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Some Interesting Subcontracting
Pointers for Small Manufactures
By M. B. PFEIFFER
National Production Authority
Washington, D. C.
A
S THE nation's defense effort
gains momentum, more and more
small manufacturing plants will
be called upon to produce parts and
assemblies of needed defense items. If
you operate a small plant, you should
consider carefully the possibility of ob-
taining subcontracts from large com-
panies which have prime contracts for
defense equipment.
Subcontracting is not, of course, an
arrangement that is used only during
emergency periods. Even in normal
times, it is a basic feature of many in-
dustries; for example, the automobile
and aviation industries. During de-
fense preparedness periods, however,
when the greatest possible production
is needed, subcontracting takes on added
importance.
Advantages Offered to the
Small Plant
Subcontracting for defense work of-
fers these important advantages to the
small plant:
1. It may enable the plant to oper-
ate at full or near-full capacity in spite
of a reduced supply of materials for
its normal operations. Under Regula-
tion 2 of the National Production Au-
thority, a prime contractor for defense
items receives a priority rating for
needed materials and can pass the rat-
ing along to his subcontractors.
2. It may lead to deferment from
military service of skilled workers who
are essential to the plant—an impor-
tant consideration if manpower short-
ages develop.
3. It gives the small plant an op-
portunity to contribute to the defense
effort.
4. It may lead to improvements in
the small plant's operations, since prime
contractors often give their subcon-
tractors valuable advice on produc-
tion and management methods.
5. It provides the small plant with
possible sources of continued work af-
ter the defense preparedness effort is
ended.
8
Problems Encountered by the
Small Plant
Subcontracting also offers problems
which should be considered and, if sub-
contracts are assumed, kept in mind.
The first of these is the possibility that,
once having started subcontracting
work, it will become the major opera-
tion of your plant, to the neglect or
discontinuance of your normal work.
This could result in your being with-
out a market between subcontracts or
after your last one is completed. An-
other danger is that any new equipment
purchased in order to carry out sub-
contracts may not be needed later for
normal operations.
Should You Seek Subcontracts?
In deciding whether it would be
practical for you to solicit subcontracts,
some factors to consider are:
1. Your present and anticipated vol-
ume of business. How long will your
non-defense work continue in light of
approaching raw material scarcities?
Do you now have or does it appear
that you will have sufficient open
capacity to enable you to fulfill sub-
contracts?
2. The item you now manufacture
and the processes employed in manu-
facturing it. Could the item be used, in
its present form, as a part of defense
equipment? If not, would minor modi-
fications make it usable for defense
purposes? Using the same processes
which you now employ, could you turn
out a different kind of item, one which
is needed for defense production?
3. Your equipment. Is it in good
condition? Would it stand up, if neces-
sary, under long hours of operating at
peak capacity?
4. Tolerances. Are you and your
workers accustomed to working to close
tolerances? If not, do you believe that
you could satisfactorily produce work
of the close tolerances required for
parts of defense equipment?
5. Working capital. Do you have an
adequate reserve of working capital?
If not, would your local bank or other
source of capital be willing to advance
the money needed to carry out sub-
contracts? (A later section of this Aid
deals with the financing of subcon-
tracts.)
Learning of Prime Contractors
If, after studying the preceding ques-
tions carefully, you feel that you should
look further into subcontracting, your
next step is to learn the names of prime
contractors for defense items and the
items for which they have been award-
ed contracts. Once you have this infor-
mation, you can select those manufac-
turers who are most likely to need the
type of services your plant can offer.
Your first efforts probably should be
directed toward learning of prime con-
tractors who are located in your own
area. It would be easier to work with
tliern than with companies located at
some distance; there is more chance of
their having some previous knowledge
of your plant; and, if they become in-
terested in "farming out" work to you.
they can more conveniently send a rep-
resentative to look over your facilities.
Perhaps you already know of large
companies in your area which are pro-
ducing defense items, or can learn of
such companies through your custom-
ers, suppliers, or other business con-
tacts, or through the local business-
men's association.
If you subscribe to a trade magazine,
you may find that it is one of a num-
ber which report on bid awards of in-
terest to their readers, giving the names
of the successful bidders, and the items
and quantities contracted for. If your
trade magazine does not publish this
information, a large public library may
be able to tell you of magazines that do.
One of the most comprehensive
sources of information on bid awards
is the procurement assistance program
of the Office of Small Business, Depart-
ment of Commerce. Under this pro-
gram, major procurement offices of the
Army, Navy, and Air Force provide the
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THE MUSIC TRADE REVIEW, MARCH, 1951