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History of Communications-Electronics in the United States Navy, Captain Linwood S. Howeth, USN (Retired), 1963, pages 433-441:


CHAPTER  XXXVII


Procurement  and  Distribution  of  Electronic  Material


1.  GENERAL  CONTRACT  PROCEDURES

Until June 1940 the Navy's contract procedures were archaic. Governed by Revised Statute 3709, enacted in 1861, which required advertisement of proposals, competitive biddings, and the awards of contracts to the lowest bidders offering materials meeting the specifications, it was a slow and cumbersome process. During the years following the enactment of this statute contract requirements became more restrictive by the addition of numerous administrative rulings and congressional restrictions in the annual appropriations bills. An act of Congress in 1911 permitted progress payments on contracts but prohibited advances.
    Under the established procedure two contract methods were open to the material bureaus: one in which the bureaus prepared the contract and either sent it to the Secretary of the Navy or the Chief of the Bureau for signature and then executed it; and the other in which requisition was made upon the Bureau of Supplies and Accounts which then prepared and executed the contract. The former type was normally used to obtain technical apparatus which required contract surveillance by personnel with knowledge of the apparatus required. Items of standard equipment were normally procured by requisitions on the Bureau of Supplies and Accounts.
    During World War I it became necessary to resort to a "cost-plus-percentage" type of contract because of spiraling prices which made it impossible for contractors to determine costs. Following the termination of the war this means of contract procurement was prohibited.
    These contract procedures had the virtue of simplicity and were easy to administrate. Weaknesses were hidden or overlooked because speed in procurement was not a vital consideration in most cases and, in the few where it was, the cumbersome methods could be accelerated as long as procurement remained at a low level.
    In addition to the unidealistic contract procedures, Congress customarily embodied a restriction in the annual appropriation bills designed to require material to be produced in navy yards or arsenals when this could be done "in the time required, at no excessive cost." However, this had but little effect upon the procurement of electronic equipment, since the Navy did not possess all the necessary patents and could not obtain license to use the essential ones that would permit the manufacture of equipment which would meet the specifications.
    With the gradual expansion of the Navy which began in 1933, the weaknesses of the contract procedure became evident. As the buildup accelerated it became ever more apparent that the legal restrictions necessarily had to be less stringent and that procedures must be streamlined. In 1939 all material bureaus of the Navy united in a concerted attack against the contract restrictions. The appropriations of that year carried the usual customary restrictions but permitted the Secretary of the Navy to waive them when required for national defense. In January 1940 the Secretary removed all administrative restrictions which had been placed by his Office during the preceding decades.
    In June 1940 Congress awakened to our need for total preparedness and enacted Public Law 671 which eliminated peacetime restrictions and revolutionized traditional procedure for procurement of military equipment. This act permitted the Secretary of the Navy to authorize, when necessary, procurement through negotiated contracts without advertisement or competitive bidding and permitted the use of "cost-plus-fixed-fee" contracts. Another important provision of the act, which was to prove extremely valuable in the years to follow, permitted advance payments to contractors up to 30 percent of the contract price.
    With the enactment of this law three additional methods of contract procurement became available to the material bureaus: contracts negotiated under Public Law 671; contracts negotiated by representatives of a material bureau assisted by representatives of the Bureau of Supplies and Accounts and then executed by the latter Bureau in response to requisition; and contracts by which a material bureau could finance critical industrial expansion. Additionally, the use of the letter of intent which authorized a manufacturer to begin work with assurance that he would be reimbursed for his expenses up to a fixed amount in the event a contract did not develop.
    After the attack on Pearl Harbor, time, rather than economy, became the controlling factor in military procurement. On 27 December 1941, the President, exercising the power conferred upon him by the First Wars Powers Act of 8 December 1941, granted the military departments general authority to contract through negotiation. On 28 December 1941, the Secretary of the Navy directed that supply and contract facilities contracts in excess of $200,000 would only be executed with the authorization of his Office. Contracts involving expenditures in excess of $500,000 required the additional clearance of the War Production Board. To assist the Secretary's Office in coordinating the business activities of the Navy, the Office of Procurement and Material was established in January 1942 and this Office was authorized to act for the War Production Board. In early 1942 the War Production Board issued a directive which, to all practical intent, made contract by negotiation mandatory. A few months later this was amended by directing that primary emphasis be placed upon ''deliveries or performance at the times required by the war program.
    Despite the liberalization of the contract procedures, procurement by the material bureaus was being slowed by the lack of administrative flexibility and lack of technical knowledge within the Bureau of Supplies and Accounts. To bring the situation into the open, the Chief of the Office of Procurement and Material, in July 1942, queried the material bureaus as to the advisability of centralizing all procurement in the Bureau of Supplies and Accounts. The technical bureaus united in opposition to this proposal and were successful in their efforts. On 13 December 1942, the Secretary of the Navy directed the material bureaus to handle their own contracts for research, development, and production of the technical items under each bureau's cognizance and to procure standard stock items of a nontechnical nature through the Bureau of Supplies and Accounts. To further facilitate procurement each bureau was directed to establish a legal office headed by an appointee of the Under Secretary of the Navy who was responsible for insuring that contracts were legally prepared.

2.  BUREAU  OF  SHIPS  ELECTRONIC  EQUIPMENT  PROCUREMENT1

The Bureau of Ships procured electronic equipment for the entire Navy, including the Marine Corps, excepting that required by the Bureau of Ordnance. Additionally, it made procurements for the Maritime Commission and the Lend-Lease Administration and for some of the Army's requirements.
    In the early days of the war, procurement was handicapped by four factors: No radar designs suitable for production existed in 1939 nor were any allowances established for this equipment; the lack of a capable organization for negotiating, determining requirements expediting, and progressing; lack of experience on which to negotiate prices sufficiently high to serve as an inducement to manufacturers; and lack of sufficient number of firms with electronic production capabilities or facilities.
    An adequate means of determining electronic requirements had not been developed by 1942. A requirements and allowances program had been projected, but this required starting with plans and procedures, data on sizes, voltages, power supplies, mast heights, strengths, and freedom from obstructions and other pertinent ships' construction data affecting installations. All these factors were important for all electronics installations and were vital in the case of radar. Beginning in March 1942, a thorough study of the physical and electrical characteristics of each ship type was made. Following the completion of this during the summer of that year recommendations were made to the Chief of Naval Operations for radar installations by ship's type.
    As mentioned earlier, legally, the function of selecting contractors, negotiating prices, and awarding contracts was the province of the Bureau of Supplies and Accounts. In the field of electronic equipment, that Bureau had for many years been dependent upon the Radio and Sound Division for the required technical assistance. With accelerated procurement it became necessary for the Bureau of Ships to assume most of this function with the Bureau of Supply and Accounts merely approving contractual actions.
    The authority for initiating requests for electronic equipment procurement came from the Chief of Naval Operations by the establishment of ship and shore station allowances or by request for specific equipments from the Bureau of Aeronautics based upon aircraft allowances which were also established by the Chief of Naval Operations, from requisitions of the Marine Corps, Army, Maritime Commission, and the Lend-Lease Administration, plus an estimated requirement for battle damage.
    Until shortly after the attack on Pearl Harbor each individual section of the Radio Branch negotiated its own procurement. After the establishment of the Office of Procurement and Material they were assisted by negotiators from the Procurement Division and contracts exceeding $200,000 were reviewed and approved by the Contract Clearance Division of that activity. It quickly became obvious that too many individuals, lacking firm requirements guidance, were initiating procurement. In late spring 1942 procurement was centered in one Procurement Section.
    Because of lack of adequate pricing experience, compounded by rapid changes in specifications, which necessitated keeping design fluid, and the urgent requirements for electronics equipment, 70 percent of the negotiations prior to July 1944 began with issuance of letter of intent or by contracts specifying maximum cost with later downward revisions. Cost-plus-fixed-fee contracts were seldom used as manufacturers opposed them and the Navy's Cost Inspection Service was not adequate to cope with a large volume of this type.
    The Office of Procurement and Material became increasingly critical of the Bureau's use of the letter of intent. In mid-1944 this culminated in an investigation of its use of this means of starting electronic production. As a result, in July 1944, electronic procurement was transferred from the Electronics Division to a Contract Division, established under a civilian head provided by the Office of Procurement and Material. Following this, a Contract Planning Section was established in the Equipment Branch of the Electronics Division. This Section aided in preparing requests for procurement, contract modifications, or change authorizations. It insured that the technical problems of production were legally covered, aided in the selection of contractors, insured that contract specifications agreed with what the contractor promised, and protected the Government patent position.
    The Contract Division thus received papers nominating contractors, specifications, quantities of material required, exceptions filed by contractors to the specifications, the financial appropriation to which the contract was chargeable, and information relative to the furnishing of material by the Government. It was not usually possible to provide the contract negotiators with all the required information. This resulted in appeals to the Contract Planning Section for additional technical assistance and brought about close liaison and considerable joint action.
    Although considerable electronic equipment was purchased from small manufacturers, the major portion was provided by the following:
Western Electric Co.;
Westinghouse Electric & Manufacturing Co.;
Radio Corp. of America;
Philco Electric Corp.;
Collins Radio Co.;
Submarine Radio Co.;
Hazeltine Service Corp.;
Sperry Gyroscope Co.;
Stromberg Carlson Co.;
Federal Telephone & Radio Co.;
Aircraft Radio Corp.; and the
National Electric Supply Co.
    The magnitude of the procurement of electronics equipment is best understood in terms of dollars. Between 1 November 1942 and 1 September 1945, contracts had been awarded for equipment in the amount of $4,009 million, of which $2,538,800,000 in deliveries were made. In July 1944, following the Normandy invasions, contracts began to be canceled for excess and undelivered obsolescent equipments. These cancellations totaled $1,058,400 by 1 September 1944, leaving an undelivered balance of $400,800,000. Most of this amount was not recoverable because of obligations incurred by contractors for material, components, completed but undelivered equipments, plant facilities, and services.
    This appears a huge sum, but it must be remembered that the military services were, at the sudden termination of hostilities, preparing an all-out invasion of Japan and that this equipment would have been required had this taken place. War is expensive and wasteful, but poverty is far more acceptable than slavery.

3.  BUREAU  OF  ORDNANCE  ELECTRONIC  EQUIPMENT  PROCUREMENT2

The electronic equipment requirements of the Bureau of Ordnance were primarily in two separate and distinct fields; fire-control radars and proximity fuzes. Early fire-control radar equipment was obtained under Bureau of Ships contracts. The Bureau of Ordnance assumed the responsibility for research, development, and procurement of fire-control radar equipment after mid-1941. Since this type of radar required the use of much higher frequencies to provide the narrow beam required for fire-control purposes, additional research was required. This was carried out under National Defense Research Committee and Office of Scientific Research and Development contracts with the Radiation Laboratory, established at the Massachusetts Institute of Technology. The costs of the development of the equipment to meet naval fire-control problems was borne by the Bureau of Ordnance. Approximately $14 million was expended for this purpose during the war years. The equipment produced from this development totalled $400 million during the same period. Most of the development and procurement was centered in the Bell Telephone Laboratories and the Western Electric Co.
    The development of the proximity fuze was sponsored by the Bureau of Ordnance. In August 1940 it made this project top priority on which National Defense Research Council work was desired. In complying with this priority request, a new section which conducted its research at the Carnegie Institution was created under the Council. In November 1941, the Bureau contracted with the Crosley Corp. to assist in this research by provision of realistic engineering design. Rapid development was achieved, and by the end of 1941 numerous companies were conducting research under National Defense Research Council or Bureau of Ordnance Contracts. In March 1942 the responsibility for this project was transferred to the Office of Scientific Research and Development; it placed the administration of the project with John Hopkins University, which established the Applied Physics Laboratory at Silver Spring, Md., for this purpose.
    In August 1942 successful tests of fuzes developed under this project permitted crystallization of specifications of the fuze for combat purposes and in November 1942 the first produced from these were rushed to the Pacific theatre of operations and were introduced upon the enemy on 5 January 1943.
    Although placed in quantity production, the design of the fuze remained fluid because rapid developments brought forth numerous improvements and miniaturization. At the end of 1944, with design more permanent, the cognizance of the project was released by the Office of Scientific Research and Development and taken over by the Bureau of Ordnance which retained the Johns Hopkins University's administration.
    Over $50 million was obligated for the proximity fuze development and facilities before a single one had been service-tested The procurement structure was a complicated one. The Chief of the Bureau of Ordnance made every possible effort to free the program by authorizing the elimination of any and all factors that threatened to slow production, but the necessity for secrecy, the small number of capable contractors, and the requirement for miniaturized electronic components, which were slow and tedious of manufacture, offset much that was done to hasten the program. By October 1942 an average of 500 fuzes per day were being delivered. Demand by all Allied services required a set-up in production and the establishment of additional facilities under facilities contracts. By the end of 1943 almost 2 million had been delivered. A year later they were being turned out in excess of 40,000 a day. The value of procurement contracts climbed from $60 million in 1942 to $200 million in 1943. The following year $300 million was obligated and for the final year of the war, $50 million. Deliveries rose more rapidly than dollar expenditures because the cost of the fuze dropped from $732 in 1942 to $18 in 1944.
    Numerous firms were utilized to manufacture components of the proximity fuze. Several companies made attempts to mass-produce the miniature electronic tube, but only Sylvania Electric Products, Inc., proved capable of combining quality with the mass production required. The special batteries, energized upon firing, were supplied by the National Carbon Co. Assembly was concentrated in five companies: the Crosley Corp.; the Radio Corp. of America; the Eastman Kodak Co.; Sylvania Electric Products, Inc.; and, the McQuay-Norris Co. All of these firms and their subcontractors, working under secrecy, not entitled to fly the incentive Army-Navy E pennant nor to provide their workers with the coveted lapel buttons to indicate their share in the war effort, rendered services to their country far in excess of that which would normally be expected even in time of grave national emergency.
    Unlike the other material bureaus, the Bureau of Ordnance centered all its procurement with one unit, the Procurement Branch of the Production Division. In initiating a procurement contract the responsible technical section prepared an analysis of its procurement of a specific end item. This indicated total requirement, amounts already under contract, and current and prospective rates of delivery. The technical section also nominated the contractor with due regard to the War Production Board directive, available labor supply and the productive facilities capable of utilization. The analysis and contractor nomination were forwarded to the Plant Equipment Section for certification that the pro-contractor possessed the facilities to complete the contract within the specified time. If this was obtained the proposed contract passed on to the Production Planning Section for further certification that the procurement was in accord with Bureau of Ordnance policies. Following this, a Controlled Materials Plan allotment number was assigned and the proposed contract was forwarded to the Procurement Branch. The Head of this Branch determined whether the procurement could be placed in a naval ordnance plant or awarded a private contractor. If decision was made to use private plants he then obtained clearances from other Navy agencies. Following this, the proposal was forwarded the legal office for preparation of a formal contract.
    The letter of intent was used when the urgency for the material necessitated the inauguration production. In no case were they allowed to remain in force for over 60 days without the approval of the Office of Procurement and Material. The letter of intent was usually followed by a fixed-price contract and where this was impracticable by cost-plus-fixed-fee contract.

4.  EXPEDITING  THE  PRODUCTION  OF  ELECTRONIC  EQUIPMENT

For the greater part of the war expediting the production of electronic equipment was a joint military effort. In the latter part of 1941 the Army Signal Corps established an expediting group to speed up production and to reduce contractor delinquencies. In July 1942, it became evident that the Navy's radar production program was falling behind. Each procurement section was performing its own expediting service, with the result that several members of the Radio and Sound Division might be competing with each other for the services of the same firm. At this time, a Progress Section was established under the Production and Procurement Branch which was assigned the expediting function. Plant liaison officers were assigned who, in turn, were reassigned to the above-mentioned Army expediting group which was, in July 1942, renamed the Army-Navy Communications Production Expediting Agency, remaining under Army administration. In October of the same year, this Agency was reorganized and became a separate activity, the Army-Navy Electronic Production Agency (ANEPA), under a civilian Director. The head of the Radio and Sound Division, Bureau of Ships, and the Chief of the Signal Supply Services, Signal Corps, were made Associate Directors. At this time the activity was composed of 373 persons, mostly employed by the Army. A year later its staff had expanded to over 1,000 of whom 350 were expediters in the field en gaged in aiding 5,000 different manufactures.
    The ANEPA was responsible for speeding production of radio, radar, sonar, telephone, telegraph, and all other electronic equipment, being produced for the military departments. Its functions were to insure the delivery of piece parts and materials to contractors as necessary to assist them in meeting delivery times; to obtain higher priorities from the Joint Communications Board for urgent end products to enable manufacturers to concentrate on their productions; to obtain draft deferments of key production personnel; to obtain necessary financial assistance and additional facilities as necessary; to insure that contractors complied with change orders and stabilized design as quickly as possible; to insure the production of equipment in the order of its importance; and to provide Government agencies information concerning the reliability and capabilities of contractors. The Agency's policy was to avoid interfering with a manufacturer's operations, and to take action only after one had exhausted his own resources. Many of these functions essentially belonged to the War Production Board, but that agency tacitly left them to the ANEPA.
    To assist the ANEPA and to provide the information essential for it to meet Navy delivery requirements a series of monthly production reports was initiated in late 1942 which listed pertinent data concerning all Navy contracts. The first of these brought out the fact that, 93 percent of the dollar value of the Navy's electronic contracts were concentrated in the largest 14 of 44 contracts. This information aided in directing distribution of critical components and raw materials.
    The ANEPA performed its functions with less delay, less expense, and fewer personnel than would have been required had both services retained separate agencies. This notwithstanding, despite Navy pleas, it was disestablished in mid-1944 in the belief that the work could be undertaken by service procuring agencies and the War Production Board. This left the Navy in an extremely poor situation in the field and resulted in the functions necessarily being assumed by overburdened personnel of the Navy Inspection Service.

5.  BUREAU  OF  SHIPS  DISTRIBUTION  OF  ELECTRONIC  EQUIPMENT3

Prior to the war, electronics equipments were purchased for specific ships. By May 1942, equipments were being delivered in volume from contracts awarded prior to and after attack on Pearl Harbor. They continued to be distributed directly from factories to various navy yards or shipbuilders earmarked for a particular ship. This often resulted in equipment, which was badly needed elsewhere, remaining in storage for months awaiting ship availability or completion. In some cases equipment remained stored for vessels which had been sunk.
    By late 1942 ships were being launched at such a rate that it had become impossible to tie down completion dates and to foresee exact electronic installation dates or to keep specific equipments tied to specific ships. To insure availability of equipments when required, the old method was abandoned and pools of electronic equipments were created at all navy yards requiring this material. From these pools it was allocated by the yards' radio material officers under the directions of yards' industrial managers.
    As originally established, there was no tie-in of issues of equipage with combat requirements. This often resulted in a claimant with an established large requirement, not connected with combatant vessels, exhausting the supply of any particular equipment in short supply. This situation was eliminated, in the summer of 1943, when the Chief of Naval Operations set up the following four precedence categories to control pool issues:
  1. New construction, controlled by the Bureau of Ships;
  2. Maintenance of ships, controlled by forces afloat;
  3. Shore stations, controlled by the Bureau of Ships; and
  4. Advance bases, controlled jointly by the Commanders in Chief Atlantic and Pacific Fleets.
Later, a fifth category was established to take care of equipment removed from ships and shore stations. This was controlled by the Bureau of Ships for reassignment to the above categories.
    To assist in administering the category system an Assignment Section was organized in the Radio and Sound Division. This Section used the directives of the Chief of Naval Operations as a guide in assigning the total estimated production of each type of electronic equipment to the several categories from which the controlling activities then distributed equipment to its own claimants in accord with the particular requirements.
    By July 1944, there was enough equipment in stockpile to meet practically all requirements. This eliminated the necessity of rigid control of issues and the category system was abandoned. From that time on, equipment was shipped to general stock for issue. In the few cases of apparatus in short supply, the Radio and Sound Division determined distribution and in extreme cases asked the Office of Chief of Naval Operations to render the decision.
    The establishment of the pool system made it desirable to provide each pool with a supply officer for radio who possessed adequate knowledge of the complexities of electronics equipments and of the thousands of different types of spare parts and components.
    The Distribution Liaison Section provided shipping instructions by writing manufacturers letters which were sent to the Bureau of Supplies and Accounts for signature. Each of these contained a summary of the current status of shipment, including quantity undelivered under the contract. Copies of these were provided each consignee and the appropriate inspectors of naval material. This Section also acted as a clearinghouse and central point of contact between the Bureau and contractors, consignees, and naval inspectors whenever two or more activities such as Army, Marine Corps, Maritime Commission, and Lend-Lease Administration were claimants of the same equipment.
    Shipments were scheduled in accordance with requirements determined by the progress of new construction, maintenance needs as reported monthly by fleet services forces, and by the requirement of the above-mentioned outside claimants. The actual mode of transport, air, rail, and ship, was determined by the Transportation Section of the Bureau of Supplies and Accounts to meet deadline dates provided by the Bureau or the service forces.

6.  BUREAU  OF  AERONAUTICS  DISTRIBUTION  OF  ELECTRONIC  EQUIPMENT

Prior to the war, all electronic equipment procured for the Bureau of Aeronautics was shipped from the manufacturer to the Naval Aircraft Factory, Philadelphia, Pa., for acceptance tests and installation in newly acquired aircraft or for storage. Prewar expansion of naval aviation rendered this procedure unsatisfactory. In mid-1944 the Bureau of Aeronautics Circular Letter 38-41 established the policy of having aircraft contractors install all unclassified electronic equipment. Thereafter, such equipment was shipped from the manufacturers' plants to those of the aircraft contractors.
    Electronic repair facilities were established at the naval air stations at Norfolk, Philadelphia, Quonset Point, San Diego, Alameda, Seattle, Coco Solo, and Pearl Harbor. At these facilities pools of aircraft radio equipment were established to provide replacements of obsolescent or damaged equipment in existent aircraft. Equipment was shipped direct to these facilities from electronic manufacturers' plants.
    Beginning in April 1942 all but the classified components of radar equipment were shipped to aircraft contractors for installation during construction. Classified components were shipped to the aircraft repair facilities pools for installation by the facilities or by squadron personnel. This procedure was continued until July 1944 when approved aircraft contractors were directed to incorporate complete aircraft electronic system during aircraft construction. Thereafter, classified components were delivered to them under safe handling.
    Shipping was handled by the Bureau of Supplies and Accounts, using whatever mode of transportation required to meet established deadlines.

7.  BUREAU  OF  ORDNANCE  DISTRIBUTION  OF  ELECTRONIC  EQUIPMENT

The distribution problem of the Bureau of Ordnance was far less complicated than those of the other two material bureaus. Proximity fuzes were normally handled in the same manner as other ammunition through ammunition depots to service forces ammunition ships for distribution to fleet units to replace expended fuzes, The Bureau made no attempt to establish separate fire-control radar maintenance units, but depended solely on the existing organizations at navy yards and advance bases, and had equipment shipped from the Western Electric Co. plants to navy yards and service forces pools as anticipated by the requirement of installation in ships under construction or for fitting in fleet vessels.

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    1 The information contained under this sub-heading was obtained from "An Administrative History of the Bureau of Ships During World War II," first draft narrative prepared by the Historical Section, Bureau of Ships; unpublished and undated, pp. 283-294.
    2 Buford and Rowland, op. cit., pp. 408-432; 271-286; 448-460.
    3 "An Administrative History of the Bureau of Ships During World War II," op. cit., pp. 311-315.
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