Control of Productive Facilities
Priorities: Particularly in the conversion period preceding full-scale defense production it is necessary to compel producers to accord first priority to fulfillment of government contracts. During such interval prior to all-out defense mobilization, when his competitors may be satisfying the demands of consumers, the businessman has ample cause to fear that in giving priority to government orders disgruntled private customers will be permanently lost to competing firms. Accordingly, a June 1940 statute provided that, in the discretion of the President, fulfillment of Army or Navy contracts was to take priority over all deliveries for private account or for export.[352] In a year this was amended to extend the President’s power over priorities to include contracts or orders for the Government of any country whose defense the President deemed vital to the defense of the United States and contracts or orders, or subcontracts or sub-orders, which the President deemed necessary or appropriate to promote the defense of the United States.[353] In May 1941 the Maritime Commission was empowered to demand that work on its contracts take priority over the furnishing of materials or performance of work for private account or for export.[354] The Second War Powers Act continued in effect the provision of the June 1940 and May 1941 statutes[355] by providing that all orders for vessels, equipment, and weapons placed by the Army and Navy were, in the discretion of the President, to take priority over all deliveries for private account or for export.
To repair the Spring 1945 flood damages, Congress in June of that year granted the War Production Board, and every other governmental agency which had jurisdiction over allocations and priorities relating to farm machinery and equipment, authorization to take such steps as might be necessary to provide for the necessary allocations and priorities to enable farmers in the areas affected by floods in 1944 and 1945 to replace and repair their farm machinery and equipment which was destroyed or damaged by floods, or windstorms, or fire caused by lightning, and to continue farming operations.[356]
Again, the Defense Production Act of 1950 gave the President virtually plenary power to require that defense orders be given priority by private industry: “The President is hereby authorized ... to require that performance under contracts or orders (other than contracts of employment) which he deems necessary or appropriate to promote the national defense shall take priority over performance under any other contract or order.”[357] Perhaps not classifiable as examples of an assertion of governmental priority in the use of productive facilities are three enactments under which the Federal Government has exercised the right to withhold issuance of patents and to reserve certain inventions for its exclusive use whenever the public safety or defense so require.[358]
Compulsory Orders: The establishment of priorities for the fulfillment of contracts presupposes voluntary fulfillment of government contracts by private industry. Do the principles of democratic government preclude conscription of industrial plants, regardless of the willingness or unwillingness of owners to execute war contracts? Having conscripted physically eligible young men under the Selective Training and Service Act of 1940 Congress also established therein priority for industrial performance on military orders, and a provision to compel acceptance and priority performance on defense orders.[359] The President was empowered, through the head of the War Department or the Navy Department, to place orders with any individual, firm, association, company, corporation, or organized manufacturing industry for whatever materials might be required, and which were of the nature and kind usually produced or at least capable of being produced by the productive units involved. General Motors produced automobiles, but they could also produce tanks or trucks as the Army required. Compliance with all such orders for products or materials was obligatory and took precedence over all other orders and contracts previously placed.[360] The use of plant seizure by the government as the sanction for infraction of the provision has previously been reviewed in the section on acquisition. In the Second War Powers Act of 1942 the President was given the plenary power to require acceptance of and performance under defense contracts or orders in preference to all other contracts or orders.[361] More recently, the Defense Production Act of 1950 and the 1953 amendment to it authorize the President to require acceptance and performance of such contracts or orders as he deems necessary or appropriate to promote the national defense.[362]
Protection of Quality: Only one example in this category has been discovered. In 1940 Congress amended an old World War I law, vintage 1918, that provided punishment for the willful injury or destruction of war materials or war premises used in connection with war material.[363] Sections 5 and 6 of this Act imposed maximum penalties of $10,000 fine and ten years imprisonment for willfully injuring or destroying national defense materials, whatever they might be, premises or utilities, or willfully making defective defense material or equipment utilized for the production of defense material. An important element of the offense was existence of an intent to injure, interfere with, or obstruct the national defense of the United States.[364] While laws against sabotage have been enforced vigorously, this 1918 law was designed to protect the Government against shoddy workmanship and poor equipment.
Controlling Labor Relations: Emergency provisions regulating labor relations in private enterprise appear to have four different motivations. First, wide scale control of the relations between employers and employees may constitute an integral part of a total program aimed at countering an economic depression. Second, it may be aimed at preventing unethical practices. Third, the purpose may be to avoid interruption of vital production. And, fourth, the control may be designed as a precaution against espionage, sabotage, or other violation of the national security.
The National Industrial Recovery Act obviously conceived as emergency legislation which it indubitably was, is the outstanding example of an endeavor in part through the regulation of employer-employee relations, to overcome an economic depression.[365] The objective of course was to increase consumer income and purchasing power, which in turn was to stimulate production, with related chain effects. Section 7 (a) required that every code of fair competition established under the Act guaranteed employees the right to bargain collectively, and to join or refrain from joining a union. Company unions were outlawed. Employers were to comply with the maximum hours or labor, minimum rates of pay, and other conditions of employment, approved or prescribed by the President. In Section 4 (b) the President was granted the unprecedented power whenever he found “that destructive wage or price cutting or other activities contrary to the policy of this title were being practiced in any trade or industry or any subdivision thereof,” to license business enterprises in order to make effective a code of fair competition or an agreement that would carry out the policy of the Act. Once a finding had been made, and publicly announced, no one could carry on any business, if in interstate commerce, unless a license had been obtained. Any order of the President suspending or revoking any such license was to be final if in accordance with law.
Title II of the Act, pertaining to public works projects, closely regulated employment practices on projects contracted under the Act: Convict labor was prohibited; no one, except in an administrative or executive position could work more than thirty hours a week; all employees were to be paid just and reasonable wages sufficient to provide a standard of living in decency and comfort; wherever possible ex-servicemen with dependents were to be given preference in employment; and human labor in preference to machinery was to be used wherever practicable and consistent with sound economy and public advantage.[366] In June 1934 Congress authorized the establishment of labor boards to enforce the labor relations provisions of the N.I.R.A.[367] As is well known these sweeping provisions were later swept aside in the famed case of Schechter Poultry Corporation v. United States,[368] wherein Mr. Justice Cardozo, speaking for a unanimous Court, said “this is delegation run rampant.”
Next to be considered are controls designed to forestall interruption of vital production. Section 8 of the War Labor Disputes Act required 30 days notice of a prospective strike and secret balloting of the union members concerned.[369] Other sections of the Act authorized government seizure of struck plants, and made it unlawful to interfere with government operation of plants.[370] The Labor Management Relations Act of 1947 set forth procedure whereby the President may secure injunctions postponing strikes or lockouts which will, if permitted to occur or to continue, imperil the national health or safety.[371]
Controlling Profits: The campaign of the 1930’s to take the profits out of war is well known. Correlative to the deeply felt aspiration in time of peace to end the resort to war as an instrument of policy, is the popular thesis that war and the profitability of war production have a causal connection. In time of war, the public, on the other hand, is receptive to the proposal that command of the services and lives of mature young human beings warrants conscription of capital at least to the extent necessary to avoid profiteering, or to the extent such conscription facilitates the attainment of other worthy defense goals. In harmony with these beliefs the Vinson-Trammell Act of 1934 authorizing naval construction within the limits of the Washington and London treaties of 1922 and 1930 instructed the Secretary of the Navy to make no contract for the construction and/or manufacture of any complete naval vessel or aircraft, or any portion thereof unless the contractor agreed to certain conditions: (1) he had to agree to pay any profit in excess of ten percent of the total contract price to the United States Treasury (twelve percent was allowed as the profit margin on aircraft); and (2) he could make no subdivisions of any contract or subcontract for the same article or articles for the purpose of evading the provisions of the Act.[372]
In 1938 provisions for close supervision of the leasing of naval petroleum reserves also were imposed upon the Navy Department, obviously directed in part at precluding extortionate profit-making from such leases.[373]
In permitting emergency negotiation of contracts for the acquisition of construction of war vessels or material with or without competitive bidding, upon determination that the price was fair and reasonable the Act of June 28, 1940 to expedite national defense afforded the Secretaries of War and Treasury authority to modify existing contracts, including Coast Guard contracts, as the Secretary concerned believed necessary.[374] Presumably upon a later finding that an agreed price was not fair and reasonable, profits could be revised downward through resort to Section 9 permitting contract modification at the discretion of the Secretary. Again, the Second War Powers Act of 1942, in permitting the Secretary of the Navy, when authorized by the President, to negotiate contracts for the acquisition, construction, repair, or alteration of complete naval vessels or aircraft, or any portion thereof,[375] stipulated that the cost-plus-a-percentage-of-cost system of contracting should not be used unless considered necessary by the Secretary of the Navy, in which case the percentage was not to exceed seven percent.[376] By way of enforcement the government reserved the right to inspect the plants and audit the books of contractors.[377]
Authority to award contracts without competitive bidding was not freely granted. A Supplemental Defense Appropriations Act of 1942 required the Secretaries of War and Navy to report to the Congress all defense contracts in excess of $150,000 and to justify those awarded without competitive bidding.[378] The Secretaries were authorized and directed to insert in any contract for an amount in excess of $100,000 a provision for the renegotiation of the contract price.[379] In 1951, declaring that sound execution of the national defense program requires the elimination of excessive profits from contracts made with the United States, and from related subcontracts, in the course of such program, Congress enacted the Renegotiation Act of 1951 providing for the renegotiation of defense contracts netting contractors more than a reasonable profit.[380]