Fernald, Ohio, and St. Louis, Mo. An estimated $20,100,000 will be expended to expand the Fernald feed material center operated by the National Lead Co. of Ohio. Singmaster and Breyer of New York City were selected architect-engineers for new facilities at Fernald. Existing refinery and metal plant capacity at St. Louis operated by the Mallinckrodt Chemical Co. will be expanded at a cost of $6,500,000. In addition to the present St. Louis plants, new facilities will be constructed at a nearby site. A portion of the Government-owned Weldon Spring Ordnance Works, 27 miles west of St. Louis, was selected for the new plants to cost an estimated $33,300,000. The St. Louis area plants will be designed by the Blaw-Knox Construction Co., of Pittsburgh, Pa., and built by the joint venture of the FruinColnon Contracting Co. and the Utah Construction Co., with offices in St. Louis. The Mallinckrodt Chemical Works will operate Weldon Spring facilities in connection with the other AEC facilities at St. Louis.

Capacity for auxiliary gaseous diffusion processing areas also will be increased with the provision of new uranium processing facilities at Paducah, Ky. This expansion, estimated to cost $7 million, will be designed by Giffels and Vallet of Detroit, Mich.

AEC-Mississippi Valley Generating Co. Contract

On November 11, the Commission signed a contract with the Mississippi Valley Generating Co. providing for delivery of 600,000 kilowatts of electric power to or for the account of the Commission. This contract was negotiated in compliance with a directive from the President through the Bureau of the Budget to the Commission to make arrangements for the purchase of power from private sources in order to reduce, by the fall of 1957, existing commitments of the Tennessee Valley Authority to AEC. The power furnished under the contract will be delivered to TVA near Memphis, Tenn., and arrangements are being made with TVA for delivery of an equivalent amount of power to Commission installations at Paducah, Ky., and Oak Ridge, Tenn. As power under this contract becomes available, AEC plans to release TVA from a portion of its commitments under its existing contracts with AEC.

In compliance with the provisions of the Atomic Energy Act of 1954, the contract was submitted to the Joint Committee on Atomic Energy which, after holding public hearings on the question, passed a resolution on November 13, waiving the thirty-day waiting period established under the Act. On December 21 the Arkansas Public Service Commission approved the company's application to issue and sell common stock. The Securities and Exchange Commission

conducted hearings on the company's application to issue and sell common stock. After filing of post-hearing briefs, oral arguments were heard on January 19, 1955.

Source and Special Nuclear Materials

Accountability

The Division of Source and Special Nuclear Materials Accountability continued to discharge its responsibilities for developing and administering a system of accounting for source and special nuclear materials. The General Manager and the Commission were kept informed of the effectiveness and reliability of control exercised by the contractors and the local operations offices.

Annual audits and reviews of contractor surveys conducted by the operations offices were continued. Upon request survey assistance was furnished operations offices performing such surveys, when division. personnel were available. When justified, field problems of accountability received division aid.

A review of AEC's needs for measurement methods development and standard materials preparation and distribution was completed and a report issued. In addition, during the period all contractors evaluated the economic appropriateness of their materials accounting system.

Consistent with the Commission's policy requiring contractor's efforts to be appropriate for dollar value of materials handled, a criterion is being developed to permit operations offices to maintain a routine evaluation of contractor's activities.

Construction and Supply

Capital investment in atomic energy facilities continued its steady growth, largely as a result of progress in construction of new major facilities at Oak Ridge, Paducah, Portsmouth, Savannah River, and Hanford, and as of December 31, 1954, was estimated to have risen to about $6.2 billion before depreciation reserves. Except for production plant facilities at Portsmouth, and expansion of process facilities at Oak Ridge, most of the major construction in the program is nearing completion, and activity has begun to taper off.

Costs incurred for new plant and equipment amounted to $1.22 billion during fiscal year 1954-a new peak for the atomic energy program. During this period AEC construction costs accounted for about 312 percent of the Nation's total construction dollars.

From July to December 1954 monthly costs incurred averaged about $85 million, a moderate decrease from the $101 million per month for the first half of the calendar year. Monthly construction costs should continue to decline slowly during the next 6 months. It is estimated that costs incurred for new plant and equipment during fiscal year 1955 will total approximately $980 million, an average of about $82 million per month.

Construction Management

It is the policy of AEC to enter into contracts with construction contractors and private architect-engineer firms for required construction and associated engineering services. However, in a few special situations, design and inspection of construction is performed by the experienced engineering organizations organic to certain of the industrial concerns who operate AEC production facilities. As a result, AEC construction and engineering forces, both in Washington and at the field offices, consist of small, primarily administrative groups. During the last half of 1954, these groups administered construction and architect-engineer contracts employing a monthly average of about 58,600 persons. The average cost of these engineering and construction overhead forces amounted to about three-tenths of one percent of the cost of construction during this period.

Radio Communications

Plans for the improvement of two-way radiotelephone communications with scores of scattered AEC exploration camps and radioequipped motor vehicles within a radius of 350 miles from field headquarters in Grand Junction, Colo., are being completed. The improved radio system will use Frequency Modulated (FM) signals in the Very High Frequency (VHF) band of the radio spectrum. This system will be far more effective in providing dependable and economical communications with these remote working parties than the high frequency system now in service.

Recently conducted field tests demonstrated that the VHF signals (normally considered to travel in a straight line) will be bent over the top of the Uncompahgre Plateau in the first application of this method (diffraction phenomena) in the United States. Due to this bending effect, repeater stations on top of the plateau, which would be largely inaccessible during the winter, are now unnecessary.

Small Business

AEC operations offices and major cost-type contractors continue to maintain small business programs. These programs are consistent with both the Congressional small business policy and the Atomic Energy Commission-Small Business Administration agreement to exchange information between AEC and SBA field offices regarding AEC procurement and other matters. The 1955 edition of "Selling to AEC," a procurement information booklet, is now available to assist small business concerns. (Copies of the publication are on sale by the Superintendent of Documents, U. S. Government Printing Office, Washington 25, D. C., for 25 cents.)

Small business continues to receive a substantial volume of AEC procurement dollars. During the April 1 to June 30, 1954, quarter, small business received a record 49.5 percent of $120.8 million subcontract dollars. From July 1, 1951 to September 30, 1954, AEC cost-type contractors awarded subcontracts totaling $2.5 billion. Of this total, $850 million or 34 percent went to small business. Direct contract awards to small business amounted to $156 million or 3 percent of $5.3 billion in contracts awarded during the same period.

Stores Inventories Reduced

The Commission's investment in stores inventories continued downward during fiscal year 1954 to a year-end level of $79 million, despite the start-up of major production facilities. While the level of the operating program and issues are expected to increase considerably, a very nominal increase is planned in total current use stores because of an anticipated increase in turnover rates.

Shipment of Radioactive Materials

A "Handbook of Federal Regulations Applying to the Transportation of Radioactive Materials" was issued for the use of AEC offices. The handbook was designed to be of assistance in locating and understanding Federal regulations for the shipment, packaging, and labeling of materials peculiar to AEC.

Auction Sales to Dispose of AEC Surplus

Whenever the amount, value, type, and location of property justify, AEC is using the auction-sales method rather than the sealed-bid method to dispose of surplus property. Gross returns from seven

auctions conducted at Los Alamos, Paducah, Savannah River, Hanford, and Fernald within the past 12 months, ranged from approximately 20 percent to 33.2 percent of the original cost of the property sold. In some cases, this was approximately twice as much as returns from previous sealed-bid sales.

Military Application

Operation CASTLE, conducted in the spring of 1954 at the Pacific Proving Ground, was the most extensive test series yet conducted there. The evaluation of the results during this reporting period confirmed the pre-CASTLE promise of most significant progress in design, development, and proof test of weapons. As a result the weapons program was directed toward new areas of research opened up by the CASTLE information that hold promise of additional major developments, and toward the stockpiling of weapons adding large potential to our defensive power.

Although many contractors and laboratories contributed significantly and earnestly to the thermonuclear weapons program, the contribution of the Los Alamos Scientific Laboratory, whose personnel have for many years worked unstintingly in the weapons field, was outstanding. In recognition of its contributions to the atomic weapons program, the President, on July 8, 1954, awarded a special citation to this laboratory for outstanding achievements in the weapons field. The Commission's other two principal laboratories in the weapons program, Sandia Corp. and the University of California Radiation Laboratory are also contributing noteworthy accomplishments. Sandia Corp. is primarily concerned with the development and design of the non-nuclear phases of atomic weapons. The major efforts of the UCRL weapons research laboratory at Livermore, Calif., are directed toward research, development, and testing of nuclear systems. Both laboratories, as well as LASL will play major roles in forthcoming test series.

Production of atomic weapons during the last half of calendar year 1954 was in accordance with the President's directive.

New Tests to Protect Free World Security

Preparations are well advanced for the spring 1955 series of nuclear tests at the Nevada Test Site, scheduled to begin in mid-February. The new tests are required to obtain scientific knowledge essential to development and utilization of nuclear weapons for defense of this Nation and the free world. Experiments will again be conducted for the Commission and its contractors, for the Department of Defense, Federal Civil Defense Administration, and other Federal agencies.