types of resources—labor and facilities as

well as materials. As a consequence, the

spread between the output of the United

States and its combined enemies was

really substantially greater than the production totals alone may at first appear

to indicate.

In yet another sense, the production

figures presented in the foregoing tables

require qualification. Even within a single category of aircraft such as bombers,

the total output shown for any one year

cannot be compared accurately with the

7

 United States Strategic Bombing Survey, Overall

Economics Division, The Japanese Aircraft Industry

(Washington, May 1947), pp. 166-67, and USSBS, Aircraft Division, The Effects of Strategic Bombing

on the German War Economy (October 1945), pp.

149, 158, and 277.
556 BUYING AIRCRAFT

output of another year. Designs changed

with such rapidity during the war period

that bombers in 1945 were very different

from the bombers of 1940. The rising

curve of airframe gross weights makes

this point clear. Where bombers in the

United States averaged 7,709 pounds in

1940, by 1945 they had increased to more

than 20,000 pounds.8 In short, the figures for total production in the later years

of the war represent more airplane in

every sense of the word than they did in

the earlier years.

One final word of warning. In at least

some of the statistics provided by British sources during the war, the figures

purporting to reflect the total number of

aircraft produced actually included a

large number of items returned damaged

from operations to the manufacturers for

major rebuilding.9 Unless one is fully

informed of considerations such as this,

it would be easy to draw grossly misleading conclusions from seemingly objective data. If this is true of production

figures, it is certainly no less true when

applied to the dollar costs of the wartime aircraft program.

Counting the Cost

Between July 1940 and August 1945,

when the war ended, the AAF received

just over 43.5 billion dollars worth of air

matériel. Aircraft accounted for 82.5

percent of this sum, which represented

37 percent of the total value of all matériel bought by the War Department.

The value of the air matériel procured

by the Army and Navy together amounted

to just under 25 percent of the nation's

185 billion-dollar outlay for munitions

of all sorts in this period.10 Sums of these

magnitudes may be awe inspiring, but

they are so large as to lose meaning for

most readers. Unless they can be broken down and presented in terms that

can be equated with rather more commonplace statistics, they serve little purpose.

Congressional appropriations offer at

least one familiar point of departure for

students of military procurement. Table 15 shows direct cash appropriations

for air matériel and expenditures from

these appropriations. The figures are

given for the full decade 1935-45 in order to place the war years against an ample peacetime perspective. The disparity between the two columns in Table 15

requires explanation. Funds appropriated in one year may be spent in that

year, in subsequent years, or not at all.

Sums obligated, that is, written into

contracts, may be paid out across a period of deliveries stretching over many

months; they may be recovered by means

of renegotiation or not paid out at all as

a consequence of cutbacks or terminations. For this reason, in wartime, the

status of funds obligated may often provide a far more meaningful indicator

of the current production pattern than

either the size of the annual appropriation or the actual rate of expenditure in

any one year.

Thus, for example, as of 30 June 1945,

the end of fiscal year 1945, the cumula- 8

 Airframes only. CAA, Statistical Handbook, 1948,

p. 45. 9

 Memo, CofS MC for USW, 22 Jan 43, AFCF

452.01-A Production.

10

 Crawford and Cook, Statistics: Procurement, p.

10, and CPA, Official Munitions Production, p. 363.
THE PROCUREMENT RECORD 557

TABLE 15—AAF CASH APPROPRIATIONS AND EXPENDITURES: 1935-45

Source: Abstracted from Office of Statistical Control, AAF, Army Air Forces Statistical Digest: World War II, 1945, p. 297. (The 1945

edition should not be mistaken for the 1946 edition labeled "first [sic] annual edition.") The last three digits have been rounded off in each

figure given. Appropriations here listed are for air materiel only, aircraft, gasoline, etc. Supplies contributed by other technical services

such as QM are not included.

live obligations or contracts entered by

the AAF but not paid off amounted to

15.33 billions. Yet by November, after

the war had ended, terminations rather

than deliveries played a major role in

whittling this backlog down to about five

billions. Obviously any statistical compilation that looked only to actual expenditures would neglect a vast area of

effort simply because it did not mature

into payments. Moreover, expenditures

from direct appropriations take no account of foreign aid funds. Since in 1942

alone obligations from this source ran to

nearly 2.5 billion dollars, it must be clear

that statistics on appropriations give at

best a partial view of AAF procurement.11

If one bears in mind the significant

difference between funds obligated and

funds actually spent, Table 16, showing

expenditures by major categories, may

be helpful in giving some idea of how the

AAF appropriation dollar was used from

July 1942 through August 1945, the period during which the heaviest payments

were made.

Although the tabulations in Table 16

do help to express procurement expenditures in terms more comprehensible than

the big totals recorded earlier, it would

be a serious mistake to assume that they

represent anything like the true cost of

the air matériel bought during the war.

Certainly some consideration must be

given to expenditures for research and

development, the heavy outlays made for

new facilities, and various other overhead

expenses. New facilities, including the

cost of tools as well as floor space financed

directly by the government, absorbed

more than three billion dollars of federal funds. Another half billion must be

added to this if one includes the indirect

costs to the government from tax amor11

 I. R. Friend, History of the Air Technical Service

Command: 1945, AMC Hist Office, Aug 50, p. 43;

and McMurtrie, Hist of AAF MC: 1942, app. 3.
558 BUYING AIRCRAFT

TABLE 16—AAF EXPENDITURES BY MAJOR CATEGORIES: 1942-45

a

 Last six months. b

 First eight months.

Source: Abstracted from AAF Statistical Digest, 1945, pp. 298-99.

tizations authorized to manufacturers by

the AAF.12

Expenditures for research and development on AAF projects are somewhat

harder to compute. A substantial proportion of the spectacular advances in

design that marked the war years was

underwritten, directly or indirectly, in

the sums obligated on production contracts. Then too, the funds allocated for

modifications in accepted aircraft contributed appreciably to the pace of development. As Table 17 indicates, the

total charges attributable to modification

were actually greater than the direct expenditures earmarked for research and

development.

Yet another element of overhead that

cannot be ignored in appraising the cost

of air matériel is the payroll of the large

number of employees in the Materiel

Command. At peak strength in mid1943, there were more than 10,000 civilTABLE 17—EXPENDITURES FOR MODIFICATIONS AND RESEARCH AND DEVELOPMENT: 1942-45

a

 Last six months. b

 First eight months.

Source: Abstracted from AAF Statistical Digest, 1945, pp. 298-99.

ians employed at Wright Field. Wage

and salaries for these people obligated

nearly 48.5 million dollars a year. At

the same time more than twice as many

civilians were on the federal payroll in

the various procurement district offices,

which continued to build up to a peak

strength of 27,000 a year later. In addition, during the same period the payroll 12

 AAF Hist Study 40, p. 232.
THE PROCUREMENT RECORD 559

TABLE 18—COMPARISON OF CIVILIAN PAYROLL TO NEW AIRCRAFT AND RESEARCH AND

DEVELOPMENT: 1938-41

Source: McMurtrie and Davis, Hist AAF MC: 1926-41, app. E-2. Personnel figures excluded troops attached from Signal Corps, Ordnance, and so forth, and all maintenance employees of the Field Service Section who later transferred to the Air Service Command.

for nearly 10,000 military personnel at

Wright Field and in the districts must

be taken into account.13

From the various facts and figures recorded here it should be apparent that

no accurate total can ever be compiled to

represent the true "cost" of the air matériel purchased during the war. Nevertheless, the data presented may open up

a number of thought-provoking vistas

for those who would understand the

problem of procurement costs in their

broadest context, including the record of

prewar experience. Table 18 should go

far to provide this necessary perspective.

Whatever the observations made upon

these figures, one conclusion seems inescapable. In light of the billions spent

in wartime on air matériel, it would appear that even the most modest increases

in payroll during the prewar years might

well have led to disproportionately large

dividends in terms of better preparedness

—faster procurement at lower cost and a

less disturbing impact on the national

economy. For example, is it entirely idle

to speculate on what savings might have

been expected if a few more really able

contract negotiators could have been

hired before the war? Was it a real economy to keep the procurement staff continually shorthanded and so modestly

paid? Clearly it is not without significance that the average salary paid to civilian employees at Wright Field in the

period from 1938 through 1941 was never

higher than $1,944 per annum.14 What

is more, the same sort of questions could

be raised with regard to research and development expenditures. If air matériel

cost too much during the war, surely one

of the principal reasons for this was that

it cost too little before the war.

13

 Davis, Hist of AAF MC: 1943, app. 2 and 3;

Russel, Hist of AAF ATSC: 1944, app. 3.

14

 McMurtrie and Davis, Hist of AAF MC: 1926-

41, app. E-2.
560 BUYING AIRCRAFT

TABLE 19—AVERAGE UNIT COSTS OF SELECTED AIRCRAFT: 1939-45

Source: Abstracted from AAF Statistical Digest. 1945. Figures given show average cost per unit computed to reflect the several costs

resulting from different contracts, renegotiated prices on uncompleted portions of contracts, and so forth. Cash refunds from renegotiations

are not taken into account. Costs as shown cover complete flyaway aircraft with engines, propellers, and factory installed signal and ordnance equipment hut exclude value of spares and equipment installed at modification centers.

Although the increased number and

growing skill of Wright Field procurement staff during the war years did lead

to closer pricing and lower costs, probably the most important factor in securing this result was the introduction of

mass production techniques by the industry. The decline in unit costs occurring

during the war is indicated in Table 19.

The economies resulting from mass production suggested by these figures become

considerably more impressive when it is

recalled that all of these aircraft were

modified into heavier and more complex

types in each successive year of the war.

The reductions in unit costs, while remarkable, offer only one indication of

the prodigious accomplishments of the

aircraft industry as a whole during the

war years. For a fuller index of the industry's wartime achievement, a number

of different yardsticks are clearly necessary.

The Contribution of Industry

The contribution of the aircraft industry to the war effort cannot be measured

solely in terms of deliveries to the AAF.

As the following table clearly reveals, the

Air Forces received just over half the total number of aircraft turned out in the

United States between July 1940 and

August 1945:

 15

Number of

Recipient Aircraft

U.S. AAF ........ . 158,880

U.S. Navy ........ . 73,711

U.S. other ........ . 3,714

British Commonwealth ... . 38,811

USSR .......... . 14,717

China ......... . 1,225

Other foreign ....... . 4,901

Total ....... . 295,959

15

 Abstracted from AAF Statistical Digest, 1945,

p. 127.
THE PROCUREMENT RECORD 561

Of this grand total, 230,287 aircraft were

actually procured under AAF cognizance

regardless of the ultimate recipient.16

The aircraft builders who helped to

achieve the total production record are

listed in Appendix B, along with the

number and types of aircraft they built.

On the basis of the production figures

cited in Appendix B, the top fifteen manufacturers of aircraft under AAF cognizance were:

Aircraft Accepted

Manufacturer AAF Navy

North American ...... . 41,839 0

Consolidated ....... . 27,634 3,296

Douglas ......... . 25,569 5,411

Curtiss ......... . 19,703 6,934

Boeing ......... . 17,231 291

Lockheed ........ . 17,148 1,929

Republic ......... . 15,663 0

Bell .......... . 12,941 1

Martin ......... . 7,711 1,272

Beech .......... . 7,430 0

Ford .......... . 6,792 0

Fairchild ......... . 6,080 30 0

Cessna ......... . 5,359 0

Piper .......... . 5,611 33 0

Taylor ......... . 1,940 0

When the aircraft under Navy cognizance

are added in, the order is changed substantially, especially when the four firms,

Grumman, Eastern, Chance-Vought, and

Goodyear, which produced nothing for

the AAF, are added into the sequence

with 17,448, 13,449, 7,896, and 3,940 aircraft, respectively.

If airframe pounds rather than individual aircraft accepted by the AAF and

the Navy are used as a yardstick, the order

of importance is changed somewhat further, the makers of heavy bombers and

transports in the leading position. On

this basis the top producers in the order

of their output were:

 17

Manufacturer Percent of Total

Douglas ....... . 15.3

Consolidated ..... . 14.6

Boeing ....... . 11.3

North American .... . 10.5

Lockheed ...... . 9. 0

Curtiss ....... . 6. 9

Martin ....... . 6. 3

Ford ........ . 6. 2

Republic ...... . 3. 9

Grumman ...... . 3. 7

Bell ........ . 2. 7

Eastern ....... . 2. 4

Chance Vought .... . 1.4

Goodyear ...... . 0. 7

A ll others ...... . 5. 1

100.0

The foregoing makes it clear that AAF

procurement policy placed major reliance upon the old-line aircraft firms.

With the exception of Ford, every one

of the principal manufacturers for the

AAF could be classed as an old-line firm

with a continuous history of prewar operations in the aircraft field. This pattern of policy by no means held true with

the wartime production of aircraft engines. While the two old-line firms, Pratt

and Whitney and Wright Aero, continued to lead the field, a substantial share

of the total engine output came from

firms licensed by them. (Appendix C)

The licensees did include some of the

smaller old-line aircraft engine builders,

but the total output achieved by them

was small in comparison with the records made by firms of the automobile industry without recent experience in air16

 AAF Statistical Digest, 1945, p. 118.

17

 From table in Craven and Cate, eds., Men and

Planes, p. 355.
562 BUYING AIRCRAFT

TABLE 20—PRODUCTION OF TURBOJET ENGINES: JULY 1940-AUGUST 1945

Source: CPA, Official Munitions Production, pp. 65, 68, 70.

craft engine work. Appendix C lists the

major aircraft engine producers with

their licensees in the order of their importance according to the number of

units produced. A listing in terms of total horsepower capacity produced would

not significantly alter the sequence. To

the record of production in conventional,

reciprocating engines must be added the

first trickle of output in turbojet engines

which appeared toward the end of the

war. (Table 20)

The pattern of production in the propeller industry was similar to that prevailing in the engine industry. The oldline firms led the field insofar as design

was concerned, but manufacturers outside the aviation industry supplied much

of the wartime capacity. The two leading old-line firms were Curtiss Electric, a

subsidiary of Curtiss-Wright, with an automatic controllable pitch propeller system operated by electric devices, and

Hamilton Standard, a subsidiary of

United Aircraft, using a hydraulic control. Both firms followed the corporate

policy they had laid down when expanding engine production. Curtiss increased

output by additions to plant and increased subcontracting; United took these

steps too but also resorted to licensing on

a large scale. The third major source of

military propellers was Aeroproducts,

a division of General Motors established

in 1940 when the corporation acquired a

small Dayton, Ohio, concern that had developed an adjustable pitch propeller

with a hydraulic control system.

Table 21 gives production figures for

automatic controllable pitch propellers

only. Although the Curtiss scheme of

concentrating production under an experienced management enjoyed certain

advantages from the point of view of design co-ordination and quality control,

production could not be expanded indefinitely in this fashion since management

resources would be spread dangerously

thin. On the other hand, although the

policy of licensing pursued by United involved difficulties of technical supervision, it did enlist substantial additions of

managerial talent. The production record for engines as well as propellers seems
THE PROCUREMENT RECORD 563

TABLE 21—PRODUCTION OF AUTOMATIC CONTROLLABLE PITCH PROPELLERS: JULY 1940-

AUGUST 1945

Source: CPA, Official Munitions Production, pp. 73-80.

to suggest that the latter course had much

to commend it.18

While no array of statistics can convey

an adequate impression of the full contribution to air power made by industry

during the war years, the following figures may add substantially to the tabulations already presented. Where the foregoing statistics spelled out the achievements of individual manufacturers in

turning out airframes, engines, and propellers, the following data gives some

idea of the size of the industry as a whole

and the enormous complexity of the task

undertaken.

At peak production in early 1944,

some fifty different firms held prime contracts for military airframes. Taken all

together, these concerns had over 100

million square feet of floor space representing an investment of more than a

billion dollars. On this production base

they managed to achieve a monthly output of more than 9,000 aircraft or better

than 100 million airframe pounds excluding spares. This feat required a labor force of over 750,000 people working

in assembly plants and a third of that

number working for subcontractors.

These figures for peak production are

best understood when seen against the

airframe industry in June 1940, when

the major wartime growth began. Then,

some 85,000 employees in 8 million

square feet of floor space turned out only

a little more than 2 million airframe

pounds a month, excluding spares and

experimental aircraft.19

Although airframe manufacturers

ranged in size from one small firm with

only 100,000 square feet of space to the

largest with 7 million square feet, over

95 percent of the airframe weight produced came from those manufacturers

with more than 2 million square feet of

available space. Approximately half the

total number of airframe contractors fell

in this category. The necessity for such

18

 See especially, Lilley et al., Problems of Accelerating Aircraft Production During World War II,

sec. V.

19

 Undated monograph prepared in 1945 in conjunction with the postwar industrial mobilization

planning project, Technical and Statistical Analysis

of the U.S. Aircraft Industry, WFHO, Research file:

Aircraft Industry, Analysis (hereafter cited as Statistical Analysis: 1945). See also, CAA, Statistical

Handbook, 1948, pp. 46 and 56.
564 BUYING AIRCRAFT

large production areas is implicit in the

vital statistics of the typical tactical airplanes turned out during the war. Fighters weighed up to 31,000 pounds and

had wing spans up to 70 feet. Heavy

bombers ranged from 35,000 to 130,000

pounds and had spans from 100 to 130

feet. The empennage assemblies for some

heavy bombers built during the war were

almost as large as the whole of a typical

fighter of a few years earlier. Rudders

on the big bombers stood anywhere from

18 to 47 feet in the air.

If the sheer size of military aircraft explains why the bulk of wartime airframe

output fell to a relatively small number

of large assembly plants, even the briefest catalogue of the component parts in

the various types of tactical aircraft will

suggest the magnitude of the production

problems faced by these concerns. A typical fighter might embody 10,000 or more

different kinds of parts, 10,000 feet of

wiring , 3,000 feet of hydraulic tubing,

and 36,000 rivets. A bomber might contain 16,000 parts, 24,000 feet of wiring,

and over 200,000 rivets. The B-29, to

cite but one example, required 23,652

pounds of sheet aluminum, 1,418 forgings, 618 castings, and 11,308 separate

extrusions for every airplane turned out.

Obviously only those manufacturers who

mastered the techniques of production

control could hope to keep one jump

ahead of chaos in such a welter of parts.

Yet another factor of significance in

appraising the contribution of industry

to the wartime expansion of air power is

the pace at which airframe manufacturers had to recruit, train, and absorb additional employees. From a total of

59,000 employees in January 1940, the

labor force in the airframe industry rose

to a peak of 936,000 in November 1943.

Individual manufacturers had payrolls

of anywhere from 700 to 80,000 people.

Table 22 shows the distribution of employment in the airframe industry as of

April 1945.

That the aircraft manufacturers finally

did achieve an impressive mastery over

both men and materials is attested by the

following production ratios: where airframe builders in January 1943 required

an average of 2.3 man-hours of direct labor per pound of airframe accepted, by

July 1944 they had reduced this ratio to

the point where it required an average of

just under one man-hour for every airframe pound accepted. As Table 23

suggests, under certain circumstances

where the volume was high and the number of design changes was closely controlled, some manufacturers achieved records far superior to this average. In conjunction with Table 23, it may be useful

to note that the manufacturers of heavy

bombers averaged between 1.5 and 2 airframe pounds of output per square foot

of floor space. For fighter aircraft the ratio was 1 to 1 .5 airframe pounds per foot.

As a group, the aircraft engine manufacturers can be measured in much the

same fashion as the airframe builders.20

The 18 firms holding prime contracts for

military engines at peak production employed over 339,000 people and occupied

75 million square feet of floor area. In

addition, another 120,000 persons were

engaged by subcontractors to the engine

manufacturers. The engine firms together turned out more than 24,000 engines or 42 million horsepower in the

20

 The rest of this chapter is based on Statistical

Analysis: 1945, unless otherwise indicated.
THE PROCUREMENT RECORD 565

TABLE 22—DISTRIBUTION OF EMPLOYMENT IN AIRFRAME INDUSTRY: APRIL 1945

Source: Statistical Analysis: 1945; CAA, Statistical Handbook, 1948, p. 56.

TABLE 23—DIRECT MAN-HOURS PER AIRFRAME POUND ACCEPTED

Source: AFF Hist Study 40, pp. 178-79. No direct comparisons can be made from the figures shown. Even in the case of the B-24,

where two firms produced the same items, differences in expenditures on tooling and previous production experience preclude valid comparisons as to relative efficiency of production.

peak month of August 1944. By the way

of contrast, the engine industry in January 1940 shipped 856 military engines

producing a total of 646,000 horsepower.

At that time only about 16,000 persons

were employed in this work.21

Throughout the war the aircraft engine manufacturers not only turned out

more and better products but also made

continual strides toward higher productivity. Over the five-year war period, the

number of man-hours per horsepower

output in air-cooled engines dropped

from 5.82 to .86. For liquid-cooled engines the drop was from 3.14 to .80 manhours per horsepower output. And all

this, it should be observed, was accomplished at a time when the turnover in

labor was climbing rapidly. Whereas in

1941 the annual turnover rate was 27 in

100, by 1943 the rate was 30 in 100. In

the airframe industry, by way of compar- 21

 CAA, Statistical Handbook, 1948, pp. 48, 56-57.
566 BUYING AIRCRAFT

ison, the turnover rate increased from 30

in 100 in 1940 to 50 in 100 by 1943.

In addition to the three major propeller firms and their licensees already

mentioned, there were eight other concerns making propellers for training aircraft, and ten firms turning out the light

wooden blades used on liaison aircraft.

In all, these lesser facilities and those of

the major producers of propellers represented about 10 million square feet of

floor space with perhaps 10 million more

in subcontractors' plants. At peak, in

January 1944, the propeller manufacturers employed over 57,000 people, a 23-

fold increase over the level of employment in January 1940. In this period,

production of military propellers increased from 648 a month to more than

22,000 a month.22

Although airframes, engines, and propellers constituted vital ingredients of

air power in World War II, they were

only the most important in a long list of

components. Beyond the essentials lay

dozens of accessories and items of subordinate or corollary equipment that cannot be neglected when surveying the

role of the aircraft industry as a whole.

The list of firms manufacturing these

items is entirely too long to identify individual concerns by name and too diverse to lend itself readily to statistical

treatment. Nonetheless, a few facts and

figures may give at least some impression

of the magnitude of this collateral facet

of the aircraft industry.

The fabrication of landing-gear assemblies provides an excellent illustration of the sizable complexes organized

to produce the many vital accessories so

often neglected in the emphasis generally placed on airframes, engines, and

propellers. By 1944 there were over 100

firms engaged in this effort. Included on

the roster were 15 companies turning out

oleo struts, 3 making wheel and brake

components, 6 making tires, and 80-odd

contributing parts for retracting gear

mechanisms. At peak these manufacturers produced 35,300 units a month.

Without question, the oleo strut, or

compressible hydraulic shock absorber,

was the most difficult item to manufacture in the whole assembly. Ranging in

size from 1 to 15 inches in diameter, from

6 inches to 8 feet in length, and from 75

to 700 pounds in gross weight, the struts

required the most exacting precision

work to produce. Approximately 85 percent of the man-hours spent on them

were machine time—turning, boring, and

honing. But emphasis on the close tolerances required in strut construction

should not obscure the achievements of

the many other manufacturers contributing to the fabrication of landing-gear

assemblies. For example, many of the

development problems and production

headaches encountered in manufacturing

aircraft tires ranging from 6 inches to 9

feet in diameter and weighing anywhere

from 6 to 600 pounds should be more or

less implicit in these bare statistics.

One large but nebulous group of suppliers and contractors serving the aircraft

industry is vaguely referred to as the

electrical equipment manufacturers. In

1939 three major concerns with upward

of 50 subs met the needs of the airframe

builders. All together, the principal

primes then had about 1,000 people on

the payroll. By 1945 at least 50 firms

22

 CAA, Statistical Handbook, 1945, p. 49; Statistical Analysis: 1945.
THE PROCUREMENT RECORD 567

held major prime contracts in this field

and relied upon more than 1,000 subcontractors in addition. Over a million

persons were employed in 1945 by these

electrical equipment manufacturers who

turned out such items as generators, motors, starters, solenoids, switches, ignition

coils, and the like.

Some indication of the problems posed

by the requirements for electrical equipment can be seen in the production of

aircraft generators. Before the war two

manufacturers turned out all the generators needed by the Air Corps, a total of

about 500 units a year. By the end of

1944 seven different manufacturers were

shipping a total of more than 38,000

units a month—a rate of over 450,000 per

year. Since the firms supplying the auto

industry had mass-produced as many as

10,000 generators a day before the war,

the achievement of the manufacturers

who entered the aircraft field during the

war may not seem remarkable at first

glance. But aircraft quality called for far

more exacting standards than those prevailing in the automobile industry at

that time, and aircraft generators were

by no means the same as those used in

cars. Where the latter operated at 600

revolutions per minute, aircraft generators ran at a minimum of 24,000 revolutions per minute. Moreover, there was

a considerable span between the 300-

watt capacity of an automobile generator

and the 9,000-watt model used in a B-29.

The war years marked an almost revolutionary shift in the use of electric motors in aircraft. And although no special

industry grew up to serve the airframe

builders on this account, the regular

electrical manufacturers gave increasing

attention to the problem of light, fractional horsepower motors. Before the

war such units were virtually unknown

in fighter aircraft. By 1945 one fighter

model mounted 11 and the B-29 used

more than 140 of them.

The aircraft instrument makers no

less than the electrical equipment manufacturers supplied a diversity of items

but constituted a rather more cohesive

and identifiable group. A wide variety of

skills was required to produce the more

than 60 instruments found on the panel

of a heavy bomber. These included both

navigational instruments such as altimeters and turn and bank indicators and

engine instruments such as tachometers,

manifold pressure gages, and temperature

gages for cylinders, bearings, and so on.

In 1940 15 firms turned out these instruments. They subcontracted about 50

percent of their work to some 1,200 other

concerns. This unusually high percentage

of subcontracting laid a base of experience that made it possible to avoid extensive expansions by the major primes during the war. Instead, the 15 old-line

concerns recruited up to 4,000 subs,

mostly from the watch and musical instrument manufacturers, to meet their

production requirements.

Perhaps no single accessory epitomizes

the contributions of industry more effectively than the turbosupercharger, an

exhaust-driven compressor designed to

offset the effect of altitude on engine performance. Before 1940 only one manufacturer in the United States was engaged in producing the item; it had a

staff of 38 employees and 68,000 feet of

floor space. By the end of 1944, five

manufacturers had 2,750,000 square feet

of space and over 12,000 employees devoted to supercharger work. At peak
568 BUYING AIRCRAFT

these concerns turned out 13,800 units a

month. Although the finished product

was small, weighing from 140 to 260

pounds, the various stages of fabrication

required a large number of specialized

skills and expensive pieces of equipment

such as heat treating ovens, X-ray inspection devices, and metallurgical laboratories in addition to such production

tools as the heavy drop hammers required

to forge turbine blades. This complexity

was an important consideration in minimizing subcontracting. At the most,

only about 10 percent of the total work

involved was passed out to subs who

numbered no more than 200 in all.

Manufacturers of the accessory items

ranged from tiny one-room shops turning

out such products as the almost microscopic machine screws used by instrument makers to giant industrial corporations with numerous branch plants and

thousands of employees making such

elaborate mechanisms as power-operated

gun turrets weighing hundreds of pounds

and embracing thousands of parts. Similarly, no generalizations are possible regarding the role of subcontracting since

practices and policies varied widely

among the various manufacturers concerned. Nor can these firms be neatly

and exactly identified as elements of the

aircraft industry. Unlike the makers of

airframes, engines, and propellers, with

few exceptions the manufacturers of accessories and other related items did not

confine their activities to the aircraft

field. As a consequence, meaningful generalized conclusions on this segment of

the industry are difficult if not impossible to draw.

The mass of facts and figures presented

in this chapter and those preceding it do

make one conclusion patent: the procurement record achieved during World War

II resulted from the combined contributions of the military organization and the

manufacturers of the nation. In a study

such as this the preoccupation with problems of military administration, while

inevitable, may tend to give a false emphasis, stressing the contribution of the

air arm rather than that of industry. No

such distortion is intended. Governmental agencies guided the course and controlled the process, but industry built the

airplanes. In the final analysis, perhaps

the best measure of industry's contribution is to be seen in the weapons used

against the enemy. The nation that desperately and ineffectually sought to defend itself against Japanese attacks in

December 1941 by sending a few ancient

P-26 and obsolete P-35 fighters into the

air was striking in 1945 with tens of

thousands of aircraft, many of them

models that had not even been test flown

when the war broke out. Surely this is

the true measure of the industry's achievement.
CHAPTER XXII

Some Concluding Observations on

Military Procurement

The more the author has reflected

upon the complex mass of evidence presented in this book, the less he is inclined to dogmatic certainties regarding

the existence of a right or a wrong course

in military buying. He is persuaded that

there are no simple formulas, no neatly

packaged principles to be memorized in

axiomatic form. Yet for all of this, some

observations of more than fleeting significance may be abstracted from the book.

If these be conclusions, they are no more

than tentative conclusions, offered rather

as suggestions for discussion than as essential lessons distilled beyond all shadow

of doubt.

What Is Air Arm Procurement?

Buying Aircraft presents one thesis

above all others: the procurement process itself is a weapon of war no less significant than the guns, the airplanes, and the

rockets turned out by the arsenals of democracy. Just as these more conventional

weapons must be continually changed to

keep pace with those of the nation's enemies, so too the procurement process

must be continually modified and improved to meet the emerging demands of

the future. But improvement requires

understanding, and the enormous complexity of military procurement makes

even the most rudimentary understanding a difficult goal to achieve.

Air arm procurement embraces a panorama of considerations far beyond the

range of the regulations and procedures

hammered out by military officials. Inescapably, in any appreciation of military

procurement, one encounters a host of

others factors: the prevailing federal statutes, court decisions, the rulings and opinions of various regulatory agencies, the attitudes of Congress, the economic health

and character of the aircraft industry, the

state of research and development, and so

on. Indeed, even the term aircraft industry is an all-too-easy generalization that

requires elaboration and explanation,

for it encompasses not merely the ten to

twenty leading airframe manufacturers

but a whole congeries of related industries as well—suppliers, vendors, and subcontractors—in seemingly endless array.

To understand the procurement process

is to appreciate the full gamut of problems raised by this bewildering hierarchy

of firms no less than the internal administrative procedures of the military buyers.

Procurement and Politics

In an era of total war, supplying the

voracious demands of armed forces becomes a major function of the national

economy. The requirements for matériel
570 BUYING AIRCRAFT

send out shock waves of increasing severity until scarcely an individual in the nation remains unaware of their impact.

Inexorably, air arm procurement becomes a question of widespread popular

and therefore political interest. To ignore or even to minimize the frankly political aspects of military buying is to be

less than candid and, at the very least,

unrealistic.

The sum total of the record, in two

world wars and the years of peace between

them clearly reveals the necessity for a

high level of experience as minimal

equipment for staff officers dealing with

Congress. Hill tactics are profoundly important. Officers inexperienced in this

specialized function, no matter how high

ranking or meritorious in every other respect, operate at a serious disadvantage

and to the detriment of the service they

represent. Staff officers who would provide continuity of support for procurement programs must develop political

sagacity of the first order; they must learn

to anticipate the shifting tides of congressional opinion that reflect the fevers of

the body politic, changes in administration, fluctuations in the national economy, and shifts in foreign policy.

Above all, officers who serve on the

Hill, operating as they do in a political

milieu, must develop a sensitivity to "political" realities. They must learn that

congressmen are not always free to pursue a straight-line course toward a clearly

defined goal but must heed the sometimes

irrational and usually contradictory dictates of their constituents or they will no

longer represent them. In short, the interests of the military may best be served

if the officers who deal with Congress

recognize the character of political necessity and learn to accommodate it as best

they can, standing ever ready, with

imagination and flexibility, to concoct

alternatives when their proposed measures or programs prove politically unacceptable. Politicians are under continual

pressure to come up with easy solutions,

quick expedients, and flashy panaceas

that promise national security without

presenting the voters a higher tax bill.

As they come to understand this, military

officers can expect to operate with increasing effectiveness on the Hill.

Although a number of staff officers

may become highly competent specialists

in Hill tactics, it is hardly to be expected

that more than a very few congressmen

will ever acquire more than a general

grasp of military procurement. The evidence of air arm relations with the Hill

over the years clearly reveals that the demands of elective office militate against

the development of any such expert

knowledge even when an enlightened

and dedicated legislator makes a determined effort to understand the technicalities of the procurement process. For this

reason, the impressions formed by Congress on the subject of military procurement are highly significant. Procurement officials would do well to recognize

that in any given problem they present

to Congress, whether it be a budget proposal or the draft of a new law, the symbolic significance of the measure is often

just as important as the particular details in question. Which is to say, procurement officials must recognize that the

impact of any proposal in shaping congressional opinion may in the long run

be fully as important as or even more important than the objectives sought for the

immediate future.
SOME CONCLUDING OBSERVATIONS 571

The relationship of military officers to

the executive branch of government is

also of crucial significance. The record

of air arm procurement before and during World War II revealed repeatedly

that military leadership is neither exclusively the task of professional soldiers nor

of the politicians in the executive branch.

Together they must find adjustments between the demands of the soldiers, stated

as minimum requirements, and programs

that the politicians believe to be politically feasible. If this equilibrium is to be

attained, both the soldiers and the politicians must have a clear conception of

their differing roles. If the soldiers begin

by trimming down their stated requirements to a level that they regard as politically acceptable, they deprive the

President of their best technical and professional advice on the needs of national

defense. If the President fails to keep soldiers aware of the nature of the nation's

changing diplomatic and political commitments, responsible military leaders

can scarcely be expected to give him adequate professional advice on military

matters.

Procurement Leadership in Wartime

Procurement leadership is not, however, confined to the precincts of Capitol

Hill and dealings with government officials. Those who set out to mobilize

the nation's air power for World War

II discovered anew that their decisions

had a symbolic significance within the

military organization and throughout

the ranks of industry and labor no less

than among the politicians. Those officers who wielded effective command

learned that the programs they launched

were most successful when they were

somehow endowed with a leader's personality. Any number of minor functionaries could have spelled out the right answers for this or that procurement program, but even the right answers when

spoken by the wrong people have a way

of failing to gain acceptance. The soundest of policies often need the prestige of

a famous name before they succeed.

Sometimes the magic of a name alone is

not enough; then it is necessary to simplify the issues at hand and reduce a

statement of policy to well-nigh axiomatic form. Clever indeed is the leader,

be he politician or general, who can lay

down policy in an epigram; one bon mot

by a leader—or his ghost writer—is sometimes worth a host of bone-dry staff studies, detailed, accurate, and unimpeachable, when those studies are written by

unknowns. Sound staff work is always essential, but successful leaders give to it

an added dimension.

Procurement leadership also calls for

courage. The experience of air arm officers in the era of World War II underlined this requirement endlessly. Whatever may have been the temptation to

stay within convention, to "play it safe"

and follow the usual routines, on occasion an able executive had to make daring use of his discretionary powers.

Where necessary, he had to assume political risks and display a bold willingness

to make decisions stretching the powers

of his office to the limit. A significant difference between the able executive and

the mere administrator is to be found at

precisely this point: the former clearly

apprehends those situations that call for

innovation and acts accordingly; the latter continues in faithful execution of a
572 BUYING AIRCRAFT

routine long after it has ceased to be

important.

During the war years, however, air

arm officers found that bold leadership

also involved knowing when not to act.

They learned how important it was not

to assume that innovation meant inevitable improvement. The truly effective

leader is the one with enough imagination to see the need for innovation and

enough sense to know when and whether

it should or should not be introduced.

Sometimes effective leadership calls

for quite another kind of courage, the

courage to delegate power. By sharing

discretionary powers with trusted subordinates, by granting them authority to

make final decisions, a bold officer can

substantially enlarge his effectiveness. To

share power calls for character: the timid

man is afraid to delegate, the selfish man

refuses to.

Air Power and Organization

In one respect at least, the coming of

war vastly simplified the task of procurement leadership. In the nation's hour of

danger, Congress authorized sweeping

grants of power to those charged with the

nation's defense as concern for cost to the

taxpayers gave place abruptly to a consuming interest in the immediate delivery of essential weapons. But power, no

matter how all embracing, does not of

itself ensure success. To exercise power

is to make decisions, and, as leaders at

every echelon soon learned, sound decisions require a continuing flow of appropriate information.

One of the significant tasks of procurement leaders, then, is to contrive organizations that will ensure an adequate flow

of information into the decision-making

centers of command. Experience, sometimes of the most frustrating kind, gradually revealed that organizations—whether

they were of the decision-making or the

information-gathering variety—worked

best when they were kept flexible, almost as living entities, sensitively atuned

to the changing needs of the moment.

While it is usually obvious when an organization needs to expand, an able

leader must recognize when an organization should be reduced or abolished.

One fundamental dilemma inescapably confronts the air arm, and for that

matter, every tactical arm of the defense

establishment. Somehow, military men

must reconcile the conflicting objectives

of more weapons and better weapons—

quantity and quality. The technical necessities of mass production put a premium upon stability of design, but the

exigencies of battle, the need for weapons that will outperform the enemy in

action, require continual changes in design to ensure superiority. During World

War II air arm officers learned that these

conflicting and seemingly contradictory

ends could be effectively reconciled. The

solution, they found, lay not in abnormal

and extraordinary powers conferred on

command, but in organization. Once the

major functions to be carried out were

clearly understood, it became only a matter of diligent effort before an organization of suitable form was contrived to

ensure mastery over the immense array

of details involved.

Just as the experience of the air arm in

World War II proved that the horizontal

equation of quantity and quality could

be resolved, so too the war years revealed

that the vertical equation of command
SOME CONCLUDING OBSERVATIONS 573

and operations could be accommodated

by imaginative innovations and organization. Military doctrine has traditionally held that command should be centralized and operations decentralized, but

to centralize command and decentralize

operations may spell isolation for both.

Centralized command separates the decision-makers from day-to-day operations,

the roots that nourish them with information; at the same time decentralization

of operations tends to remove the operators from the seats of power, away from

the commanders who alone can pass down

the authoritative decisions required for

efficient operations. Those in authority

had to discover suitable means for bridging this gap. After several false starts

during the war years, air arm leaders

evolved an organization that did just this.

Each assistant chief of staff was assigned

a dual role. In his first capacity he served

as the chief of a functional staff division,

coping with issues of current interest and

thus acquiring personal and intimate

knowledge of the problems in his specialized area. In his second capacity he sat

on the top policy-making staff as an expert advisor to the commanding general.

By this arrangement, with its analogy and

precedent in the Presidential Cabinet,

the officers of the policy staff remained in

close touch with the problems of the operating echelons and were thus in a position to feed realistic and informed advice

to the top command while transmitting

necessary decisions promptly down the

chain.

In sum, effective procurement for national defense calls for a high order of

leadership. Those who buy the nation's

armament must develop sound political

insight, a keen understanding of the arts

of organization, and, no less than the officers who lead troops in the field, must

display unusual courage. But they would

do well to remember that there is no simple set of rules governing military procurement. To pretend to have found any

such certainty is to court disaster. Continuing and unremitting study is the only

alternative. In the struggle for superior

weapons, the administration of procurement is of crucial importance, a vital

aspect of the whole process. Yet, in a

nation that has piled up a significant portion of its federal debt in buying weapons, no aspect has been studied less.

Appendix A

MEMBERSHIP IN THE AERONAUTICAL CHAMBER OF COMMERCE: 1938

Manufacturers producing civil aircraft only:

Aeronautical Corp. of America, Cincinnati, Ohio

Culver Aircraft Corp., Columbus, Ohio

Fairchild Aircraft Corp., Hagerstown, Md.

Fleetwings, Inc., Bristol, Pa.

Luscombe Airplane Corp., West Trenton, N.J.

Monocoupe Corp., Robertson, Mo.

Piper Aircraft Corp., Lockhaven, Pa.

Porterfield Aircraft Corp., Kansas City, Mo.

St. Louis Aircraft Corp., St. Louis, Mo.

Spartan Aircraft Co., Tulsa, Okla.

Stearman-Hammond Aircraft Corp., San Francisco, Calif.

Stinson Aircraft Division of Aviation Mfg. Corp., Wayne, Mich.

Taylorcraft Aviation Corp. (Taylor-Young Airplane Co.), Alliance, Ohio

Waco Aircraft Co., Troy, Ohio

White Aircraft Co., Leroy, N.Y.

Manufacturers producing both civil and military types:

Beech Aircraft Corp., Wichita, Kans.

Bellanca Aircraft Corp., Newcastle, Del.

Boeing Aircraft Corp., Seattle, Wash.

Consolidated Aircraft Corp., San Diego, Calif.

Douglas Aircraft Co., Santa Monica, Calif.

Grumman Aircraft Engineering Corp., Bethpage, Long Island, N.Y.

Kellett Autogiro Corp., Philadelphia, Pa.

Lockheed Aircraft Corp., Burbank, Calif.

North American Aviation Corp., Inglewood, Calif.

Saint Louis Airplane Division of Curtiss-Wright Corp., Robertson, Mo.

Solar Aircraft Co., San Diego, Calif.

Stearman Aircraft Division of Boeing Aircraft Corp., Wichita, Kans. Vought-Sikorsky Aircraft Division of United Aircraft Corp., Stratford, Conn.

Vultee Aircraft Division of Aviation Mfg. Corp., Downey, Calif.

Manufacturers producing military types only:

Bell Aircraft Corp., Buffalo, N.Y.

Brewster Aeronautical Corp., Long Island City, N.Y.

Curtiss Aeroplane Division, Curtiss-Wright Corp., Buffalo, N.Y.

Seversky Aviation Corp., Farmingdale, Long Island, N.Y.

Source: Hearings, House Subcommittee of Committee on Appropriations, Supplemental Military

Establishment Bill for 1940, pp. 319-20.
Appendix B

WARTIME PRODUCERS OF AIRCRAFT*
APPENDIX B 577

WARTIME PRODUCERS OF AIRCRAFT*—Continued
578 BUYING AIRCRAFT

WARTIME PRODUCERS OF AIRCRAFT*—Continued
APPENDIX B 579

WARTIME PRODUCERS OF AIRCRAFT*—Continued

*In those instances where a firm produced only for Navy cognizance or for the Navy as well as the

AAF, the number of units so produced is indicated in the column on the right along with the description

of the principal items turned out.

Note: Figures in parenthesis show the total production for each aircraft or group of similar aircraft.

Source: AAF Statistical Digest, pp. 113-17. (Dec 45)
Appendix C

MAJOR PRODUCERS OF AIRCRAFT ENGINES: JULY 1940-AUGUST 1945*
APPENDIX C 581

MAJOR PRODUCERS OF AIRCRAFT ENGINES: JULY 1940-AUGUST 1945*—Continued
582 BUYING AIRCRAFT

MAJOR PRODUCERS OF AIRCRAFT ENGINES: JULY 1940-AUGUST 1945*—Continued

* Because cross procurement played such an important role in engine production, total rather than AAF

acceptances are shown.

Source: Official Munitions Production, p. 61 ff.; Lilley, Problems of Accelerating Aircraft Production During World War II, ch. V and apps. B and C.
Bibliographical Note

During the more than fifteen years

that have past since the author started

work on this volume, he has consulted

the contents of over a thousand published

volumes and over 5,000 tightly packed

file drawers containing the working papers of the major agencies and organizations concerned with the procurement of

air matériel. Expressed another way, in

the course of his research the author

worked through sheaves of papers that,

piled one upon another, would stand well

over two miles high. Thus physical stamina and good eyesight were prerequisites

to research in this subject every bit as

important as scholarly objectivity. These

depressing observations are here recorded

not to frighten off the student interested

in procurement, but rather to impress

him with the necessity for some sort of

guide to the many scattered repositories

housing the enormous mass of official

records pertaining to procurement. The

paragraphs that follow are to be regarded

as a road map designed to simplify the

task of leading the researcher to the information he needs rather than as an exhaustive bibliography covering all the

many sources consulted.

Broadly speaking, the volume rests

upon three types of sources: first, and

most significantly, the actual working

papers generated by various procurement

agencies at the several echelons from the

President on down; second, the unpublished historical monographs and other

secondary studies produced during and

after World War II by a number of the

agencies interested in the procurement

process; and, third, published materials,

both primary and secondary, issuing from

sources ranging from organizations for

which procurement was a central mission

to those having only a remote or indirect

interest in the subject. As a matter of

convenience, the following description of

these sources is presented by organization

or by repository rather than by the type of

source involved.

As a point of departure, one should

consult the National Archives volumes,

Federal Records of World War II: Volume I, Civilian Agencies (1950), and

Volume II, Military Agencies (1951).

Much of the bibliographical information

that would otherwise have to be spelled

out in great detail is already available in

these two volumes. Not only do they describe most of the major collections of

materials used by the author, they also

provide a great deal of indispensable collateral information such as a description

of the War Department decimal filing system. The comments that follow should

be regarded for the most part as supplementary to Federal Records of World

War II.

The most significant body of records

in the Washington area used for this book

was the official headquarters files of the

Air Service, Air Corps, and Army Air

Forces, and their subordinate staff sections, covering the period from World

War I to the end of World War II. For
584 BUYING AIRCRAFT

a description of these records, see Federal

Records of World War II, Volume II,

items 255ff. (Hereafter, unless otherwise

noted, all references to item numbers refer to descriptive items in Volume II.)

Throughout the span of years covered in

this study, the successive headquarters

maintained a central file, the Air Force

Central File (AFCF). (Items 256a and

256b) Although materials relevant to

procurement were found scattered

through virtually the whole range of decimal or subject headings, the following file

numbers generally were most rewarding

in both the classified and the unclassified

portions of the central file:

000.71 Interviews

004.4 Firms and Factories;

Manufacturers

030 Misc. President and Congress

031 The President

032 Congress

111.3 Estimates

112.4 Apportionment of Funds

161 Contract Regulations

161 Contracts

230.433 Labor

319.1 Reports

321.9 Organization

334.7 Boards, Misc.

337.1 Conferences

360.01 War Dept. Policy on Aviation, Programs, etc.

360.02 Foreign Aviation

381 War Plans

381.3 Lend Lease

400.12 Procurement

400.174 Priority

452.1 Procurement of Aircraft

452.1 Production

452.1 Requirements

45 2.1 Bomber Program

452.1 Sales Abroad

452.1 Airplanes, General

452.1-191 Price of Aircraft

The shortcomings of the War Department decimal system as applied to the

Air Force Central File during the war

years is clearly indicated by the concentration of subjects under a single heading such as 452.1.

Although all subordinate staff sections

were supposed to use the facilities of the

central file, almost all of them also built

up file systems of their own. While these

accumulations duplicate the materials in

the central files in many respects, they do

contain large quantities of unique materials and should be consulted. Especially

valuable for the purposes of this volume

were the papers generated by the subordinate sections of the headquarters matériel and requirements staffs in their

successive organizational guises (items

281, 287, 287a and b, 289, 290, 291, and

292). Also useful were the planning staff

files (items 296-98).

For the crucial period of expansion

before 1941, one of the most helpful collections of materials on procurement is

known as the Air Corps Project Records,

assembled by Col. A. J. Lyon while serving as executive for the incumbent chief

of the Materiel Division, Brig. Gen. G. H.

Brett. An index and a summary provide

a guide to the 124 binders that comprise

the collection (item 289). A microfilm

copy of this whole series is available in

the Historical Office at Wright Air Force

Base, Dayton, Ohio.

In addition to the air arm records described above, the author used many

other file collections within the War De-
BIBLIOGRAPHICAL NOTE 585

partment. These include those of the

Secretary of War (items 133-34); the Under Secretary (item 137a-c:); the Assistant

Secretary (item 139); and the Assistant

Secretary of War for Air (item 142). Necessary for certain aspects of procurement

were the files of the Office of the Chief

of Staff (items 165ff.), particularly the

War Plans Division (Operations Division) papers (items 197ff.). Also helpful

were certain records from the Legislative

and Liaison Division, War Department

Special Staff (items 205, 213).

An extremely valuable body of materials relating to procurement law and its

interpretation is to be found in the files

maintained by The Judge Advocate General's Office (item 765). Of particular interest are Contract Division files (item

773) and Patents Division files (item

775). These include formal opinions, related correspondence, and working papers concerned with proposed legislation, all preserved in a well-organized

collection employing the standard War

Department decimal system of filing.

For the period after the formation of the

AAF, consult the files of the Air Judge

Advocate (item 304).

Although the working papers of the

various military organizations dealing

with procurement described above provided the real core of this book, an almost equally useful body of materials

can be found in the repositories maintained by such organizations as the Air

Historical Office (item 258); the Office,

Chief of Military History (items 130b,

182, and 253); the National War College

Library (item 253); the Pentagon Library

(item 141); the Library of Industrial College of the Armed Forces (item 138); and

the Documentary Reference and Research Branch (Administrative Reference Branch, Director of Administrative Services, USAF).

The files of the Air Historical Office

(item 330) contain a large quantity of

material on procurement. In addition

to the elaborate series of historical monographs and studies prepared by this organization during and after the war, the

office files contain several collections of

working papers of operating agencies

that were taken over bodily at the end

of the war. Most useful among these

were the files of the Plans Division, Office of the Chief of Air Corps, and the

records of the prewar Air Corps Board.

The Library of the Industrial College

of the Armed Forces maintains, in addition to its unequalled collection of published materials dealing with economic

mobilization, a system of files containing

a large number of fugitive items obtainable nowhere else. Without the resources of this collection it would have

proved difficult, if not impossible, to

complete this book.

The Documentary Reference and Research Branch, USAF, collection was built

upon the nucleus of files accumulated before the war by the Information Division,

Office, Chief of Air Corps. A number of

scattered files in this collection were especially useful for the prewar period. Materials in this collection are filed under a

Library of Congress cataloguing system.

In addition to the several collections

mentioned above, the author made extensive use of two other large bodies of

materials in the Washington area. At the

National Archives, the records of the

President's postwar Air Policy Commission, 1947-48 (Record Group 220), was

most useful. Also valuable were the files
586 BUYING AIRCRAFT

and reference collection of the Aircraft

Industries Association (Aeronautical

Chamber of Commerce).

The author did not make direct use

of the working files of the War Production Board and all its related civilian

agencies concerned with mobilizing the

national economy in wartime. (See Federal Records of World War II, Volume

I.) For data regarding the activities of

these agencies, he was dependent upon

the large number of monographs and

other studies, published and unpublished, turned out by the Civilian Production Administration and its predecessors. In the same way, the author had

to rely upon the manuscript monographs

prepared by the Naval History Division

(item 799) when he was unable to consult the working files of the Bureau of

Aeronautics.

Outside of Washington, the principal

air arm procurement records are those located at Wright Field (Wright-Patterson

Air Force Base), Dayton, Ohio, where

four separate collections of working papers and files contributed significantly to

the preparation of this volume (items 321

and 321a-e). These included the Materiel Division (Materiel Command, Air

Technical Service Command) Central

Files, the Procurement and Contract

Files, the Judge Advocate General's files,

and the collections designated as the

Central Air Documents Office (CADO).

The first of these, cited in this study as

Wright Field Central File (WFCF) for

simplicity and convenience, is the local

equivalent of the headquarters central

file in Washington. It, too, employs the

War Department decimal filing system

for the major part of its accessions, and,

like its Washington counterpart, is divided into two parallel collections, one

classified, the other unclassified.

The procurement organization at

Wright Field in all of its successive mutations of name and structure has maintained a major record repository, independent of the central file, comprising

the record copy of all air arm contracts,

as amended, along with the correspondence pertaining to them, the regulations

governing procurement, and the various

administrative tools, periodic reports, and

so forth employed by the procurement

organization. Although the latter are

filed under a War Department decimal

system, all contracts are filed by contract

number.

The files of the Judge Advocate at

Wright Field proved to be extremely

rich in materials supplementing the official central file on problems raised by

contests with the Comptroller General

and in staff papers reflecting the efforts

of air arm officers to hammer out effective interpretations of the successive statutes governing the procurement of air

matériel.

The Central Air Documents Office at

Wright Field, established to administer

enemy records and other air intelligence

materials, assumed custody of the technical data library files accumulated before

World War II. This archive was especially valuable for its extensive holdings

on foreign procurement methods, industrial planning, Air Corps and Navy procurement procedures before 1939, and

military attache reports.

The records in the Wright Field Historical Office (WFHO), though relatively

small in bulk, constitute one of the most

important sources of information employed in the preparation of the volume.
BIBLIOGRAPHICAL NOTE 587

In addition to writing annual organizational histories, monographs, and documented case histories on special topics,

the staff of this office has been particularly active in saving and filing a wide

variety of items otherwise unobtainable.

These include lecture transcripts, manuscript histories of contractors' operations,

and personal copies of various reports,

staff papers, procedural manuals, and the

like secured from interested participants

across the whole range of air arm procurement operations.

The records of the procurement district offices subordinate to the authorities

at Wright Field contain a number of

blocks of files of considerable use in the

preparation of the volume (item 322).

Although the wartime working papers of

the several districts have been retired to

a central repository, copies of the histories

prepared by district historians during the

war are on file in the archive of the Air

University Library, Maxwell Air Force

Base, Alabama.

Although any one seriously interested

in the problems of air arm procurement

would find it essential to consult virtually all of the several repositories listed

above, there is a vast quantity of pertinent source material readily available in

any major Federal depository library. In

addition to the immense array of factual

data to be found in the hearings and reports published by congressional committees, there are the published reports and

records of various special committees and

commissions appointed by the President,

the published opinions of the Attorney

General, decisions of the Treasury Department, reports of the Civil Aeronautics Board, and such other agencies.
Glossary

AAF Army Air Forces

AAG Air Adjutant General

ACAD Automotive Committee for Air Defense

ACC Aeronautical Chamber of Commerce

ACofAC Assistant Chief of Air Corps

ACTS Air Corps Tactical School

Actg Acting

Admin Administrative; administrator

ADP Authority for District Purchase

AFAMC Air Forces Air Materiel Command

AFMM&D Air Forces Materiel, Maintenance, and Distribution

AG Adjutant General

AHO Air Historical Office

AGF Army Ground Forces

AIA Aircraft Industries Association

AIC Army Industrial College

AMA Automobile Manufacturers Association

AMC Air Materiel Command

ANB Army-Navy-British

ANMB Army and Navy Munitions Board

ARCO Aircraft Resources Control Office

ASC Air Service Command

ASF Army Service Forces

ASU Air Scheduling Unit

ASW Assistant Secretary of War

ATSC Air Technical Service Command

AWPD Air War Plans Division

BLS Bureau of Labor Statistics

BPC British Purchasing Commission

Br Branch

Bull Bulletin

CAA Civil Aeronautics Administration

CAB Civil Aeronautics Board

CAS Chief of Air Staff; Chief of Air Service

CADO Central Air Documents Office
GLOSSARY 589

CGMC Commanding General, Materiel Command

CofAC Chief of Air Corps

Com Committee

Comm Commission

CofS Chief of Staff

Compt Gen Comptroller General

Cong Congress

CPA Civilian Production Administration

CPFF Cost plus fixed fee

CPPC Cost plus percentage of cost

DCofS Deputy Chief of Staff

Dir Director

Dist District

Doc Document; documentary

DPC Defense Plant Corporation

EES Experimental Engineering Staff

Engr Engineer; engineering

EPF Emergency plant facility

Exec Executive

FDR Franklin Delano Roosevelt

FO Field Order

G-1 Personnel section of divisional or higher staff

G-2 Intelligence section of divisional or higher staff

G-3 Operations and training section of divisional or higher staff

G-4 Supply section of divisional or higher staff

GAO General Accounting Office

GFE Government-furnished equipment

GHQAF General Headquarters Air Force

GOCO Government-owned, contractor-operated

H Doc House document

H.R. House bill

ICAF Industrial College of the Armed Forces

IG Inspector General

IOM Interoffice memorandum

Interv Interview

IPS Industrial Planning Section
590 BUYING AIRCRAFT

JAC Joint Aircraft Committee

JAG Judge Advocate General

JAGD Judge Advocate General's Department

JAGO Judge Advocate General's Office

Jt Joint

LI Letter of intent

Mat Matériel

MB Munitions Board

MC Materiel Command

MID Military Intelligence Division

MM&D Materiel, Maintenance, and Distribution

NACA National Advisory Committee for Aeronautics

NDAC Advisory Commission to the Council of National Defense

OASW Office of the Assistant Secretary of War

OCAC Office, Chief of Air Corps

OCofOrd Office, Chief of Ordnance

OCofS Office, Chief of Staff

OEM Office for Emergency Management

OPA Office of Price Administration

OPM Office of Production Management

P&A Priorities and Allocations

PES Production Engineering Section

PMP Protective Mobilization Plan

Proc Procurement

PR Procurement Regulation

PWA Public Works Administration

RAF Royal Air Force

Rcd Record

R&D Research and Development

Res Resolution

RFC Reconstruction Finance Corporation

Rpt Report

R&R Routing and record; reference and research

S Senate

SAE Society of Automotive Engineers

Sess Session
GLOSSARY 591

SGS Secretary, General Staff

SN Secretary of the Navy

SOS Services of Supply

SSUSA Special Staff, U.S. Army

Stat Statutes; statistical

SW Secretary of War

SWPC Smaller War Plants Corporation

TAG The Adjutant General

Telg Telegram

T&O Training and Operations

TWX Teletypewriter exchange

UAW United Auto Workers

USCA United States Code Annotated

USW Under Secretary of War

WD War Department

WDPAB War Department Price Adjustment Board

WF Wright Field

WPB War Production Board

WFCF Wright Field Central File

WFHO Wright Field Historical Office

WPD War Plans Division

WRA War Resources Administration

WRB War Resources Board
UNITED STATES ARMY IN WORLD WAR II

The following volumes have been published or are in press:

The War Department

Chief of Staff: Prewar Plans and Preparations

Washington Command Post: The Operations Division

Strategic Planning for Coalition Warfare: 1941-1942

Strategic Planning for Coalition Warfare: 1943-1944

Global Logistics and Strategy: 1940-1943

Global Logistics and Strategy: 1943-1945

The Army and Economic Mobilization

The Army and Industrial Manpower

The Army Ground Forces

The Organization of Ground Combat Troops

The Procurement and Training of Ground Combat Troops

The Army Service Forces

The Organization and Role of the Army Service Forces

The Western Hemisphere

The Framework of Hemisphere Defense

Guarding the United States and Its Outposts

The War in the Pacific

The Fall of the Philippines

Guadalcanal: The First Offensive

Victory in Papua

CARTWHEEL: The Reduction of Rabaul

Seizure of the Gilberts and Marshalls

Campaign in the Marianas

The Approach to the Philippines

Leyte: The Return to the Philippines

Triumph in the Philippines

Okinawa: The Last Battle

Strategy and Command: The First Two Years

The Mediterranean Theater of Operations

Northwest Africa: Seizing the Initiative in the West

Sicily and the Surrender of Italy

Salerno to Cassino

Cassino to the Alps

The European Theater of Operations

Cross-Channel Attack

Breakout and Pursuit

The Lorraine Campaign

The Siegfried Line Campaign

The Ardennes: Battle of the Bulge

The Last Offensive
The Supreme Command

Logistical Support of the Armies, Volume I

Logistical Support of the Armies, Volume II

The Middle East Theater

The Persian Corridor and Aid to Russia

The China-Burma-India Theater

Stilwell's Mission to China

Stilwell's Command Problems

Time Runs Out in CBI

The Technical Services

The Chemical Warfare Service: Organizing for War

The Chemical Warfare Service: From Laboratory to Field

The Chemical Warfare Service: Chemicals in Combat

The Corps of Engineers: Troops and Equipment

The Corps of Engineers: The War Against Japan

The Corps of Engineers: The War Against Germany

The Corps of Engineers: Military Construction in the United States

The Medical Department: Hospitalization and Evacuation; Zone of Interior

The Medical Department: Medical Service in the Mediterranean and Minor

Theaters

The Ordnance Department: Planning Munitions for War

The Ordnance Department: Procurement and Supply

The Ordnance Department: On Beachhead and Battlefront

The Quartermaster Corps: Organization, Supply, and Services, Volume I

The Quartermaster Corps: Organization, Supply, and Services, Volume II

The Quartermaster Corps: Operations in the War Against Japan

The Quartermaster Corps: Operations in the War Against Germany

The Signal Corps: The Emergency

The Signal Corps: The Test

The Signal Corps: The Outcome

The Transportation Corps: Responsibilities, Organization, and Operations

The Transportation Corps: Movements, Training, and Supply

The Transportation Corps: Operations Overseas

Special Studies

Chronology: 1941-1945

Military Relations Between the United States and Canada: 1939-1945

Rearming the French

Three Battles: Arnaville, Altuzzo, and Schmidt

The Women's Army Corps

Civil Affairs: Soldiers Become Governors

Buying Aircraft: Materiel Procurement for the Army Air Forces

The Employment of Negro Troops

Manhattan: The U.S. Army and the Atomic Bomb

Pictorial Record

The War Against Germany and Italy: Mediterranean and Adjacent Areas

The War Against Germany: Europe and Adjacent Areas

The War Against Japan

Index

A-20's, 517, 550, 560, 576-77, 580

A-24's, 550, 577

A-25's, 550, 577

A-26's, 241, 243, 550, 576

A-28's, 550, 578

A-29's, 550, 578

A-30's, 550, 578

A-31's, 242, 550, 576, 578

A-32's, 576

A-35's, 550, 576

A-36's, 550, 578

Absenteeism, 457

ACAD, 305

ACC. See Aeronautical Chamber of Commerce.

Accelerated depreciation. See Depreciation; Facility financing, by accelerated depreciation.

Acceptances of aircraft, 243n, 244-45, 370, 532, 534,

553, 560, 564. See also Aircraft production; Deliveries; Delivery schedules.

"Accepted schedules," 152-55

Accessories, 6, 8, 198, 210, 273. See also Components.

Bendix role, 450

contract negotiation, 354

educational orders for, 160, 183

experimental development, 97, 99

exports influence, 197

facility expansion, 294, 310, 320-21, 324, 328

manufacturers' profits, 36

production, 530, 566ff.

production capacity, 180

proposed nationalization of supply, 124-25

shortages, 183

small business role, 492, 501

special tools problem, 485

standardization, 267

Accident ratios, 50. See also Attrition rate.

Accidental loss. See Aircraft accidents; Attrition rate.

Accountable property, 397. See also Property accounting. Accountability. See Property accounting.

Accountants, 354, 360, 393, 407, 416

Accounting, 34-35, 125, 282, 300, 419, 535

in CPFF contracts, 380-81, 392, 415

escalation problem, 423, 427

impact on finances, 36, 38

inadequacies, 391, 394, 397, 416, 421, 433

in modification centers, 532

organization and procedures, 390

savings, 367

Accounting office. See General Accounting Office.

Accuracy. See Standardization; Tolerances.

Act of 24 June 1936, 171-72. See also 2, 320 aircraft

program.

Administration. See Administrative procedures.

Administration Branch, Materiel Division, 98

Administrative controls, 473. See also Management

control; Organizational planning; Statistical

Control Office.

Administrative discretion. See Discretionary powers.

Administrative history, 271

Administrative organization, 329

Administrative overhead. See Overhead.

Administrative personnel, 403. See also Civil Service;

Civilian personnel; Enlisted men; Officers.

Administrative procedures

analysis of, 106, 109-11, 128, 272, 338, 352, 408-09

for CPFF contracts, 408

delay procurement, 274, 307, 331-32, 350, 353

in facility expansions, 296-98

standardized forms, 473

for termination, 452

weaknesses, 105, 261, 380

Wright Field, 99, 104, 493

Administrators, qualities required, 147. See also Discretionary powers; Leadership; Officers; Personnel.

ADP. See Authority for District Purchase; Data

processing.

Advance payments, 284-85, 413, 415. See also Partial

payments.

Advanced trainers, 482, 546, 551, 560, 576-78, 581

Advertising, promotional, 382

Advertising for bids, 80, 89-90, 128, 275, 508. See

also Bids; Circular proposals; Competitive bidding; Competitive procurement.

Advertising registers, 492, 497-98

Advisory Commission to the Council of National Defense. See National Defense Advisory Commission.

Aerial navigation, 13

Aeronautical Board, 211, 213

Aeronautical Chamber of Commerce, 8-9, 187

Army-Navy agreements, 89

capacity studies, 178, 188, 193n

criticizes procurement methods, 145, 277, 422, 426

relations with Air Corps, 87-88, 145, 188, 426

site selection check list, 307

Aeronautical Corporation of America, 575

Aeronautical engineers. See Aircraft designers; Design engineers; Design staffs.
596 BUYING AIRCRAFT

Aeronautical journals, 275

Aeronautical research. See Research and development.

Aeronautical Section, NDAC, 256-57

Aeronca Aircraft Corp., 321, 576. See also PT-19's;

PT-23's.

Aero Supply Corp., 7-8, 8n

Aeroproducts Division of CMC, 562-63

AGF, 241, 475

Agreements, interservice, 392. See also Aeronautical

Chamber of Commerce; Army-Navy; Interbranch

competition; Interservice rivalry; Joint Army

and Navy Board.

Aid for Britain, 199

Air arm. See Air Corps; Army Air Forces; Bureau

of Aeronautics; Royal Air Force, etc.

Air arm versus ground forces, 173. See also Interbranch competition.

Air arsenals, 176-79, 185, 277, 291. See also Facilities,

nationalization; Nationalization of industry.

Air Associates, Inc., 7-8, 8n

Air bases, 77-78, 216-17, 411. See also Depots.

Air Board, 220

Air Commerce Act of 1926, 13-14, 17

Air-cooled engines. See Engine manufacturers; Engine production; Radial engines.

Air Cooled Motors, Inc., 6n, 581

Air Corps

administrative procedures, 75, 78, 127, 260-61, 261n,

380

airmail, 15, 121

auditing, 35, 390

authorized strength, 43, 48-51, 50n, 59-61, 63-75,

171-75, 206

balanced program, 77-78

as combat arm, 48

co-operation with Navy, 212-13

defers to export orders, 202-03

educational orders, 160, 183

expansion program, 170, 178-79, 283

expenditures for aircraft, 1926-34, 117

50,000 program, 228n

finances, 67, 70, 172-73. See also Appropriations;

Expenditures for air matériel,

inadequately armed, 43, 208, 244-45

JAC members, 266

manufacturers, 21

mission, 48, 53, 63, 101, 124, 169-70, 210. See also

Doctrine,

mobilization planning, 159, 161-62, 168, 178-79,

206, 225, 249, 291

obsoletion policy, 50

oleo strut procurement, 318

OPM relations, 270

personnel, 64

prewar procurement, 3, 20, 66, 332, 346

procurement procedures, 130, 143. See also Procurement procedures.

Air Corps—Continued

profits on contracts, 126

relation to Congress, 48, 55-57, 76-77, 92, 119, 144-

45, 277, 280, 283

relations with NDAC, 192, 256, 262

relief funds, 67-68

research policy, 23-25

rivalry with British, 263

studies requirements, 51-52, 63

spares policy, 74, 215

Standards Book, 132

Air Corps Act of 1926, 47, 49, 59, 64, 89

Air Corps policy on, 116, 124

alleged violations of, 118, 123

amendment considered, 52, 116, 116n, 127-28, 276

auditing provisions, 390, 402

creates ASW (Air), 53, 94

data for negotiation, 344

expenditures, 1926-34, 117

interpretations, 51, 92-93, 100, 114-16, 126-28, 171-

72

operating experience, 50-51, 61, 106, 137, 148

procurement procedures, 92-93, 106ff., 113ff., 130

used in emergency, 275, 278

Air Corps Board, 94-95, 106, 217

Air Corps officers. See Officers.

Air Corps Technical Committee, 94, 97, 97n, 104, 106-

07

Air defense plans, 52, 95. See also War planning.

Air depots, 98, 244-45, 533, 537. See also Depots;

Field Service Section, Materiel Division; Maintenance; Supply.

Air force, concept of, 45

Air forces. See Army Air Forces; German Air Force;

Royal Air Force.

Air Mail Act of 1925, 12, 14, 17

Air Mail Act of 1934, 15, 56

Air Ministry, 165, 266. See also British Purchasing

Commission; Joint Aircraft Committee; Royal

Air Force; United Kingdom.

Air power. See also Doctrine.

Army advocates silenced, 212

Army views on, 174

Baker Board views, 56

British, 224

character of, 5

doctrines discussed, 52, 63, 101, 156, 169, 233

factors influencing, 41, 52, 171-74, 210-11, 237, 553

German, 169

GHQ Air Force role, 102

Johnson's views, 181

Lassiter Board views, 45

newspaper comment on, 195

procurement law role, 278

requirements for, 210

Rogers Committee views, 123-24

Roosevelt's strategy on, 172-73

War Department views, 48, 157, 172, 210-11
INDEX 597

Air Scheduling Unit, JAC, 269-73, 457

Air Service

aircraft expenditures in 1920-24, 85

engineering center, 112

policy on composition, 45, 47

procurement officer, 144

procurement program, 44-46

strength in 1926, 48

"Air service," concept of, 45

Air Service Command, 470-71, 487, 533

Air Staff, AAF, 241, 465, 478, 487. See also individual

elements of staff, e.g., Materiel, Maintenance,

and Distribution, Air Staff.

Air Technical Service Command, 471

Air trust, 123

Air War Plans Divisions, 237-38

Airacobra. See P-39's.

Airacomet. See P-59's.

Aircraft. See also Engines; Manufacturers.

A-20's, 517, 550, 560, 576-77, 580

A-24's, 550, 577

A-25's, 550, 577

A-26's, 241, 243, 550, 576

A-28's, 550, 578

A-29's, 550, 578

A-30's, 550, 578

A-31's, 242, 550, 576, 578

A-32's, 576

A-35's, 550, 576

A-36's, 550, 578

Advanced trainers, 482, 546, 551, 560, 576-78, 581

AT-6's, 482, 551, 560, 578

AT-7's, 551, 576

AT-8's, 551, 576

AT-9's, 577

AT-10's, 576-77

AT-11's, 576

AT-16's, 578

AT-17's, 576, 581

AT-19's, 576

AT-21's, 546, 576-78, 581

attack, 64

attack bomber, 72, 275

autogiros, 275, 278

B-10's, 117, 142, 163-64

B-15's. See Aircraft, XB-15's.

B-17's, 20, 76, 77n, 142, 148, 214, 245, 246, 250, 257,

282, 302-03, 306, 309, 362, 460, 529, 540, 550, 560,

576-78, 580

B-18's, 76-77, 77n, 142, 245

B-19's, 550

B-23's, 246

B-24's, 306, 309, 310, 326-27, 416, 494n, 519-21,

524, 526-27, 529, 531, 535-36, 539, 540, 545, 550,

560, 576-78, 580

B-25's, 241, 306, 308, 528, 550, 560, 578, 580

B-26's, 241, 243, 302, 306, 308, 366, 534, 540, 545-46,

550, 560, 578, 580

Aircraft—Continued

B-29's, 156, 303, 308, 325, 399, 415, 546-47, 550, 553,

564, 567, 576, 578, 580

B-32's, 308, 550, 576

B-38's, 576

B-42's, 550

bomber (general), 45, 52, 64, 72, 72n, 75, 77-78, 77n,

117, 142, 156, 204n, 210, 537, 553-56, 576-77

BT-12's, 577

BT-13's, 551, 576

BT-15's, 576

C-32's, 136

C-43's, 551

C-45's, 551, 560, 576

C-46's, 546, 551, 577

C-47's, 136, 551, 560, 577, 580

C-50's, 576

C-54's, 514, 551, 560, 577, 580

C-55's, 577

C-60's, 551

C-61's, 551, 577

C-64's, 551, 578

C-69's, 551, 578

C-78's, 551, 576

C-82's, 577

C-87's, 551, 576

C-97's, 576

C-117's, 551

cargo, 514, 537

civilian, 8-9, 11, 20, 126, 575

CS-2's, 85-86

DC-2's, 136

DC-3's. See Aircraft, C-47's.

E-6's, 578

F-2's, 550. See also Aircraft, C-45's.

F-4's, 550, 578. See also Aircraft, P-38's.

F-5's, 550, 578. See also Aircraft, P-38's.

F-6's, 550. See also Aircraft, P-51's.

fighter, 45, 110, 112, 156, 228, 233, 237, 239, 244-45,

269, 278, 310, 457, 533, 537, 564, 567, 576-79

four-engine bomber, 302-03, 319

glider, 373, 552, 558, 577

heavy bomber, 233, 237, 244, 253, 564, 567

L-1's, 551

L-2's, 551, 579

L-3's, 551, 576

L-4's, 551, 578, 580

L-5's, 551, 576, 580

L-6's, 578, 580

L-7's, 579

L-8's, 578

L-14's, 578. See also Aircraft, L-4's.

liaison, 11, 552, 566, 576-79

light bomber, 244

medium bomber, 244, 302, 308

observation, 45, 64, 156-57

P-26's, 568

P-35's, 568
598 BUYING AIRCRAFT

Aircraft—Continued

P-38's, 517, 531, 533-34, 550, 560, 578, 581

P-39's, 245, 302, 550, 560, 576, 581

P-40's, 228, 517-18, 550, 560, 577, 581

P-43's, 578

P-47's, 550, 560, 577-78

P-51's, 550, 578, 581

P-59's, 550, 562

P-61's, 550

P-62's, 578

P-63's, 517, 550, 576

P-67's, 578

P-70's, 550, 577

P-75's, 269, 577

P-80's, 550, 562, 578

P-84's, 538n

PT-13's, 546, 551, 576, 581

PT-14's, 579

PT-17's, 551, 576

PT-19's, 551, 576-78, 581

PT-20's, 578, 581

PT-21's, 578

PT-22's, 578, 581

PT-23's, 546, 551, 576-78

PT-24's, 577, 581

PT-25's, 578, 581

PT-26's, 551, 577

PT-27's, 551

R-1's, 578

R-4's, 551, 578, 582

R-5's, 551, 578

R-6's, 551, 578

reconnaissance, 576-79

rotary wing, 577-79

strategic bomber, 212

tactical, 170, 225, 225n, 241, 244

transport, 12, 16, 110, 134ff., 183, 551, 576-79

UC-45's, 442-43

utility, 442-43

XB-15's, 149

XFM-1's, 199

YB-10's, 117

Aircraft acceptances. See Acceptances of aircraft.

Aircraft accidents, 121. See also Accident ratios; Loss

rates.

Aircraft armament. See Armament, aircraft.

Aircraft Board, 82, 82n

Aircraft Branch, Materiel Division, 97-99

Aircraft Branch, WPB, 273

Aircraft characteristics, evaluation of, 111. See also

Aircraft performance; Military characteristics;

Performance characteristics; Specifications.

Aircraft, civilian. See Civilian aircraft.

Aircraft design. See also Design et seq.

data flow studied, 308, 541

evaluation of, 89-90, 109-110, 113, 131

freeze of, 187

impact on profits, 36

Aircraft design—Continued

influences mobilization, 157

interpretation problems, 469, 522, 544

Martin B-10, 117

Reuther misconception of, 311

Aircraft designers. See also Design engineers; Design

staffs; Engineers.

automotive industry lacks, 290

danger of loss by, 114-15, 302

fees allowed, 377

indispensable to government, 177, 182

spare parts problem, 342

specify engines desired, 127

Aircraft Designers Handbook, 131

Aircraft engineers. See Aircraft designers; Engineers.

Aircraft engines. See Engine manufacturers; Engines.

Aircraft expenditures, 117, 556-59

Aircraft grounded for repairs, 50. See also Depots;

Maintenance; Spare parts.

Aircraft on hand. See also Authorized strength.

average number, 50

factors influencing, 44, 56-59, 70-71, 171

lack equipment, 246

1941 GHQ Air Force, 244

1929-40 period, 55, 61, 66, 129, 230

reported not actual, 50

Aircraft hardware, 8, 404, 433. See also Accessories.

Aircraft Industries Association, 188n. See also Aeronautical Chamber of Commerce.

Aircraft industry

accepts audits, 402

accounting practices, 34-35

Air Corps Act impact, 93

Air Corps representatives with, 99. See also Resident representatives.

alleged banker control, 123

alleged frauds, 122

capacity estimates, 161, 186. See also Production

capacity.

character of, 6-10, 27

contract negotiating practices, 286, 355-56

contributions, 568

co-operation needed, 182

cost-cutting requirements, 297

criticizes procurement procedures, 86-87

dollar value output, 27

economic status, 26-27, 46, 93, 127, 130, 141, 143,

147, 159-61, 178, 325, 569

educational orders, 159-60

facilities expansion, 41, 70, 175-78, 193, 291, 302.

307

fear of nationalization, 38, 124-25, 277. See also Air

arsenals; Nationalization of industry.

financing, 17, 19, 21, 33-41, 70, 184, 451. See also

Advance payments; Capital investment; Facility

financing; Loans; Partial payments; Stock market; V-loans.

floor space, 29, 294-95, 310
INDEX 599

Aircraft industry—Continued

foreign order impact, 200. See also Exports.

impact of secrecy, 18. See also Release policy; Security classification.

inventory problem, 457

job-shop views, 164

lacks adequate staff, 405. See also Aircraft designers; Employment; Engineers.

lobby, 145. See also Aeronautical Chamber of

Commerce.

managerial experience, 304

market, 11ff., 17, 21-22, 41, 179. See also Exports;

Foreign orders.

mobilization planning, 152-55, 181ff., 207

NRA code, 8

operating ratios, 40-41

order backlog, 179-80, 202, 234

output per worker, 26-27

political influence on, 38

prewar production experience, 26ff.

research bid policy, 24-25

resists strategic dispersal, 307. See also Geographic

dispersal.

shortages, 180, 258

statutory aids for, 281

technical changes in, 148, 246. See also Research

and development.

training engineers, 23

wage indices, 424-25

Aircraft innovations, 107. See also Design; Experimental aircraft; Experimental contracts; Research and development.

Aircraft instruments. See Instruments, aircraft.

Aircraft losses. See Aircraft accidents; Attrition rate;

Loss rates.

Aircraft Maintenance Branch, Materiel Division, 98

Aircraft manufacturers. See Airframe manufacturers;

Manufacturers.

Aircraft "on order," 49, 66, 67n. See also Aircraft

industry, order backlog.

Aircraft performance, 3-4, 110-14, 116, 127, 130. See

also Military characteristics; Performance characteristics; Specifications.

Aircraft Planning Committee, ANMB, 252

Aircraft Procurement Branch, Wright Field, 348

Aircraft production, 511, 511n

acceleration, 189, 315, 324, 518, 520, 528, 553

cost curves, 344

design change role, 26, 32, 468, 516. See also Design

freeze; Quantity versus quality.

Detroit conversion for, 314

directly from design, 251

efficiency yardstick, 326-27

factors delaying, 27, 246, 274, 306, 468

first large-scale, 16

by foreign powers, 169n, 553ff.

goals change, 257, 304

impact of nationalization, 201

Aircraft production—Continued

lags behind automobile, 27

legal obstacle, 274

neutrality impact, 201

1939-45 total U.S., 241n, 548, 555

1922-35 total U.S., 10, 21n, 26-28

one-an-hour rate, 518

organization for, 273

peak monthly, 553, 563

prewar resources, 7-9, 26ff.

rate determines fee, 418

relation to training, 225

scheduling and co-ordination, 263-64, 266-67, 270,

273. See also Airframe manufacturers, scheduling.

steps leading to, 106ff.

stressed over experimentation, 257n, 514

wartime expansion, 457

Willow Run efficiency, 527

World War I, 84n

Aircraft Production Board, WPB, 273

Aircraft Production Board of 1917, 82n

Aircraft program. See Procurement program; individual programs by name.

Aircraft Resources Control Office, 273

Aircraft seats, 267n

Aircraft Section, OPM, 266, 270

Aircraft strength. See Air Corps, authorized strength;

Aircraft on hand.

Aircraft tools, 484

Aircraft unit costs. See Unit costs.

Aircraft weight. See Airframe pounds; Airframes,

average gross weights.

Airframe manufacturers, 6-9, 293n, 563, 575-79

accounting, 416, 423

aluminum, 180, 250-51, 257

attitudes and practices, 119, 185, 251, 318, 333, 356,

356n

audits, 344, 392

automotive industry relations, 306, 522, 541

capacity studies, 111, 185-87, 191, 290, 292. See also

Production capacity.

competition, 127, 141

conference in 1938, 166

contract negotiations, 277, 336, 355

costs per pound, 521

criticize procurement procedures, 87n, 114-15, 129,

142, 145, 370

design role, 8, 32, 132, 513, 529

dollar volume, 491

educational orders, 160, 183

employees, 564-66

exports impact, 200, 202, 294-95

facility expansions, 29, 162, 165, 177-78, 184-85,

290, 299, 301-02, 321, 324-25

fear automotive competition, 290-91, 304

fear government facilities, 124-25, 178. See also

Air arsenals; Nationalization of industry.
600 BUYING AIRCRAFT

Airframe manufacturers—Continued

fear of loss, 286, 297, 332-33, 345, 383, 421, 424, 427

financial condition, 35-36, 40, 126, 130, 141-43, 289,

448

floor space, 29

inventory value, 40-41

lobbying, 68. See also Aeronautical Chamber of

Commerce.

mass production, 324, 348, 520, 528, 538. See also

Production contracts.

modifications, 303, 531-32, 535, 538

neutrality problem, 196, 201, 201n. See also Exports; Foreign orders; Release policy.

oleo strut shortage, 318

order backlog, 29, 376

priorities problems, 259-60

productivity rank, 561

purchase orders, 457

scheduling, 263-64, 267, 269-70, 274, 277

subcontracting, 182, 184, 282

suborders, 404, 457

suppliers, 251

views on Reuther, 312

Airframe pounds, 190, 548, 551, 556, 563-64. See also

Airframes, average gross weights.

Airframe spares. See Spare parts.

Airframes, average gross weights, 72, 243, 527, 556.

See also Airframe pounds.

Airframes, security classification, 198. See also Release policy; Security classification.

Airlines. See also Modification centers; individual

airlines by name.

alleged profiteering, 119

aircraft market, 11-12, 17, 20, 143

airmail contracts, 12-13, 121

description, 11ff.

engines borrowed, 250

finances, 15-17, 123

modifications role, 530

passenger traffic, 14-16

pilots' experience aids planners, 222

priorities problem, 259, 262

production scheduling, 265-66

Airmail, 14-15, 55, 119, 121, 279

Airplane Division, NDAC, 293

Airstrips, 77-78. See also Air bases.

Akron, Ohio, 9

Alaska, 242, 534

Albert Kahn, Inc., 28n

Alcoa, 250-51

Alignment, 524

All-metal aircraft, 16

Allis-Chalmers, 455-56

Allison Division of GMC, 6n, 269, 293n, 309, 562, 581.

See also V-1710 engine; V-3420 engine.

Allocation of contracts, 88. See also Approved lists.

Allocation of costs, 362, 392. See also Accounting.

Allocation of industrial capacity, 152, 247, 269. See

also Facilities, requirements; Facilities Division,

OASW; Mobilization planning; Office of Assistant Secretary of War.

Allowable costs

in CPFF contracts, 379-82

French policy, 378

in renegotiation, 435

in terminations, 451

Altimeters, 567

Aluminum

airframe weights, 180

mobilization planning for, 158

production problems, 523

requirements, 257, 564

shortages, 250-51, 271n

Aluminum industry, 180. See also Alcoa.

AMA, 305

Amendment of contracts, 366-67. See also Change

orders; Escalator clauses; Price adjustment; Renegotiation.

American Airlines, 530

Amortization of costs, 85. See also Deferred development charges.

Amortization specialists, 354. See also Facility financing, by accelerated depreciation.

ANMB. See Army and Navy Munitions Board.

Annual reports, War Department, 3

Antikickback acts, 281

Antitrust statutes, 499

APB, 273

Appeals, 370, 477. See also Board of Contract Appeals; Federal courts.

Applied research, 22-25. See also Experimental aircraft; Experimental contracts; Research and development; Service tests.

Appropriations. See also Estimates.

administration of, 43, 73-74, 78, 104-05, 144, 154,

298, 300, 423

buy less than intended, 76

congressional responsibility, 70

for Defense Aid, 267

discretionary fund sought, 78

distinguished from authorization, 43

for 50,000 program, 229

funds maldistributed, 78

impounded by President, 67, 128

inadequate between wars, 63

Lampert Committee recommendations, 46

Morrow Board recommendations, 47

in 1940 crisis, 179-80, 230

for 1935-45 fiscal years, 556-57

no substitute for procurement skills, 79

Appropriations Committee. See House Committee on

Appropriations.

Approved lists, 88, 120

Aqua system, 209

ARCADIA Conference, 238
INDEX 601

ARCO, 273

Area offices, 506

Area representatives, 361. See also Resident representatives.

Argentina, 3

Armament, aircraft, 203, 267, 529. See also Ordnance

Department.

Armament Branch, Materiel Division, 98

Armament dealers, 196. See also Neutrality legislation.

Armor, 203, 245, 269

Arms and Services, 93-94, 104, 152-53. See also Technical Services; individual arms and services by

name.

Army

air power views, 106, 174, 211, 213. See also Air

Corps; Air power; Army Air Forces; General

Staff, War Department, doctrine.

bids versus Navy, 150. See also Army-Navy; Interservice rivalry.

Army Air Corps. See Air Corps.

Army Air Forces

criticized, 411

1942 procurement, 346

organization, 475, 487, 490

relation to ASF, 453, 477

relation to Signal Corps, 486

relation to SWPC, 500

relation to USW, 478

resist procurement assignment, 482

retains procurement control, 479

Army cognizance, 293

Army co-operation aircraft, 54. See also Close-support role; Liaison aircraft.

Army depots, 400

Army Ground Forces, 241, 475

Army Industrial College, 151, 247

Army-Navy

ANMB resolves conflicts, 258

cognizance agreement, 293n

contract procedures criticized, 317

co-ordination problems, 230, 424, 442

discussion silenced, 212

DPC mediation role, 300

"E" awards, 436n

facility expansion roles, 293

priorities problem, 260

procurement statutes, 285

requirements, 250, 252

roles and missions, 212. See also Doctrine.

terminations, 451

total wartime expenditures, 556

Army-Navy-British Purchasing Commission Joint

Committee, 263-67, 270-71. See also Air Scheduling Unit, JAC.

Army and Navy Munitions Board. See also Office of

Assistant Secretary of War.

mobilization role, 152, 155, 247, 252

Army and Navy Munitions Board—Continued

organization, 151, 213, 253, 261

priorities problems, 261-62, 258-59

Army-Navy Petroleum Board, 484

Army-Navy procurement. See Joint procurement.

Army Regulations

on procurement, 94, 116-17

on property accounting, 400

sole source defined, 129

on technical committees, 104

Army Service Forces, 453, 475-76, 482

Arnold, General Henry H., 112, 234, 244-45, 465.

See also Chief of Air Corps; Commanding General, AAF.

on aircraft ceiling, 171-73

aircraft program, 170, 170n

on aircraft reserve, 204n

approves CPFF, 335

disciplines President's critics, 205

on expansion difficulties, 177

50,000 program comment, 243

JAC role, 266

legislative tactics, 204

mistrusts mobilization plans, 205

and obsolescence problem, 203n

orders conversion survey, 322

preparedness views, 181-82

production goals, 242

rejects supply ministry, 272-73

release policy, 197n, 205, 207

seeks capacity yardstick, 185, 188, 190

seeks negotiation authorization, 278

separates production and engineering, 468

Arsenal of Democracy, 304

Artillery shells, 296

Artillery spotting, 45. See also Army co-operation

aircraft; Liaison aircraft.

Aruba, 282

ASC. See Air Service Command.

Assembly lines

ASU curbs stoppages, 271

for B-24, 309, 521

conversion of, 315

impact of standardization, 264

incorporating changes, 516, 530, 532, 534-35, 537.

See also Modifications.

Assignment of claims, 288. See also Loans.

Assistant Chief of Air Staff, AAF, 465, 478, 573

Assistant Secretary of Navy, 88-89, 247

Assistant Secretary of War, 3-4, 118, 279, 352. See also

Davis, D. F.; Johnson, Louis B.; Office of Assistant Secretary of War; Patterson, Robert P.;

Woodring, H. H.

ANMB role, 247

backs sample aircraft, 133

and bottlenecks, 248

considers design freeze, 514

CPFF role, 334
602 BUYING AIRCRAFT

Assistant Secretary of War—Continued

development role, 107

favors proprietary rights, 88

limits educational orders, 183

mass production views, 519

mobilization planning, 151, 153, 154n

procurement assignment, 480

Procurement Regulations role, 339

procurement role, 93-94, 100, 128-30, 336, 474

reaction to negotiated contracts, 129

studies escalation, 425

Assistant Secretary of War for Air, 53, 94, 101, 241,

378, 474, 542

ASU. See Air Scheduling Unit, JAC.

ASW. See Assistant Secretary of War.

ASW (Air). See Assistant Secretary of War for Air.

AT-6's, 482, 551, 560, 578

AT-7's, 551, 576

AT-8's, 551, 576

AT-9's, 577

AT-10's, 576-77

AT-11's, 576

AT-16's, 578

AT-17's, 576, 581

AT-19's, 576

AT-21's, 546, 576-78, 581

Atlanta, Ga., 303, 506

Atom bomb, 547

ATSC, 471

Attaches. See Military attaché reports.

Attack aircraft, 64. See also A-20's et seq.

Attack bombers, 72, 275

Attorney General

defines executive discretion, 81

opinions on Air Corps Act, 51, 128

procurement role, 80, 137, 147, 275, 339

seeks statutory loopholes, 281

Attrition rate, 70, 214, 217-18, 225. See also Loss

rates; Obsoletion, problem of; Operational

losses.

Auditing

administration of, 35n, 364, 390, 393

contractor complaints of, 396

data for negotiators, 344, 358

minimizes fraud, 357, 406, 409

Navy contracts, 126

overhead role, 382

for renegotiation, 431

retroactive, 392

subcontractors resist, 402

terminations, 452

Auditors, 391, 396, 406, 442

Austin automobile, 165

Australia, 200

Authority for District Purchase, 507

Authority for purchase, 503

Authorization, distinguished from appropriation, 43,

61, 65

Authorized strength, 43, 48-51, 50n, 59-61, 63-75,

171-75, 206

Autogiros, 575, 578. See also Rotary wing aircraft.

Automatic data processing. See Data processing.

Automobile industry

aircraft manufacturers influenced by, 304, 541

aircraft production problems, 162-63, 162n, 522,

528

aircraft role considered, 162, 290, 304-05, 314

capacity estimates faulty, 164

establish aircraft committee, 305

components role, 540, 567

conversion considered, 290, 314-15, 322

costs per pound, 521

CPFF salary increases, 384

designers, 290, 306

facilities expansion, 306, 309

fees allowed, 377

labor allegations, 313-14, 316

mass-production views, 164, 529

mobilization role, 163, 166, 539

1937 wages, 26

output per worker, 26-27

Reuther Plan views, 311

survey, 27

tooling expenditures, 520

World War I engines, 6. See also Liberty engines.

Automobile Manufacturers Association, 305

Automobile model change, 311-16

Automobile production, 26, 310, 314-15

Automotive Committee for Air Defense, 305

Autonomy for air arm, 476, 482

Autopilots, 183, 437

Aviation Engineering Center, proposed, 277

Aviation gasoline. See Fuel.

Aviation magazine, 184

Aviation Manufacturing Corp., 6n. See also Lycoming, Stinson, and Vultee Divisions of the corporation.

Aviation periodicals, 89-90. See also Magazines.

Aviation Procurement Committee, 124n

Aviation shares, 119. See also Aircraft industry, economic status; Aircraft industry, operating ratios; Airframe manufacturers, fear of loss; Capital investment; Stock market.

Award of contracts, 81, 115, 134-38, 279, 317, 498-500.

See also Procurement procedures.

AWPD, 237-38

Axis air power, 195

B-10's, 117, 142, 163-64

B-15's. See XB-15's.

B-17's, 148, 282, 362

costs, 20, 142, 560

engines, 250, 580

facilities, 302-03, 306, 309

joint production program, 540

modification, 529
INDEX 603

B-17's—Continued

parts, 214, 245, 460

performance compared, 77n, 246

production, 550, 576-78

production opposed, 76, 257

B-18's, 76-77, 77n, 142, 245

B-19's, 550

B-23's, 246

B-24's, 306, 309, 326-27, 416

engines, 310, 580

joint production program, 540

modification, 529, 531, 535-36

production, 550, 576-78

unit costs, 560

Willow Run, 494n, 519-21, 524, 526-27, 539, 545

B-25's

engine, 580

engineering, 528

production, 241, 306, 308, 550, 578

unit costs, 560

B-26's

engine, 580

facility expansion, 302

modification, 534

production, 550, 578

production co-ordination problems, 540, 545-46

production discussed, 241, 306, 308

supply problems, 243

termination problems, 366

unit costs, 560

B-29's, 399, 415, 546-47, 553

component parts, 156, 564, 567

engine, 580

facilities, 303, 308, 325

production record, 547, 550, 576, 578

B-32's, 308, 550, 576

B-38's, 576

B-42's, 550

Backlog, 472

Bad debts, 435

Bad faith, 383

Baker Board, 56, 58-59, 159n

Baker, Newton D., 55-56

Balance sheets, bidders', 357, 363. See also Financial

statements.

Balanced force, 174

Balanced program, 77-78

Baldwin-Southwark, 31

Ball turrets. See Gun turrets.

Balloons, 558

Baltimore (light bomber). See A-30's.

Baltimore, Md., 9, 37, 506, 540

Baltimore & Ohio R.R., 307

Bank loans. See Loans,

bankers, 123, 284, 298-99

Bankruptcy

industry fears of, 130, 150, 178, 333

from sample aircraft, 142

Bankruptcy—Continued

small business, 494

from terminations, 448

Bankruptcy Act, 37

Banks. See Facility financing; Federal Reserve System; Loans.

Barracks, 77-78

Basic training aircraft, 551, 576-77

Battle of Britain, 232-33

BDV Committee, 541-45

Bearings, antifriction, 271n

Beaverbrook, Lord, 209, 228

Bechtel-McCone-Parsons base, 533

Beech Aircraft Corp., 293n, 302, 321, 442. See also

AT-7's; AT-10's; AT-11's; C-45's; UC-45's.

production, 561, 575-76

Belgium 200, 207-08, 224

Bell Aircraft Corp., 38-39, 259, 293n, 303-04, 376. See

also B-29's; P-39's; P-63's; XFM-1's.

B-29 role, 547

facility expansion, 302ff., 321

production, 245, 561, 575-76

Bell, L. L., 190

Bellanca Aircraft, 321, 576. See also AT-21's; C-50's.

Bendix Aviation Corp., 7-8, 8n, 449-50

Bibliography on renegotiation, 432

Bid bonds, 288

Bid summary form, 408

Bidders, 92-93, 131, 133, 197. See also Air Corps Act

of 1926.

inadequate number of, 142-43, 145-46, 358

Bidders lists, 492, 497-98

Bids

contractor tactics, 108-09, 114, 138, 350

evaluation of, 131, 133, 136-37

preparation problems, 275-76, 492-93, 496-98

wartime limitations, 358

Big business

AAF dollar volume, 502

alleged favoritism, 317, 493-95

negotiating contracts with, 356-57, 499

political implications, 125, 312

renegotiation, 439

Bill of materials, 153-54, 270, 407, 521

Billing, 406

Binghamton, N.Y., 506

Birmingham, Ala., 531, 533

Birmingham (England), 165

Black, Hugo, 55n, 119, 121

Black Widow. See P-61's.

Blitzkrieg, 194, 211, 222-24

Block system modifications, 535, 537

BLS, 424

Blueprints, 99, 251, 305, 493, 501

interpretation problems, 86, 361, 483, 521-22, 539,

544

Board of Contract Appeals, 371, 379
604 BUYING AIRCRAFT

Boards of Officers, 59, 110-11. See also Air Corps

Board; Investigations; Procurement Planning

Board, Materiel Division.

Bobcat. See AT-8's; AT-17's; C-78's.

Boeing Aircraft Corp., 9, 293n, 575. See also A-20's;

B-17's; B-29's; C-97's.

contract administration, 349, 399, 540ff.

facility expansion, 29, 299, 302, 325

financing, 34, 38n, 40n

production, 7, 21n, 373, 376, 547, 561, 565, 576

Boeing-Douglas-Vega Committee, 541-45

Bogey contracts, 82-83. See also Bonus contracts; Incentive contracts; Incentives.

"Boiler plate," 340-41, 448, 455. See also Contract

forms.

Bomber aircraft, 117, 204n. See also B-10's et seq.;

Four-engine bombers; Heavy bombers.

armament, 156

doctrine and use, 45, 52, 72n, 156, 210

gross weight, 556

modification, 537

Navy, 576-79

number of parts, 72, 564

production, 553-55

program, 64, 75, 77-78, 77n

unit costs, 142

Bomber competition, 145

Bomber plant program, 305-08

Bombsights, 246, 483

Bonds, 36-37, 288

Bonus, 379, 385, 429. See also Incentives.

Bonus contracts, 417. See also Bogey contracts; Incentive contracts; Incentives.

Book of standards, 107

Bookkeeping, 282, 300. See also Accounting.

Boring mills, 259

Borrowing, 298. See also Emergency plant facility

contracts; Loans.

Borrowing of parts, 399, 415

Bottlenecks, 160, 183, 257, 271, 292, 294. See also

Shortages.

BPC. See British Purchasing Commission.

Brakes, 566

Branch plant, 399. See also Facility expansion.

Brand names, 314

Branshaw, Brig. Gen. C. E., 465, 471, 504-05, 509

Breakage, 342

Breaker points, 250

Breeze Manufacturing Co., 7-8, 8n

Brett, Maj. Gen. George H., 266

Brewster Aeronautical Corp., 7-8, 8n, 293n, 575-76

British Army, 208

British Commonwealth, 560

British Purchasing Commission, 200, 262, 266, 392

British Supply Council, 263, 266

British War Relief, 382

Brokers. See Capital investment; Middlemen.

Browning, Brig. Gen. A. J., 477-79

BT-12's, 577

BT-13's, 551, 576

BT-15's, 576

BuAer. See Bureau of Aeronautics.

Budd Manufacturing Co., 576

Budget

estimates, 62, 64, 70-72, 74-75, 173, 204

impact on requirements, 219, 221, 232ff.

procedures, 60-61, 79, 125, 143-44, 171-74, 192

Budget and Accounting Act, 43, 173-74

Budget Director, 68-69

Budget Officer, Materiel Division, 98, 107

Buffalo, N.Y., 29, 153, 302

Buick Motor Division of General Motors, 310, 580

Bulk purchase, 512

Bullitt, William C., 169, 226

Bureau of Aeronautics, 9, 21, 59

fears Air Corps Act amendment, 116n

escalator clauses, 422n, 423-24

JAC members, 266

NDAC tie, 256

priorities problem, 262

sample aircraft difficulties, 142

scout bomber contract, 85-86

Bureau of Air Commerce, 13

Bureau of Air Production, 102

Bureau of the Budget. See also Appropriations;

Budget estimates.

procedures, 60-61

relations with Air Corps, 43, 60, 63-64, 69-71, 195,

215, 232, 232n

Bureau of Internal Revenue, 336, 435. See also Tax

amortization et seq.

Bureau of Labor Statistics, 424

Bureau of Ordnance, 362

Burns, Maj. Gen. James H., 224-25, 231, 231n

Business machines. See Data processing.

Business Week, 316n

Businessmen. See also Big business; Small business.

attitudes of, 271, 316n, 340, 438

employed by AAF, 468, 505

influence policy, 129, 169

mobilization role, 247

Buy American Act, 90, 280, 282-83, 286

Buyers. See Contract negotiators; Purchasing agents.

C-32's, 136

C-43's, 551

C-45's, 551, 560, 576

C-46's, 546, 551, 577

C-47's (Douglas DC-3), 136, 551, 560, 577, 580

C-50's, 576

C-54's, 514, 551, 560, 577, 580

C-55's, 577

C-60's, 551

C-61's, 551, 577

C-64's, 551, 578

C-69's, 551, 578
INDEX 605

C-78's, 551, 576

C-82's, 577

C-87's, 551, 576

C-97's, 576

C-117's, 551

CAA, 13

CAB, 13-14

California, 299, 299n, 387-88

California Institute of Technology, 256

Canada, 199-200, 201n, 213, 229, 399

Canadian Car Co., 576

Canadian Propellers, Ltd., 563

Cancellations. See Termination.

Cannibalization, 240

Capacity. See Production capacity.

Capital. See Capital investment; Defense Plant Corporation; Facility financing; Financing; Working capital.

Capital assets, 398

Capital investment. See also Bonds; Stock market.

in aircraft industry, 36-40

Bendix, 450

CPFF problem, 411, 413

evaluation of, 22, 111, 141-42, 333, 373, 448. See

also Airframe manufacturers, fear of loss; Bankruptcy; Losses by contractors; Risk taking.

in facilities, 29, 70, 292, 322, 563. See also Facility

financing.

foreign order impact, 200-201

influences subcontracting, 182

per worker, 26

in production tools, 31-33. See also Production

tooling.

for research and development, 21

return, 34, 376. See also Aircraft industry, economic

status; Airframe manufacturers, financial condition; Profits.

small business problem, 502

sources of, 33, 125, 179, 184

World War I profits on, 83

Capital reserves, 435. See also Cash reserves.

Carburetors, 183, 294

Career officers, 212. See also Regular Army officers.

Cargo aircraft, 514, 537. See also C-32's et seq.;

Transport aircraft.

Case, J. L., 540

Case histories, 389

Case law, 374

Cash and carry neutrality law, 196, 201n

Cash reserves, 299. See also Capital reserves.

Castings, 180, 250, 264

Catalogues, 408, 458. See also Mail-order catalogue

parts supplier.

Cave, W. S.,Col., 270n

Ceiling on aircraft strength. See Authorized strength.

Censorship, 382. See also Witnesses.

Central Procurement District, 443, 458, 491

Centralization. See also Decentralization.

of procurement, 462, 489, 493

of production control, 273

of renegotiation, 430

of termination policy, 453

Certificates of exemption, 388

Certificates of necessity, 336

Certification of facility costs, 297-98, 300

Certified public accountants, 360

Cessna Aircraft Division of United Aircraft, 293n,

561, 576. See also AT-8's; AT-17's; C-78's.

Chaco war, 196n

Chance-Vought Division of United Aircraft Corp.,

22, 561

Change notifications. See Engineering change notifications.

Change orders, 99, 146, 366. See also Amendment of

contracts.

potential abuse, 108-09, 303

rectify errors, 140

termination agreements, 452

Chemical Warfare Service, 476

Chemidlin, Capt. Paul, 199

Chevrolet Division of GMC, 26, 580

Cheyenne, Wyo., 530, 533

Chicago, Ill., 153, 310, 459, 506

Chief of Air Corps. See also Arnold, General Henry

H.; Foulois, Maj. Gen. Benjamin D.; Westover,

Maj. Gen. Oscar.

air arm strength role, 52, 55, 62, 70, 74, 78-79, 120,

124, 171, 173-74, 173n, 245

alleged misconduct, 127

criticizes relief funds, 67

fears loss of discretion, 116

GHQ Air Force role, 102

Materiel Division relations, 463

minimizes design changes, 514

mobilization planning, 153, 162, 166, 177, 179, 181ff.,

259

political problems, 57-58, 68-69

procurement role, 94, 97, 100, 107, 138-39, 542

resists escalator clauses, 422-23

responsibilities of, 182, 210

statistical tools, 192n

urges procurement changes, 51-52, 142

uses negotiated production contracts, 129

views transport case, 136

Chief of Air Service, 44

Chief of Air Staff, 516

Chief of Contract Section, Materiel Command, 345.

401, 403-04, 412, 425, 447, 503

Chief of Materiel Command, 242

Chief of Materiel Division, 100-03, 239, 303, 422, 463,

471

Chief of Procurement Division, Materiel Command,

352

Chief of Production Division, Materiel Command,

537, 542
606 BUYING AIRCRAFT

Chief of Purchases Division, ASF, 477

Chief of Staff. See also Craig, General Malin; MacArthur, General Douglas; Marshall, General

George C.

air power views, 3, 62n, 66, 171, 176, 211

controls GHQ Air Force, 102

on political maneuvering, 57-58

procurement role, 93, 146

relations with Arnold, 474

relations with ASW (Air), 53, 53n, 101

relations with USW, 475

requirements role, 93, 217, 220

Chief of Supply Division, OCAC, 103

Chiefs of Arms and Services, procurement operations, 93

China, 19, 196, 217, 560

Chokepoints. See Bottlenecks; Shortages.

Christmas Island, 213

Chrome plating, 523

Chrysler Corp., 312, 377

B-26 role, 308, 540, 546

B-29 role, 547

Dodge engine facility, 321, 580

Churchill, Winston S., 223-24, 233, 238

Cincinnati, Ohio, 9, 320

CIO, 310. See also Unions.

Circular proposals. See also Advertising for bids;

Bidders; Bids; Defense Contract Service; Invitations to bid.

difficulties in drafting, 140

distribution problems, 492

few responses to, 141-42, 145

manufacturers' tactics on, 108-09

procedures, 80, 89-90, 99, 113, 130-31

wartime use, 358

Civil Aeronautics Authority, 13

Civil Aeronautics Board, 13-14

Civil Service, 104, 125, 285n, 345-46, 393, 558. See

also Civilian personnel.

Civilian aircraft, 8-9, 11, 20, 126, 575. See also Airlines; Cargo aircraft.

Civilian control, 247, 462. See also Civilian superagency.

Civilian personnel, 106, 147, 158, 261n, 354. See also

Civil Service.

in district offices, 503, 506

fraud, 355

in Materiel Command, 270, 345, 350, 360, 466, 559

shortages, 505

wages and salaries, 558-59

Civilian requirements, 152, 317

Civilian superagency, 155, 322, 481, 495-96. See also

National Defense Advisory Commission; Office

of Production Management; War Production

Board; War Resources Administration.

abortive organization, 247-49

liaison problems, 192

need for, 251-55, 262, 265

Claimant agencies, 247

Claims, 124, 393

Clark, Bennett Champ, 199

Classified data, 473. See also Secrecy; Security classification.

Clearance Committee, ANMB, 252

Cleveland, Ohio, 153

Cleveland Pneumatic Tool Co., 7-8, 8n, 318-319

Climate. See Weather, influence of.

Close Pricing

by escalation, 423

illustrated, 363

methods, 358-59

objectives, 431, 440

problems, 343, 414, 418, 428

by repricing, 441

Close-support role, 45, 52, 157. See also "Air service",

concept of; Army co-operation aircraft.

Clothing, 250, 470, 484

Coastal defense, 211, 213

Code law, 374

Coercion. See also Compulsory directives; Mandatory orders; Plant seizure.

for administrative convenience, 338n

emergency legislation for, 287

in renegotiation, 431-32

by SWPC, 500-501

Coffin, Howard, 87-88

Cognizance agreement, 293, 293n, 561. See also Acceptances of aircraft; Allocation of industrial

capacity; Army-Navy; Cross procurement.

Cold war, 281, 283

Collector rings, 7, 183

Collusion, 110-11, 390. See also Fraud.

Color plans, 53, 95. See also RAINBOW plan.

Columbia Aircraft, 576

Combined versus joint, 266n

Collective bargaining, 426. See also Unions.

Command. See also Discretionary powers.

analysis of, 272, 424, 480, 518, 571

centralization and decentralization, 509-10, 509n,

573

organizational problems, 243, 268, 471. See also

Organization.

personal factors, 352

political restraints on, 316

procurement problems, 397, 408, 410, 455, 512, 538

relation to doctrine, 212

tools for, 450, 472-73, 572

Command post exercises, 167

Commandeering. See Plant seizure.

Commander in Chief, 213. See also President of the

United States; Presidents by name.

Commanding General, AAF, 453, 465

Commanding General, ASF, 477

Commanding General, Materiel Command, 352, 465,

471, 478

Commando. See C-46's.
INDEX 607

Commercial carriers. See Airlines.

Commercial items, procurement of, 358, 381, 392,

507. See also Open market procurement.

Commissioner of Internal Revenue, 285

Committee on Appropriations. See House Committee on Appropriations; Senate Committee on

Appropriations.

Committee on Military Affairs. See House Committee on Military Affairs; Senate Committee on

Military Affairs.

Commodities Division, OASW, 247

Common items, 481

Communications. See Signal Corps.

Communications aircraft, 551. See also L series and

R series of aircraft; Liaison aircraft; Rotary

wing aircraft.

Communications equipment, 72, 267, 529

Company pricing, 442-43

Company-wide termination, 458

Comparative prices, 359

Compensation. See Excess profits; Fees; Fixed fees;

Profits; Salaries; Wages.

Competitive bidding

below cost, 114-15

contractor purchasing without, 406

incompatible with relief, 67-68

influenced by accounting, 35

lack of bidders, 145. See also Circular proposals.

opposed, 88-89

permitted, 358

uncertainty on requirement, 92-93

Competitive economy, 316

Competitive procurement

abandoned, 123, 343

administrative alternatives, 374

adverse effects of, 85, 142-43

in aircraft industry, 185

circumvention of, 285

compensating losers, 143-46

cross procurement role, 483

difficulties of administering, 130, 138, 140, 274

equity in, 140

evaluation problem, 111, 141

favored, 80-81, 84, 124, 127-28, 148, 277-78

from foreign orders, 202-03

impact of renegotiation, 431

indirectly achieved, 127

inhibits cost disclosures, 436

interservice, 272. See also Army-Navy; Interservice

rivalry.

merits of, 146-47

in 1940 emergency, 280

reconciling price and performance, 130-31, 135

sometimes impractical, 81, 84-85, 91, 116, 274

in wartime, 358-59

Competitors, provision for appeals, 90

Complaints, 94, 281, 380, 493. See also Appeals;

Criticism.

Components. See also Accessories.

in B-24's, 521

delay production, 530

educational orders for, 160

Ford supplier role, 519

manufacture of, 6-7, 9

number per aircraft, 564

scheduling problems, 257, 259, 264, 266-67, 270,

271n. See also Materials; Parts; Raw materials;

Spare parts.

Comptroller General. See also General Accounting

Office.

capacity for delay, 138

centralized operations, 394-95

corporate seal ruling, 332

CPFF conversion views, 414

criticizes procurement procedures, 118, 128, 134-37

curbed in terminations, 452

defines executive discretion, 81. See also Discretionary powers.

disallowances, 329, 383, 393. See also Allowable

costs; Disallowances.

Eight-Hour ruling, 281

favors supervised contracts, 409

influences procurement regulations, 339

independence, 383

mutual mistake role, 366

procurement role, 147

on proprietary rights, 89n

rules on fees, 376

Compulsory directives, 271, 444. See also Mandatory

orders.

Concurrent delivery, 342

Concurrent procurement, 294, 470

Conferences, 181ff., 238. See also White House conference.

Confiscation, 435. Sec also Plant seizure.

Congress

air arm strength role, 43, 45, 51, 78, 172

Air Corps Act views, 92, 116, 127-28

Air Corps liaison, 105, 119, 144

Air Mail Act, 15

appropriations impounded, 128

authorizes plant seizure, 443

authorizes priorities, 258

authorizes wide discretion, 289

CPFF views, 284, 412, 419

delays defense, 64, 71, 75, 79, 175, 179, 235, 301

defense responsibilities, 3, 5, 43, 62, 130

economy minded, 52, 66, 73-74, 195, 202, 204

educational order role, 159-60, 183

establishes CAA and CAB, 13

establishes NACA, 23

expansion programs, 179-80, 194, 243

facility financing, 297, 301, 304

favors aircraft over facilities, 50, 77-78

favors quantity versus quality, 64-65

fraud problem, 121, 355, 357
608 BUYING AIRCRAFT

Congress—Continued

impact on procurement, 88-89, 118, 120-21, 133,

136, 495, 570

manufacturing by government, 125

neutrality legislation, 196, 201, 201n

opposes negotiated contracts, 277

procurement views change, 148, 283

proposes aviation center, 277

relation to Executive, 68, 74, 78, 91, 131, 137, 169-

71, 276

renegotiation problem, 430-31, 438

secrecy legislation, 197. See also Release policy;

Secrecy; Security classification,

small business problem, 498, 500

social legislation, 72, 281, 389n

sources of information, 55, 57-59, 62-63. See also

Congressional investigations; Investigations.

spare engine policy, 215

split awards views, 280

termination legislation, 452

views on emergency, 229-30, 280

views on profits, 418, 429

Congressional appropriations. See Appropriations.

Congressional authorization, 43, 61, 65. See also

Authorized strength.

Congressional investigations, 107-08, 111, 118-24. See

also Investigations; Lampert Committee; Rogers

Committee; Truman Committee.

Congressional Record, 122

Connally, Tom, 287

Consolidated Aircraft Corp. (Consolidated-Vultee),

293n, 575. See also A-31's; A-35's; AT-19's; B24's; B-32's; B-38's; BT-13's; BT-15's; C-87's;

L-5's.

criticized, 539

facilities, 10, 29, 309, 326

finances, 38n, 40n

Ford collaboration, 521-22

joint production program, 540

production record, 21n, 561, 565, 576

Reuben H. Fleet's role, 144

Constellation. See C-69's.

Constitutional law, 389

Construction contracts, 411

Continental Motors Corp., 6n, 293n, 580-81

Continental U.S., 52-53, 213. See also Hemisphere

defense.

Contingency allowances

impair CPFF conversion, 414

pad fixed-price contracts, 418, 422. See also Umbrella pricing.

policy liberalized, 323

sought by manufacturers, 428, 442

in termination, 450

Continuity of orders, 67, 87

Contraband, 199

Contract administration, 364; 368ff., 491, 509

Contract Administration Branch, Materiel Division,

98

Contract amendments. See Change orders.

Contract Audit Section, 430

Contract audits. See Auditing.

Contract authorization, 73

Contract awards. See Award of contracts; Procurement procedures.

Contract cancellation. See Termination.

Contract carriers. See Airlines.

Contract changes. See Change orders.

Contract clearance, 495-96, 499

Contract Compliance Unit, 470

Contract distribution, 499

Contract Distribution Division, 496n. See also Allocation of contracts; Defense Contract Service.

Contract files, Procurement Division, Materiel Command, 472

Contract follow-up, 470

Contract forms. See also Form 32.

boiler plate clauses, 340

British experience, 165

for CPFF, 334-36, 389

data purchase clause, 186

deviations, 340, 478

disputes clause, 370

formulation of, 330, 409, 419, 474

selection of, 344

simplify negotiation, 339

standard, 365

termination clauses, 446

World War I, 150

Contract negotiation

abandoned by districts, 509

alleged laxity in, 126

audit data used, 390, 395

business fears, 340

co-ordination with renegotiation, 430

delays, 71, 73, 109, 350

described, 112n, 339, 343, 350, 355

with letter of intent, 338

literature lacking, 461

procedures, 107, 347, 353-55, 358, 509. See also

Procurement procedures.

spare parts problem, 342

specialists for, 104, 353-54. See also Contract negotiators; Contracting officers.

wartime volume, 346

Wright Field advantages, 491

Contract negotiators. See also Contracting officers.

allowable costs problem, 379

anticipate problems, 409

bargaining position, 423-24

conflict with termination, 453

educate businessmen, 363

effectiveness, 357, 442

escalation, 423, 427
INDEX 609

Contract negotiators—Continued

fee views, 376

incentive payments, 426

minimize nonmilitary ends, 455

morale, 355

need for data, 345, 348, 357, 418

prewar experience, 345

profits allowed, 375

shortage, 337, 344, 416, 494, 559

specialization introduced, 347-48

statistical tools, 192

training of, 344, 346

verification methods, 362

Contract placement, 482. See also Allocation of contracts; Cross procurement.

Contract Section, Wright Field

circular proposal problems, 492

cost analysis role, 429

CPFF conversion, 412

fee problem, 378

operations, 462

organization, 345-47, 349, 473

Contract Settlement Act, termination statute, 452

Contract status report, 508

Contract termination. See Termination.

Contracting officers. See also Contract negotiators;

Procurement officers.

alleged violations of, 123

approves costs, 379

basis of evaluation, 495

bid bond waivers, 288

Buy American problems, 283

criticized, 87, 491n, 494

delayed by industry, 301

difficulties, 354-55, 367, 369-70, 382, 409

encounter shortages, 250

favor negotiated contract, 117-18

fear political criticism, 81, 115, 332

monitor contractor purchasing, 403-05

need for information, 507

on negotiating team, 354

overhead problem, 382

reconciling price and performance, 130

relations with GAO, 396

require production options, 127

reversal of rulings, 383

scope of discretion, 80-81, 88-89, 289, 352, 385,

499-500. See also Discretionary powers.

seek loopholes, 275

skills required, 409

small business views, 502

status and role, 353, 364-65, 368, 389

use Naval Aircraft Factory costs, 125

verbal rulings, 391

Contracting procedures. See Procurement procedures.

Contracting regulations. See Procurement Regulations.

Contractors. See also Participating prime contractors; Prime contractors; Subcontractors.

accountability threatened, 388

adjustment of compensation, 108-09. See also Renegotiation.

auditing, 391

bidding tactics, 108-09, 317, 469

criticize procurement procedures, 492-93

decision-making role, 409

disallowance of costs, 383

disclosures required, 357

excise tax problem, 387

facilities role, 297-98, 328

fear inventory problems, 457

financial statements, 440

inadequate business methods, 363, 406, 416

joint production program, 540, 547

losses on contracts, 114

need for education, 377

negotiations scheduled, 337

priority conflicts, 258

procurement procedures monitored, 360, 403-05,

407

profits allowed, 122, 375, 385n

relations with subcontractors, 447

renegotiation views, 435, 439

reports required, 282, 349

respect for law, 332

responsibilities, 402, 405, 408

schedules unreliable, 187

statutory limitations on, 281

terminations, 448, 452, 454

Contracts. See also Amendment of contracts; by type

of contract.

administrative alternatives to, 543

advance preparation of, 175

allocation of costs, 362

amendment of, 366-67

by big business, 493-94

civilian agency evaluation, 495

commingling of, 398

co-ordination of, 350ff.

correspondence files, 99, 472

delays, 297, 301, 315, 332, 353

delegation of approval, 478

distribution by size, 491n

for district negotiation, 504

drawn by Procurement Section, 99

EPF, 298-99

experience not extracted, 389

final settlement delayed, 427

for 50,000 program, 243

Ford B-24 series, 526

impact of, 246

inadequate provisions, 207

independent GAO review, 383

interpretation of, 331

maldistribution of, 277
610 BUYING AIRCRAFT

Contracts—Continued

modification authorized, 284. See also Change

orders.

monthly average negotiation, 346

negotiations summarized, 337

philosophy of, 408-09

processing speeded, 331-32

rate of revision, 367-68

renegotiation clause, 429

small business volume, 492

split awards, 498

status record, 472

by SWPC, 500

Treasury co-ordination of, 253

in World War I, 446

Contributions, 383

"Contributory items," 156

Control, distinguished from operations, 510. See also

Command.

Control units, administrative, 472

Conventions, political, 253

Conversion of CPFF contracts, 412, 414-15

Conversion of facilities. See also Facility expansion;

Mobilization, facility policy; Mobilization planning.

Air Corps policy, 319

by automobile industry, 309

conversion versus construction, 326, 328

costs appraised, 327

delays, 321, 325-26

difficulties, 319, 322

enforced by WPB, 323

inadequate planning for, 163-66, 321

inadequately emphasized, 317, 320

machine tool, impact on, 328

in mobilization, 161

obstacles to, 315

policy revised, 290, 323

priorities control of, 322

secures military orders, 493

by small business, 316

Conveyors, 521

Coolidge, Calvin, 46

Co-operation by contractors, 538ff., 542, 546. See also

Interplant borrowing.

Co-ordinating agency, abortive, 124n

Co-ordinating committees, production control role,

538ff.

Co-ordination. See also Army and Navy Munitions

Board; Joint Army and Navy Board; Liaison.

AAF directorate role, 465

Air Corps emphasis on, 107-08

aircraft exports, 252-53

Army-Navy failure, 424

of audits, 391

Curtiss policy, 562

by informal methods, 471, 473

inhibited by decentralization, 491-92, 504-05, 509

Co-ordination—Continued

in mobilization, 254, 262-63

of modifications, 534

organization for, 265, 472

in procurement, 101, 109, 350ff., 467ff., 480, 484.

See also Cross procurement.

Signal Corps-AAF, 486

users and suppliers, 102

Cornell. See PT-19's; PT-23's; PT-26's.

Corporate Profit Unit, 348

Corporate seal, 332

Corps of Engineers, 296

Correspondence, 471, 473, 492

Corruption. See Fraud.

Cost accounting, 416-17. See also Accounting.

Cost in relation to performance, 130

Cost analysis

District field studies, 509

faulty, 433

illustrated, 363-64

by Navy, 86

problems involved, 298, 344-45

for renegotiation, 429-31

required by negotiators, 357-60

Cost Analysis Branch, 348, 429

Cost estimates, 114, 360-64

Cost-plus-fixed-fee (CPFF) contracts

accounting, 393

administrative instructions, 409

authorized, 285, 334

conversion to fixed price, 412, 414-15

criticized, 335-36, 372, 411

drawbacks, 373, 410

evaluation, 373, 410, 418-19

fee reduced, 288

first written, 335

forms, 334, 339

history lost, 389

influenced by escalation, 427

for modifications, 532, 537

problems raised, 336

savings effected, 364

termination policy, 455

use limited, 334, 418

Cost-plus-percentage of-cost (CPPC) contracts

accidentally employed, 406, 441

confused with CPFF, 412

defined, 82

discredited, 83-84

prohibited, 284, 372

Cost-plus principle, 82, 372

Costs. See also Allowable costs; Cost accounting; Cost

analysis; Unit costs.

bids below, 114

bombers. 141-42

civilian aircraft, 20

in CPPC contracts, 82

estimating, 343-44, 413, 427, 431
INDEX 611

Costs—Continued

of facility expansions, 298

foreign order impact, 204-05

of GFE, 132

gliders, 373

impact of inflation, 303

increased by subsidies, 146

increases cut procurement, 128

influence capacity yardstick, 189-90

influence President, 170-71

mass production economies, 560

of modification, 532, 534

per airframe pound, 521, 527

as procurement objective, 330

relation to profits, 364n, 418, 445

statistical tools for, 192

yardsticks, 125, 277

Council of National Defense, 82n, 254. See also National Defense Advisory Commission.

Courier service, 331

Court of Claims, 446, 448. See also Federal courts.

Court rulings. See Judicial decisions.

CPFF. See Cost-plus-fixed-fee contracts.

CPPC. See Cost-plus-percentage-of-cost contracts.

Craig, General Malin, 3, 57, 171-73, 199

Cranes, 520, 524

Crankcases, 250

Crashes, 121

Credit, 18. See also Loans.

Credit rating, 502

Crew exhaustion, 218

Criminal action, 433. See also Department of Justice.

Critical raw materials, 319. See also Materials; Priorities; Raw materials; Shortages.

Criticism. See also Complaints.

of auto manufacturers, 178

of centralized procurement, 492

Materiel Command reaction to, 501

of military procurement, 495, 502

procurement leaders risk, 352

Cross procurement, 480-85, 552. See also Joint procurement; Joint production programs.

CS-2's (Curtiss scout-bombers), 85-86

Culver Aircraft Corp., 575-76

Current ratio in aircraft industry, 39-41

Curtiss Aeroplane and Motor Co., 85

Curtiss Electric Division of Curtiss-Wright, 562-63

Curtiss-Wright Corp., 7-8, 8n, 190, 256, 293n, 575.

See also A-25's; AT-9's; C-46's; CS-2's; P-40's;

P-47's.

Condor transport, 15

CPFF conversion, 415

delayed by shortages, 180-81

engine profits, 33

facility expansion, 29, 302, 320-21

finances, 37-39

neutrality violations, 196n

policy evaluated, 562

Curtiss-Wright Corp.—Continued

production record, 7, 21n, 561, 577

subcontractors and suppliers, 404

transport bid, 134

Cutting Tools Warehouse, 459-60

Cyclone engine, 580. See also Wright Aeronautical

Corp.

Dallas, Texas, 302, 539. See also North American

Aviation Corp.

Data contracts, 186-87

Data processing, 32, 261, 271, 473, 535. See also Information processing.

Dauntless. See A-24's.

Davis, D. F., 46, 88

Dayton, Ohio, 177, 562. See also Wright Field, Dayton, Ohio.

"Dayton lobby," 491n

Dayton-Wright Airplane Co., 83

DC-2's, 136

DC-3's. See C-47's.

Dealers, automobile, 314

Decentralization

of operations, 273, 395

of procurement, 462, 489, 491, 503-05, 507-08, 509n,

573

of renegotiation, 430

of termination, 453

Decision making. See also Contract negotiation; Contracting officers; Delegation of authority; Discretionary powers; Leadership; Procurement procedures.

organizations for, 265, 268, 272-73, 573

in procurement, 352, 571

in production engineering, 468, 516, 544, 547

requires information, 572, 518

Decisions. See Judicial decisions.

Defaulting contractors, 365, 365n, 447. See also

Bankruptcy; Losses by contractors.

Defense Act of 1916. See National Defense Act of

1916.

Defense Act of 1920. See National Defense Act of

1920.

Defense Aid contract, 267, 399

Defense Contract Service, 496-98, 503

Defense contracts, 285, 317

Defense Plant Corporation, 284, 299-301, 303, 315,

323, 520

Defense policy. See Doctrine.

Deferred delivery, 207

Deferred development charges, 34-36

DeHaviland Aircraft of Canada, 577. See also

PT-24's.

Delaney, John J., 121

Delaney Committee, 122-23

Delays, 71, 150, 240, 313, 365, 509, 516

Delegation of authority, 272, 351-52, 572

Deliveries, 71, 240, 330, 361, 426, 494

advantage in deferring, 201-03
612 BUYING AIRCRAFT

Deliveries—Continued

of aluminum forgings, 251

influence contract negotiation, 317, 435, 499

influence facility policy, 301, 320

mobilization role, 157, 251, 269

modifications impact, 532, 537

1940-45 aircraft, 552-54. See also Acceptances of

aircraft.

procurement yardstick, 495

Delivery schedules, 244, 362, 365, 469, 520

Delivery scheduling, 240, 251, 266, 270. See also Air

Scheduling Unit, JAC.

Denver, Colo., 177

Department of Air, proposed, 59

Department of Commerce, 13, 222, 422

Department of Defense, proposed, 124-25

Department of Justice, 84, 402, 433

Department of Labor, 94, 422

Department of State, 196

Depots, 50, 77-78, 215

Depot repair, 322

Depreciation, 125, 285, 289, 296, 435

Depression

imposes economies, 10, 65-66, 384

influences attitudes, 41, 129, 178, 184, 291

Deputy Chief of Air Staff, 241

Deputy Chief of Staff for Air, 474

Dern, George H., 56-57, 59-60, 210

"Desert proofing," 534

Design. See also Aircraft design.

financing, 85-86

NDAC influence, 257n

specification problem, 86, 132, 138, 140

standardization, 264, 266

time lag, 108

Design changes, 16ff. See also Design freeze.

affect market, 10, 17

affect obsoletion policy, 51

complicate contract administration, 25-26, 319, 365,

413, 448

complicate cross procurement, 483

excessive numbers of, 240, 516-17

favor centralized procurement, 491-92

foreign impact, 203

impact on costs, 20, 36, 40-41, 72, 75-76

impact on labor, 362

mobilization impact, 156, 207

prevent contract comparison, 419

production problems, 32, 251, 468, 512, 522-23, 547

require organization, 572

spare parts problem, 342

Design competitions

administration of, 104, 106, 108

advocated, 91-92, 124

Navy, 85-86

procedures outlined, 89-90

tried and abandoned, 113-14, 139-40

used in emergency, 275-76

Design data, 145-46. See also Data contracts.

Design engineers, 163. See also Design staffs.

Design freeze

illustrated, 242, 516, 518-19, 525

problem discussed, 137, 166-67, 187, 512-14, 513n

Design prime contractors, 543-46

Design rights, 85, 87, 166, 444. See also Proprietary

designs.

Design stabilization. See Design freeze.

Design staffs, 88, 139. See also Design engineers.

Designers. See Aircraft designers; Engineers.

Detroit, Mich., 9, 290, 323, 519

aircraft role, 304ff., 519

Procurement District, 153, 491

Detroit tool case, 458ff.

Development. See Research and development.

Development project, 106

Developmental engineering, 468

Deviations, 478, 544

Die forming, 30-31, 521

Die-sinkers, 251, 523

Die steel, 250

Dies, 251, 398, 523

Direct labor. See Labor.

Director of Military Requirements, 241-42

Directorates, 465, 487

Directory of Allocated and Reserved Facilities, 152

Disallowances. See also Allowable costs.

in terminations, 448, 452

Treasury guide, 380

under CPFF, 380, 388, 394-95, 414

Discounts, 360, 406n, 407

Discretionary fund, 78

Discretionary powers. See also Command; Comptroller General; Decision making; Executive discretion; Leadership.

Congress grants, 111, 113, 285-86, 289

fiscal limitations, 78

proposed enlargement, 276-87

require skill and courage, 84, 115, 286, 571

Discrimination, 317

Dishonesty. See Fraud.

Dispersal, 328, 455. See also Site selection; Strategic

dispersal.

Disputes

between divisions, 469

in contract administration, 370, 379, 383, 448

JAC role, 266

Distribution pipeline, 216-17, 222

District representatives. See Procurement Planning

District representatives; Resident representatives.

District Supervisor, 465

Dive bombers, 142, 239

Dividends, 34, 436. See also Profits.

Division of Military Aeronautics, 102

Dockweiler, John F., 59n
INDEX 613

Doctrine

advanced by Douhet, 45

air arm, 4-5, 52-54, 101-02, 157, 237. See also Procurement doctrine.

Air Corps Board role, 95

on centralized command, 573

difficulties in formulating, 210-12, 233

influences requirements, 106, 156, 210, 217, 232-33

on mobilization, 265

Dodge Division, Chrysler Corp., 321, 580

Doehler Die Casting Co., 435

Dollar volume yardstick, 189-90. See also Yardstick,

for productive capacity.

Dominator. See B-32's.

Donations, 383

Douglas Aircraft Corp., 199, 201, 241, 293n, 575. See

also A-20's; A-24's; A-26's; B-17's; B-24's; C47's; C-54's; P-70's.

B-18 costs, 142

contract administration, 378n, 393, 393n

facility expansion, 9, 299n, 309, 321

finances, 38n, 40n

production, 21n, 540, 561, 577

production problems, 264, 315, 362, 519

relation to Boeing, 540-41, 543, 546

transports, 15-17, 134, 136-37, 514

Douglas Airview, 382

Douhet, Giulio, 45

DPC. See Defense Plant Corporation.

Draft boards, 416

Draftees, 384

Draftsmen, 522

Drawings. See Blueprints.

Drop hammers, 521, 568

Drum, Maj. Gen. Hugh A., 53, 56

Drum Board, 53-56, 58, 119

Dunkerque, 208

Duplication of effort, 86, 103-04, 468, 471, 480-81,

485. See also Army-Navy; Cross procurement.

Durable goods index, 424-25. See also Bureau of

Labor Statistics.

E-6's, 578

Earnings. See Profits.

Eastern Aircraft Division of GMC, 561, 577

Eastern Procurement District, 491, 506, 508

Echols, Maj. Gen. Oliver P., 167n, 464-65, 478-79

Economic controls. See Army and Navy Munitions

Board; National Defense Advisory Commission;

Office of Production Management; War Production Board.

Economic czar, 247

Economic dislocation, 315, 435, 452

Economic feasibility, 232

Economic mobilization, 313, 316. See also Mobilization planning.

Economic planning, 150ff.

Economy Board, 213

Economy drives, 65-67, 73, 124-25, 128, 175

Economy-mindedness, 181n

Edison, Charles, 224

Educational orders

data contracts, 291

exports replace, 195

faulty application, 159-60, 183

Ford B-24, 520, 526

need for, 152-53, 183

Efficiency. See also Labor, productivity; Productivity.

of centralized procurement, 492

contractor negotiation role, 364, 418, 421, 443, 445

in labor utilization, 362

production ratios, 564

Eight-Hour Law, 280-81

1,800 aircraft program, 49, 51, 53, 66, 71, 128. See also

Air Corps Act of 1926; Five Year Program.

El Paso, Texas, 530

Elections, 194, 203n, 265

Electric power, 150, 247-48, 308

Electrical equipment, 156, 271. See also Fractional

horsepower motors.

Electrical equipment manufacturers, 566-67

Electronics, 486. See also Communications equipment; Radios; Signal Corps.

Elyria, Ohio, 460

Embargo. See Neutrality legislation.

Emergency facilities. See Facility expansions.

Emergency plant facility contracts, 298-99, 302

"Emergency" procurement, 275

Emerson Electric, 378

Empennage, 564

Employees, 281, 467. See also Civil Service; Labor.

Employment. See also Labor.

aircraft and automobile industry, 27

factors influencing, 7, 200-201

insurance rating, 386

as procurement objective, 330

reports on, 181, 187, 282

Engine accessories, 271

Engine change, 110

Engine instruments, 567

Engine manufacturers, 6-8, 123, 186-87, 281, 293n,

312. See also Engine production.

contract negotiations, 336, 355, 561

educational orders, 183

export sales, 19, 200, 205

facility expansions, 184, 201, 302, 309, 320-21. 324

floor space, 294-95

productivity, 564-65

profits, 35-36, 36n, 120, 126

Engine overhaul, 215-16. See also Engine change;

Maintenance.

Engine production, 292, 381, 392, 580. See also Engines, acceptances.

factors influencing, 16, 27-28

1929-37, 7, 20

peak monthly output, 565
614 BUYING AIRCRAFT

Engine production—Continued

World War I, 6

Engine production scheduling, 267. See also Air

Scheduling Unit, JAC.

Engineering change notifications, 99, 366, 539-40,

543. See also Change orders.

Engineering Division, 358, 361, 466-67, 486

Engineering drawing releases, 521, 541

Engineering drawings, 554. See also Blueprints.

Engineering information, 543

Engineering and Research Corp., 577

Engineering Section, Materiel Division, 97-98, 106ff.

Engineering versus production, 513

Engineers, 186, 188, 361, 456, 545. See also Aircraft

designers; Corps of Engineers; Design staffs.

Engines, 309-10, 458. See also individual engines by

number and manufacturers by name.

acceptances, 548-59. See also Deliveries.

aluminum needs studied, 257

costs, 20, 83, 142

critical shortages, 250

Cyclone, 580

four-engine bombers, 302-03, 519

horsepower, 16, 20, 580-82

in-line, 309, 565

indirect competition, 127

jets, 456, 562

Liberty's, 64, 83

liquid cooled, 309, 565

Merlin, 309, 580

mounting methods, 524

Packard-Rolls Royce, 301

production data, 580-82

spare, 74, 215-16

spare parts, 215

special tools, 485

World War I, 64

England. See United Kingdom.

Englewood, Calif., 302

Enlisted men, 466

EPF. See Emergency plant facility contracts.

Equipment Branch, Materiel Division, 98

Equity

in contract procedures, 335, 377, 385, 509

in escalation, 425

for small business, 494

in terminations, 451

Equity capital. See Capital investment.

Escalator clauses

repricing as alternative, 442

sought by contractors, 332, 421

use of, 423-25, 427

Escape kits, 470

Espionage Act, 197

Estimates, 361. See also Appropriations, administration of; Budget, estimates.

Estimators, 360-61

Ethiopia, 196

Europe, 18. See also Exports.

Evaluation procedures, 90, 108-12, 110n, 114, 131,

133-38, 140, 146

Exceptions to contracting requirements, 80-81. See

also Disallowances.

Excess profits. See also Profits, statutory curbs.

attitudes on, 83, 277

causes, 428

contract negotiation problem, 330, 348, 380, 384,

422

induce voluntary refunds, 428

problem of definition, 431-32, 434

offset escalation, 427

recapture, 431, 441, 443-44

Excess profits tax, 289, 298, 301

Excise taxes, 386, 388

Executive branch, 79, 137. See also President of the

U.S.; Presidents by name.

Executive budget. See Appropriations, administration of; Budget, estimates.

Executive discretion, 68, 78, 81, 84, 92. See also Discretionary powers.

Executive Office, 213

Executive order, 124n, 367

Executive session. See Secrecy; Security classification.

Exemptions, 80-81

Exhaust manifolds, 7, 183

Expansion program

planning, 176-78

problems met, 181-83, 191, 193-94, 200, 202-05, 216,

281, 294

shifting conception of, 304

Expansion versus conversion, 325

Expediters, 520. See also Aircraft production, acceleration; Co-ordination; Liaison.

Expediter. See C-45's.

Expendable property, 398

Expenditures for air matériel, 117, 556-59

Experience factors, 215-16

Experience rating, 386

Experimental aircraft, 246, 514, 519. See also Experimental contracts.

Experimental contracts, 90, 117, 278, 399

competitive procurement, 132

with design competitions, 124, 139-40, 143, 145

expenditures, 117, 143-44

losses on, 88-89, 115, 126

negotiated contracts, 84-86, 114

relation to production contracts, 113-14, 127

in sample competition, 140-41

Experimental development procedures, 97, 106-08

Experimental engineering, 104, 468

Experimental Engineering Section, Materiel Division,

462

Export-Import Bank, 196, 198

Export licensing, 18
INDEX 615

Exports. See also Foreign orders.

complicate U.S. procurement, 252, 260, 263-65, 493,

529

Draft Act curbs, 288

influence financing, 204-05, 223n, 286

mobilization role, 195-96, 201, 203, 205, 253

neutrality limitations on, 196

1940-45, 560

peacetime market, 10, 17-19

secrecy release problem, 18, 197-98, 200

Extrusions, 180

F-2's, 550. See also C-45's.

F-4's, 550, 578. See also P-38's.

F-5's, 550, 578. See also P-38's.

F-6's, 550. See also P-51's.

Facilities. See also Capital investment; Floor space;

Production capacity; individual firms by name.

Air Corps representatives in, 99. See also Contract

administration; Resident representatives.

Army-Navy cognizance, 273

in contract negotiations, 340-41, 357

design of, 28n, 298

expenditures for, 557

foreign investment in, 201

nationalization, 201. See also Facility expansion;

Nationalization of industry.

obsolescence, 29

requirements, 17, 290. See also Allocation of industrial capacity; Facilities Division, OASW;

Mobilization planning; Office of Assistant Secretary of War.

security restrictions, 18

seizure authorized, 286n, 288

shortage of, 250, 330

Facilities Division, OASW, 247

Facility allocation. See Allocation of industrial capacity.

Facility conversion. See Conversion of facilities; Mobilization, facility policy.

Facility costs. See Facility financing.

Facility expansion

by accessory firms, 310

administrative problems, 274, 297, 392, 435, 267

air arsenal plan, 176-79

British experience, 165. See also Shadow factories.

conversions. See Conversion of facilities.

50,000 program, 293-94

financing. See Capital investment; Facility financing. foreign order impact, 200

foreign subsidies taxed, 296

industry views on, 41, 175, 184-85, 201

by instrument firms, 567

labor requirements, 564

policies, 203-04, 317, 319-20

President's views, 291

private sites, 285

Facility expansion—Continued

requirements planning, 70, 161-62, 177, 182-83,

190, 192-93, 264, 292, 304, 307, 481

reviewed, 301ff., 310, 321, 323-26

for spares, 294

by small business, 316

World War I, 87

Facility financing

by accelerated depreciation, 285, 289, 296-98, 301.

324. See also Depreciation.

by DPC, 284, 299ff. See also Defense Plant Corporation.

by EPF, 298ff.

funds for, 296, 324

by private funds, 181, 184, 292, 294-95, 309, 557

reconversion costs excluded, 315. See also Reconversion of facilities.

relation to investment, 40

reviewed, 293-95, 327-28

tactics, 187

Facility surveys, 153-55, 186, 189ff., 322, 408. See also

Industrial Planning Section; Mobilization planning; Office of Assistant Secretary of War; Yardstick Board.

Factory plans, 152-55, 163, 186, 290

Failure. See Bankruptcy: Defaulting contractors; Loss

of bids; Losses by contractors.

Fairchild Aircraft Corp., 38-39, 134, 293, 561, 575,

577. See also AT-21's; C-61's; C-82's; PT-19's;

PT-23's; PT-26's.

facility expansion, 302, 321

Fairey Aircraft Ltd., 165

Fairey, C. R., 266

Farmingdale, N.Y., 565

Farrel-Birmingham press, 30

Favoritism

allegations of, 317, 357-58

dangers of, 88-89

procedures to avoid, 90-91, 93, 111, 139-40, 145

Federal Aviation Commission, 55-59

Federal courts, 92, 150, 333n, 389. See also Appeals.

Federal Reserve System, 496. See also Defense Contract Service.

Fees

in CPFF contracts, 364, 372, 410. See also Fixed

fees.

incentive contracts, 417

not entirely profit, 418

related to modifications, 532, 534

tied to production, 417n

Ferry Command, 487

Ferry pilots, 243n

Ferrying, 465, 530-31

Field audit offices, 395

Field Service Section, Materiel Division, 98-99, 463,

470. See also Air Service Command; Air Technical Service Command.

Field servicing equipment, 209
616 BUYING AIRCRAFT

5, 500 aircraft program, 174-75, 202-03, 230, 513

50,000 aircraft program

aluminum requirements, 257

implementation of, 229, 232-33, 235-37, 243, 249-50

influences legislation, 283

origins, 209ff., 221, 226, 228, 228n

productive capacity required, 253, 293

Fighter aircraft. See also P-38's et seq.

Bell P-39 production delays, 245

doctrine, 45, 156, 233

evaluation of, 110, 233, 237, 239, 278

Fisher P-75, 269

modifications required, 533, 537

Navy, 576-79

1941 strength on hand, 244

parts problems, 457, 564, 567

production ratios, 564

Reuther Plan for, 310

weight, 564

Figure of merit on competition, 90

Filing, 437

Final settlement, 427. See also Termination.

Financial statements, 440. See also Balance sheets,

bidders; Contract negotiation; Cost analysis.

Financing. See Advance payments; Aircraft industry,

financing; Capital investment; Defense Plant

Corporation; Facility financing; Government

financing; Interim financing; Loans; Partial payments; V-loans.

Fire control, 45

Fire protection, 389

First Aviation Objective, 235-36

First Aviation Strength, 236

First War Powers Act, 289

Fiscal decisions. See Procurement Planning Board,

Materiel Division.

Fiscal Division, 430

Fiscal obsoletion, 219

Fiscal program. See Budget.

Fisher Body Division of GMC, 269, 309, 321, 382, 415,

547, 577. See also P-75's.

Five Year Program, 46-47, 49. See also Air Corps Act

of 1926.

delayed by Congress, 64-66, 69-70, 78-79

proves unworkable, 51

Fixed fees, 372. See also Fees.

absorb disallowed costs, 379, 383-84, 389

determination of, 375-76, 378, 385

Fixed-price contracts

administration of, 303, 365-66, 370, 386

auditing, 390, 392

defined, 82

Form 32, 339

modification problems, 413, 532, 537-38

negotiation problems, 335, 339, 414, 428

relation to CPFF, 285, 410, 412

subcontractors, 443

terminations, 447, 455

Fixed-price contracts—Continued

wartime performance record, 418

Fixtures. See Jigs and fixtures.

Fleet Aircraft Corp., 577. See also PT-23's; PT-26's.

Fleet, Reuben H., 144

Fleet-in-being, 158

Fleetwings, Inc., 575, 577. See also BT-12's.

Flight testing, 110, 131

Floor space. See also Aircraft industry, floor space;

Airframe manufacturers, floor space.

for airframe industry, 294-95, 303, 310, 563

costs, 327

data sought, 181, 187

in engine industry, 321, 564

factory plan for, 163-64

50,000 program needs, 293

financing, 298, 557. See also Facility financing.

open air, 531

production ratios, 564

in propeller industry, 566

Reuther Plan for, 310

in supercharger industry, 567

at Wright Field, 467

Flow charts, 270

Flow time, 537

Flying Clippers, 399

Flying Fortress. See B-17's.

Flying suits, 250, 470

Flying training, 465

Flying Training Command, 487

Follow-on contracts, 415

Follow-on orders, 367

Food, 484

Ford, Edsel, 305, 518

Ford, Henry, 518

Ford Motor Co. See also B-24's.

B-24 role, 309, 519-23

criticized, 311, 314n, 539

facility problems, 299, 299n, 326-27, 520

managerial skills, 312

P-40 plan, 518

Pratt & Whitney licensee, 309, 580

production record, 528, 561, 565, 577

protests fee, 377

superchanger contract, 455-56

suppliers, 494n

trimotor transport, 15

Foreign aid, 214, 222, 399, 451, 507, 557

Foreign Economic Administration, 451

Foreign orders. See also Exports.

compete with Air Corps, 202, 252, 260, 262, 285

complicate scheduling, 265-66

impact on industry, 200

mobilization role, 195-96, 202-03, 205, 207, 294-95

neutrality act curbs, 196

relation to appropriations, 204

require modifications, 529

1940-45 total, 560
INDEX 617

Foreign orders—Continued

secrecy release problem, 200

Foreign policy. See also Rearmament.

aircraft export impact, 202, 204, 208

shapes requirements, 213, 570

Foreign procurement authorized, 90. See also Buy

American Act.

Foreign sales. See Foreign orders.

Foremen, 322, 522

Forging dies, 251

Forgings, 156, 180, 250-51, 564, 568. See also Aluminum.

Form 32, 339-41. See also Contract forms; Standard

contract form.

Forming dies. See Dies.

Forms, 473. See also Administrative procedures; Contract forms.

Formula for evaluating bids, 138

Fort Wayne, Ind., 310

Fort Worth, Texas, 308-09

Forward pricing, 441

Forwarder. See C-61's.

Foulois, Maj. Gen. Benjamin D., 120-21, 127, 136,

138-39, 279

Four-engine bombers, 302-03, 519. See also Bomber

aircraft; Heavy bombers.

Fractional horsepower motors, 156, 567

France, 208-09

accelerated depreciation, 297

fee policy, 378

mobilization experience, 159

nationalization of production, 201

procurement in U.S., 185, 195-96, 198-99, 201, 296

Franklin, 6n, 581

Fraud

allegations of, 120-21, 123, 125

audit role, 390, 396, 402

in CPFF purchasing, 406

prevention of, 137, 284, 351, 383

in procurement contracts, 355-56, 355n

by subcontractors, 408n

in terminations, 452

Freedom of expression, 57-58

French Purchasing Mission, 200

Fresno, Calif., 460

Frigidaire Division of GMC, 563

Fringe benefits, 378, 385

Fuel, 282, 484, 558

Fuel cells (tanks), 203, 245, 250, 267n, 527, 531, 533

Fuel transfer system, 536

Fundamental research, 22-26. See also Research and

development.

Funded debt. See Bonds.

Funds expended, 556ff. See also Appropriations;

Budget, estimates; Expenditures for air materiel.

Fungibles, 282

Furniture manufacturers, 373

Future pricing, 441

G-2, WDGS, 105, 223

G-4, WDGS, 217, 221

G & A Aircraft Corp., 577. See also Rotary wing aircraft.

Gallup poll, 313

Gang drill, 521, 523

GAO. See General Accounting Office.

Gasoline. See Fuel.

Gauges, 160, 523, 543

General Accounting Office, 128, 138, 147, 300. See

also Comptroller General.

on CPFF contracts, 379-82, 385, 387, 391, 393-96,

403-404, 414

on terminations, 448, 452

General Electric, 437, 455-56, 562

General Motors Corp. (GMC), 6n, 26, 255, 269,

293n, 309, 310, 312, 321, 382, 415, 561, 562-63,

577, 580, 581

General Staff, War Department, 44-45, 52, 63, 104,

106

doctrine, 56n, 57, 101, 157, 210, 212, 212n

5, 500 program views, 513

mobilization policy, 157, 206

requirements role, 48, 62-63, 93, 155-57, 222-23, 238

Reserve officer ruling, 506

Generators, 567

Geneva, 210

Geographic dispersal, 455. See also Dispersal; Site

selection; Strategic dispersal.

German Air Force

procurement experience, 112, 190, 214, 514

strength, 169, 194

Germany, 194-95, 205, 207-08, 283

aircraft production, 169n, 201, 553-55

influences U.S., 169, 224, 250

GFE. See Government-furnished equipment.

GHQ Air Force, 54, 77, 102, 244

Gibbs and Cox, 188n

Gifts, 295

Glenn L. Martin. See Martin, Glenn L.

Glider manufacturers, 324

Gliders, 373, 552, 558, 577

Globe Aircraft Corp., 577

GOCO, 295-96

Goethals, G. W., 475

Goodyear Aircraft Corp., 308, 540, 547, 561, 577

Gorrell, E. N., 56n

Government aircraft factory, 87, 124-25

Government contracts, 129, 362

Government factories. See Government-operated facilities; Government-owned, contractor-operated:

Government-owned facilities; Naval Aircraft

Factory; Unfair competition.

Government financing, 291, 328, 375, 435. See also

Defense Plant Corporation; Emergency plant facility contracts; Facility financing.

Government-furnished equipment, 166, 187, 340, 342,

450, 508
618 BUYING AIRCRAFT

Government-furnished equipment—Continued

aids standardization, 132

costs per aircraft, 142

organization, 348, 369

prewar volume, 345

property accounting, 399

renegotiation problem, 437

Government-furnished facilities, 306, 308-09. See also

Defense Plant Corporation; Emergency plant

facility contracts; Facility expansion, air arsenal

plan; Facility financing; Shadow factories.

Government-operated facilities, 166

Government-owned, contractor-operated, 295-96

Government-owned facilities

feasibility considered, 166, 175-177, 182, 184

industry fear of, 185, 277. See also Nationalization

of industry.

influence profit allowed, 375

site selection, 306ff.

Government ownership. See Nationalization of industry.

Government procurement, aircraft as special case,

130

Government warehouse, 458

Graflex camera, 480-81

Graham, William J., 84n

Graham-Paige, 163

Grand Rapids, Mich., 373

Grasshopper. See L-2's; L-3's; L-4's; L-14's.

Gray, C. G., 4

Great Britain. See United Kingdom.

Green, William, 254

Grievances. See Complaints.

Gross weight. See Airframes, average gross weights.

Ground crews, 209

Ground forces, 173. See also Army Ground Forces;

Army Service Forces; Close-support role; Interbranch competition; Jurisdictional disputes.

Grumman Aircraft Engineering Corp., 21n, 293n,

561, 575, 577

Guarantees, 130. See also Bid bonds; Liquidated

damages.

Guggenheim Fund, 22

Guided missiles, 485-86, 558

Gun-synchronizers, 180

Gun turrets, 245-46, 310, 378, 508, 516, 527, 536

"Guns and butter," 314, 316

Gyro-pilots. See Autopilots.

Hagerstown, Md., 321

Hamilton-Standard Division of United Aircraft

Corp., 7-8, 8n, 562-63

Hammond Aircraft. See Stearman-Hammond Aircraft Corp.

Hand tools, 397, 444, 484

Handbook for Aircraft Designers, 132

Hardstands, 531

Hardware. See Aircraft hardware.

Harrisburg, Pa., 177

Hartford, Conn., 6, 9, 28

Havoc. See A-20's.

Hawaiian Islands, 52-53, 212-13

Hawthorne, Calif., 321

Hearings. See Congressional investigations; Investigations.

Heat treating, 568

Heavy bomber program, 205, 239, 540

Heavy bombers, 233, 237, 244, 253, 564, 567. See also

Bomber aircraft; Four-engine bombers.

1940-44 acceptances, 555

Helicopters. See Rotary wing aircraft.

Helldiver. See A-25's.

Hemisphere defense, 213, 222, 246

Hides, 250

Higgins Aircraft, Inc., 577. See also C-46's.

High speed, evaluation of, 110

Hillman, Sidney, 254-55, 265, 313, 316

Hitler, Adolf, 112, 169, 200

Holding company, 299

Holland, 207-08

Honesty. See Integrity.

Hopkins, Harry, 170, 238-39, 241

Horsepower, 549, 564

Hourly earnings. See Wages.

Hours of employment, 260-61, 261n

House Committee on Appropriations

aircraft funds, 43, 51, 64-65, 195, 204. See also Air

Corps, relation to Congress; Air Corps, expenditures for aircraft, 1926-34; Appropriations.

condemns relief funds, 68

opposes B-17, 76

overtaken by price rises, 71

procedure, 171

pursues Baker report, 58-59

reduces engine reserve, 74

House Committee on Military Affairs

air arm hearings, 43, 48, 119. See also Investigations.

aircraft program, 59, 61, 174. See also Authorized

strength.

criticizes CPFF contracts, 411

freedom of witnesses, 58n

influence on War Department, 139n

military advisors, 48

procurement problems, 123, 139, 145, 277, 279, 283-

84

suspects General Staff, 55

House Committee on Naval Affairs, 121-22, 284

Housekeeping, administrative, 472. See also Administrative procedures.

Housing, 77-78, 308, 326, 389n

Houston, Texas, 318

Howard Aircraft Corp., 578. See also PT-23's.

Howell, Clark, 56

Howell Commission, 55-59

Howitzers, 552

Hudson. See A-28's; A-29's.
INDEX 619

Hudson Motor Car Corp., 163, 308, 546-47

Hughes, C. E., 37

Hughes Tool Co., 318

Hull, Cordell, 209, 228

Humping, 66, 70

Hydraulic pumps, 180-81

Hydraulic tubing, 564

I-1430 engine, 581

Ickes, Harold, 68

Ignition coils, 567

Improprieties, 110. See also Fraud.

Improvisation, 301

Incentive contracts, 416-17, 421. See also Bogey contracts.

Incentives, 83, 85, 182, 333, 335, 358, 426. See also

Liquidated damages.

in CPFF contracts, 373, 384, 386, 410, 418

in CPPC contracts, 82

negated by escalation, 426

influence modification, 532, 534

impact of renegotiation, 445

role in pricing, 343

statutory provisions, 284, 287-89

substitutes for, 374

Income tax, 299, 385, 432, 435

Indianapolis, Ind., 309, 562

Indices. See Durable goods index.

Indirect labor. See Labor; Wages.

Industrial Cost Unit, 348

Industrial mobilization, 217, 292. See also Mobilization.

Industrial Mobilization Plan, 151

Industrial planning. See Mobilization planning.

Industrial Planning Section, 98-99, 153-68, 463, 467

data inadequate, 186, 188-89, 191

transferred to Washington, 206

Industrial potential. See Production capacity.

Industrial wages. See Wages.

Inexperienced officers, 354-55

Inflation, 303, 344, 350, 425, 431

Influence

attempts to cultivate, 69

improper, 110, 356n

Informal contracts. See Purchase orders.

Informal exceptions, 395

Information contracts. See Data contracts.

Information processing, 186-87, 349, 572. See also

Data processing.

Information Division, OCAC, 105

Informers, 357, 393n

Ingersoll Milling Machine Co., 524

Initiative, by contractors, 388, 435

In-line engines, 309, 565. See also Allison Division of

GMC.

Innovations, 107, 140

Insecticides, 484

Inspection, 99

BDV Committee role, 541

contract stipulations, 340-41, 364

in procurement districts, 491, 509

by X-ray, 568

Inspection Branch, Materiel Division, 98

Inspection Section, Materiel Division, 463

Inspector General, 376

Instruction manuals, 470, 483, 518

Instrument manufacturers, 321, 567

Instruments, aircraft, 12, 72, 271n, 294, 485

Insurance, 354, 386

Integrity, 353, 355-56

Intelligence, 194, 465. See also G-2, WDGS; Military

Intelligence Division, WDGS.

Interbranch competition, 476, 484. See also Jurisdictional disputes.

Interchangeability, 501, 540, 544. See also Standardization.

Interdepartmental Committee for Coordinating Foreign and Domestic Military Purchases, 252-53,

263

Interest charges, 299, 303, 450. See also Loans.

Interim financing, 451

Interplant borrowing, 399, 415

Interservice rivalry, 272. See also Army-Navy; Jurisdictional disputes.

Interservice transfers, 481

Interstate Aircraft and Engineering Corp., 578. See

also L-6's; L-8's.

Invader. See A-26's.

Invention, stimulation of, 93

Inventory, 32, 72. See also Aircraft industry, inventory problem; Airframe manufacturers, inventory value; Stock control.

control problems, 216, 251, 426, 457, 535

CPFF problem, 411, 414-15

termination problem, 446, 448, 451-52, 456

Investigations, 59, 119, 107-08, 357. See also Congressional investigations.

Air Corps, 55

aircraft industry, 37

Detroit tool, 459

of excess profits, 429

Lampert, 46

Morrow, 47

War Department policy, 57

World War I, 84n

Investment brokers, 141-42

Investments. See Capital investment.

Invitations to bid, 80, 89-90, 358. See also Advertising for bids; Circular proposals.

distribution delays, 493, 497-98

OPM role, 496-97

IPS. See Industrial Planning Section.

Iraq, 200

Iridium, 250

Irving Airchute, 7-8, 8n
620 BUYING AIRCRAFT

Isolationists, 175, 197, 199

Isometric projections, 501. See also Blueprints.

Italy, 196

IV-1430 engine, 581

J-31 jet engine, 562

J-33 jet engine, 562

JAC. See Joint Aircraft Committee.

Jacobs Aircraft Engine Co., 6n, 293n, 580

Jack and Heintz, Inc., 429, 437

James, W. F., 58n, 124n

Janeway, Eliot, 257n

Japan, 196, 553-55

Jet engines, 456, 562

Jet fighter, 112

Jigs and fixtures. See also Production tooling.

contract negotiation, 341-42

costs, 363, 413, 426

disposal problem, 458

educational orders, 159-60

production use, 512, 521, 524, 526

property accounting, 397

Job-shop, 190, 511

Jobbers, 444

Johnson, Louis A.

leadership, 4, 175-76, 225n

on military requirements, 223, 225, 232n

on mobilization plan, 248n

preparedness views, 181

on production capacity, 186, 193, 224

urges statutory revision, 283

Johnston, S. Paul, 256

Joint Aircraft Committee, 264n, 266-68, 271-73

Joint Army and Navy Board, 213

Joint Contract Termination Board, 451

Joint procurement, 124. See also Cross procurement.

Joint production programs, 538-41, 543, 547

Joint versus combined, 266n

Jones, Col. A. E., 354n

Judge Advocate, Wright Field, 99, 349

Judge Advocate General (Army)

defines executive discretion, 81

interprets 1926 Act, 51, 115, 128

officers in OCAC, 105-06

on procurement, 139, 147, 276, 388

Judge Advocate General (Navy), 388

Judicial decisions, 353, 5"69

Judicial review. See Federal courts.

Jurisdictional disputes, 480, 485. See also Army-Navy;

Duplication of effort; Interbranch competition;

Interservice rivalry.

Justice. See Department of Justice.

Kahn, Albert, 28n

Kansas City, Kans., 9, 308, 530

Kaydet. See PT-13's; PT-17's; PT-27's.

Keller, K. T., 305

Kellett Autogiro Corp., 575, 578

Kellett profilers, 523

Kelly Act, 12, 14, 17

Kelvinator. See Nash-Kelvinator Corp.

Kennedy, Joseph P., 226

Kettering, Charles, 257

Kindelberger, James H., 169n, 190

Kingcobra. See P-63's.

Kingston, Ontario, 213

Kinner Airplane and Motor Co., 6n, 580

Knockdown airframes, 309, 519

Knudsen, William S.

approves CPFF, 335

on bomber program, 305

NDAC role, 255-56, 263

OPM role, 265, 270, 313, 316

recruits automobile industry, 304, 308

on requirements, 292-93

on Roosevelt, 232n

urges facility conversion, 322

Korean emergency, 538n

Kraus, Capt. S. M., 256

L-1's, 551

L-2's, 551, 579

L-3's, 551, 576

L-4's (L-14's), 551, 578, 580

L-5's, 551, 576, 580

L-6's, 578, 580

L-7's, 579

L-8's, 578

L-14's, 578

L-365 engine, 582

L-440 engine, 581

Labor, 340, 357, 393, 419, 429, 521. See also Employment; Semiskilled labor; Skilled labor; Unions;

Unskilled labor; Wages.

attitudes, 322, 415, 530, 565-66

availability, 241, 250, 323, 535

costs, 141, 348, 360, 362, 422, 426, 531

influences site selection, 9, 177, 303, 308, 328

influences termination, 455-56

productivity, 191, 413, 564

reports on, 282

requirements, 192, 293, 361-63

statutory protection, 281

training of, 319

waste of, 242-43

at Willow Run, 326, 524, 527

Labor Department, 94, 422

Labor force, 310

in airframe industry, 563-65

in electrical industry, 567

in engine industry, 564-65

in supercharger industry, 567

Labor leaders, 254, 311, 313-14. See also Green, William; Hillman, Sidney; Lewis, John L.; Reuther,

Walter; Unions.

Labor-management co-operation, 311
INDEX 621

Labor unions. See Unions.

Laboratories, Wright Field, 99

Lampert, Florian, 46

Lampert Committee, 46, 57n, 87, 89, 122, 124, 130

Landing field. See Air bases; Airstrips.

Landing gear, 271, 310, 566

Langley Field, Va., 23

Lassiter, Maj. Gen. William, 44

Lassiter Board, 44-46, 48

Latin America, 18, 196

Laws. See Procurement statutes; Revised Statutes;

Social welfare legislation.

Lawyers, 105-06, 353, 433, 469. See also Judge Advocate, Wright Field; Judge Advocate General;

Legal advisors.

Lay-offs, 386

"Layering," 471

Lead time, 275

Leadership, 272, 397, 401

Air Corps lack of, 261n

in business, 364n

character of, 181, 353, 404, 449, 459, 471-72. See

also Command; Decision making; Discretionary powers.

examples of, 172-73, 182, 468, 474

in mobilization, 207, 243, 249, 254

in procurement, 335-36, 346, 351, 464, 480, 571

in renegotiation, 431

in termination, 458

Leakproof fuel cells, 245

Learner curve, 344, 361-62, 426, 535-36

Leather, 250

Leavenworth, 303

Lectures, 432

Legal Branch, Contract Section, 349, 430

Legal advisors, 147, 228. See also Judge Advocate,

Wright Field; Judge Advocate General; Lawyers.

Legal problems, 99, 105-06, 296. See also Judge Advocate General.

Legislation. See also Congress.

by appropriation, 43, 62n

innovations feared, 116, 116n, 353

organization for, 92, 95, 104-06

proposals for, 119, 176-77, 276-78, 297

regulations and procedures for, 57, 133, 286

Legislative draftsmanship, 61

Lend-Lease contracts, 399

Lenses, 183

Lessons learned, technique for, 400

Letter contracts, 338

Letter of intent

drawbacks, 337-38, 392

origin and use, 257, 302, 318, 336

Lewis, John L., 254

Liaison, 58, 165, 192, 472. See also Co-ordination;

Production control.

with ASF, 477

Liaison—Continued

with manufacturers, 539

with SWPC, 500

Liaison aircraft, 11, 552, 566, 576-79. See also

Aeronca Aircraft Corp.; Consolidated Aircraft

Corp.; Interstate Aircraft and Engineering

Corp.; L-1's et seq.; Piper Aircraft Corp.; Rearwin Aircraft & Engines, Inc.; Universal Aircraft.

Liaison Committee. See President's Liaison Committee.

Liberator. See B-24's.

Liberator Express. See C-87's.

Liberty engines, 64, 83

Library, OCAC, 105. See also Technical Data Library, Wright Field.

Licensing, 444, 561-62, 566, 580

Light bombers, 244

Lightning. See P-38's.

Limited emergency, 194

Limited profit contracts, 333. See also Cost-plus-fixedfee (CPFF) contracts.

Line and staff, 381

Linen, 250

Lippmann, Walter, 316

Liquid-cooled engines, 309, 565

Liquidated damages, 203, 207, 332

Litigation, 333n, 446, 460. See also Federal courts.

Load-carrying capacity, 110

Lobby, 491n. See also Aeronautical Chamber of

Commerce.

Loans, 36, 196, 284, 298. See also Advance payments;

Assignment of claims; Partial payments.

Local taxes, 387

Lockheed Aircraft Corp., 30, 200, 293n, 376, 541, 575,

578. See also A-28's; A-29's; B-17's; B-24's;

C-69's; F-4's; F-5's; P-38's; P-80's.

B-17 production role, 540, 543, 546

financing, 38, 38n, 40n

wartime production, 561

Lockland, Ohio, 309

Locomotives, 484

Lodestar. See C-60's.

Lodge, Henry Cabot, Jr., 203n

Loening, Grover C., 88

Lofting, 521-22, 543

Logistics. See Maintenance; Supply.

Lombard, A. E., Jr., 256

Long Beach, Calif., 299

Los Angeles, Calif., 9, 153, 530

Loss of bids, procedures for appeals, 90, 147. See also

Appeals.

Loss rates, 50, 217. See also Attrition rate.

Losses by contractors, 34, 115, 299n, 333, 348

on experimental contracts, 115n, 126

in renegotiation, 431

Lovett, Robert A., 241, 474. See also Assistant Secretary of War for Air.
622 BUYING AIRCRAFT

Low bid, basis of award, 80-81, 92-93, 108-09, 113,

359, 366. See also Advertising for bids; Competitive procurement.

Lubricants. See Fuel.

Luftwaffe, 43, 175, 194, 232, 533

Lump-sum contracts. See Fixed-price contracts.

Luscombe Airplane Corp., 578

Luxembourg, 224

Lycoming Division of Aviation Manufacturing Corp.,

6-8, 8n, 156n, 259, 293, 309, 581. See also R-680

engine.

M-day, 249. See also Mobilization; Mobilization planning.

plans, 153, 155, 161, 207, 513

requirements, 52-54, 216

MacArthur, General Douglas, 3, 53n, 62n, 66, 211

McCarl, John R., 118

Machine guns, 246. See also Armament, aircraft; Ordnance Department.

Machine loading, 32, 535

Machine records tabulation. See Data processing.

Machine tools in automotive industry, 311, 313, 323,

520, 523-24

in contract administration, 267, 341-42, 411, 508, 545

expenditures, 77-78, 323, 557

influence design, 544

influence facility policy, 326-27

mobilization planning for, 158, 163-64, 187

shortages, 150, 250-51, 258-59

McCook Field, Dayton, Ohio, 112

McDonnell Aircraft Corp., 547, 578. See also AT-21's;

P-67's.

McNary-Watres Act of 1930, 14

McSwain, John J., 44, 55, 59-60, 145

Air Corps Act role, 90-93

investigates procurement procedures, 113, 123

proposes procurement bill, 133, 139, 139n

Magazines, 275

Maginot Line, 195

Magnaflux, 30

Magnesium casting, 320

Magnetos, 183, 294, 321

Mailing lists, 497. See also Advertising registers;

Bidders lists.

Mail-order catalogue parts supplier, 8

Maintenance, 110, 243, 246, 517. See also Malfunctioning; Unsatisfactory Report.

organizations, 99, 470. See also Air Service Command; Air Technical Service Command; Depots; Field Service Section, Materiel Division;

Materiel Division.

equipment, 209, 492

materials, 558

shops, 530

Malfunctioning, 530. See also Engine overhaul;

Maintenance; Modifications; Unsatisfactory Report.

Man-hours, 361-62, 531, 534, 537, 564. See also Efficiency; Employment; Labor; Manpower; Productivity.

Management consultants, 475

Management control, 478. See also Administrative

procedures; Organizational planning; Statistical

Control Office.

Managerial skills. See also Businessmen; Leadership.

corporate policy on, 562

dilution of, 309, 380, 405, 433

improvement in, 304, 538

influence site selection, 303

needed by government, 177, 261

remuneration, 382, 384

small business problem, 502

utilization of, 311-12, 322, 402, 409, 448, 534

Mandatory orders, 378n, 444. See also Compulsory

directives.

Maneuverability, 110

Manifold pressure gauges, 567

Manpower

in air arm, 45, 77-78. See also Civil Service; Civilian personnel; Enlisted men; Officers; Personnel.

in airframe industry, 191. See also Employment;

Labor.

auditing, 394

lack of skilled, 261

in mobilization planning, 44, 154, 157, 224, 330

at Wright Field, 466

Manuals, 221, 389. See also Contracting officers; Technical orders.

Manufacturers. See also Airframe manufacturers;

Engine manufacturers.

of accessories and subassemblies, 6

Aeronautical Corporation of America, 575

Aeronca Aircraft Corp., 321, 576

Aeroproducts Division of GMC, 562-63.

Air Associates, Inc., 7-8, 8n

Air Cooled Motors, Inc., 6n, 581

Albert Kahn, Inc., 28n

Allis-Chalmers, 455-56

Allison Division of GMC, 6n, 269, 293n, 309, 562,

581

alphabetical file of, 358

Aviation Manufacturing Corp., 6n. See also individual divisions.

Baldwin-Southwark, 31

Beech Aircraft Corp., 293n, 302, 321, 442, 561, 575-

76

Bell Aircraft Corp., 38-39, 245, 293n, 302ff., 376,

547, 561, 575-76

Bellanca Aircraft, 321, 576

Bendix Aviation Corp., 7-8, 8n, 449-50

Boeing Aircraft Corp., 7, 9, 21n, 29, 34, 38n, 40n,

293n, 299, 302, 325, 349, 373, 376, 399, 540, 547,

561, 565, 575, 576

Breeze Manufacturing Co., 7-8, 8n

Brewster Aeronautical Corp., 7-8, 8n, 293n, 575-76
INDEX 623

Manufacturers—Continued

Budd Manufacturing Co., 576

Buick Division of GMC, 310, 580

business practices, 354, 360, 363, 403, 409

Canadian Car Co., 576

Canadian Propellers, Ltd., 563

Case, J. L., 540

Cessna Aircraft Division of United Aircraft, 293n,

561, 576

Chance-Vought Division of United Aircraft Corp.,

22, 561

Chevrolet Division of GMC, 26, 580

Chrysler Corp., 312, 377

Cleveland Pneumatic Tool Co., 7-8, 8n, 318-19

Columbia Aircraft, 576

Consolidated Aircraft Corp. (Consolidated-Vultee),

10, 21n, 29, 38n, 40n, 144, 293n, 309, 326, 521-22,

539, 540, 561, 565, 575, 576

Continental Motors Corp., 6n, 293n, 580-81

criticisms by, 281-82, 495. See also Aeronautical

Chamber of Commerce; Lampert Committee;

Morrow Board.

Culver Aircraft Corp., 575-76

Curtiss Aeroplane and Motor Co., 85

Curtiss Electric Division of Curtiss-Wright Corp.,

562-63

Curtiss-Wright Corp., 7-8, 8n, 15, 21n, 29, 33, 37-

39, 134, 180-81, 190, 196n, 256, 293n, 302, 320-21,

404, 415, 561, 562, 575, 577

Dayton-Wright Airplane Co., 83

DeHaviland Aircraft of Canada, 577

delayed by Congress, 301, 439

Dodge Division of Chrysler Corp., 321, 580

Doehler Die Casting Co., 435

Douglas Aircraft Corp., 9, 15-17, 21n, 38n, 40n,

134, 136-37, 142, 199, 201, 241, 264, 293n, 299n,

309, 315, 321, 362, 378n, 393, 393n, 514, 519, 540-

41, 543, 546, 561, 575, 577

Eastern Aircraft Division of GMC, 561, 577

Emerson Electric, 378

excise tax problem, 387

Fairchild Aircraft Corp., 38-39, 134, 293, 561, 575,

577

Fairey Aircraft Ltd., 165

fears of, 357, 373, 376, 379, 413, 442

Fisher Body Division of GMC, 269, 309, 321, 382,

415, 547, 577

Fleet Aircraft Corp., 577

Fleetwings, Inc., 575, 577

Ford Motor Co., 15, 299, 299n, 309, 311, 312, 314n,

326-27, 377, 455-56, 494n, 518, 519-23, 528, 539,

561, 565, 577, 580

Frigidaire Division of GMC, 563

G & A Aircraft Corp., 577

General Electric, 437, 455-56, 562

General Motors Corp., 255, 312, 321. See also individual divisions.

Globe Aircraft Corp., 577

Manufacturers—Continued

Goodyear Aircraft Corp., 308, 540, 547, 561, 577

Graham-Paige, 163

Grumman Aircraft Engineering Corp., 21n, 293n,

561, 575, 577

Hamilton-Standard Division of United Aircraft

Corp., 7-8, 8n, 562-63

Higgins Aircraft, Inc., 577

Howard Aircraft Corp., 578

Hudson Motor Car Corp., 163, 308, 546-47

Hughes Tool Co., 318

Ingersoll Milling Machine Co., 524

Interstate Aircraft and Engineering Corp., 578

Irving Airchute, 7-8, 8n

Jacobs Aircraft Engine Co., 6n, 293n, 580

Jack and Heintz, Inc., 429, 437

Kellett Autogiro Corp., 575, 578

Kinner Airplane and Motor Co., 6n, 580

Lockheed Aircraft Corp., 30, 200, 293n, 376, 541,

575, 578

Luscombe Airplane Corp., 578

Lycoming Division of Aviation Manufacturing

Corp., 6-8, 8n, 156n, 259, 293, 309, 581

McDonnell Aircraft Corp., 547, 578

Martin, Glenn L., 9, 21n, 26, 37, 38n, 40n, 85ff., 88,

117, 142, 163, 169n, 184-85, 241, 293n, 299, 302,

308, 319, 436n, 534, 561, 578

Menasco Manufacturing Co., 6n, 293n, 580

Monocoupe Corp., 575

Murray Corporation of America, 315

Nash-Kelvinator Corp., 563, 578, 580

Naval Aircraft Factory, 125-26, 578, 580

Noorduyn Aviation Co., Ltd., 578

North American Aviation Corp., 21n, 30-31, 38n,

40n, 200, 241, 293n, 302, 308, 321, 414-15, 482,

539, 547, 561, 575, 578

Northrop Aircraft, Inc., 38-39, 321, 578

Packard Motor Car Co., 83, 163, 301, 309, 367, 392,

401, 580

Piper Aircraft Corp., 561, 575, 578

Platt-LePage Aircraft Co., 578

Porterfield Aircraft Corp., 575

Pratt & Whitney Aircraft Division of United Aircraft Corp., 6, 7, 28, 200-201, 293n, 309, 561, 580

Rearwin Aircraft & Engines, Inc., 9, 578

relations with procurement officers, 140, 364-65,

369. See also Contract administration; Contract

negotiation; Procurement procedures.

Remington Rand, 563

Republic Aviation Corp., 38-39, 293n, 302, 321,

376, 538n, 547, 561, 565, 578

Rolls-Royce, 301, 309, 367, 392, 580

Ryan Aeronautical Corp., 293, 302, 578

St. Louis Aircraft Corp., 575, 578

St. Louis Airplane Division of Curtiss-Wright

Corp., 575

Seversky Aviation Corp., 575
624 BUYING AIRCRAFT

Manufacturers—Continued

Sikorsky Aircraft Division of United Aircraft Corp.,

578

Solar Aircraft Corp., 575

Spartan Aircraft Co., 293n, 575, 579

Sperry Corp., 7-8, 8n, 437

Stearman Aircraft Division of Boeing Aircraft

Corp., 293n, 575

Stearman-Hammond Aircraft Corp., 575

Stinson Aircraft Division of Aviation Manufacturing Corp., 293n, 575

Studebaker Corp., 310, 377, 418, 458, 480

Taylor Aircraft Corp., 32n

Timm Aircraft Corp., 579

United Aircraft Corp., 6, 33, 38-39, 184, 187n, 256,

297, 562. See also individual divisions.

United States Steel, 255

Universal Aircraft, 579

Vega Airplane Co., 387, 541

Vickers Canadian, Ltd., 579

Vought-Sikorsky Aircraft Division of United Aircraft Corp., 273n, 575

Vultee Aircraft Division of Aviation Manufacturing Corp., 242, 293n, 302, 575

Waco Aircraft Co., 373, 575-76

Warner Aircraft Corp., 582

Warner-Swasey, 259

White Aircraft Co., 575

Wright Aeronautical Corp., 6, 200-201, 293n, 309,

418

Manufacturing methods, 153-54, 522

Manufacturing plants. See Facilities.

Mapping, 558

Marauder. See B-26's.

Marbury, W. C., 478

Maritime Commission, 188n, 451

Markets for aircraft. See Airlines; Civilian aircraft;

Exports; Foreign orders.

Markets for aircraft parts, 7-8

Market economy, 373

Market prices, 344, 360. See also Open market procurement.

Marshall, General George C. See also Chief of Staff.

on aircraft program, 202-04, 202n, 203n, 204n, 207,

231

on aluminum shortage, 251

appoints Air Board, 220

aviation communications policy, 486

relations with Arnold, 474

Martin, Glenn L., 88, 169n, 293n. See also A-30's;

B-26's; B-29's.

B-10 bomber, 117, 142, 163-64

early development role, 85ff.

facility expansions, 9, 184-85, 299, 302, 308

factory plan, 163

finances, 26, 37, 38n, 40n

production record, 9, 21n, 561, 578

wartime contract problems, 241, 319, 436n, 534

Mass production, 512

costs, 327, 560

data required for, 185-87

designing for, 110-11, 187, 264. See also Standardization.

examples of, 180, 320, 518ff., 540

exports impact, 200

influences spares policy, 215

labor role, 348

proprietary rights inhibit, 539

Reuther Plan for, 310

time lag before, 108

Master changes in modifications, 536-37, 545. See

also Change orders; Modifications.

Materials

cost analysis, 348, 359, 422, 424

definition problems, 426. See also Critical raw

materials; Raw materials.

escalation influences purchase, 423.

requirements studies, 252

shortages, 263-64, 317, 330, 468

Materials Branch, Materiel Division, 98

Materiel Center, 465, 487. See also Wright Field.

Materiel Command

decentralization policy, 503-10

organization, 270, 245-46, 465, 471-72, 476-77, 487.

See also Materiel Division; Wright Field.

procurement role, 242-43, 318, 337, 341. See also

Contracting officers; Negotiation of contracts;

Procurement doctrine; Procurement officers;

Procurement procedures.

small business problems, 502

staff, 273, 350, 558. See also Civil Service; Civilian

personnel; Enlisted men; Officers; Reserve officers.

SWPC role, 501

termination organization, 453-54

Materiel Division

co-ordination problems, 463

mobilization role, 153, 179, 188-89, 193, 258. See

also Industrial Planning Section; Mobilization;

Mobilization planning.

OCAC, 97-106

organization, 462, 465

relations with OPM, 270

staff, 463-64

statistical tools, 192

Materiel Liaison Section, OCAC, 95, 102-03

Materiel, Maintenance, and Distribution, Air Staff,

465, 478

May, Andrew J., 285

Mead, George J., 256

Medium bombers, 244, 302, 308. See also Bomber

aircraft.

Meigs, Merrill C., 266

Melrose Park, Ill., 310

Memorandum Report, 110-11

Menasco Manufacturing Co., 6n, 293n, 580
INDEX 625

Merchants of Death, 119-20, 125, 129, 155, 196

Merlin engine, 309, 580. See also Packard Motor

Car Co.

Metallurgical laboratories, 568

Methods of manufacture. See Manufacturing methods.

Midcentral Procurement District, 506

Middle River, Md., 37

Middlemen, 407, 444, 500, 510

Middletown, Ohio, 321

Midway Island, 213

Midwestern Procurement District, 506

Militarism, 67

Military Affairs Committees. See House Committee

on Military Affairs; Senate Committee on Military Affairs.

Military attache reports, 165, 169n, 514. See also G-2,

WDGS.

Military characteristics, 110, 214, 257n, 316

defined, 106, 210n. See also Aircraft characteristics; Aircraft performance; Performance characteristics; Quality; Specifications.

Military Intelligence Division, WDGS, 105

Military justice, 349. See also Judge Advocate General.

Military mission. See Mission.

Military personnel. See Enlisted men; Material Command, staff; Officers; Reserve officers.

Military priority. See Priorities.

Military services. See Arms and Services; Army; Navy

Department; individual services by name.

Minimum wage, 281. See also Walsh-Healey Act.

Ministry of Aircraft Production, 410

Ministry of Supply, concept of, 272

Ministry of Supply (British), 341, 417n

Miscellaneous Maintenance and Supply Branch, Materiel Division, 98

Mission, 210-13, 217-18, 220, 222. See also Air Board;

Air Corps, mission; Air Corps Board; Air power;

Army-Navy; Doctrine; Joint Army and Navy

Board; Requirements.

Mitchell. See B-25's.

Mitchell, Brig. Gen. William, 45-46, 112

Mobilization

Buy American Act delays, 283

Detroit role, 316

facility policy, 290, 292, 315-19, 322, 325, 329

foreign order role, 195-96

labor seeks voice in, 313

legislation for, 286-87

makeshift character, 235, 252

organization, 246-48, 255, 262, 265

status in 1940, 254

Mobilization and War Planning Branch, Materiel

Division, 98

Mobilization plan, 225, 225n, 252. See also Protective

Mobilization Plan.

Mobilization planning, 54, 150-68, 177-78, 181, 205-

08. See also Factory plans; Industrial Planning

Section; Office of Assistant Secretary of War.

appraisals of, 152, 155, 160-61, 166-67, 178, 181,

205-07, 253, 258, 265, 268, 301-02, 304, 507

conceptions, 155, 157ff., 249, 273, 291n, 307, 513

of contract negotiation, 347

data lacking, 186

educational order use, 183

by procurement districts, 491

proprietary design problems, 539

of termination clauses, 446

tools for, 191-92, 267

Mock-up, 140, 140n

Model changes, 470, 526, 535, 537. See also Change

orders; Modifications.

Modification centers, 324, 529-33, 537

Modification Section, Production Division, 532

Modifications

attempted freeze, 514-17

BDV Committee role, 545

of bombers, 117, 526

contract administration problems, 366-67, 399,

413, 417, 426, 482-83

expenditures, for, 557-58

exports pay costs, 203

need for, 242, 245, 512, 529ff.

procedures for, 108-09, 167, 530-34, 540

Moffett, Rear Adm. W. A., 116n

Monocoque construction, 16, 20, 51

Monocoupe Corp., 575

Monopoly, 127. See also Negotiated contracts; Sole

source.

Moody's Industrials, 33

Morale, 355, 361, 382, 386, 530

"Morgan interests," 249

Morgenthau, Henry, Jr., 224, 224n, 252-53, 252n, 263

Morrow, Dwight W., 46

Morrow Board, 46-47, 50, 57, 87, 89, 122, 130

Motor vehicles, military, 315

Motors, electric. See Fractional horsepower motors.

Multiple awards, 280

Multiple-shift operations, 182, 187, 191, 287. See also

Employment; Labor.

Munitions Control Board, 196. See also Exports; Neutrality legislation.

Munitions manufacturers, 120, 125

Munitions program, 231, 235-36, 238, 331. See also

50,000 aircraft program.

Murray Corporation of America, 315

Musical instrument manufacturers, 567

Mussolini, Benito, 208

Mustang. See A-36's; P-51's.

Mutual mistakes, rectification, 366

Myers, B. E., 240n
626 BUYING AIRCRAFT

NACA. See National Advisory Committee for Aeronautics.

Nash-Kelvinator Corp., 563, 578, 580. See also R-6's.

National Advisory Committee for Aeronautics, 22-

23, 256

National defense

Air Corps conceptions of, 41, 53, 124, 182, 213, 234

exports impact on, 196n, 200, 205

politics of, 3, 66, 79, 175

requirements for, 44, 52-53, 169-70, 172-73

National Defense Act of 1916, 82n

National Defense Act of 1920, 44-45, 93, 151, 159, 339

ambiguities, 475

ASW role, 474, 480

authorizes negotiated procurement, 275, 339, 474-

75, 480

exceptions authorized, 84n

National Defense Advisory Commission

capacity studies, 192, 293-94

facility expansion, 302, 304

organization, 254-58, 261-65, 313, 318, 322

views of military, 495

National Defense Expediting Act, 284

National economy, 454, 493, 511

National Guard, 48

National Recovery Administration, 8

National security. See National defense; Rearmament.

Nationalization of industry

in France, 201

industry fear of, 38, 185, 277, 291

proposed, 124-25, 177-79

Naval Aircraft Factory, 125-26, 578, 580

Navigation instruments, 567

Navigator. See AT-7's; AT-10's; AT-11's.

Navy Department, 74-75, 89n, 161. See also Bureau

of Aeronautics; Bureau of Ordnance; Joint

Army and Navy Board; Naval Aircraft Factory.

air power views, 211-13

contract administration, 362, 379, 388, 390-91,

422n, 422-24, 430, 442

cross procurement, 482-83

mobilization role, 151, 196, 241, 247, 262

organizational relationships, 256, 266, 270, 306

procurement procedures, 120, 138n, 142, 150, 284

procurement program, 230, 234

procurement record, 548, 552-53, 560-61, 576-79

profits on contracts, 120, 122, 126

requirements, 44, 53-54

termination role, 451

NDAC. See National Defense Advisory Commission.

Negotiated contracts

amendment sought, 276-80, 287

authorization for, 82, 91-92, 113, 117, 275-76, 284-

85, 289, 234, 258

Congress views on, 118-20, 127, 148, 276

for experimental aircraft, 86, 90-91, 114, 131

for production orders, 129, 144

Negotiated contracts—Continued

sometimes unavoidable, 84, 122, 130

use before 1926, 91

use discussed, 117, 127, 127n, 139, 141, 143, 146-47,

286, 338, 343, 373, 497, 499

Negotiated settlements, 452

Negotiation of contracts. See Contract negotiation.

Newspapers, 122, 124, 170, 199. See also Magazines;

Public opinion; Public relations; Publicity.

political use of, 173n, 173-74, 195

publicize irregularities, 119-20, 122, 459

Reuther Plan coverage, 311-14, 313n

Nelson, Donald, 228n, 239n, 272-73, 322, 471, 499

Netherlands, 224

Neutrality legislation, 18-19, 196-97, 200-201, 201n,

228, 249

New Castle, Del., 321

New Deal, 248-49, 316n, 402

New Haven, Conn., 506

New York, N.Y., 153, 491

New York Stock Exchange, 119

New York Times, 122, 223

Newark, N.J., 506

Noncompetitive procurement. See Negotiated contracts; Purchase orders; Sole source.

Nonferrous metal, 271n

Nonperformance, 447. See also Terminations.

Noorduyn Aviation Co., Ltd., 578. See also AT-16's;

C-64's.

Norden bombsight, 198, 483

Norseman. See C-64's.

North Africa, 534

North American Aviation Corp., 30-31, 200, 241,

293n, 539, 547, 575. See also A-36's; AT-6's;

B-24's; B-25's; B-29's; P-51's.

CPFF contract, 415-16

cross procurement, 482

facility expansion, 302, 308, 321

financing, 38n, 40n

production, 21n, 561, 578

Northrop Aircraft, Inc., 38-39, 321, 578. See also

A-31's; P-62's.

Norway, 200, 224

Nose turrets. See Gun turrets.

NRA. See National Recovery Administration.

Numbered air forces, 487

Numbers racket, 239ff.

Nye, Gerald Prentice, 55n, 199

Nylon, 250

O-60's, 578

O series engines, 581

OASW. See Office of Assistant Secretary of War.

Obligation of funds, 71-73, 76, 556-57. See also Authorization, distinguished from appropriation.

Observation aircraft, 45, 64, 156-57

Observation balloons, 206
INDEX 627

Observers, reports of, 218, 515. See also Military attaché reports.

Obsolescent aircraft

influence current production, 203, 234, 267

influence mobilization planning, 158-59

retention of, 64, 242, 245

spare parts impact, 342

Obsoletion, problem of, 49-51, 49n, 66-70, 197, 204,

219

OCAC. See Office, Chief of Air Corps.

OEM. See Office for Emergency Management.

Office, Chief of Air Corps. See also Chief of Air

Corps.

introduces machine records, 261n

organization, 94ft., 268, 462

priorities role, 258-62

procurement role, 100, 102-05

relations with NDAC, 256

seeks procurement law, 276

Office of Assistant Secretary of War. See also Assistant Secretary of War.

policies and procedures, 160, 183-84, 231, 276, 374,

397

procurement role, 94, 100, 151, 247

Office for Emergency Management, 254

Office of Production Management, 192, 257n, 495

co-ordinating role, 265-66, 270, 313, 538

Defense Contract Service, 352, 496-97

facility policies, 303, 321

Wright Field unit, 270

inadequacies, 272, 322

Office of the Secretary of War, 62. See also Secretary

of War.

Office space, at Wright Field, 349-50

Office, Under Secretary of War. See also Under Secretary of War.

anticipates conversion dislocations, 315, 403-04,

475

co-ordination problems, 475

disputes with services, 475

Officers. See also Contracting officers; Personnel;

Regular Army; Reserve officers; Staff officers;

Trained personnel.

attitudes, 115, 240, 304, 509

delay production decisions, 306

in District offices, 503, 506

frauds, 355

industrial training, 162n

at Wright Field, 466-67, 559

Offices, at Wright Field, 467

Official history, 482, 496

Ogden, Utah, 177

Oleo struts, 7, 160, 183, 318, 373, 566

Omaha, Neb., 308, 534, 540, 547

Open end contracts, 537

Open market procurement, 122, 248, 250, 343, 365

Operating expenses, fixed-fee role, 384

Operating ratios, aircraft industry, 40-41

Operating statements, financial, 357, 363

Operational experience, 381, 400

Operational losses, 217. See also Attrition.

Operations

distinguished from control, 510

influence organization, 93

Operations Commitments and Requirements, Air

Staff, 465

Operations Division, OCAC, 97

OPM. See Office of Production Management.

Options, 127, 278, 332, 423

Order backlog, 234

Order maldistribution, 88, 274

Ordnance Department, 258

CPFF practices, 379, 390-91

cross procurement, 485

GOCO contracts, 296

relation to AAF, 486

relation to ASF, 476

Organization, 93, 261, 271-272, 573. See also Doctrine; Organizational planning; Procurement

procedures,

charts, 476, 479, 505

Organizational planning, 347, 473, 476-78. See also

Organization.

Organized labor. See CIO; Green, William; Hillman,

Sidney; Reuther, Walter; Unions; United Auto

Workers.

Organized Reserve, 48

Orwell, George, 218

OSW. See Office of the Secretary of War.

Overhaul, 50, 54-55, 74. See also Depots.

Overhead, 125, 282, 360, 362-63, 381, 383, 435

Overhead cranes, 524

Overlapping organizations, 103-04. See also ArmyNavy; Cross procurement; Duplication of effort;

Interbranch competition; Interservice rivalry.

Overseas procurement, 90. See also Buy American

Act.

Overtime, 261n, 281

Oxygen systems, 267, 470, 529

P-26's, 568

P-35's, 568

P-38's, 198, 245

P-38's, 517, 531, 533-34, 550, 560, 578, 581

P-39's, 245, 302, 550, 560, 576, 581

P-40's, 228, 517-18, 550, 560, 577, 581

P-43's, 578

P-47's, 550, 560, 577-78

P-51's, 550, 578, 581

P-59's, 550, 562

P-61's, 550

P-62's, 578

P-63's, 517, 550, 576

P-67's, 578

P-70's, 550, 577

P-75's, 269, 577
628 BUYING AIRCRAFT

P-80's, 550, 562, 578

P-84's, 538n

Pacifists, 73

Packard Motor Car Co.

factory plan, 163

purchasing problems, 401

Rolls-Royce contract, 301, 309, 367, 392, 580

World War I profits, 83

Packing, 341

Pan American Airlines, 399

Panama Canal Zone, 52-53, 282

Panel instruments. See Instruments, aircraft.

"Paper aircraft," 246

Parachute harness, 250

Partial payments, 73, 284, 368, 413. See also Advance

payments; Progress payments.

Participating prime contractors, 543-45, 547

Partnerships, 436

Parts. See also Accessories; Components; Spare parts.

fighter aircraft, 457

number per aircraft, 564

production of 306, 308-09, 381

Parts lists, 483, 544

Parts manufacturers, 182, 324

Parts supplier, mail order, 8

Patent lawyers, 105-06

Patent Liaison Section, 98-99

Patent licensing, 308

Patents, 46, 80-81, 319, 341, 436, 501

Patriotism, 271, 323, 364n, 384, 428, 505

Patrol bombers, 211, 576-79

Patterns, 398

Patterson, N.J., 6

Patterson, Robert P. See also Assistant Secretary of

War; Office of Assistant Secretary of War; Under

Secretary of War.

appointed USW, 474ff.

criticizes Air Corps, 261n

criticizes legal organization, 349

quoted, 548

personal relationships, 479

procurement role, 335, 351-52, 406

Paving, 389

Pay of officers, 212

Pay-as-you-go research. See Research and development.

Payroll, 393, 448. See also Wages.

Peacetime attitudes, 307

Peacetime strength. See Aircraft on hand; Authorized strength.

Pearl Harbor, 238-39, 249, 289, 316, 320

Pecora, Ferdinand, 119

Peculation. See Fraud.

Penalties, 357, 365

Penalty clauses. See Liquidated damages.

Performance characteristics. See also Aircraft performance; Military characteristics.

Performance characteristics—Continued

design change role, 512

evaluated in procurement, 93, 140. See also Evaluation procedures.

impact of increased range, 52

maximum sought, 130

relation to price, 131, 134-38

Periodic repricing, 441

Periodicals. See Aviation periodicals; Magazines.

Personal equipment, 470, 492

Personal and organizational equipment, 558

Personalities, influence on procurement, 272n, 353,

355, 505

Personnel. See also Civilian personnel; Labor; Manpower; Officers; Skilled labor; Trained personnel.

AAF directorate role, 465

inexperienced, 110-11, 354-55, 369

recruitment problem, 349, 360, 453

requirements studies, 472

shortages, 99, 104-05, 109

Wright Field statistics, 466

Petroleum products, 484. See also Fuel.

Philadelphia, Pa., 125, 506

Philippine Islands, 52-53

Photography, 558

Piano manufacturers, 373

Pilot training, 225

Pilots, 11, 78, 121

Pipeline. See Distribution pipeline.

Piper, W. T., 32n

Piper Aircraft Corp., 561, 575, 578. See also L-4's.

Pirating of labor, 181

Planning, 44, 294. See also Mobilization planning;

Policy formulation; Procurement planning.

Planning Branch, Materiel Division, 98

Planning Branch, OASW, 151ff., 165

Planning districts. See Procurement Planning Districts.

Plans Division, OCAC, 94-95, 105-106, 176-77

Plant clearance, 451-52, 456

Plant seizure, 322. See also Coercion; Confiscation;

Seizure of facilities.

Plant Site Board, 307

Plant site selection. See Site selection.

Plant surveys. See Facility surveys.

Plants. See Facilities.

Plaster patterns, 544. See also Lofting; Templates.

Platt-LePage Aircraft Co., 578

PMP. See Protective Mobilization Plan.

Point system in aircraft evaluation, 111

Poland, 195, 205, 211

Police protection, 389

Policy formulation, 381, 401. See also Chief of Air

Corps; Chief of Staff; Congress, defense responsibilities; Decision making; General Staff, War
INDEX 629

Policy formulation—Continued

Department; House Committee on Military Affairs; Leadership; Senate Committee on Military

Affairs.

Political parties, 253

Political slogans, 237

Political symbols, 229, 571

Politics. See also Congress; Decision making; Leadership; Procurement statutes; Public opinion.

business allegations on, 316n

influence aircraft industry, 37-38

influence aircraft program, 172, 232n, 233, 515, 519,

569-71

influence decentralization policy, 509-10

influence design decisions, 515

influence procurement leadership, 115, 188, 272n,

352-53

in mobilization, 208, 248, 253-54, 265, 320

plant seizure problem, 322

in priorities problem, 494-95

in procurement process, 55-58, 68-69, 106, 421

in relief funds, 68-69

in Reuther Plan, 312

Roosevelt's tactics, 170-74

separate air arm, 476

in site selection, 308

small business pressure, 497, 500, 502

Pools, formed by businessmen, 499

Porterfield Aircraft Corp., 575

Post Office Department, 12-13, 15, 497

Postmaster General, 14

Postwar economy, influence, 295-98, 431, 438

Power Plant Branch, Materiel Division, 98

Power plants. See Engine manufacturers; Engines;

Jet engines; Liberty engines.

PR. See Procurement Regulations.

Pratt & Whitney Aircraft Division of United Aircraft Corp., 6, 28, 293n. See also R-985, R-1340,

R-1830, and R-2800 engines.

engine production, 7, 561, 580

license Ford production, 309

1939 foreign orders, 200-201

Precision work. See Tolerances.

Preparedness, 158, 164-65, 178, 225-26, 312. See also

Mobilization planning; National defense.

President of the United States. See also Coolidge.

Calvin; Roosevelt, Franklin D.

Air Corps relations with, 69

discretionary powers, 285, 289

influence on procurement, 148

mobilization role, 247

requirements role, 63, 571

Presidential Budget. See Budget.

President's Liaison Committee, 252-53, 263, 265

Press. See Magazines; Newspapers; Public relations;

Publicity.

Press, heavy forming, 30-31

Pretermination, 454

Price

as factor in award, 93, 115, 138, 330, 343

market policing of, 343

procedure for evaluating, 134

profit as factor in, 418

relation to performance, 130-31, 134ff., 138. See

also Performance characteristics.

statute to minimize, 127

Price adjustment, 369, 421, 479n. See also Amendment of contracts; Renegotiation.

Price Adjustment Board, 429-30, 436-37, 440

Price Adjustment Section, 429

Price analysis, 407-08, 407n, 442

Price comparison, 358

Price competition, 130. See also Price.

Price increases, 108

Price indices, 358, 422-24, 436

Price quotations, 357

Price trends, 359

Prices

accelerated depreciation lowers, 297

contracting officer monitoring, 403-04

excessive, 123

foreign order impact, 204-05

historical records, 359

impact of renegotiation, 445

Naval Aircraft Factory leverage on, 125

reporting changes, 437

verification, 360

Pricing, 87, 192, 357, 428

Primary training aircraft. See PT-13's et seq.

Prime contractors. See also Contractors.

for airframes, 563

favor facility expansions, 319

favored over subs, 8, 317

1942 volume, 346

profits allowed, 375

property accounting, 399

purchasing problems, 401

renegotiation clause, 429

responsibilities, 494

subcontractor relations, 319, 406, 447, 454, 494,

500, 543

utilize small business, 323, 502

views on modification, 531-32

Priorities

district role, 508

Draft Act provisions, 288

for facility expansion, 321

military compliance, 495

OASW mobilization assignment, 247-48

pinch small business, 262, 316-20, 493-94, 499

procedures, 258-60, 262

rivalry for, 259-60

Priorities and Allocations Section, OCAC, 259

Priority competition, 481
630 BUYING AIRCRAFT

Private aircraft. See Civilian aircraft.

Private enterprise, 125, 388, 409

Procurement

annual, 67, 87

total expenditures, 556

Procurement, Army-Navy. See Joint procurement.

Procurement assignment, 480-81. See also Co-ordination, in procurement; Cross procurement.

Procurement Assignment Board, 480-85

Procurement Control Section, 472

Procurement cycle, 331-32. See also Procurement

procedures.

Procurement district representatives, 167

Procurement districts

complicate audits, 391

contracting officers, 368-69

data for negotiators, 358

organization, 491, 506-08. See also Procurement

Planning Districts.

personnel problems, 466, 503, 505, 558-59

price analysis groups, 407

procurement role, 489, 493, 503-04, 504n, 508-10

renegotiation role, 430, 433

termination teams, 454

Procurement Division, Materiel Command

cadres for districts, 503

co-ordination with production, 468-69

CPFF conversions, 414

description, 466, 469-70, 472-73

officer strength, 467

sheds termination role, 454

Procurement Division, Treasury Department, 124n

Procurement doctrine

on allowable profits, 434

ASW role, 93

auditing role, 390

on contractor role, 388, 401-05

favors established firms, 561

formulated by ASF, 477

GAO encroachment, 383

impact of termination on, 453

interpretations of, 80, 84, 209, 381, 408, 410, 573.

See also Procurement policy; Procurement procedures.

on organization, 430

on renegotiation, 440

on subcontracts, 494, 502

supervision costs problem, 460

on termination, 447

Procurement Engineering Branch, Materiel Division,

98

Procurement hump, problem of, 49

Procurement legislation. See also Procurement statutes.

organization needed, 104-05

revisions considered, 88

specialists needed, 106, 349

turning point, 283-84

Procurement officers. See also Contracting officers.

attitudes of, 107-08, 401-02

authority, 289, 500

circumvent procurement curbs, 275

close pricing failures, 442

contractor pressure on, 317

co-operate with SWPC, 501

criticism of, 84

criticism of ASF, 477

defend contractor purchasing, 403, 409

designer contracts restricted, 140

educational role, 404, 419

experience recorded, 389

facility views, 319-20, 328

fee views, 376

inadequate staffs, 328

neglect termination, 446, 449, 455

oleo strut problem, 318

problems confronting, 330ff.

profit goals, 434

qualities required, 147, 317, 343, 377

question CPFF conversion, 419

relations with GAO, 281, 396

resist tax directive, 387

shed subcontractor problem, 494

swamped with data, 349

use OPM services, 496

value co-ordination, 351

volume of negotiation, 346

Procurement organization. See also Materiel Command; Materiel Division; Procurement districts;

Procurement Division, Materiel Command.

congressional impact, 495

criticism of, 345-46, 381

district parallelism prescribed, 505

functional subdivision, 346-48

functions analyzed, 487

housekeeping, 467

lacks estimators, 361

morale, 355

personnel strength, 350

reaction to criticism, 404

Procurement planning. See also Industrial Planning

Section; Mobilization planning; Office of Assistant Secretary of War.

design freeze planned, 513

by OASW, 93, 151

practical difficulties, 166n, 235-36

requirements computation, 223

Procurement Planning Board, Materiel Division, 94,

97

Procurement Planning District representatives, 98,

153-54

Procurement Planning Districts, 153, 181n

Procurement policy, 82, 132, 141. See also Procurement doctrine; Procurement procedures; Procurement Regulations.

"Procurement priority," 262
INDEX 631

Procurement procedures. See also Contract negotiation; Contracting officers; Procurement doctrine;

Procurement Regulations; Procurement statutes.

AAF retains control, 479

administering samples difficult, 133, 140

ASW (Air) role, 94

avoid favoritism, 140

business instruction needed, 498

change orders, 108-09, 303

Chief of Air Corps role, 94

complexity of objectives, 6, 104, 107, 112, 146-47,

209, 330, 569, 573

congressional interest, 48, 121, 124

contractor purchasing supervised, 360, 403

co-ordination problems, 100-101

criticism of, 75, 84-86, 113, 139, 350-51, 388

described, 79, 81, 89, 99, 106-08, 113, 128, 148, 388,

513

detailed specifications undesirable, 137-38

evaluation methods, 110-11, 133

Field Service Section role, 99

General Foulois' views, 120

German, 112

impact of organization, 93

impact of termination, 453

innovations feared, 353

internal record keeping, 358

investigation of, 123

irregularities alleged, 121-22, 127

legal aspects, 105-06

Navy's approved, 122

negotiated contracts, 88, 129

political aspects of, 106

precedents for, 109-10

price analysis, 408

reconciling price and performance, 130

revision urged, 86-89, 109, 124, 128, 131, 142, 145,

331ff.

rival conceptions, 408

simplified by Johnson, 175

small business complaints, 493

standardization required, 132

subcontractor stipulations, 494

USW role, 476

upset by war, 146

Procurement program. See also Air Corps, balanced

program; Air Corps, expansion program; Air

Corps Act of 1926; Authorized strength; 1,800,

2, 320, 5, 500, and 50,000 aircraft programs; Mobilization; Rearmament program.

Air Service, 46

complexity of, 229

civilian agency interference, 495-96

delays, 71, 334

implications discussed, 236

influenced by doctrine, 5-6, 211, 233

lack of, 44

Morrow Board, 46-47

Procurement program—Continued

need for continuing, 47

revision in, 239

Procurement Regulations

ASF role, 477

authorize discretion, 81

condition negotiations, 356

on contracting officers, 353, 369

define fair price, 357

described, 339

drafted by ASW, 474

evasions, 367

incentive contract, 417

literal compliance, 459

nonmilitary objectives, 455

problem of formulation, 478

procurement assignment, 481

Procurement Section, Materiel Division, 99, 106ff.,

116. See also Procurement Division.

Procurement statutes. See also Legislation; Procurement legislation; Revised Statutes; Social welfare legislation.

ACC role, 87-88

administration of, 80ff., 94, 104-05, 125, 147, 419

complexity, 147

danger of tampering, 116, 128, 131, 276, 353

discourage designers, 86-87

discretionary powers ignored, 115

evasion of, 275-367

impact of, 569

inadequacies, 100, 274-75, 280, 283

interpretation of, 81, 114-15, 172

limit fees, 375

penalties for fraud, 357

permit wartime deviations, 359

renegotiation provisions, 429, 432, 438-39

revisions sought, 89, 126, 276, 279-80

strict compliance harmful, 85

termination, 452

Procurement without competition, 89, 113-17, 123,

127. See also Air Corps Act of 1926; Allocation of

contracts; Negotiated contracts; Sole source.

Production, 511, 511n. See also Aircraft industry,

prewar production experience; Aircraft production.

Production analysis, 163-64. See also Factory plans.

Production capacity. See also Aircraft industry, capacity estimates; Mobilization, facility policy;

Mobilization planning.

for accessories, 180, 294

allocation of, 152, 155-56, 247

in aluminum, 180

in automobile industry, 304

in conception of mobilization, 159, 178, 234, 329

expansion of, 143, 176-77, 182, 232, 304, 320, 324-

25. See also Facility expansion.

foreign order impact, 18, 195, 197, 200-203

impact of nationalization, 201
632 BUYING AIRCRAFT

Production capacity—Continued

measurement of, 175, 181, 181n, 185-92, 291, 294,

305, 321, 408

misuse of, 242

needed for spares, 294

of oleo struts, 318 out of doors, 531

problem of maintaining, 178-79, 234

reports on, 186

requirements, 168n, 169, 186, 224-25, 252, 290, 292,

507

shortage of, 150, 181, 250

in small business, 317, 494

subcontracting inadequate for, 184

turbosuperchargers, 455-56

Production contracts

to amortize research, 25, 85, 88, 114

Beech UC-45 discussed, 442

budgetary problems, 72, 128, 143-44

competition required, 84-85, 115, 124, 131

co-ordination problems, 463

delayed by development, 75-76, 108

by design competition, 90-91, 276

evaluation of, 131

facility financing, 295

indirect competition on, 127

JAG rulings on, 115

political influence on, 115

procedures for, 107, 274

profits on, 126

sample required, 140-42

specifications, 86

without competition, 88, 91, 116-17, 127n, 144, 146

Production control. See also BDV Committee; Coordination; Joint production programs; Production Division, Materiel Command; Production

planning.

industry failures in, 32

for modifications, 516-17, 535, 538

need for, 564

termination problem, 456

Production Control Section, 467

Production data contracts, 291

Production Division, Materiel Command

aids negotiators, 358, 361

co-ordination problems, 468-69

officer strength, 467

organization, 466, 469

schedules modifications, 532, 535

Production Division, NDAC, 256, 262

Production engineering, 32, 468

Production Engineering Section, Materiel Command,

270, 462, 467, 482, 502, 517

Production engineers, 186, 188, 306, 361, 468, 538

Production expediting, 364, 471, 509. See also Aircraft production, acceleration.

Production failures, 240

Production lines. See Assembly lines.

Production methods, 156. See also Aircraft production; Manufacturing methods.

Production models, 331

Production options, 127

Production orders, procedure for, 113

Production versus performance, 75

Production planning. See also Production control.

BDV Committee role, 541

during design phase, 519

faulty premises, 294

Ford initiative, 520

influences renegotiation, 437

for modifications, 534

statistical tools, 192

Production processes. See Aircraft production; Manufacturing methods.

Production programs. See also procurement programs and individual programs by name.

Air Staff "ultimate," 237

airframe weight factor, 243

criticized, 4, 239

design changes influence, 156

Ford Willow Run, 521

goals change, 304

President's, 238, 240, 571

require symbolic leadership, 571

Production ratios, 564. See also Aircraft industry,

output per worker; Airframe manufacturers,

cost per pound; Production time.

Production scheduling. See also Production control;

Production planning; Scheduling.

by JAC, 266-69

NDAC initiates, 263

periodic revision of, 264

unreliable, 187

Production statistics. See Aircraft production.

Production targets, feasibility questioned, 240

Production time, airframes, 141. See also Time lapse,

production.

Production tooling. See also Jigs and fixtures.

accelerated depreciation for, 297

Air Corps failure, 190n

in aircraft industry, 17, 28, 30-31

BDV Committee on, 543, 545

complicates contract authorization, 73

in contract negotiation, 341-42

cost analysis of, 348, 360, 363

costs, 31, 141, 413, 526

delays encountered, 325-26

disposal, 458-59

duplicate charges for, 399

economies, 26-27, 33, 327, 367, 512

educational order, 159-60

escalation for, 426

evaluation of, 111

exports impact, 200

influences facility policy, 327

influences renegotiation, 437
INDEX 633

Production tooling—Continued

in modification costs, 534

paucity of literature, 32

prevents contract comparison, 419

property accounting, 397, 399

spare parts impact, 342

upsets capacity yardstick, 189-90

at Willow Run, 518-27

Productivity

in engine industry, 565

of labor, 191, 361

ratios, 564

Products, alphabetical file of, 358

Profit limitations

impact on industry, 35-36

impact on priorities, 259-60

legislation, 280, 288, 297, 301. See also VinsonTrammell Act.

in negotiated contracts, 279

regulations, 380

Profiteering

adverse publicity, 445

alleged in aircraft industry, 59, 126, 384

alleged in airlines, 119, 121

alleged in Navy contracts, 120, 122

alleged in World War I, 46, 83, 119. See also Nye,

Gerald Prentice.

compared with treason, 84

Congress curbs, 429. See also Price adjustment;

Renegotiation; Vinson-Trammell Act.

infrequent on military contracts, 126

procedural changes against, 124

Renegotiation Act role, 431, 438

Profits. See also Excess profits.

allowable margins, 375, 434

Army-Navy contracts, 126

automobile industry views, 314

Congress studies curbs on, 119-20, 123-26

on cost-plus contract, 82, 372

faulty industry index, 40

in fee setting, 378

foreign order impact, 197, 201, 203-04, 260

inadequate capital source, 36

misunderstood by public, 445

Naval Aircraft Factory control of, 125

Navy contracts, 120, 122

on negotiated contracts, 121

1926-38 aircraft industry, 33, 35-36, 39, 126

preferred to preparedness, 178

recapture. See Profit limitations; Renegotiation;

Repricing; Vinson-Trammell Act.

reduce fraud temptation, 357

reduction, 364

relation to costs, 360, 364n, 418, 445

in renegotiation, 431, 440, 443. See also Renegotiation.

role in pricing, 343-44, 348

Profits—Continued

statutory curbs on, 284-85. See also Profit limitations; Renegotiation; Repricing; Vinson-Trammell Act.

tax impact on, 299n

termination allowance, 450

on unfinished work, 450

in World War I, 83, 150

Programs. See Procurement planning; Procurement

program; Production programs; individual programs by name.

Progress payments, 73, 284. See also Partial payment.

Progress reports, 368

Project engineers, 269, 366, 513. See also Project

officers.

Project officers, 97, 99, 358, 361, 463

Promotion, 212, 354, 384

Propeller manufacturers, 7-8, 8n, 183, 294-95, 566

Propellers, 562-63. See also Hamilton-Standard Division of United Aircraft Corp.; Nash-Kelvinator Corp.

aluminum needs studied, 257

concurrent spares production, 294

for Ford B-24, 527

mobilization plans for, 156

P-39 production delays, 245

production, 549, 563

production acceleration, 566

production scheduling, 267

types procured, 552

variable pitch, 72, 156

Property accounting, 397-98, 400, 415, 532

Property disposal, 456, 458-60

Property officers, 399-400

Proposal form, 357

Proposals. See Circular proposals.

Proprietary designs, 87-89, 160, 319, 539. See also

Licensing; Patents; Sole source.

Protective Mobilization Plan, 151, 166, 206, 221, 225,

225n

Proving Ground Command, 487

Psychological targets, 228-29, 234, 236-40, 242-43

PT-13's, 546, 551, 576, 581

PT-14's, 579

PT-17's, 551, 576

PT-19's, 551, 576-78, 581

PT-20's, 578, 581

PT-21's, 578

PT-22's, 578, 581

PT-23's, 546, 551, 576-78

PT-24's, 577, 581

PT-25's, 578, 581

PT-26's, 551, 577

PT-27's, 551

Public advertising. See Advertising for bids.

Public exigency, 80
634 BUYING AIRCRAFT

Public opinion. See also Congress; Magazines; Newspapers; Politics; Public relations; Publicity.

dilemmas for command, 243

manipulation of, 172-73

misled by minority report, 122

on production goals, 241, 310, 316

on profits problem, 445

relation to air power, 3-5

Public relations, 105, 378, 431

Public War Housing Act, 389n

Public works, statutory requirements for, 281, 376

Public Works Administration, 67, 128-29, 393

Publications, 382

Publicity, 124, 312, 412, 454, 459, 496. See also Advertising for bids; Magazines; Newspapers; Public

relations.

Puddle jumpers. See Liaison aircraft.

Pumps, 271n

Purchase Branch, Materiel Division, 98, 347-48

Purchase of land, 327

Purchase orders. See also Purchasing; Suborders.

business volume, 346, 457

excise tax problem, 387

forms, 339

monitoring, 404, 407-08

noncompetitive, 406

retail pricing, 434

Purchase Section, Materiel Command, 348, 473

Purchase, Storage, and Traffic Division, 475

Purchases Division, ASF, 481

Purchasing. See also Contract administration; Contractors, procurement procedures monitored.

abuses, 406

Buy American requirement, 280

by contractors, 403

co-ordinating committee role, 541, 543, 545

improved procedure, 408

requires specialized skills, 405

Purchasing agents, 404-06

Purchasing missions, 195-96. See also British Purchasing Commission; French Purchasing Mission.

Purchasing organizations, automotive, 312

Pursuit aircraft. See Fighter aircraft; P-26's et seq.

PWA. See Public Works Administration.

Pyrotechnic equipment, 267n

Quality. See also Aircraft performance; Performance

characteristics; Specifications; Tolerances.

problem of achieving, 112, 116

control, 562

versus price, 330

Quantity procurement, 132, 134, 140-41. See also

Production data contracts.

Quantity versus quality, 64-65, 75-77, 144, 241-43

compromises required, 512-18, 528

modification role, 530, 538

Quantity versus quality—Continued

NDAC interest, 257n

organization required, 572

Quartermaster Corps, 258, 476

R-1's, 578

R-4's, 551, 578, 582

R-5's, 551, 578

R-6's, 551, 578

R-420 engine, 582

R-440 engine, 581

R-500 engine, 582

R-540 engine, 581

R-550 engine, 582

R-670 engine, 581

R-680 engine, 309, 581

R-755 engine, 581

R-760 engine, 580

R-915 engine, 581

R-975 engine, 580

R-985 engine, 580

R-1340 engine, 580

R-1820 engine, 458, 580

R-1830 engine, 309-10, 580

R-2100 engine, 309

R-2600 engine, 310, 438, 580

R-2800 engine, 309, 580

R-3350 engine, 580

R&D. See Research and development.

Radar, 485. See also Communications equipment;

Radios; Signal Corps.

Radial engines, 309, 565

Radiator caps, 32

Radio Corporation of America, 7-8, 8n

Radio programs, 432

Radios, 246, 271, 486

RAF. See Royal Air Force.

RAINBOW plan, 211n

Railroads, 327

Ramsey, Capt. D. C., 266

Range, impact of increased, 52. See also Aircraft

performance.

Ranger Engineering Co., 6, 28n, 273n, 580

Raw materials. See also Critical raw materials; Materials.

Buy American Act role, 282

costs, 303, 360. See also Market prices; Price quotations; Price trends.

CPFF problems, 411

interplant transfers, 545

mobilization problems, 158, 259, 267, 269-70. See

also Air Scheduling Unit, JAC; Priorities;

Scheduling; Shortages.

shortages, 241, 250, 271n, 317, 493

waste of, 242

RCA, 7-8, 8n

Readjustment Division, ASF, 453

Readjustment Division, Materiel Command, 454
INDEX 635

Rearmament. See also National defense.

foreign order role, 195-96

stimulus to, 175, 179-80, 194

U.S. policy on, 169

Rearmament program, 210, 274, 281-83, 300, 314,

493. See also 5, 500 aircraft program.

Rearwin Aircraft & Engines, Inc., 9, 578

Rebates, 281

Reconnaissance aircraft, 576-79

Reconstruction Finance Corporation, 284, 299, 451

Reconversion of facilities, 315, 323, 377, 452, 457

Record-breaking flights, 3

Record keeping, 473. See also Data processing.

Recovery rate, 536

Recruiting, 355

Red Cross, 382

Red tape, 388, 395. See also Procurement procedures.

Reform, 123-25. See also Investigations.

Reformation of contracts, 366n

Refunds, 434. See also Renegotiation; Voluntary refunds.

Regular Army officers, 212, 506. See also Officers; Reserve officers.

Regulations. See Army Regulations; Procurement

Regulations.

Rehabilitation. See Reconversion of facilities.

Reimbursement, 380-81. See also Contract administration; General Accounting Office.

Release policy, 197-200, 207. See also Neutrality legislation; Secrecy; Security classification.

Relief appropriations for aircraft, 67-69, 128

Relief payments, 389n

Remington Rand, 563

Renegotiation, 289, 355, 358, 377, 396, 429-30

administration of, 433-43, 453

criteria, 440n

objectives, 431

summarized, 444-45

Renegotiation Act

amended, 438-39

lacks profit definition, 434

passed, 429

spirit and philosophy, 431-32, 436, 443

Renton, Wash., 547. See also Boeing Aircraft Corp.

Reorganization of Army, 475, 480

Repair shops, 530. See also Depots.

Repairs. See Maintenance.

Replacement aircraft, 49, 66, 70, 74-75, 217-19, 225

Replacements. See Spare engines; Spare parts.

Reports, 349, 473. See also Contract administration;

Management control; Statistical Control Office.

Repricing, 355, 377, 422, 427, 441

Republic Aviation Corp., 38-39, 293n, 538n, 547.

See also B-29's; P-47's; P-43's; Seversky Aviation

Corp.

facility expansion, 302, 321

production record, 376, 561, 565, 578

Requirements

for aluminum, 158

for aluminum forgings, 250

changing character, 241, 291, 304, 446

conflicting objectives in, 130, 172

design factors in, 130, 140, 156

estimates, 61-62, 70, 153, 224-25, 225n

factors influencing, 48, 172, 216, 218ff., 238, 321

industry capacity for, 161, 178. See also Allocation

of facilities; Facility expansion; Mobilization

planning.

interbranch consolidation, 481

Johnson views on, 181

organizations involved, 52, 63, 65-66, 93-95, 99, 231,

241, 252, 257, 271, 465

for petroleum products, 484

Roosevelt role in, 169-73, 214, 225-26, 237-40, 292

Requirements Branch, Materiel Division, 98

Requirements computation

in Air Service, 44-45

defects in, 220-22

doctrinal basis, 211, 231-33

Drum Board studies, 53

methods of, 52-53, 155-58, 209-14, 222-23, 223n,

231, 525, 571. See also Troop basis.

political factors behind, 213

Research and development, 10. See also Aircraft innovations; Experimental aircraft; Experimental

contracts; Scientific advances; Service tests.

design firms favored, 22, 88

facilities, 23, 99

financing, 21, 36, 70, 85, 144, 557-59

impact of procurement, 569

industry losses on, 24-25

influences renegotiation, 435

procedures for encouraging, 25, 90

procurement statute role, 85, 92, 141. See also Aeronautical Chamber of Commerce; Air Corps Act

of 1926; Procurement statutes.

university role, 23

Reserve aircraft, 54, 74, 157, 204. See also Spare engines; Spare parts.

Reserve Branch, Materiel Division, 98

Reserve officers, 158, 466, 505-06. See also Officers;

Regular Army officers.

Resident representatives, 98-99, 358, 361, 369-70, 391,

406, 406n. See also Contract administration;

Procurement districts.

Resources, 247-48. See also Raw materials.

Resources Control Section, Materiel Command, 489

Retirement pay, 385

Retraction gear, 180-81, 566

Retrenchment. See Economy drives.

Reuther, Walter, 310-15, 314n

Reuther Plan, 310-14

Revenue Act of 1943, 444

Revenue Act of 1944, 388
636 BUYING AIRCRAFT

Revised Statutes, 80, 275. See also Procurement statutes.

RFC. See Reconstruction Finance Corporation.

Risk taking, 82, 200-201, 421

River Rouge (Detroit) facility, 309

Rivets, 564

Rochester, N.Y., 506

Rogers, W. N., 123, 136

Rogers Committee, 55n, 123-24, 124n, 127

Rolls-Royce, 301, 309, 367, 392, 580. See also Packard

Motor Car Co. Roosevelt, Franklin D.

airmail role, 15

ARCADIA Conference, 238

Arsenal of Democracy, 304

and ASW (Air), 53, 102

Aviation Procurement Committee, 124n

budget minded, 60, 67, 71, 128, 195, 231, 232n criticized, 234, 236, 239-43, 277, 291, 313

decision to rearm, 169-71, 174

declares emergency, 193-95

export policy, 202, 205, 207, 210, 252

50,000 aircraft program, 209, 224, 226, 230, 240, 250,

283, 332

initiates bomber program, 540

military leadership, 213, 228, 240, 274-75, 279, 302,

385, 492 on nationalization of facilities, 125, 177-79. See

also Air arsenals; Government-owned facilities;

Nationalization of industry.

NDAC role, 253-55

neutrality policy, 19, 196, 198-99

OPM role, 265, 270

orders aviation investigation, 56

political skill, 170-75, 173n, 249 on Reuther Plan, 313n

role in requirements, 169-73, 214, 225-26, 237-40,

292

WPB role, 322

WRB role, 248-49

Roosevelt, James, 68-69

Roosevelt, Theodore, Jr., 88-89

Rosenman, Samuel, 228n

Rotary wing aircraft, 551, 577-79, 582

Rotation in office, 109

Roush, F. E., 354n

Royal Air Force, 51, 218. See also British Purchasing

Commission; United Kingdom.

Royalties, 357, 436

Rubber, 322

Rudders, 564

Rulings. See Judicial decisions. See also Comptroller

General; General Accounting Office.

Rumors, 170

Russia, 200, 242, 246, 534, 553, 560

Rutherford, Col. H. K., 184

Ryan Aeronautical Corp., 293, 302, 578. See also

PT-20's; PT-21's; PT-22's; PT-25's.

Safety belts, 267n

St. Louis, Mo., 9, 378, 575, 578

St. Louis Aircraft Corp., 575, 578. See also PT-19's;

PT-23's.

St. Louis Airplane Division of Curtiss-Wright Corp.,

575

Salaries, 154, 382, 384-85, 435, 558-59. See also Wages.

Sales abroad. See Foreign orders; Exports.

Sales taxes, 387, 406n

Salvage, 398, 407, 458. See also Plant clearance;

Property disposal; Scrap; Surplus aircraft.

Salvageable parts, 399

Sample aircraft competition, 114, 131-36, 139-49,

274, 331

San Diego, Calif., 9, 29, 565, 575

Santa Monica, Calif., 9, 491

"Save harmless" clause, 386

Scamping, 181

Scandal, 15, 55, 118, 123, 458ff.

Scarcities. See Shortages.

Scarff, Col. J. G., 389

Scheduled carriers. See Airlines.

Scheduling, 251, 267, 270, 537, 541. See also Delivery

scheduling; Production scheduling.

School construction, 389

Schools for contract termination, 454

Schwinn, J. W., 354n

Scientific advances, 97. See also Aircraft innovations;

Research and development.

Scrap, 398, 458, 522, 524. See also Salvage.

Screw machine, 443

Sealed bids, 343. See also Advertising for bids; Bidders; Bids; Circular proposals; Competitive

procurement.

Seattle, Wash., 9, 299, 542

Second Aviation Objective, 236

Second Aviation Strength, 236

Second Revenue Act of 1940, 288-89

Second-shift operations. See Multiple-shift operations.

Secretary of the Air Force, 378

Secretary of the General Staff, 211

Secretary of Labor, 282

Secretary of Navy

discretionary powers, 88-91, 115, 284

emergency powers, 286

establishes Munitions Board, 151

urges air study, 46

urges discretionary funds, 224

Secretary of State, 209

Secretary of Treasury, 224, 252-53, 256, 265, 282

Secretary of War. See also Davis, D. F.; Baker, Newton D.; Dern, George H.; Stimson, Henry L..

Woodring, H. H.

anticipates private financing, 292-93

approves Bell EPF, 302

backs sample aircraft, 133, 143, 148

Buy American suspension, 283
INDEX 637

Secretary of War—Continued

conflict with Comptroller, 137

curtails negotiated contracts, 334

on design change, 156

design competition role, 89-90

discretionary powers, 88-89, 111, 113, 115-16, 136-

38, 276

emergency powers, 82, 286

establishes Munitions Board, 151

50,000 program contracts, 243

investigates air arm, 4, 44, 46, 48, 55-57

negotiated procurement authorized, 275

plant seizures authorized, 288

Price Adjustment Board, 429

procurement role, 91, 100, 107

rejects conversion study, 163

relations with ASW (Air), 53

resists McSwain, 59-60, 139n

studies facility financing, 294

transport case views, 137

urged to spread contracts, 129

Secrecy, 124, 185, 197, 207. See also Release policy;

Security classification.

Secret procurement, 279n

Secret weapon, 112

Section 10, Air Corps Act, 89-93, 278, 344

Securities, sale of. See Capital investment; Stock

market.

Security classification, 18, 188, 198, 502. See also

Classified data; Release policy; Secrecy,

Self, Sir Henry, 266

Seizure of facilities, 286n. See also Coercion; Confiscation; Plant seizure.

Selective auditing, 394

Selective Service, 157

Selective Service Act, 288, 338n, 378n, 443. See also

Draft boards; Draftees.

Seller's market, 287

Semiskilled labor, 348, 512, 524

Senate Committee on Appropriations, 43

Senate Committee on Military Affairs, 43, 61, 284

Senate Committee on Naval Affairs, 284

Seniority, 322

Sentinel. See L-5's.

Separate air force, 476

Service pay, 212

Service testing, expenditures, 558

Service test contract, 278

Service test squadron, 107

Service tests, 24, 107-08, 113, 117, 203, 509

Serviceable aircraft, defined, 51

Services of Supply, 475

Settlement. See Termination.

Settlement Review Board, 453

Settlement Review Committee, 453

Seversky Aviation Corp., 575. See also Republic Aviation Corp.

Sewage disposal, 389

Shadow factories, 164-66, 184, 290n

Shaw, Col. F. P., 354n

Sherwood, Robert, 239n

Shock absorbers. See Oleo struts.

Shooting Star. See P-80's.

Shop practices, 86. See also Manufacturing methods.

Shortages. See also Bottlenecks; Critical raw materials; Priorities.

in aircraft industry, 180-81, 250, 258

ASU alleviation role, 271, 271n

BDV Committee solutions, 545

complicate inventory control, 457

cut production economies, 524

foster procurement assignment, 481

50,000 program reveals, 250

ground aircraft, 50

hurt small business, 318

industry warnings of, 180

influence bidders, 493

influence modification policy, 530

influence procurement objectives, 330

influence on subcontracting, 182

Materiel Division personnel, 99, 104-05

spare parts, 55

in World War 1, 150

Shutdown, 415

Siam, 529

Signal Corps, 109-10, 480-81, 486

Sikorsky Aircraft Division of United Aircraft, 578.

See also R-1's; R-4's; R-5's; R-6's; VoughtSikorsky Aircraft Division of United Aircraft

Corp.

Site selection, 177, 307-08. See also Facility expansion.

"Sitzkrieg," 195

60,000 aircraft program, 238-39

Skilled labor. See also Labor; Skilled personnel;

Trained personnel.

in aircraft industry, 348, 522

airlines as source, 530

dispersal feared, 179

Eight-Hour law impact, 281

lost during conversions, 322

mobilization planning for, 158, 163, 187

shortages, 181

termination problem, 456

Skilled personnel, 104

Skymaster. See C-54's.

Skytrain. See C-47's.

Slogans, 54, 229

Small business. See also Smaller War Plants Corporation.

congressional concern for, 121, 288, 438, 498

conversion for defense, 319-20, 323

defined, 316

favored by competition, 127

favors decentralization, 492, 510

influences termination. 455
638 BUYING AIRCRAFT

Small business—Continued

integrity, 346

military procurement from, 317, 495-96, 498

profiteering, 439

resents disclosures, 357

seeks defense contracts, 317, 493

subcontract role, 494

volume of contracts, 492

Small Business Act, 499, 501

Small claims, 349

Smaller War Plants Corporation, 500-501

Social costs, 389

Social security, 386

Social Security Building, 273

Social welfare legislation, 72, 141, 280-81, 285n

Socialism, 277. See also Nationalization of industry.

Socialists, 297

Society of British Aircraft Constructors, 188

Solar Aircraft Corp., 575

Sole source, 80, 108, 116-18, 127, 129, 435. See also

Licensing; Patents; Proprietary designs; Purchase orders.

Solenoids, 567

Somervell, Lt. Gen. Brehon B., 475, 482

Sorties, 217

SOS, 475

South Bend, Ind., 310

Southeastern Procurement District, 506

Spain, 217

Spare engines, 74, 215-16

Spare parts

ASC purchasing, 470

concurrent production, 294

contract stipulations, 342

cross procurement problem, 483

delay contract settlement, 427

Field Service Section role, 99

impact on procurement, 80-81

importance, 210

influence production decisions, 243

influence release policy, 198

lacking for B-17, 245

production cut, 240

requirements computation, 214-16, 342

shortages ground aircraft, 50, 55

standardized, 267n

SWPC policy, 501

Spark plugs, 214, 250

Spartan Aircraft Co., 293n, 575, 579

Special-purpose tools, 342, 484

Special tooling, 452. See also Production tooling.

Specialization, 347-50, 354

Specifications. See also Standardization.

advantages in delaying, 145

compliance problems, 492-93

Comptroller misunderstands character of, 137

in contract negotiations, 130, 140, 340-41, 366, 497

co-ordination of. 543

Specifications—Continued

curb cross procurement, 485

for data contracts, 186

decisions on changes, 468

deviation problems, 108, 507

by Engineering Section, 97

for first airplane, 110n

foreign policy influences, 214

indexed, 132

influence mobilization plans, 155

interbranch differences, 480-81

needed for priorities, 259

never complete, 86

petroleum products, 484

restrict scope of competition, 130

small business problem, 502

subcontractor role, 404

for suppliers, 251

time in formulation, 108

Wright Field files, 99

Speculators, 39

Sperry Corp., 7-8, 8n, 437

Spitfire, 228

Split awards, 280, 283, 498

Spot checking, 394. See also Auditing.

Staff-loading studies, 472

Staff manuals. See Manuals.

Staff officers. See also Officers.

education, 404

lack of, 381, 476, 479

modification role, 518

need political skill, 570

termination role, 456

Staff paper. See Memorandum Report.

Staffing problems. See Personnel.

Standard designs, 107. See also Standardization.

Standard contract form, 365. See also Contract forms.

Standard hardware. See Accessories; Aircraft hardware.

Standard Oil of N.J., 282

Standard Proposal Form, 357, 359, 363

Standard tools, 459. See also Hand tools.

Standardization

Air Corps Technical Committee role, 107

in aircraft, 519

of aircraft accessories, 131, 267

of audit procedures, 391

co-ordination of, 544

Engineering Section role, 97

guidebooks, 131-32

inhibits design change, 26

JAC role, 266, 268-269

need for, 264, 293

organization needed, 264

prewar conception, 513n

procedures for, 107, 132

proprietary design problem, 539
INDEX 639

Standardized forms, 440. See also Contract forms;

Form 32.

Standardized parts, 8, 160

Standards book, 132

Stand-by facility. See Government-owned facility;

Shadow factories.

Stand-by reserve, 195

Standing operating procedures, 147. See also Administrative procedures; Procurement procedures.

Starters, aircraft, 183, 294, 429, 437, 567

State taxes, 299-300, 387-88

Statistical Control Office, 508

Statistics, 191-93, 216, 261, 472. See also Data processing.

Status of Equipment Book, 99

Statutes. See Legislation; Procurement statutes; Revised statutes; Social welfare legislation.

Stearman Aircraft Division of Boeing Aircraft Corp.,

293n, 575

Stearman-Hammond Aircraft Corp., 575

Steel, electric furnace, 250

Steel, weight in airframes, 180

Steer hides, 250

Stettinius, Edward R., Jr., 255

Stein, Gertrude, 434

Stimson, Henry L., 335

Stinson Aircraft Division of Aviation Manufacturing Corp., 293n, 575

Stock control, 32, 400, 457

Stock market, 119, 121, 141-42. See also Capital investment.

Stock record cards, 400

Stockholders, 436. See also Stock market.

Stoppages, 271

Strategic bombers, 212. See also Four-engine bombers; Heavy bombers.

Strategic dispersal, 9, 177, 307. See also Dispersal.

Strategic mission, 54. See also Air power.

Strategic requirements, 55, 172

Strategic vulnerability. See Strategic dispersal.

Strategy, influence of, 225, 307

Strength in aircraft. See Aircraft on hand.

Strength ceiling, 170-72. See also Authorized strength.

Strength report. See Aircraft on hand.

Stopped vouchers. See Disallowances.

Stretching devices, hydraulic, 31

Stretch-out, 280

Structural defects, 245

Structural steel, 267, 321

Studebaker Corp., 310, 377, 418, 458, 480. See also

Wright Aeronautical Corp.

Subassemblies, 6-7, 290, 303, 305-06, 309, 324. See

also Components.

Subcontracting

in airframe industry, 191

co-ordination problems, 539

by Curtiss Electric, 562

discussed, 7-8, 182-84, 317, 502, 568

Subcontracting—Continued

dollar volume, 494n

in engine industry, 564

excise tax problem, 387

in 50,000 program, 293

influences bidding, 359

influences renegotiation, 435

by instrument firms, 567

in propeller industry, 566

small business seeks, 317

in supercharger industry, 568

Subcontractors

escalation accounting, 427

in automobile industry, 290, 309

Bendix role, 450

close pricing, 361

contract stipulations, 342

contracting officer monitoring, 368, 404, 408n

CPFF conversion problem, 415

distribution of, 511

facility conversion, 315

facility expansion, 320

feared as competitors, 319

Ford role, 494n, 519

inventory problem, 450

labor force, 282, 563

listings inadequate, 508

mobilization planning for, 153-54

obligations, 401

prewar description, 7

price certifications, 408

priorities problems, 258

profit curbs, 285, 289

property accounting, 399

relation to primes, 543, 546

renegotiation, 429

repricing, 443

right of audit, 402

small business role, 494

studied as sources, 508

termination, 447, 451, 454

1942 volume, 346

Suborders. See Purchase orders.

Subsidies, 119, 143-44, 146

Sub-subcontractors, 405, 407

Superagency. See Civilian superagency.

Superchargers. See Turbosuperchargers.

Superfortress. See B-29's; Boeing Aircraft Corp.

Supervision

in CPFF contracts, 408-09. See also Contract administration; Contracting officers, monitor contractor purchasing; Suppliers, contracting officer

monitoring.

difficulties of, 403, 472-73, 479. See also Command;

leadership.

Supplementary agreement. See Supplementary contracts.
640 BUYING AIRCRAFT

Supplementary contracts, 366-67, 413. See also

Change orders.

Suppliers. See also Vendors.

in automobile complex, 305, 309

Bendix role, 450

and Buy American Act, 282

catalogues, 408, 458

close pricing, 360

contracting officer monitoring, 404, 408n

co-ordination, 545

distribution of, 511

DPC role, 300

of electrical equipment, 566-67

facility conversion, 315

facility expansion, 320

faulty cost accounting, 433

Federal Reserve survey, 496

50,000 program orders, 250

Ford Willow Run, 494n

impact of failures, 500

materials production, 180

need design data, 251

petroleum products, 484

scheduling helps, 264

share of funds, 443

SWPC aids inexperienced, 501

west coast disadvantages, 493

Supply, 99, 470, 517. See also Air Service Command;

Field Service Section, Materiel Division; Supply

Division, OCAC.

Supply contracts defined, 411

Supply Division, OCAC, 95, 102-04

Supreme Court, 8. See also Federal courts; Judicial

decisions.

Surplus, capital, 126

Surplus aircraft, 234

Surveys, 257, 270, 294, 507-08. See also Aircraft industry, capacity estimates; Production capacity,

measurement of.

Swatland, Brig. Gen. D. C., 360n

Sweden, 200, 529

Switches, electric, 567

SWPC. See Smaller War Plants Corporation.

Symbolism, 571. See also Command; Leadership;

Slogans.

Symington, W. S., 378

Syracuse, N.Y., 562

Tables of Organization, 206

Tachometers, 567

Tactical aircraft, 170, 225, 225n, 241, 244

Tactical availability, 245-46, 553

Tactical life. See Obsoletion, problem of

Tactical mission, 246

Tactical performance, 110

Tactical suitability, 107

Tactical units, 64, 107, 110, 245-46, 470

Tank trucks, 209

Tankers, 282

Tanks, 514

Target-price contract, 417. See also Incentive contracts.

Targets, combat, 246

Tax accountants, 354

Tax amortization, 296-97, 324, 557-58. See also Depreciation; Tax concessions.

Tax avoidance, 387

Tax claims, 388

Tax concessions, 296, 313. See also Depreciation.

Tax exemption certificates, 368

Taxation, 195, 202, 285, 296, 299-300, 357, 386-87, 431.

See also Depreciation; Excess profits tax; Excise

taxes; Income tax; Sales taxes.

Taxpayers, 72-73, 329

Taylor Aircraft Corp., 32n

Taylor-Young Airplane Co. See Taylorcraft Aviation

Corp.

Taylorcraft Aviation Corp., 561, 575, 579. See also

L-2's.

TD-5000, Treasury directive, 380

Technical Committee. See Air Corps Technical

Committee.

Technical Data Library, Wright Field, 165

Technical executive, Materiel Division, 464

Technical innovations. See Design changes.

Technical orders, 470, 518

Technical revolution, 148. See also Design.

Technical Services, 475-77, 480. See also arms and

services and individual services by name.

Technical training, 465

Technical Training Command, 487

Technological advance, 97. See also Research and

development.

Telephone calls, 307, 331, 337

10,000 aircraft program, 275

Tennessee, 527

Temperature gauges, 567

Templates, 543-44. See also Lofting.

Termination, 367, 369, 396, 414, 442, 470-71, 479n,

556

problems, 446-55

success, 461

Termination clauses, 449, 451-52, 455

Termination Section, 473

Terminators, 453-55

Testimony, 57

Texan. See AT-6's.

Texas, 527

Theater commanders, 517

Theaters of operations, 246

Three-party contract, 367

Thunderbolt. See P-47's.

Time cards, 393

Time lapse, production, 108-09. See also Production

time, airframes.
INDEX 641

Time magazine, 195

Time studies, 361

Timm Aircraft Corp., 579

Tires, 566

Tolerances, 7, 164, 312, 319, 435, 502, 523, 566

Tool and die industry, 305, 311

Tool design, 520, 522

Tooling. See Production tooling.

Toolmakers, 523

Tools. See Hand tools.

Tools warehouse, 459

Towers, Rear Adm. J. H., 266

Trade associations, 188, 382. See also Aeronautical

Chamber of Commerce.

Trade journals, 432

Trained personnel, 66, 77-78

Training, 225, 243, 355, 454, 467, 521

Training aircraft. See also AT-6's et seq.; BT-12's

et seq.; PT-13's et seq.

cross procurement, 482

educational order, 183

engines and propellers, 309, 549, 566

Navy, 576-79

production, 551, 553

program, 239, 241, 244

requirements, 64, 66, 170, 246

Training program, 66, 204, 483

Training schools, 64. See also Schools for contract

termination.

Transportation, 247-48, 308, 330, 360, 455

Transport aircraft, 12, 16, 110, 134ff., 183, 551, 576-

79. See also Cargo aircraft; C-32's et seq.

Traveller. See C-43's.

Treasury Department, 94, 124n, 262-63

allowable costs role, 380, 390

excise tax rule, 386

facility financing, 294, 301

Form 32, 341

termination role, 451

Trial balloons, 172-73, 253

Troop basis, 44-45, 48, 52, 157, 225, 231

Truman Committee, 317, 320

Trusts, 127

Tulsa, Okla., 308-09.

Turbosuperchargers, 294, 321, 455-56, 527, 567

Turn and bank indicators, 567

Turnover in labor, 413

Turret lathe, 259

Turrets. See Gun turrets.

TWA, 530

2, 320 aircraft program, 55-56, 58, 60-62

UC-45's, 442-43

Umbrella pricing, 414, 419, 421, 440, 442

Under Secretary of War. See also Patterson, Robert P.

contract role, 343, 351-52, 425, 495

CPFF role, 387, 406

cross procurement, 480-81

Under Secretary of War—Continued

organizational status, 474-78

renegotiation role, 432

termination role, 449, 451, 453, 458

Unemployment, 315, 322-23, 455

Unemployment insurance, 386

Unfair competition, 87

Unification, 471, 475

Unified command, 462

Uniformity. See Standardization; Tolerances.

Unilateral determinations, 444

Unincorporated business, 436

Unions, 129, 249, 310-14, 402, 424. See also Green,

William; Hillman, Sidney; Lewis, John L.;

Reuther, Walter.

Unit costs

for aircraft, 20,86, 233, 442, 560

to amortize facilities, 295

in CPFF contracts, 417-18

estimating, 192, 344, 412

factors influencing, 11, 16-17, 20, 26-27, 32-33, 72,

141, 197, 264, 297, 367, 428

higher than bids, 114

impact on procurement, 10, 70-71, 74, 76

records on, 32, 189-90

World War I engines, 83

United Aircraft Corp., 6, 33, 38-39, 184, 187n, 256,

297, 562. See also Cessna Aircraft Division;

Chance-Vought Division; Hamilton-Standard Division; Pratt & Whitney Aircraft Division; VoughtSikorsky Aircraft Division.

United Airlines, 530, 533

United Auto Workers, 310

United Kingdom

aircraft orders, 18n, 195-96, 199, 201, 234. See also

British Purchasing Commission.

aircraft procurement, 521, 555, 560

aircraft production qualified, 556

chief of production, 209

contract forms, 341, 417

engine requirements, 310

experience influences U.S., 242, 290n, 315, 514

impact of aircraft orders from, 237, 246, 263, 296

Ministry of Aircraft Production, 410

Packard contract, 301, 309, 392

representation in U.S., 195-96, 266, 270

shadow factories, 164-65

United States Army. See Army.

United States Steel, 255

Universal Aircraft, 579. See also L-7's.

Unjust Enrichment Division, PWA, 393

Unpreparedness, 150

Unsatisfactory Report, 97, 99, 530

Unskilled labor, 200, 523, 527

UR. See Unsatisfactory Report.

Use taxes, 387

Users versus suppliers, 102

USSR. See Russia.
642 BUYING AIRCRAFT

USW. See Under Secretary of War.

Utility aircraft, 442-43

V-770 engine, 581

V-1650 engine, 309, 581

V-1710 engine, 581

V-3420 engine, 269, 581

V-loans, 413

Valiant. See BT-13's; BT-15's.

Valves, 271n

Vanaman, A. W., 465

Vaughan, G. W., 29

Vega Airplane Co., 387, 541

Vendors, 7-8, 8n, 205, 250, 264, 300

in auto industry, 304

monitoring of, 404, 407

Vengeance. See A-31's; A-35's.

Venezuela, 282

Verbal rulings, 391

Vickers Canadian, Ltd., 579

Victory Program, 238

Vigilant. See L-1's.

Vinson, Carl, 121-22, 284

Vinson, F. M., 91

Vinson Act, 284-85

Vinson-Trammell Act, 35-36, 279, 297, 380, 390

Voluntary refunds, 428, 445

Voters, 352

Vouchers, 379, 383, 403

Vought-Sikorsky Aircraft Division of United Aircraft Corp., 273n, 575. See also R-1's; R-4's;

R-5's; R-6's.

Vultee Aircraft Division of Aviation Manufacturing Corp., 242, 293n, 302, 575

Waco Aircraft Co., 373, 575-76. See also PT-14's.

Wages. See also Payroll; Salaries.

in aircraft industry, 26

in capacity yardstick, 189

in contract administration, 344, 360, 411, 413

in Materiel Command, 558

reports and indices, 282, 35"9, 424. See also Labor.

Wagner Act, 311

Waiver list, 501

Walsh-Healey Act, 280, 282, 340. See also Employment; Labor.

War Contracts Price Adjustment Board, 430

War Department

air power views, 211, 213

Air Service policies, 43-48

aircraft release problem, 199, 202

annual report, 3

auditing policy, 391

contracting officer powers, 383

Drum Board survey, 53-57

educational orders, 159

emergency procurement legislation, 278-79, 281

establishes GHQ Air Force, 102

War Department—Continued

facilities expansion, 290, 298-99, 301, 315

initial air mobilization role, 159, 170, 173n, 174,

181

legislative liaison, 57-58, 92

March 1942 reorganization, 464, 475, 489

perfects procurement policies, 81, 86, 89n, 116,

118, 129, 144-45

price index, 358

rearmament program, 202, 204, 210, 246-47

requirements role, 62-64

responsibility for delays, 79

seeks relief funds, 67

studies Buy American, 282

World War 1 procurement, 150

War Department Circular, 475-76

War Department General Staff. See General Staff,

War Department.

War Department Price Adjustment Board, 438

War games, 167

War Labor Board, 412

War planning. See Industrial Planning Section, Materiel Division; Mobilization planning; Office of

Assistant Secretary of War; Plans Division,

OCAC; War Plans Division, WDGS.

War Plans Division, WDGS, 52, 57, 211, 217, 220

War Policies Commission, 119

War Powers Act of 1941, 367

War prevention, 125. See also Nye, Gerald Prentice;

War Policies Commission.

War Production Board. See also Civilian superagency; National Defense Advisory Commission;

Office of Production Management; War Resources Administration.

organization, 272-73, 322

production control, 358, 499, 538

statistical tools, 192

SWPC role, 500

War Production Board, tool disposal, 458

War profiteering. See Profiteering.

War reserve. See Reserve aircraft.

War Resources Administration, 247, 249, 265

War Resources Board, criticized, 248-49

Warhawk. See P-40's.

Warner Aircraft Corp., 582

Warner-Swasey, 259

Washington Post, 118

Washouts. See Accident ratios; Attrition rate.

Wasp aircraft engine, 256, 580

Wastage. See Attrition rate.

Waste, 83, 411, 457

Watch manufacturers, 567

Watson, Brig. Gen. E. M., 68, 223

WDGS. See General Staff, War Department.

Weapons design, 257n. See also Aircraft design; Design; Design changes.

Weather, influence of, 218, 308, 531

Weather reconnaissance aircraft, 534
INDEX 643

Weatherizing. See Winterization.

Wehrmacht, 283

Wedell-Williams Air Service Corp., 139

Weight. See Airframes, average gross weights.

Welfare legislation. See Social welfare legislation.

West coast, 493

West Lynn, Mass., 562

Western Hemisphere defense. See Hemisphere defense.

Western Procurement District, 435, 465, 491, 504

Westover, Maj. Gen. Oscar, 68, 166, 199

West Wall, 195

Whirlwind engine, 580

White Aircraft Co., 575

White House conference, 169-70, 175, 210, 213, 274

Wichita, Kans., 9, 302, 321, 506, 565

Wilbert, G. C., 393n

Williamsport, Pa., 6

Willow Run, Mich. See also Ford Motor Co.

criticism of, 314n, 321, 326

described, 518ff.

facility planned, 309

modifications, 531, 536

production control problems, 539

production ratios, 565

project evaluated, 527-28

property accounting, 400

suppliers, 494n

Wilson, C. E., 273, 305

Wilson, E. E., 186n

Wilson, H. R., 169, 169n

Wind tunnels, 23

Windshields, 269

Wing spans, 164, 564

Winterization, 242, 534. See also Modifications.

Witnesses, 57. See also Congressional investigations;

Investigations; War Department, legislative liaison.

Wolfe, Brig. Gen. K. B., 354n, 468-69, 509

Woodring, H. H., 4, 66, 128-31, 138, 170n, 253, 253n

Worcester, Mass., 506

Work week, 260-61, 261n

Working capital, 39-40, 284, 288, 373, 377, 448. See

also Advance payments; Assignment of claims;

Capital investment; Loans; Partial payments.

Workload, 294, 472

World War I

accounting experience, 392, 395

contract litigation, 333n, 393

contract terminations, 414, 446, 448

cost-plus contracts, 372, 412, 417

World War I—Continued

foreign order impact, 195-96

incentive contracts, 83

interbranch competition, 474, 476

lessons learned and ignored, 84, 207, 209, 222, 272,

355n

mobilization experience, 161, 166-67, 247

modification centers, 529

Navy aircraft, 125

procurement organization, 102

procurement procedures, 81, 112

production record, 84n, 150, 189, 464, 511-12

profits, 82, 84n, 119

Purchase, Storage, and Traffic Division, 475

secrecy, 197

WPB. See War Production Board.

WPD. See War Plans Division, WDGS.

WRA. See War Resources Administration.

Wright Aeronautical Corp., 6, 200-201, 293n, 309,

418, 561, 580. See also R-760, R-975, R-1820,

R-2600, and R-3350 engines.

Wright Field, Dayton, Ohio

Industrial Planning Section, 153

matériel role, 95, 99, 128, 131, 492

OPM unit, 270

organization and personnel, 141, 345-46, 349-50,

466-67, 558-59. See also Materiel Center; Materiel Command; Materiel Division.

relation to district offices, 505. See also Procurement districts.

relation to Washington headquarters, 102, 106,

331, 463

termination file, 447

Wright, Theodore P.

capacity yardstick, 190-92, 304

devises learner curve, 344

JAC role, 266, 267n

NDAC role, 256

reports on Germany, 169n

X-ray inspection, 568

XB-15's, 149

XFM-1's, 199

YB-10's, 117

Yardstick, for productive capacity, 125, 185, 188-90,

277, 294. See also Learner curve.

Yardstick Board, 191-93, 291

Zinc dies, 31

U.S. GOVERNMENT PRINTING OFFICE : 1988 0 - 223-418 : OL 3