of the ammunition to ship it. Secondly, the United States price is the average price, sir. It was not the price of the first contract. It was not the price of the producer early in the learner's curve. It was the average price as of a recent date.

The highest United States price in some cases was substantially higher than the average price, the lowest, somewhat lower. We took the average.

They are capable of making it; they are making it in quantity now and with some improved technology. The contracts being placed this year in most cases are going to be at lower prices than last year, and I believe it is fair to say, General Russell, that in the majority of cases the contracts placed this year will be comparable to the United States price.

Mr. BURLESON. I would assume that labor is a pretty big item in the consideration?

Mr. HALABY. Labor is, of course, the lower cost item in European production.

STATEMENT OF BRIG. GEN. SAM RUSSELL, DEPARTMENT OF THE ARMY

General RUSSELL. The biggest cost is the cost of the propellent. It runs three times the United States charge.

The other thing from the military standpoint is that it is extremely important to have a production base on the ground which in fact can take the place of stockpile.

(Discussion off the record.)

Mr. HALABY. We had intended service by service, to describe these examples.

Why do you not, General, describe the 105-millimeter shell which was produced under this program and just give us a rough idea of the requirements in the program and the cost?

General RUSSELL. The large shell is the 105-millimeter howitzer shell. It is an actual example of an item which was procured offshore in France. This is the shell that is used by the the standard light artillery piece in the Infantry and Armored Division in the 105-millimeter howitzer.

There are 54 of these in each division, and the rate of fire of this item, the standard rate of fire is 45 rounds per day, so you see it is quite a sizable item and obviously would represent a great amount of shipping space. It was put under offshore procurement for the reasons Mr. Halaby has just gone over.

This is one of the items where our price is not as favorable, shall we say, as in some of the other items.

A more favorable one is the next item I will talk about. However, we feel that it is a reasonable price when everything is considered in comparison with the United States prices.

To be specific, the offshore prices run something under $30 a round— as low as $29.25, and as high as $30.

Not taking into consideration shipping charges and various other elements, the average price for 1953 has been $25.58.

However, since Korea started, in starting up production-which always costs more and which is the same situation we have in Europewe have paid as high as $31 for that round in the United States. The

average OSP price on that round, as I say, is above the overall United States average, running around 120 percent of our average 1953 contract price.

Mr. VORYS. To a layman looking at this, it looks like a piece of simple construction. Once they get into quantity production, is there not any relation between quantity production and unit price?

General RUSSELL. There is indeed, sir.

It is not just as simple as all that. That fuse in there is a complicated thing. There is a bursting charge and an igniting charge. It is just a can full of powder with a hunk of metal on the end.

You are quite right, sir, and we think that if we have follow-on contracts in Europe, that price must come down. Quantity production accounts for the difference between the United States price of $31, which I said was the highest price we have paid since Korea started, and the average price in 1953, of $25.58.

Mrs. CHURCH. Mr. Chairman, may I ask a question at that point? When we were down at Bombrini Parodi Delfino Colleferro, the question was raised that there was always difficulty in meeting a new low price as it came from the United States.

In other words, when it came to 110 percent over the 100 percent, that they would just about get their prices down to where they could compete and then a new price would come in undercutting the original 100-percent price which they had to meet and the argument was raised among some of us, that the difference might be due in fact to the fact that some of our ordnance was produced in Governmentowned and tax-free ordnance bureaus.

Does that enter materially into the offshore procurement of ammunition abroad?

General RUSSELL. On this round we are paying about 120 percent of the United States price. We feel that can be explained-not entirely precisely-but perhaps 4 or 5 percent of it is for shipping charges.

We provide for our profit contractors as well as Government facilities, certain facilities assistance. We loan them the machine tools. They remain the property of the Government, but there is an expense of installing that. That perhaps represents another 4 or 5 per

cent.

There are other tangibles, such as tax forgiveness. Early amortization in cost of buildings, and so forth, that perhaps represents another 5 percent so we do not feel by paying $30 for that round, we are paying a great deal more in the long run than that round would cost us at home and we do have the tremendous advantage of having the production facilities near the place where the fighting might be.

Chairman CHIPERFIELD. Tell us about these others, if you will? General RUSSELL. The next is the 3.5 rocket. It is used in the improved bazooka, which is the principal antitank weapon of the infantry soldier. There are 465 rocket launchers or bazookas, the item that fires this particular round, in an infantry division. The reason for placing that on offshore is much the same, it is a high-consumption item.

As far as price is concerned on this, we have paid offshore as high as $19.90 on a round. We have paid as low as $15.58.

The United States average contract price for this item in 1953 was $16.30, as compared with our lowest offshore price of $15.58. We have paid as high as $26 for that round in the United States.

That is obviously one of the more favorable ones from the price standpoint.

Now I do have over there about 300 pounds of radio stuff that is not very visible. That is another example of an item that was procured offshore in France.

Do you wish to go into that now, sir?

Chairman CHIPERFIELD. Go right ahead.

General RUSSELL. This radio set can be mounted in a vehicle or can be used as a dismounted set. It can communicate between moving or stationary vehicles. It is used in the infantry division in the artillery. There are 93 of these sets in the infantry division.

This was one of the more or less guinea pigs in the offshore procurement program. It was placed on the program very early. It is a new model which will not be obsolete for some time. We did not have the facilities in the United States-and this applies equally well to ammunition-to provide this equipment to fill our time requirements.

There were ample facilities, know-how, and technique available in Europe to produce this. We had the specification and drawings and it is readily available. It is a set that is used widely throughout the NATO forces.

Now so far as the financial aspects of this one are concerned, it is about in the middle.

The offshore price of this is $1,542.

The average United States price-again, not counting shipping and these other intangibles.

Chairman CHIPPERFIELD. How much was that?

General RUSSELL. $1,542. It not only receives, it sends out.

Mr. HARRISON. For all divisions it would cost a good deal.

General RUSSELL. The average 1953 price of that in the United States was $1,448, as compared with $1,542 offshore. In the United States we have paid as high as $1,784 for it. I think that is typical of what you will find across the board.

Mr. WOOD. That is a voice transmitter.

General RUSSELL. You can talk or send telegraph.
Chairman CHIPERFIELD. Thank you very much, sir.

Mr. HALABY. Just very briefly, these organization charts I know you have always found rather more confusing than clarifying, but it is a complicated program.

General RUSSELL. We have tried to show that the program is performed largely abroad. We have the SRE and the European Command. They make recommendations which are sent back to the Office of the Secretary of Defense and he sends them to the Army, Navy, and Air Force for comment and recommendation.

When they come back we send them to Governor Stassen's office and he either approves or modifies them and allocates the money to initiate the procurement.

Mr. HARRISON. I want to go into this, and I do not know whether this is the proper time or not.

If it is not, I want you to tell me.

I have been trying to read some of these reports of these various teams. One of the things that impressed me most about it is that these different teams working separately on quite a number of occasions have come up with the same criticisms and the same recommendations and they are very much along the lines of the views that the subcommittee came up with in its study over there.

One of these recommendations that I noted in almost all these reports is a rather severe criticism of the present functions of SRE. Almost all of them contain a recommendation for drastic changes. Are you going to do that, or not?

Mr. HALABY. I think that question is Governor Stassen's.

Mr. HARRISON. Is it Governor Stassen's or is it ours?

Mr. HALABY. What we do under the present law I presume would be a decision for Governor Stassen, the Secretary of State and the Secretary of Defense working with him, but if you wish to pass any new legislation of course, you will determine that.

Mr. HARRISON. Is SRE set up by law or executive order?

Mr. Wood. It is set up by law, but some of its functions are further developed by Executive order.

I may say, Mr. Harrison, that the recommendations of these teams are being very carefully taken into account, and I understand that a plan to make a fairly substantial change in the functions of the Paris office is under active discussion now.

The problem of organization has been studied by the Rockefeller Committee, and the results of this study have been the subject of intensive discussion among the Bureau of the Budget and the various Cabinet officers and staffs concerned.

So far as I can now prophesy since final conclusions have not been reached on this subject, it certainly looks as though there is going to be a fairly substantial change in SRE organization in line with, or in the direction of, the recommendations of these teams.

Mr. HARRISON. Including the recommendations of practically all these teams, that the MSA be absorbed in the Department of State? Mr. WOOD. That is a different question, Mr. Harrison.

I may say, however, that I can answer your question "Yes" in one respect. Discussions of this subject are now taking place at very high levels. I think you know that Secretary Dulles has from time to time said that he would wish to have very clear authority over policy but would hope to be able to delegate to an operating agency the actual operations of these programs.

What will finally come out of the high-level consideration of these questions by way of recommendations to the Congress I am not yet in a position to say.

All I can say to you is that the new administration is going very deeply and conscientiously into these questions.

Mr. HARRISON. Mr. Chairman, the only reason I went into thisand I am not going to press it at this time-is that it does seem to me that these numerous reports with these teams working separately and coming up with these recommendations to correct what they regard as serious flaws in the program, it does seem to me it should have some consideration in the drafting of this legislation.

Mr. WOOD. They are very useful reports, and they are being taken most seriously by those who are concerned with the problem of the administration of this program.

Chairman CHIPERFIELD. Mr. Wood, it is obvious that we cannot finish this subject, today.

I wonder if you feel you have proceeded far enough that you could finish it if we had a meeting tomorrow morning at 10:30?

Mr. HALABY. I wonder if we could, with your permission, put very briefly on the record the story of the aircraft and the ships and the nets and then I could release three key officers. It will not take more than 12 minutes.

Chairman CHIPERFIELD. Go right ahead. I am in no hurry to adjourn the meeting.

Mr. HALABY. That will enable me to release three of these key officers who have other duties.

I think we should take first the aircraft. Perhaps one or two of you may have seen these models before. I know that you have heard of the recent contract signed in Paris by Secretary Wilson and the other defense ministers involved with respect to the French Mystere interceptor and the Hawker-Hunter here.

We asked the Air Force through Col. Henry Taylor to give you some facts and figures on these, and in general to try to demonstrate with firm figures why we think this was a very good deal.

Colonel Taylor.

STATEMENT OF COL. HENRY TAYLOR, DEPARTMENT OF THE AIR FORCE

Colonel TAYLOR. I will give you but a very brief description today of these two day-interceptor fighters which we have under procurement in Europe.

These two models which make up the bulk of our fiscal year 1953 procurement.

As Mr. Halaby has said, this is a French-designed aircraft officially designated as the MD-452 Mark IV. We know it as a Mystere.

We have here the famous British Hawker-Hunter aircraft. Both of these aircraft have been flown by topflight United States Air Force test pilots and have been found to be readily acceptable and fully capable of performing their NATO mission.

As you can see from the configuration they are modern in every respect, and have the swept-back wing so necessary for high speeds.

The green airplane, the Hawker-Hunter, was designed by the British strictly as a day fighter. It is capable of a high rate of climb, a high combat ceiling and high speed. It is powered by one Rolls Royce Avon engine which is of British design and which has a thrust rating of around 7,000 pounds. That 7,000 pounds is capable of being raised to 9,000 pounds when combined with what we call an after burner, which is a thrust augmentation device.

This airplane is also capable of taking another British-design engine in a similar thrust category. It is the Sapphire engine and I mention that because the Sapphire engine is the British comparable design to our own J-65 engine which we have in some of our fightersthe F-84-F, for instance.

I realize that some of these thrust ratings might not mean too much to you people, but I am trying to compare them with a United States type so that you will get some idea and have a feeling in your own minds that you are getting in these two aircraft, modern aircraft.