Statement by the President on the Response of Defense Contractors to the Cost Reduction Program.

ON DECEMBER 2, 1963, I requested that all Defense contractors initiate immediately "an affirmative program of cost reduction in the performance of Defense contracts." Subsequently, the Department of Defense issued "Guidelines Defining an Effective Contractor Cost Reduction Program" to contractors having an annual volume of Defense sales in excess of $5 million, exclusive of firm fixed-price contracts. The objectives stated in those guidelines were:

1. Intensify efforts by individual contractors to achieve cost reductions in the performance of Defense contracts.

2. Establish criteria for operating a contractor cost reduction program.

3. Provide for regular review and evaluation by the Department of Defense of contractors' individual cost reduction programs.

4. Assure that the effectiveness of a contractor's cost reduction program will be taken into account in making future source selections and in determining contractor profit and fee rates.

5. Provide appropriate public recognition to contractors who have achieved significant cost reductions.

I am happy to report that 78 of the Nation's largest Defense contractors, with a total of 205 major plants or divisions, have now joined us in this vital effort, and that reports of their considerable accomplishments are now being evaluated by the Department of Defense. The first of these semiannual reports covers cost reductions for the previous 6 months period, based on the individual contractor's fiscal year.

During March and April, Defense contractors from all parts of the country are participating in the Advanced Planning Briefings for Industry at Los Angeles, New York, Chicago, Dallas, and Washington, D.C. These briefings, which are jointly sponsored by the Department of Defense and the National Security Industrial Association, are providing opportunities for Defense contractors to display the many impressive cost reduction ideas which they have already put into practice and of which they are justifiably proud.

The speed and effectiveness with which our Nation's defense industry has responded to this challenge is not surprising, but it is gratifying. The contractors engaged in this important effort have pledged a dollar's value for every dollar spent, and this value is being reflected in lower costs to the American people for their national defense.