Chapter V THE WAR INDUSTRIES BOARD Entry of the United States into World War I in 1917 called for swift mobilization of manpower, production facilities, and procurement expedients. Enlarged Government departments and agencies started pressing for more of the everyday items with which to conduct their business. Personnel was reaching new high levels. War agencies were sprouting. Throughout this period of intensified activity, the General Supply Committee continued to issue its General Schedules of Supply or indefinite quantity term contracts. The method of keeping the departments in operation in this respect was left unchanged, but the larger job, that of procuring an extraordinary range of war and civilian goods, was specially handled. set Recognizing the possibility that war would follow, the Congress, on August 29, 1916, passed the Army Appropriations Act. Section 2 up a Council of National Defense, to be composed of the Secretaries of War, Navy, Interior, Agriculture, Commerce, and Labor. These officers were to nominate to the President an "advisory commission, consisting of not more than seven persons, each of whom shall have special knowledge of some industry, public utility, or the development of some natural resource, or be otherwise specially qualified * for the performance of duties hereinafter provided." The duties stressed procurement of supplies and equipment. In part they were: * * * * (to stimulate) the increase of domestic production of articles and materials essential to the support of armies and of the people during the interruption of foreign commerce; the giving of information to producers and manufacturers as to the class of supplies needed by the military and other services of the Government, the requirements relating thereto. Nominated, and approved as members of the advisory commission 1 American Industry in the War, p. 18, by Bernard M. Baruch. Such an Advisory Commission staffed with specialists representing the major industrial and financial organizations of the country was in an ideal position to know the supply and purchase problems. On July 28, 1917, the Council of National Defense and the Advisory Commission met jointly and established, with the approval of President Wilson, the War Industries Board. All other boards, commissions, and groups, such as the Munitions Standards Board and the Raw Materials Board, were abolished. Centralized control over raw materials, finished products, priorities, labor, and prices rendered the War Industries Board supreme in the American war effort. The first Board chairman was Frank A. Scott.3 Other members were: Bernard M. Baruch____ Robert S. Lovett___ Hugh A. Frayne---. Col. Palmer E. Pierce--- Commissioner of raw materials. Priorities Commissioner. .Labor Commissioner. .Army Representative. Rear Admiral F. F. Fletcher-Navy Representative. Contained in the resolution establishing the Board was a statement of its duties:* The Board will act as a clearing house for the war industry needs of the Government, determine the most effective ways of meeting them and the best means and methods of increasing production, including the creation or extension of industries demanded by the emergency, the sequence and relative urgency of the needs of the different Government services, and consider price factors, and in the first instance the industrial and labor aspects of the problems involved and the general questions affecting the purchase of commodities. To these Bernard M. Baruch later added: "(1) To analyze the needs of our Government, of the Allies, and of the civil population; (2) to study the extent to which the resources could meet these needs. * Reorganization of the War Industries Board begun on March 4, 1918, was consummated by Executive Order No. 2868, May 28, 1918, which read in part: * * * I hereby establish the War Industries Board as a separate administrative agency to act for me and under my direction. The functions, duties, and powers of the War Industries Board, as outlined in my letter of March 4, 1918, to Bernard M. Baruch, Esq., its Chairman, shall be and hereby are continued in full force and effect. 2 Ibid., p. 20. 8 Ibid. Mr. Scott was President of Warner-Swasey Co., Cleveland machine tool makers. Contrary to popular opinion, Bernard M. Baruch was not the first chairman. American Industry in the War, p. 21. • Ibid. * * * The "letter" 6 was one which President Wilson had addressed to Mr. Baruch, offering him the chairmanship of the Board. It outlined, also, some of the Board's duties and functions, among them, "* (4) (To give) advice to the several purchasing agencies of the Government, with regard to prices to be paid; (5) To see that contracts and deliveries are folbe necessary; (6) The making of purchases for the Allies." The letter ended with the observation that the Chairman of the War Industries Board should "act as the general eye of all supply departments in the field of industry." lowed up where such assistance as is indicated * * * * A rigid control of raw and manufactured materials was thus established. Needs of the war machine imposed a strict discipline. Once again it was proved that purchase procedure must at all times be adaptable to changing conditions. Various committees composed of authorities in particular fields were organized under the War Industries Board, much of the actual groundwork of purchasing being done by them. Purchase of aluminum, as an example, serves to indicate the amount of negotiated purchasing (i. e., purchase without the formality of invitations-to-bid) in progress. The President of the Aluminum Co. of America (producing millions of pounds of aluminum for the Government) met with the Aluminum Section of the War Industries Board. At this meeting a definite price per pound was set. Similar arrangements held not only for aluminum but for other urgent requirements. Details of specifications, price, delivery dates and points were worked out. Much of formal Government procedure was eliminated in specific cases and, in still others, rules were relaxed to meet various exigencies. Millions of dollars of public funds were expended during the war years through these fast, red-tape-slashing mediums of buying. To make procedure still more elastic, the Overman Act of May 20, 1918, authorized the President to "coordinate or consolidate executive bureaus, agencies, and offices and for other purposes in the interest of economy and the more efficient concentration of the Government." Thus, the President might, as he saw fit, shift or combine some duties, eliminate others, and grant the authority to purchase, along with other rights, all indicated by the war effort. War ended. The War Industries Board was dissolved. Many advantages of centralization were again lost. • Ibid., p. 24. 7 American Industry in the War. This information taken from a general discussion of the topic, p. 156. 8 President Wilson accepted Mr. Baruch's resignation on November 30, 1918, and Mr. Baruch's final report went forward on December 24, 1918. Chapter VI POSTWAR DEVELOPMENTS OF WORLD WAR I The aftermath of World War I particularly beset the General Supply Committee. Departmental purchasing agencies, foreign purchasing commissions, and the War Industries Board had effected delivery of a vast amount of materials for which now there was no immediate use. The United States Government thus had accumulated millions of dollars worth of surplus stocks. A report entitled, The Coordinating Service and the Federal Business Associations, states that by November 1, 1923, surplus property had been liquidated in the amount of $3,691,002,762.1 This figure is some indication of the size of the task confronting the General Supply Committee as a result of Executive Order No. 3019 issued December 3, 1918. The President directed that surplus materials, supplies, and equipment falling into disuse because of the cessation of war be transferred to the Secretary of the Treasury for reissue to other Government establishments through the General Supply Committee. The Committee took over all surplus material, classified and warehoused, repaired and reissued it as other departments found need for particular commodities. In 6 months, beginning June 30, 1919, the General Supply Committee reissued $555,195.34 worth of property declared surplus by the various Government agencies. Operational expense involved in these transactions amounted to 42 percent of gross sales. Surplus material which could not profitably be reissued to Government departments was disposed of by direct sale. In its "annual report" to the Secretary of the Treasury, issued June 30, 1919, the General Supply Committee advanced recommendations for its own reorganization: In advance of provision for the centralized control of all contracting for, and purchasing of, supplies for Washington and the field, it is urgently suggested that prompt measures be taken at least to remodel and expand the functions of the General Supply Committee, which at the present time is only an agency of contracting for Government supplies. In the absence of the suggested general legislation, a plan should be evolved under which common supplies required for use by two or more of the executive 1 The Coordinating Service and The Federal Business Associations, p. 90. Prepared by the Bureau of the Budget, February 1941. 2 Ibid. Also in the General Supply Committee Report for 1919. departments or independent establishments of the Government in Washington would be contracted for, purchased, stored and distributed through a single bureau. In lieu of the General Supply Committee there should be created a bureau of supplies consisting of three divisions, one of which should include the present general functions of the General Supply Committee to be known as the Division of Contracts, the second to be known as the Division of Purchases and the third to include the present Division of Property Transfer of the committee and to be known as the Division of Stores. This would require the maintenance of a suitable warehouse adequately stocked with all articles in common use for distribution to the Government service. In the same report under the heading, “Purchasing and Contracting" approval was urged for centralization of purchases for the field and Washington services. Numerous legislative restrictions of the 1910–19 period still hampered the General Supply Committee. Contracting for supplies amounting to $15,000,000 in 1919 denoted that the time was ripe for further development of purchasing operations. Clamor for better procurement persisted. Though the General Supply Committee had adequately handled the first inflow, Government surplus property not only remained but assumed greater proportions. In June of 1921, an inventory of surplus stocks revealed $5,000,000,000 tied up. Gen. Charles G. Dawes, assuming the post of first Director of the Bureau of the Budget, set about disposing of this surplus before deterioration. On July 27, 1921, he issued Budget Circular No. 15 approved by the President. The basic provisions of Budget Circular No. 15 which created the Coordinating Service were: 1. To provide for the prompt location, inspection, and inventorying of supplies and to determine whether they had been reported as surplus. 2. To supervise the purchase functions of all departments and establishments coordinating purchasing with the transfer, sale, or disposal of Government property. 3. To fix the fair market price in transfers of surplus property between departments, and to determine whether public surplus property sales should be held, and are in the interest of the Government. An emergency device, organization of the Coordinating Service, followed Army lines. Broad powers were conferred upon a Chief Coordinator, the first being Brig. Gen. H. C. Smither, who was to be assisted by nine Area Coordinators, one in each of the Army corps areas. The Area Coordinator was to submit to departments concerned and to the Chief Coordinator practical suggestions for effecting economies in the dispensation of surplus property, or for better interagency cooperation. Within a few years the problem of surplus property waned, the idea of coordinating all business operations of the Government assuming greater prominence. 3 The Coordinating Service and The Federal Business Associations, p. 90. |