Message to Congress on Defense Contracts and Labor Policy.

To the Congress:

The National Defense Advisory Commission on September 6, 1940, unanimously agreed to and adopted general principles governing the letting of national defense contracts. On August 31, the Commission also unanimously adopted a statement of labor requirements as a guide for contractors who have received national defense orders from the United States Government.

I consider these two documents to be of such importance as to justify my sending them to the members of the Senate and the House of Representatives as a matter of information. The values of these policies and principles to the Government, to industry, agriculture, labor, and to the country, sectionally and as a whole, will be seen at once.

The general principles governing the letting of defense contracts follow:

The essence of the Preparedness Program is the getting of an adequate supply of materials of the proper quality in the shortest space of time possible. Considerations of price alone are highly important, but in the Emergency are not governing.

1. Speed of delivery of all items on the Defense Program is essential. This means:

(a) That orders should be placed in such a manner as to insure the most efficient use of each particular facility from the point of view of the program as a whole;

(b) That proper consideration should be given to contributory industries, such as the machine tool industry, to avoid creating underlying bottlenecks;

(c) That once delivery dates are fixed, assurance be given that they will be met by the supplier.

2. Proper quality is also of prime importance. It is therefore necessary to determine first of all whether or not the supplier can meet the quality requirements, as specified. There should be a willingness on the part of both the Army and Navy, on the one hand, and of the supplier on the other, to adjust specifications on a cooperative basis in order that such specifications may come as near as possible to meeting commercial standards while at the same time fulfilling the military requirements.

3. Price, while not the sole consideration, is of outstanding significance, and every effort must be made to secure a fair price. This must take recognition, among other things, of determination of proper cost factors.

4. The impact of the defense program upon the consumers must be recognized. This relates to such factors as:

(a) Due regard to the necessity of protecting civilian needs and morale;

(b) Proper health and housing conditions among employees;

(c) Consideration to possible off-season production in order to dovetail the military program into production for civilian requirements. Off-season production should also lead to lower overhead and consequently to lower prices for both the consumers and the Government.

5. Adequate consideration must be given to labor. This means compliance with the principles on this subject stated by the Commission in its release of August 31st, copy of which is attached hereto.

6. Undue geographic concentration of orders should be avoided, both as to procurement districts and as to industrial sections within any such procurement district. Reasons for such decentralization relate to factors of military strategy, as well as avoiding congestion that will slow down production.

7. Financial responsibility of the supplier should be examined. Ability to post a bond does not necessarily dispose of this problem. The probability should exist that the supplier will be able to continue in business, at least long enough to complete his contract satisfactorily. Further, an ability to finance himself through private sources should take preference over necessity for securing government aid.

8. The avoidance of congestion of transportation facilities should be sought. The same applies to warehousing facilities.

9. Due consideration should be given to the adequacy of power facilities, particularly where furnished by public utilities.

10. A general preference should be given to firms having experience with so-called educational orders.

11. The moral responsibility of the supplier is important and, in some respects, fundamental. There should be evidence of honest and sincere desire to cooperate with the Army and Navy in producing what is called for, and on time, without profiteering; to assume some risks himself rather than attempt to shift all such risks to the Government; and to furnish a correct statement as to his capacity and his experience. The supplier's general standing and reputation among reputable business men (as distinct from his financial rating) is one index of such qualifications.

12. The Commission recognizes that competitive bidding is the better procedure in certain types of industry and circumstances. However, it is often impossible to make sure that the principles outlined above are followed when contracts are placed on the basis of price alone and are let to the lowest bidder. Therefore, in cases where competitive bidding will not fulfill the above stated needs of national defense, the Commission recommends that the use of the negotiated contract be authorized where necessary in order that these objectives be obtained in making defense purchases.

Following is the statement of labor policy adopted by the National Defense Advisory Commission:

Primary among the objectives of the Advisory Commission to the Council of National Defense is the increase in production of materials required by our armed forces and the assurance of adequate future supply of such materials with the least possible disturbance to production of supplies for the civilian population. The scope of our present program entails bringing into production many of our unused resources of agriculture, manufacturing and man power.

This program can be used in the public interest as a vehicle to reduce unemployment and otherwise strengthen the human fiber of our nation. In the selection of plant locations for new production, in the interest of national defense, great weight must be given to this factor.

In order that surplus and unemployed labor may be absorbed in the defense program, all reasonable efforts should be made to avoid hours in excess of 40 per week. However, in emergencies or where the needs of the national defense cannot otherwise be met, exceptions to this standard should be permitted. When the requirements of the defense program make it necessary to work in excess of these hours, or where work is required on Saturdays, Sundays or holidays, overtime should be paid in accordance with the local recognized practices.

All work carried on as part of the defense program should comply with Federal statutory provisions affecting labor wherever such provisions are applicable. This applies to the Walsh-Healy Act, Fair Labor Standards Act, the National Labor Relations Act, etc. There should also be compliance with State and local statutes affecting labor relations, hours of work, wages, workmen's compensation, safety, sanitation, etc.

Adequate provisions should be made for the health and safety of employees. As far as possible, the local employment or other agencies designated by the United States Employment Service should be utilized.

Workers should not be discriminated against because of age, sex, race or color.

Adequate housing facilities should be made available for employees.

The Commission reaffirms the principles enunciated by the Chief of Ordnance of the United States Army, during the World War, in his order of November 15, 1917, relative to the relation of labor standards to efficient production:

In view of the urgent necessity for a prompt increase in the volume of production . . . vigilance is demanded of all those in any way associated with industry lest the safeguards with which the people of this country have sought to protect labor should be unwisely and unnecessarily broken down. It is a fair assumption that for the most part these safeguards are the mechanisms of efficiency. Industrial history proves that reasonable hours, fair working conditions, and a proper wage scale are essential to high production .... Every attempt should be made to conserve in every way possible all of our achievements in the way of social betterment. But the pressing argument for maintaining industrial safeguards in the present emergency is that they actually contribute to efficiency.