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Chapter XIV

THE PROCUREMENT DIVISION IN WORLD WAR II

With the passage of the Lend-Lease Act1 on March 11, 1941, and the First Lend-Lease Appropriation Act 2 on March 27, 1941, the Procurement Division prepared to purchase vast quantities of industrial products for foreign countries participating in the program. A unit, developed to specialize in Lend-Lease purchases, began operating with receipt of the first requisition on April 3, 1941.

Modern war technique demands ready adaptability of Government purchasing units to changing economic conditions. Reacting to war pressure, all procurement functions of the Procurement Division tended progressively to focus on the national effort. Needs of newly created defense agencies received prompt attention. Cooperating organizations, like the Federal Business Associations, were assigned such specific programs as the collection of rubber and metal scrap, surveys of office space, and bond-selling drives. Even before Pearl Harbor the Division was operating on a quasi-war basis. Actual war conditions, however, impose a radically different perspective. Rapid changes render futile any attempt at hard-and-fast procedure. To facilitate the prosecution of the war, the First War Powers Act was approved on December 18, 1941. The urgent need for speedy elimination of conventional obstacles to expedited contracting was recognized in Title II, Contracts, section 201 of this act:

The President may authorize any department or agency of the Government exercising functions in connection with the prosecution of the war effort, in accordance with the regulations prescribed by the President for the protection of the interests of the Government, to enter into contracts and into amendments or modifications of contracts heretofore or hereafter made and to make advance, progress, and other payments thereon, without regard to the provisions of law relating to the making, performance, amendment, or modification of contracts whenever he deems such action would facilitate the prosecution of the war: Provided, That nothing herein shall be construed to authorize any contracts in violation of existing law relating to limitation of profits: Provided further, That all acts under the authority of this section shall be made a matter of public record under

155 Stat. 27. 255 Stat. 53.

regulations prescribed by the President and when deemed by him not to be incompatible with the public interest.

On December 27, 1941, President Roosevelt signed a new Executive order which, when amended 18 days later, practically revolutionized the procedure of the Procurement Division. Executive Order No. 9001, one of the most significant milestones in the history of Federal purchasing, ranks in importance with section 3709 of the Revised Statutes. Essentially, it delegated authority contained in Title II, Contracts, First War Powers Act (quoted above) to the War Department, the Navy Department, and the United States Maritime Commission.

The provisions of Executive Order No. 9001 were extended by Executive Order No. 9023 to contracts of the Treasury Department, the Department of Agriculture, the Federal Works Agency, the Panama Canal, the Government Printing Office, and the National Advisory Committee for Aeronautics. The immediate effect of these two Orders was to cut red tape:

Executive Order No. 9001 reads:

The successful prosecution of the war requires an all-out industrial mobilization of the United States in order that the materials necessary to win the war may be produced in the shortest possible time. To accomplish this objective it is necessary that the Departments of War and the Navy and the United States Maritime Commission cooperate to the fullest possible degree with the Office of Production Management in the endeavor to make available for the production of war material all the industrial resources of the Country. It is expected that in the exercise of the powers hereinafter granted, these Agencies and the Office of Production Management will work together to bring about the conversion of manufacturing industries to war production, including the surveying of the war potential of industries, plant by plant; the spreading of war orders; the conversion of facilities; the assurance of efficient and speedy production; the development and use of subcontracting to the fullest extent and the conservation of strategic materials.

TITLE I

1. By virtue of the authority in me vested by the Act of Congress, entitled “An Act to expedite the prosecution of the War effort," approved December 18, 1941 (hereinafter called "the Act"), and as President of the United States and Commander-In-Chief of the Army and Navy of the United States, and deeming that such action will facilitate the prosecution of the war, I do hereby order that the War Department, the Navy Department, and the United States Maritime Commission be and they hereby respectively are authorized within the limits of the amounts appropriated therefor to enter into contracts and into amendments or modifications of contracts heretofore or hereafter made, and to make advance, progress, and other payments thereon, without regard to the provisions of law relating to the making, performance, amendment, or modification of contracts. The authority herein conferred may be exercised by the Secretary of War, the Secretary of the Navy, or the United States Maritime Commission, respectively,

8 Approved January 14, 1942.

or in their discretion any other officer or officers or civilian officials of the War or the Navy Departments or the United States Maritime Commission. The Secretary of War, the Secretary of the Navy, or the United States Maritime Commission may confer upon any officer or officers of their respective departments, or civilian officials thereof, the power to make further delegations of such powers within the War and the Navy Departments, and the United States Maritime Commission.

2. The contracts hereby authorized to be made include agreements of all kinds (whether in the form of letters of intent, purchase orders, or otherwise) for all types and kinds of things and services necessary, appropriate, or convenient for the prosecution of war, or for the invention, development, or production of, or research concerning any such things, including but not limited to, aircraft, buildings, vessels, arms, armament, equipment, or supplies of any kind, or any portion thereof, including plans, spare parts and equipment therefor, materials, supplies, facilities, utilities, machinery, machine tools, and any other equipment, without any restriction of any kind either as to type, character, location, or form.

3. The War Department, the Navy Department, and the United States Maritime Commission may by agreement modify or amend or settle claims under contracts heretofore or hereafter made, may make advance, progress, and other payments upon such contracts of any percentum of the contract price, and may enter into agreements with contractors and/or obligors, modifying or releasing accrued obligations of any sort, including accrued liquidated damages or liability under surety or other bonds, whenever, in the judgment of the War Department, the Navy Department, or the United States Maritime Commission, respectively, the prosecution of the war is thereby facilitated. Amendments and modifications of contracts may be with or without consideration and may be utilized to accomplish the same things as any original contract could have accomplished hereunder, irrespective of the time or circumstances of the making of or the form of the contract amended or modified, or of the amending or modifying contract, and irrespective of rights which may have been accrued under the contract, or the amendments or modifications thereof.

4. Advertising, competitive bidding, and bid, payment, performance or other bonds or other forms of security, need not be required.

TITLE II

Pursuant to title II of the act and for the protection of the interests of the United States, I do hereby prescribe the following regulations for the exercise of the authority herein conferred upon the War Department, the Navy Department, and the United States Maritime Commission.

1. All contracts and all purchases made pursuant to the act and this Executive order shall be reported to the President of the United States. Such reports shall be made at least quarter-annually: Provided, however, That purchases or contracts of less than $100,000 may be consolidated in such reports with other such purchases and need not be separately set forth. In case the War Department, the Navy Department, or the United States Maritime Commission shall deem any purchase or contract to be restricted, confidential, or secret in its nature by reason of its subject matter, or for other reasons affecting the public interest, such purchases or contracts shall not be included with those described in the report just mentioned, but shall be included in a separate report containing such restricted, confidential, or secret purchases or contracts. The Secretary of War, the Secretary of the Navy, and the United States Maritime Commission

shall make public so much of such reports (other than those reports covering restricted, confidential, or secret contracts or purchases) as they shall respectively deem to be compatible with the public interest.

2. Notwithstanding anything in the act of this Executive order the War Department, the Navy Department, and the United States Maritime Commission shall not discriminate in any act performed thereunder against any person on the ground of race, creed, color, or national origin, and all contracts shall be deemed to incorporate by reference a provision that the contractor and any subcontractors thereunder shall not so discriminate.

3. No claim against the United States arising under any purchase or contract made under the authority of the act shall be assigned except in accordance with the Assignment of Claims Act, 1940 (Public No. 811, 76th Cong., approved October 9, 1940).

4. Advance payments shall be made hereunder only after careful scrutiny to determine that such payments will promote the national interest and under such regulations to that end as the Secretary of War, the Secretary of the Navy, or the United States Maritime Commission may prescribe.

5. Every contract entered into pursuant to this order shall contain a warranty by the contractor in substantially the following terms:

The contractor warrants that he has not employed any person to solicit or secure this contract upon any agreement for a commission, percentage, brokerage, or contingent fee. Breach of this warranty shall give the Government the right to annul the contract, or, in its discretion, to deduct from the contract price or consideration the amount of such commission, percentage, brokerage, or contingent fees. This warranty shall not apply to commissions payable by contractors upon contracts or sales secured or made through bona fide established commercial or selling agencies maintained by the contractor for the purpose of securing business.

6. Nothing herein shall be construed to authorize the cost-plus-a-percentageof-cost system of contracting.

7. Nothing herein shall be construed to authorize any contracts in violation of existing law relating to limitation of profits, or the payment of a fee in excess of such limitation as may be specifically set forth in the act appropriating the funds obligated by a contract. In the absence of such limitation, the fixed fee to be paid the contractor as a result of any cost-plus-a-fixed-fee contract entered into under the authority of this Order shall not exceed seven per centum of the estimated cost of the contract (exclusive of the fee, as determined by the Secretary of War, the Secretary of the Navy, or the United States Maritime Commission, as the case may be).

8. No contract or modification or amendment thereof shall be exempt from the provisions of the Walsh-Healey Act (49 Statute 2036) because of being entered into without advertising or competitive bidding, and the provisions of such act, the Davis-Bacon Act, as amended (49 Statute 1011), the Copeland Act, as amended (48 Statute 948) and the Eight Hour Law, as amended by the act of September 9, 1940 (Public, No. 781, 76th Cong.) if otherwise applicable shall apply to contracts made and performed under the authority of this Order.

The Second War Powers Act, March 27, 1942, in Title III, section 2 (a) extended the authority of the Navy Department to negotiate. War Production Board Directive No. 1, January 24, 1942, delegated authority to the Office of Price Administration with respect to rationing. Prior to War Production Board Directive No. 2, which prescribed letting of all supply contracts relating to war procurement by negotia