In a paper presented in the Naval Institute Proceedings for December, 1931, Captain Pence sets forth the case for procurement planning and gives a historical summary of the activities of the War and Navy Departments and a description of the organizations that have been set up within the departments for this work. In the belief that a brief description of the actual work of procurement planning, as practiced in the War Department, as well as of the work of the Army Industrial College, will prove of interest and value, the present paper has been prepared.
As pointed out by Captain Pence, the office of the Assistant Secretary of War, referred to herein as the O.A.S.W., is charged, under the terms of Section 5a of the National Defense Act,
with supervision of the procurement of all military supplies and other business of the War Department pertaining thereto and the assurance of adequate provision for the mobilization of material and industrial organizations essential to war-time needs.
Under this mandate, there has been set up in the War Department an elaborate organization charged with the duty of procurement planning for war.
There are, of course, two problems involved in any general mobilization preparatory to war: (a) mobilization of man power, (b) mobilization of industry. The solution of (a) resolves itself, so far as the procurement of material is concerned, into the solution of the following questions:
(1) What will be required?
(2) How much will be required?
(3) When and where will it be needed?
(4) How shall it be procured?
(5) How shall the supplies be cared for between the factory and the point of distribution?
(6) How shall they be distributed and issued to the troops?
All of these questions are inter-related but depend almost solely, except (4), on military decisions, which must of necessity be made by the general staff.
The O.A.S.W. answers (4) and on it depends the solution to (b).
From the foregoing it is seen that procurement planning may be divided into (1) determination of requirements, and (2) development of plans for the procurement of such requirements.
Determination of requirements naturally depends on the proposed organization, the number of men, and the rate of mobilization. The great difficulty in the World War lay in the lack of military plans and the fact that there was no basis for computing requirements. There were purchased 945,000 saddles for 86,418 cavalry horses and 1,111,480 sets of harness for approximately 500,000 draft animals. Computation of requirements as now practiced would have saved during the World War more than $240,000,000 in leather equipment alone and probably have avoided overloading the industry. Due to failure to provide correct requirements, not only was there much wastage all along the line, but also, with the uncoordinated buying by the supply branches, practical paralyzation of industry and transportation.
It is not a simple matter to figure requirements of material for a mobilization plan. It is said that it required 50 officers 9 months to figure the requirements of a comparatively simple War Department mobilization plan. Where there is conflict and the available supply of any class of material is inadequate to meet the requirements, there must be a military decision as to priority of requirements. If conflict in meeting requirements exists between the Army and the Navy, which may be regarded as inevitable, decision as to priority of military plans will have to be secured from the Joint Board. In any event determination of requirements under any military plan also must include consideration of the priorities of the various requirements, based on the military plan of action.
Development of Army Procurement Plans
The Army procurement system is based on control centralized in the O.A.S.W. and operation decentralized to the seven supply arms and services (quartermaster, ordnance, engineers, signal, chemical warfare, air, Coast Artillery for mines and mining equipment), each of which specializes in and procures a particular class of equipment and supplies. Those items required for two or more branches are procured by the quartermasters. Each procurement service is charged with the duty of computing requirements for the items for which it is responsible and the schedule of procurement it must attain to meet mobilization plans. An industrial survey is made to determine what items various plants can produce to best advantage, as well as the capacity of each for production. To each plant there is assigned a definite task with which it will proceed immediately in an emergency, and for which it can make plans with respect to its supplies of raw materials, labor, power, transportation, and new equipment required. It is intended to base war-time procurement upon allocation of plants rather than on competitive bidding. By allocation is meant the assignment of certain definite plant facilities to each procurement agency to supply its needs in a particular item or items. The advantages of this system are that it permits peacetime prearrangement for production of munitions as a basis of orderly distribution. Each plant being forewarned can plan for its war-time task and make preparations to meet it. Competitive bidding among the various procurement agencies will be prevented and prices determined by negotiation.
It will be of interest to examine the progressive steps in procurement planning. First, designs and specifications must be available for each item. These are prepared by each technical service charged with procuring the item, in consultation with the general staff and the using branch. The O.A.S.W. investigates the design from the point of view of procurement possibilities. Requirements for each item are figured under the various mobilization plans from tables of basic allowances, equipment tables, and tables of organization provided by the general staff.
For the purpose of decentralizing procurement and of dividing the war load throughout the country, there have been established four War Department procurement zones, in which the supply arms and services have one or more districts to suit their particular needs. The Ordnance Department for example has fourteen districts in each of which it has a district representative. The requirements having been determined, the next step is to distribute the load so that no section of the country is given war orders too much in excess of its normal productive capacity. This is accomplished by apportionment of various items to each of the several procurement districts. The district representative requests the allocation of certain plants and facilities for the production of particular items. This is followed by a survey of the plant, a factory plan to show disposition and layout necessary to manufacture the item, and finally by an accepted schedule of production, which is in effect an assent by the facility for wartime production in specified quantity at specified rates of delivery. Some factory plans are quite elaborate and in considerable detail, showing not only factory layout, but also details of routing, machine tools used, etc. When a plan for a particular item has been completed so as to meet requirements, it is possible to prepare a so-called specific procurement plan which represents for that item a complete record of all procurement information including an analysis of requirements, design and specifications, apportionment, allocations, factory plans, accepted schedules of production, and description of manufacture. They enable the O.A.S.W. to carry out his statutory duty of assuring himself of the adequacy of the procurement plan. The following points are covered by each specific procurement plan:
(a) Status of specifications, drawings, and “description of manufacture.”
(b) Basis of computation of the requirements.
(c) Estimated time lag between acceptance at the factory and delivery to troops.
(d) What new facilities are required and whether they are to be new construction or converted from other lines of industry.
(e) Plans for inspection and acceptance.
(f) Weight of article; number to be packed in the container; weight, size, and cubical content of the container if used.
(g) Requirements by months for number of months prescribed by mobilization plan used.
(h) Tables of schedules of production arranged by procurement zones and districts within each zone placed with each facility.
(i) Tables of sub-schedules of production for critical contributory items, i.e., raw materials of which a shortage is indicated.
(j) Unit cost of finished item and cost of procurement program by months for the number of months covered by the plan.
(k) Cumulative requirement curve.
(l) Cumulative curve of delivery to troops.
(m) Present stock on hand.
Many articles of munitions are not ordinarily produced commercially and manufacturers have no prior knowledge of applicable production methods. Complete drawings and specifications are necessary to define any given article to a producer. Experimentation and actual production at government arsenals and laboratories is conducted to develop this information, which when properly assembled is called a “description of manufacture.” This includes all information as to factory layouts, machine tools and personnel required, operations, drawings of jigs, dies, and fixtures, and other information applicable to the manufacturing equipment and processes.
As an indication of the extent of the activities of the O.A.S.W. in this work, it is of interest to state that over 15,000 plants and facilities have been allocated to War Department supply arms and services, and over 14,000 of these have been surveyed. There are over 14,000 accepted schedules of production, i.e., orders for munitions which become effective upon declaration of a war emergency.
An essential feature of procurement planning for war is a study of the raw materials required and in particular those known as “strategic.” Early and uninterrupted production in war time requires a prompt and sufficient supply of raw materials, if interference with early production is to be avoided. It can be assumed that at the outbreak of a war, commercial manufacture and available supply of raw materials are essentially in balance. There will be an unbalance immediately the manufacture of a vast amount of military supplies and munitions is imposed. The adjustment of the disturbed balance between the supplies of raw materials and the demands of the industries manufacturing military munitions was one of the first problems presented to the Council of National Defense in the World War and led to the organization of a committee on raw materials on its advisory commission. This led also to the formation of commodity committees, which in co-operation with agencies from trade associations of industry studied the questions of distribution of supplies of raw materials to meet the most urgent needs as they arose. The function of the present peace-time commodities division of the O.A.S.W. is to study raw materials and commodities which past experience indicates as likely to involve some particular difficulty of supply. There are 43 commodity committees, each assigned to a particular raw material or commodity and charged with determining quantities that will be needed by each user and consolidating these requirements and studying available supplies and methods of distribution. These committees also study the industries concerned in the production of its particular raw material or commodity and obtain definite and reliable information about their capacity. With all of this information, the committee is in a position to determine the extent of the problem and if a shortage is indicated it is necessary to develop a solution. Materials known as “strategic,” promise to give the most difficulty, i.e., those essential to the national defense, for the supply of which dependence definitely must be placed in whole or in part on sources outside the continental limits of the United States and for which there are no satisfactory substitutes available within the United States.
It is to be expected that in time of war, most merchant marine vessels will be required for conversion to auxiliary naval vessels and for use in supplying the fleet and expeditionary forces. The import trade of the country will be dependent to a large extent on foreign bottoms and imports and exports will fall off very sharply. Strategic raw materials will be conspicuous by their absence; domestic raw materials normally exported in quantity will be conspicuous by their plenty. It is therefore essential that in peace time study be made of such strategic raw materials in an effort to find substitutes. This has been done by the commodity committees of the War Department and as a consequence many items now listed as strategic materials might well be eliminated. For those for which substitutes have not been found, and there are a number, study has been made to determine quantities that will be needed and ways and means of providing a reasonably adequate reserve supply.
Examples of the most important items of strategic raw materials are manganese, chromium, tin, and rubber. Fourteen pounds of metallic manganese is used in every ton of steel manufactured. Present supplies come from India, Russia, the Gold Coast, and Brazil, a long haul in war time. The United States is normally the world’s largest consumer of manganese and it is not likely that there is a year’s supply in this country at any one time. It is known that other countries have accumulated enormous reserve supplies. Chromium, used for the manufacture of high tensile steel, armor plate, projectiles, corrosion resisting steel, dyestuffs, and refractory materials, comes from Rhodesia, New Caledonia, Asia Minor, Russia, and Brazil. Tin, required for solder, bearing metals, and bronzes, for tin-plate used in canned-food containers, comes mostly from Bolivia and the East Indies. Rubber, of which this country consumes more than two-thirds of the world’s production, is produced almost exclusively in the East Indies.
Only slight consideration of the above is necessary to convince the student of war plans of the urgent need for the study of raw materials and of the importance of work of the commodity section of the O.A.S.W.
Organization of the Procurement Branch O.A.S.W.
There are two main branches of the procurement branch O.A.S.W., one devoted to current procurement control and the other to procurement planning for war.
The former concerns itself primary with co-ordinating the current purchasing activities of the seven supply arms and services of the Army, the transfer of supplies between branches and to other government departments. It co-ordinates the action of the requiring department with that of the supply arm, charged with the purchases. Its work in peace time is largely administrative, educational, and supervisory, the initiative being left to the procurement agencies.
The planning branch studies questions relating to war-time mobilization of material and industrial organizations essential to war-time needs. It is the co-ordinating and control agency for all procurement planning and answers the question for the War Department regarding all wartime materials, “How shall it be procured?” This branch has four main divisions. The administrative division cares for general questions, inspection, training, statistics, and information. The commodities division administers the War Department commodity committees. The procurement control division administers priorities, allocations, price control, contracts, conservation, and foreign relations. The industrial division administers power, labor, transportation and communications, and facilities. The plans covering these organizations provide for assignment of officers in time of emergency to the various duties and functions, which just now are handled in some cases by more or less skeletonized organizations.
Industrial Mobilization Plan
The provisions of the National Defense Act also charge the Assistant Secretary of War with the duty of making “Assurance of adequate provision for the mobilization of material and industrial organizations essential to war-time needs.” Under this mandate of law, the O.A.S.W. has made a very comprehensive study and has prepared an industrial mobilization plan, which, as stated by Captain Pence, is the best plan yet produced and well worthy of study and investigation. This plan was reported to the war policies commission of 1931, and the details were published in the report of hearings before that body. It has been brought up to date of 1933, having in consideration the recommendation of the war policies commission of March 5, 1932. This revised plan has been approved by the Secretary of War and by the Secretary of the Navy.
During the World War improvised methods of control of industry and mobilization of resources were necessary and were extemporized in the heat of conflict. The folly of permitting the country to drift into war without having made provision for prompt mobilization of industry was brought home to the people and to their leaders. While improvised methods resulted in winning the war for the Allies, they prevented neither extravagance and delays in procuring munitions nor profiteering in some quarters and unnecessary suffering in others.
Mobilizing a nation for war is an exceedingly involved and intricate process. What is known as a “planned economy” is necessary. Industry must be regulated, raw materials and supplies of all sorts controlled and distributed where most needed, labor and capital controlled, public morale must be kept up, and transportation agencies co-ordinated. All of this requires agencies of size and power far in excess of normal peace time.
The plans for control of economic resources and mobilization of industry include (1) determination of measures to be employed to insure the proper co-ordination and use of the nation’s resources, (2) development of plans for the organization of administrative machinery, super-agencies, that will execute these control measures. The execution of these plans is a responsibility of the President acting through such agencies as he and Congress may establish. Thus the industrial mobilization plan is only a tentative plan, which may or may not become effective, depending upon circumstances at the time of the emergency. This plan, however, contains provisions in detail for all the various so- called super-agencies necessary to meet the requirements for control of economic resources, as well as drafts of legislation and executive orders necessary to make them effective.
The Army Industrial College
Just as the Army War College and Naval War College study military plans for waging war, so the Army Industrial College studies industrial plans for supplying material for war-time needs and for the war-time mobilization of industry. The length of the course is from September 1 to June 30 of each year. The faculty consists of a director and five officers, one of them a naval officer. The student body of 54 for the 1932-33 session consisted of 40 officers of the Army and 14 of the Navy and Marine Corps. The course of instruction, which as a rule is self-instruction, is designed to give the student officer an insight into the questions covered by the provision of the National Defense Act, i.e., (1) the peace-time preparation of plans for the procurement in war of all items of Army requirements and (2) “the- assurance of adequate provision for the mobilization of material and industrial organizations essential to war-time needs.” These subjects naturally carry the student into short studies of economics, business methods, organization, accounting, industrial management, purchasing methods. There is a course of study on governmental organization and the functions of the War and Navy Departments and their procedure in current procurement and procurement planning. Study is made of the control agencies and procurement methods during the World War. Problems are assigned to committees of students covering a vast range of questions which will be listed briefly. The reports of committees are delivered from the rostrum by each committee to the class as a whole and there is free and open discussion of the conclusions. The written reports are on file in the library of the college and form a valuable reference for study of the questions covered. Visits are made to the Army Proving Ground at Aberdeen, the Naval Gun Factory and Powder Factory, and a number of industrial plants at Pittsburgh.
Throughout the year lectures are delivered to the class by army and naval officers on various topics related to the subject of study as well as by civilians and others qualified to discuss these subjects. The class attends some scheduled lectures at the Army War College. There is close contact at all times with the officers of the O.A.S.W. and of the supply arms and services on duty in connection with procurement planning and current procurement. The following is quoted from the address delivered to the class by the director on the occasion of the opening of the 1932-33 course:
Throughout the ages men have studied military preparedness, but this is the first school that has ever concentrated on economic preparedness for war. We are a comparatively young institution and, to a great extent, still exploring a primeval wilderness. So you have a great opportunity to work out virgin trails and carve your initials on virgin timber. You may put originality and individuality into your written and spoken word in this school. I mean what I say when I say that here we encourage freedom of thought and expression, within the limits of what is, of course, expected among high-minded officers and gentlemen: courtesy, constructive intent, and, in our conferences, strict parliamentary procedure.
The following is a list of the problems studied by the members of the class of 1932-33, either individually or through committees. The first six problems may be said to be the orientation part of the course. They are all individual problems.
(1) Report writing.
(2) Historical study of procurement and industrial mobilization in the World War.
A study of the major difficulties in the procurement of munitions and all those super-agencies engaged in the mobilization of the economic resources of the nation.
(3) Fundamentals of business.
(4) War and Navy Departments’ organization and plans for procurement and industrial mobilization.
(5) Purchasing, methods of.
Student’s own arm or service showing the organization of same for current procurement, and the methods used by the Assistant Secretary of War in his control of current procurement.
(6) Special work in procurement planning of the supply arms and services.
(7) Procurement planning.
Analytical study of procurement planning by the supply arms and services.
(8) The procurement disctrict.
A review of the history of procurement districts; their origin; determination of their boundaries.
(9) Budgetary control.
A study of budgetary control in industry, in the Navy Department, and in the War Department.
(11) War reserves.
(12) Personnel and training.
A study of the methods of recruiting and training personnel for procurement of munitions in a major emergency.
(13) Food.
A study of the food problems of the country during the World War, analysis of the present food situation in the United States, and a study of the steps necessary to effective handling of the problems in a future emergency.
(14) Communications.
A study of the control of communication systems in war.
(15) Purchase, storage, and traffic division of the general staff, World War.
A historical study of the development and operation of that organization.
(16) Publicity.
A study of World War activities in disseminating information regarding the mobilization of material resources. A discussion of the same class of publicity in a future war, indicating plans for control if control is thought desirable.
(17) War-time contract forms.
(18) Production in early stages of war.
(19) Construction and conversion of facilities.
A historical study of how these problems were handled during the World War.
(20) Test of a mobilization plan with respect to procurement.
A detailed study of the work required in computing primary requirements to meet mobilization plans and of ways and mean of testing such plans with respect to procurement for supply.
(21-22) Basic industries of the United States.
(23) Army procurement procedure in peace and war.
(24-25) Economic control in certain foreign countries.
A discussion of the agencies and methods of economic control by Great Britain, France, Germany, and Italy.
(26) Contributory requirements.
A study of the problem of assuring to the manufacturers of essential items an adequate supply of raw materials.
(27) The Industrial war load.
(29) Labor.
Study of the steps necessary to effective handling of the problem in emergency.
(30) Transportation.
(31) Price control.
(32) The power of eminent domain.
A study of the extraordinary power exercised in time of war by the Congress or by the President with respect to procurement and industrial mobilization, together with a study of statutory provisions relating to War Department procurement, particularly those that are restrictions or limitations, and of the legislative plan of the Assistant Secretary of War.
(33) Priorities.
(34) Economic planning in relation to national defense.
(35) Control of foreign commerce.
A historical study of the war trade board.
(36) Financial control agencies.
A brief discussion of the World War activities of the war finance corporation, the war credits board, and the capital issues committee.
(37) Conservation.
(38) Fuel and power.
(39) Commodity committees and strategic raw materials.
(40) Shipping.
(41) Trade associations.
A study of the utilization of trade associations in war-time procurement.
(42) Maximum effort criteria.
An attempt to define the limits of the nation’s maximum effort in war.
(43) Transition of the office of the Assistant Secretary of War from peace to war. -
Steps necessary in changing the functions and methods of procurement and procurement control from those obtaining in peace to those contemplated in war.
(44) Industrial readjustment after war.
(45) Organization for control of industry in war.
Importance of Economic Planning
The value of economic preparedness for war cannot be stressed too strongly. No discussion of the question of measures to assure the most effective utilization of industry in war is complete without reference to the need for procurement planning and study in advance of the event. Procurement planning, such as is being carried on currently in the O.A.S.W., should be done for both the Army and Navy under joint and unified military plans and in accordance with priorities to be established by the joint board. It must be recognized that many of the plans prepared in advance of an actual emergency will not become operative. There will be many changes both in the military situation and in industry which render necessary continual revision of plans. However, if there is in existence an experienced organization studying and revising the plans, such an operating organization will prove of incalculable value in time of emergency. It is no exaggeration to say that had there been in existence prior to the World War agencies such as the Army Industrial College and the planning branch of the O.A.S.W., our national debt now would be billions of dollars less in amount.
Plans for industrial mobilization for war and for military procurement will serve to obviate to greater or less degree, depending on the effectiveness of the work done, the following evils which have been experienced heretofore in all wars:
(1) Delay in the procurement of necessary munitions, perhaps even to the point of jeopardizing national safety.
(2) Lack of knowledge concerning the amounts of supplies needed, which causes waste of resources in over-production on the one hand and a shortage of essential items on the other.
(3) Lack of knowledge concerning the most logical place for production of the required munitions, resulting in improper distribution of the load and causing congestion, difficulties in transportation, inefficient use of resources, and local and finally general upsets in the price structure.
(4) Uncoordinated purchasing by many government agencies, encouraging competition among these agencies and inevitably resulting in further maladjustments in the price structure.
(5) Inequitable distribution of war’s economic burden.