I have got to be able to have some sort of conception of the value of the plant being used in the manufacture of the guns and the value of the organization aside from that salaried part which you pay for in the cost of the rifle.

Mr. F. A. SCOTT. Mr. Sisson, I am going to state now what I am sure every experienced manufacturer will tell you is so; that in many lines of industry, in our own, for instance, if you would offer to trade me the name of my company and organization and you would take the buildings and machinery I would prefer to take the name and the organization; the organization is worth so much as that because of the special training of these men to do that particular thing, the fact that they have had long experience and the fact that you have them on a task which they can do best.

The CHAIRMAN. At least one of these companies was very anxious to get this contract?

Mr. F. A. SCOTT. Well, I think they were all anxious to get it on a satisfactory basis.

The CHAIRMAN. I do not know the basis on which they were very anxious to get the contract, but they were very much alarmed that the Government would not make these rifles, and under section 120 of the national defense act we were not dependent upon these companies accepting these contracts on their own terms; we were in a position to place these orders with them upon terms that the Government determined were sufficient. I refer to the section of the national defense act which gives the President the power to place these orders. Mr. F. A. SCOTT. But the law there, Mr. Chairman, says that the terms shall be fair and just, and if these terms are no more than fair and just the Government is in the same position or in a better position than it would have been if it had commandeered the plants.

The CHAIRMAN. The Government was not at the mercy of the companies and did not have to make contracts on the theory that they were the only conditions upon which they could operate. We were not put in the position that you have intimated in the beginning, that this was the only basis upon which they would take the contracts.

Mr. F. A. ScoTT. I do not believe, as a practical matter, that the Government has much of an opportunity to help itself by commandeering the plants. I think that that process will result, in most cases, in a higher cost than would be the result of a fair contract with the manufacturers. If the Government can find in existence the articles that it wants and can commandeer those all ready for its purposes then the commandeering proposition may work successfully, but I am confident that if what you need is the service of a big manufacturing organization that you can not commandeer that successfully.

The CHAIRMAN. You can place the order with them and direct them to do it and fix the price?

Mr. F. A. Scorr. And the law says that the price shall be fair and just, and if the Secretary of War is satisfied that the price to be paid is fair and just he is in the same position.

Mr. SHERLEY. What the chairman, perhaps, was speaking of was your statement earlier that the Government was in a position where it had to have these rifles and had to do business with these com

panies and that left the impression that perhaps this contract would not have been made except for the exigencies of the case.

Mr. F. A. SCOTT. Well, I will restate that if you wish; I am willing to reiterate that statement and say that in my opinion, in the state of mind in which these gentlemen appeared before the Chief of Ordnance and ourselves, if the basis on which the Government was willing to make a contract had been less favorable than the basis given in that contract, they would have preferred that the Government take over their plants.

The CHAIRMAN. That was not required.

Mr. F. A. SCOTT. Now, I may say-probably the Chief of Ordnance has testified about that-that at least two of these men, possibly three, but I remember that two of them said that particular thing, that it would please them if the Government would take over their plants, because they knew that the compensation, under the law, would be fair and just and that there would be no risk assumed by them.

Mr. SISSON. There is none assumed under this contract.

Mr. F. A. SCOTT. Except this, that they must deliver the goods. They have involved their reputation on the delivery of the goods; if the Government had taken over the plants they would not have risked their reputation on the delivery of the goods, and that is a very considerable risk to a concern that has a good reputation.

FRIDAY, AUGUST 17, 1917.

SUPPLIES COMMITTEE--CLOTHING FOR THE ARMY.

(See p. 503.)

The CHAIRMAN. Mr. Rosenwald, did your committee have to do with the purchasing of clothing for the enlisted men?

Mr. ROSENWALD. We have to do with the arranging for the purchases which the quartermaster makes.

The CHAIRMAN. Just what does your committee do?

Mr. ROSENWALD. Our committee is instructed by the quartermaster. I brought with me a few sample letters.

Mr. GILLETT. What committee is this?

Mr. ROSENWALD. I am a member of the advisory commission of the Council of National Defense.

Mr. GILLETT. I mean, which special committee is it?

Mr. ROSENWALD. It is known as the supplies committee; that is the name we have taken ourselves. Under date of May 1, for example, there is a letter from Henry G. Sharpe, Quartermaster General, as follows:

I am inclosing herewith for your files your letter of April 30, 1917, addressed to the Quartermaster General, in connection with contracts for the articles of clothing and equipage enumerated therein, which have been approved, as you will note, by the Secretary of War. I have retained for our files a duplicate copy on which the Secretary also noted his approval. Orders have been issued for Col. Hirsh to join you in New York Thursday morning, and I have written him a personal note, asking that he report to you at the Hotel St. Regis at that

time.

Col. Hirsh is the quartermaster at Philadelphia in charge of purchases. Now, this letter was written by Mr. Eisenman, of our committee on supplies, to the Quartermaster:

Referring to the confidential hearing this morning between the Secretary of War, Gen, Henry G. Sharpe, and Gen. A. L. Smith, it was agreed that the committee on supplies of the Council of National Defense, together with a competent purchasing officer of the Government, may enter into contracts for the items which are here enumerated and that such action is hereby approved by the Secretary of War.

Then it goes on to enumerate these articles. The first is cotton cloth, O. D., which means olive drab, 13,000,000 yards; wool drawers, 1,100,000; gloves, wool, O. D., 381,856 pairs; shoes, russet 1,018,270 pairs; stockings, wool, light weight, 1,750,000; undershirts, cotton, 765,000; undershirts, wool, 765,000; blankets, 554,568; cots, 761,856; duck, shelter-tent, 2,775,000 yards; duck, khaki, 12.4-ounce, 9,500,000 yards; drilling, unbleached, 930,000 yards; duck, No. 4, 42-inch, 137,500 yards; duck, khaki, 8-ounce, 1,750,000 yards; flannel shirting, O. D., 2,000,000 yards; meltons, O. D., 16-ounce, 2.412,500 yards; meltons, O. D., 30-ounce, 1,675,000 yards; bobinette, 72-inch, 2,250,000 yards; and bobinette, 52-inch, 2,300,000 yards. Then the letter goes

on to say:

And such other quantities of the above items as may have been previously authorized but not purchased.

That is one letter, and here are any number of other letters.

The CHAIRMAN. The letter from the Quartermaster General or the letter from Mr. Eisenman stated that the Secretary had authorized the supplies committees, with a representative of the Quartermaster's Department, to make those purchases. What was the procedure followed?

Mr. ROSENWALD. It varies a little, depending on the material. If it is bobinette, the Quartermaster would probably take care of that himself; I am not sure whether our committee arranged for that or not. We will start with the first article, cotton cloth, O. D. We have a subcommittee, consisting of people who are in the industry, to whom we give this information, that we require this amount of cotton duck. They know all of the manufacturers and they give us information where this can be had to the best advantage and at the best price. Some of these manufacturers supply a part of this themselves. It is a question for the Quartermaster's Department to decide whether it wants to give them that order for anything they have recommended or whether it does not. As to most of the articles, the demand is greater than the supply, and it is necessary to accept the output of every mill that we can get hold of, making it necessary for us to accept what can be furnished by the members of this committee, without whose knowledge we would not be in a position to know many of the things that are necessary for us to know in order to get this quantity. They supply, as nearly as possible, the requirements of the Quartermaster.

The CHAIRMAN. How would the price be arranged if the Government's demand is in excess of the supply and the men on the committee in charge of the matter would themselves necessarily furnish some of the materials called for?

Mr. ROSENWALD. The price is arrived at by knowing what these goods have brought heretofore. We got into the costs of the articles

and use our judgment in making recommendations, as to whether or not the price that is submitted is fair.

The CHAIRMAN. Take, for instance, this subcommittee on cotton cloth. They furnish information as to the available places where it can be obtained and submit the price. Now, that recommendation is made to whom?

Mr. ROSENWALD. To Mr. Eisenman, who is in charge of this particular line of work.

The CHAIRMAN. Mr. Eisenman's position is what?

Mr. ROSENWALD. He is my representative on this committee. The CHAIRMAN. He is a member of the committee on supplies?

Mr. ROSENWALD. Yes. He is not in business himself at all; he is a retired manufacturer and has for the last several years been out of business.

The CHAIRMAN. I want to get his position in the organization. Mr. ROSENWald. He is vice chairman.

The CHAIRMAN. That information is reported to him and then he makes a report on that recommendation?

Mr. ROSENWALD. They furnish samples of this material, according to the specifications of the Quartermaster, and he decides whether or not, in his opinion, he can recommend to the Quartermaster to purchase these goods in accordance with the recommendations, but if not he sends for the manufacturer and says, "Now, this price is too high; we are able to buy this from other manufacturers at such a price."

The CHAIRMAN. You can not do that where the demand is greater than the supply?

Mr. ROSENWALD. Yes; we do that even when the demand is greater than the supply. We send for these people and tell them that notwithstanding the fact that we know there is a shortage and that everybody knows that they can get all the business they want we still want them to know that they must make these goods for the Government at a reasonable price, and a reasonable price is determined upon the basis of costs of the best manufacturers. It sometimes happens that some people are able to produce a little cheaper than some other people, on account of location, on account of labor conditions, etc., and that has to be taken into consideration, so that everybody is not paid exactly the same price. But to the best of the ability of the committee and our representatives we get this man to furnish these goods at the lowest possible price.

The CHAIRMAN. For instance, as to the cotton cloth, where the Government is in the market for the entire output, instead of a flat rate per yard being fixed, is the price fixed for each concern that furnishes a part of the cloth?

Mr. ROSEN WALD. Each concern has its own price, although many of them are the same. Where we can not make as good a deal with one as we can with others we have sometimes to pay a little more. The CHAIRMAN. I say, instead of fixing a flat or uniform rate the rate must be fixed with each concern?

Mr. ROSENWALD. Yes.

The CHAIRMAN. With the exception, probably, of shoes

Mr. ROSENWALD (interposing). The next item is wool drawers; but before going on with the different articles enumerated may I

just say this: That the quartermaster is well informed as to values, and he is there to protect the Government's interests. When we are willing to recommend a purchase at a price which, in our judgment, would be all right, taking into consideration the conditions as they are and the needs of the Government, he might say, "Now, that is more than I think we ought to pay, and we will either try to get along without these or we will compel them to make them at a lower price."

The CHAIRMAN. Does that ever happen?

Mr. ROSENWALD. Oh, yes; it does happen. The quartermaster is a well-informed buyer. He has been connected with the Philadelphia Arsenal for a number of years and is very keen.

The CHAIRMAN. You mean Col. Hirsh?

Mr. ROSENWALD. Yes; he is one of the best traders I ever knew. The CHAIRMAN. Is he in the regular service?

Mr. ROSENWALD. Yes; he is an exceptionally able officer.

Mr. SHERLEY. Does he not only exercise a judgment as to the price, but does he exercise an independent judgment as to the allotments that shall be given to different manufacturers?

Mr. ROSENWALD. In many of these cases, like cotton duck and cotton cloth, there is no argument about the allotments, because we give every man all he can take.

Mr. SHERLEY. I understand; but there is some judgment as to what he can take. What I mean by that is this: A man might offer to furnish more than he could, having in mind to sublet the contract. That might not aply to cloth, but it has been stated it does apply to a number of things that are manufactured, and in some instances it has been claimed that men who were making goods for a contractor with the Government at a less price than the contractor was getting had undertaken to get a direct contract with the Government but had not succeeded.

Mr. ROSENWALD. That could hardly be possible where we require the services of everybody and they can get the order direct. Under such circumstances there would be no incentive for them to pay a commission to somebody in order to get business that we are anxious to place.

Mr. SHERLEY. I am not speaking of paying a commission. For instance, a man gets an order to make up so many shirts?

Mr. ROSENWALD. My statement refers to piece goods; that is, yardage goods.

Mr. SHERLEY. I understand it is; but I am branching for a moment.

Mr. ROSENWALD. We do not go into the manufacture; we do not have anything to do with the making of the cloth into garments. In no instance do we have anything to do with the making of these khaki uniforms; that is entirely in the hands of the Quartermaster.

Mr. SHERLEY. All right. So there is no use in taking up that phase of it with you. Have you, in the matter of cloth, supplied every responsible person who offered to furnish this cloth with information as to the amount of cloth that the Government wanted, the quality, etc., in order that he might submit bids, or have you undertaken to confine such information to men that you considered were

manufacturers of cloth?