We contacted the Munitions Board, and they gave us their customary good cooperation. T h e net result was that for a short period of time—two or three months —the use of vinyl acetate for adhesive and V-board was cut down to 25 per cent of the program. T h e consensus was that the cut wouldn't do any harm because vinyl acetate would get back into the V-board program in plenty of time. The amount of vinyl acetate m a d e available by that readjustment, was diverted into public health production. At the moment, the drug section, which is now headed by one of t h e best people in the industry, Norman Storm, is active with respect to penicillin capacity. There is a good deal of capacity in prospect. The balance of supply and demand seems to be fairly well understood. At least, the figures look good, and we feel that that is a typical example of what happens in our drug section. T h e section is quite new and needs more expansion, b u t it has started off in a \ c r y satisfactory fashion. Now we come to the S64 question— the relation of controls to new product development. T h e first question is: "Can new products be developed or brought to full bloom faster by getting t h e government interested?"
I should suppose they could, but I d o not believe that the Chemical Division is organized, at the moment at least, in such a way as to have much influence on that. I think that the man who has a new product that h e thinks might interest t h e Government should rely on his own efforts to find out which agency of the Government might be interested. It seems likely that in t h e course of developing it he would also have developed the best appreciation of its potential virtues. This goes back to what I stated at the beginning, that up to this time and in the foreseeable future, w e are not going to b e very strong in the technological aspects of product development. I am not sure that w e ever should be. Will government regulations on t h e use of laboratories or laboratory personnel ret a r d development? I should think definitely not. I have a little evidence to that effect. W e h a v e already passed on certificates of necessity for the extension of laboratories, and in several instances research laboratories. Moreover, w e have little difficulty in finding t h e relatively small amounts of critical materials which are needed for research or experimental development work. Is there anv central government agenc\
pansion
THE EFFECT OF REGULATIONS O N COMMERCIAL CHEMICAL DEVELOPMENT
X H E Internal Revenue Act of 1950 provides that u n d e r certain conditions rapid tax amortization may b e awarded by t h e Government. T h e Defense Production Act of 1950 incorporates this provision and specifies that plant expansion necessary t o the defense effort warrants t h e granting of rapid tax amortization, certificates of necessity. T h e Facilities and Construction Bureau of the National Production Authority helps to expedite loan requests m a d e to NPA. The routine followed in processing such an application can perhaps best be explained by first outlining the functions of the five divisions that make u p the b u reau. T h e y are: 1. T h e Tax Amortization Division, which recommends w h a t projects or industrial 1822
to review new products? I have reason to believe that t h e National Research C o u n cil is active in that regard just now. It is the modern version, I think, of t h e old O S R D . If somebody has a development of his own, it seenis to me that the National Research Council would b e a firstclass place to take it. T h e y cover a very broad field. Of course, there is always t h e Bureau of Standards, which at all times is willing to look at a new product. In addition, t h e role of product development will be considered essential. Many things that were novelties ten years ago. luxuries five years ago, are absolute necessities today. In conclusion, I must say that I d o not believe the chemical industry could cooperate in a better way. T h e industry has given us excellently qualified men. It gives us freely of its experience, its advice, and it has disclosed to us the facts and figures about its capacities a n d production. As long as w e respect its trust by holding those matters in strict confidence, and see that the information is not abused, w e h a v e every reason to suppose that the chemical industry will continue to give it. I feel that the entire Chemical Division is greatly indebted to the industry*-
The encouragement of industrial plant and the allocation of supplies are part of
ex-
NPA's Role in Defense F R A N K R. C R E E D O N , Chief, Facilities and Construction National Production Authority
plant expansions will get tax amortization certificates, a n d recommends t h e percentage of t h e certificate. 2. T h e Building Materials Division, w h i c h tries to foresee which materials are going to b e in short supply, a n d to suggest ways and means t o try to overcome the shortage. 3. T h e L o a n Division, w h i c h recomm e n d s direct government loans to help in t h e construction of n e w plants. 4. T h e Industrial Plant Expansion Division, which determines w h a t industrial plant projects are sufficiently urgent to merit government assistance in getting delivery of materials and construction. It follows t h r o u g h to see that t h e Government does provide t h e necessary assistance. 5. T h e Construction Controls Division, C H E M I C A L
Bureau,
which prohibits construction not in keeping with NPA controls. These controls specify that n e w construction must b e of an essential character, vital to the defense program or to essential civilian needs. F o r t h e present, I shall confine myself to one aspect of t h e division's functions: t h e issuance of certificates of necessity. W e have h a n d l e d about 7 0 % of all certificates of necessity applications filed with the Government. T o date, there have been approximately 4000, a n d w e have reviewed almost 3000. W e have completed our actions and recommendations o n about 1200 of these applications. Briefly, w e are trying t o encourage private industry to build whatever n e w expansion is necessary t o meet defense needs. It is hoped that the Government will not AND
ENGINEERING
NEWS
Fin
RANK R. C R E E D O N w a s b o r n i n Boston, Mass.,
1896 a n d is a g r a d u a t e of M I T . I n 1941 he d i r e c t e d t h e W a r D e p a r t m e n t construction prog r a m of o r d n a n c e a n d chemical warfare plants a n d later b e c a m e D e p u t y R u b b e r Director in c h a r g e of construction of t h e g o v e r n m e n t synthetic r u b b e r program. In 1944—45 h e w a s construction m a n a g e r for Stone & W e b s t e r Engineering C o r p . , w h i c h firm w a s in charge of construction of t h e atomic b o m b plant at O a k Ridge, Tenn. H e served for a year a n d a half as t h e Federal H o u s i n g E x p e d i t e r . In 1948 General Electric Co. n a m e d him construction m a n a g e r in charge of design a n d construction of t h e atomic b o m b plant at H a n f o r d W o r k s , a n d he h e l d that post until h e b e c a m e t h e assistant administrator for facilities a n d construction in t h e National Production Authority in W a s h i n g t o n , D . C .
have to go extensively into the building of plants with government money. In this time of high taxes, an incentive must be given in o r d e r to encourage business to expand. T h e Government is relying u p o n a system of rapid tax amortization to achieve t h a t objective. Specifically, rapid tax amortization, or a certificate of necessity carries with it t h e privilege of writing off a certain percentage of t h e cost of a n e w plant in five years. F o r example, if a certificate calls for a rapid amortization of 5 0 % , t h e plant owner can write off, if he so wishes, 10?r a year for five years. I n addition, h e can write off t h e normal depreciation that h e is entitled to on the b a l a n c e . So far, it seems that defense expansion of industry will b e satisfactorily accomplished with that help. Equipment Procurement A n o t h e r i m p o r t a n t factor in h e l p i n g industry meet o u r defense needs is governm e n t help in obtaining delivery of t h e required materials a n d e q u i p m e n t . I n t h e final analysis, t h e delivery d a t e determines t h e completion date of e q u i p m e n t of a n y project, even in normal t i m e s , a n d will b e c o m e more important as t h e m a t e rials a n d e q u i p m e n t get more difficult to obtain. T h e Industrial Plant Expansion Division is t h e agency to s e e for trie p r o c u r e m e n t of materials a n d e q u i p m e n t r e q u i r e d to complete plants. T h e division gives assistance in cases w h e r e materials a n d e q u i p m e n t cannot b e obtained without some form of priority rating, b e it a D O , or b e it a directive. It forwards applications t o t h e Facilities Clearance C o m m i t t e e for review. It h a s generally been t h e policy of t h e Government t o follow u p the certificate of necessity w i t h t h e priority assistance n e e d e d to carry the project to completion. W e m a y n o t always b e able t o d o this, d e p e n d i n g upon t h e v o l u m e of facilities of high urgency. A business representative w h o wishes to apply for a certificate of necessity must first file an application, in triplicate, with t h e Defense Production Administration. Until recently the first agency t o see w a s V O L U M E
2 9,
NO.
19
the National Security Resources Board. D P A logs it i n , gives it a n u m b e r , retains one copy, and sends two copies to our office, ii i t is a commodity t h a t is to be reported o n b y t h e M PA. About 70 r/c of t h e total n u m b e r of applications come our way. Upon receipt of t h e application, w e refer it to the proper industry division, b e it rubber, iron a n d steel, textiles, or chemicals, for a technical report. T h e high t h e total n u m b e r of applications that came our way. 1. Is t h e product needed in t h e interests of national defense? 2. Is it n e e d e d in the quantity that is asked for o r spelled o u t in t h e application? 3. To g e t t h e particular product in t h e desired q u a n t i t y , is i t necessary to build t h e facility proposed? In other words, is there existing i d l e capacity in t h e industry making it unnecessary to build t h e proposed facility? 4. W h a t is t h e outlook for profitable operation of t h e proposed facility at t h e e n d of t h e emergency period? T h e period administratively accepted for this purpose is five years. If the commodity r e q u e s t e d is one for which there is a substantial n u m b e r of a p plications, and if there is a considerable volume o f the product involved, t h e report must be accompanied by an over-all review of the present capacity of the industry, t h e present r e q u i r e m e n t s , as well as the foreseeable r e q u i r e m e n t s in t h e next two and five years. W e d o n o t w a n t to approve more facilities t h a n are necessary to meet t h e projected defense requirements. The best m e t h o d t o encourage defense plant expansion, it seems t o m e , lies in giving priority assistance for the materials of constuction a n d eriuipment that are in short supply a n d t h a t are needed for necessary construction. In instances where the proposed produ c t is one whose major use is for t h e military, we require an endorsement from t h e Munitions Board, or t h e appropriate a n d recognized spokesman—the Department of Air Force, the D e p a r t m e n t of M A V 7,
1951
Army, or t h e D e p a r t m e n t of Navy. This endorsement should state that p r o d u c t in t h e proposed facilities is required in t h e defense effort, a n d that i n order t o obtain t h e quantity of t h e product in t h e time needed, it is necessary to build t h e facility proposed. This endorsement from t h e military is absolutely necessary on all products of a military n a t u r e . Upon receipt of the proper endorsements, a n d t h e over-all reports, a n d t h e military endorsements, w h e n they are necessary, it becomes the job of o u r Tax Amortization Division to recommend w h e t h e r or not t h e recommendation is to b e approved, a n d if so, w h a t percentage of the cost can be rapidly amortized. The governing factors in determining t h e percentage might be broadly described —of course after establishing that t h e product or facility is necessary—as t h e degree of encouragement or incentive t h a t is required to obtain t h e necessary a m o u n t of expansion. W e must also consider t h e outlook for a profitable operation at t h e e n d of five years, or, p u t t i n g it t h e other w a y around, t h e degree of risk involved in going a h e a d with t h e project. The division h a s a c o m m i t t e e which consists of an engineer, a n economist, a n d , a manufacturer or an industry representative w h o is acquainted w i t h t h e problems of the particular industry. T h o s e three people d o their best to reach an e q u i t a b l e percentage for t h e particular project. One of o u r major concerns is t o refrain from upsetting t h e competitive position within an industry. We try to give each industry, or each manufacturer of a particular commodity, the same consideration so far as p e r c e n t a g e is c o n c e r n e d on t h e certificate. T o d a t e , w e h a v e recommended the denial of certificates to about 20 to 25'/< of t h e cases that w e have handled. At present, several congressional committees are holding hearings on t h e subject of rapid tax amortization. T h e feeling is that t h e award of certificates of necessity will be tightened rather than loosened. As far as t h e chemical industry is concerned, t h e certificates h a v e just recentlystarted to b e issued. W e have received a substantial n u m b e r of reports from t h e Chemical Division. W e are also holding several of t h e individual reports, pending the receipt of t h e required over-all reports. W e hope to act o n t h e m promptly upon receipt of those general over-all guiding reports. The pressure of work on t h e division, in addition to t h e difficulty in getting space, a n d equipment, a n d administrative a n d clerical personnel, h a s been very hard on us, a n d doubly hard on t h e business concerns that h a v e filed applications. W e are very anxious t o complete actions on their applications.
O T H E R papers dealing with t h e effects of government r «gulations will be published in subsequent issues of C&EN. The papers were presented at the annual meeting of the Commercial Chemical Development Assoc, held March 2 1 , 1951, in New York City. Mr. Bates a n a Mr. Creedon's addresses were given extemporaneously.
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