this work should be done under cost-plus-fixed-fee contracts. These improvements are urgently needed by the earliest possible date to enable us to proceed with the other betterments planned. The extent of the repairs, under each of these items, necessary cannot be determined without tearing out a large amount of the existing construction at considerable expense and involving considerable delay. Under cost-plus-fixelfee contracts, the work may be specified and estimated only in a general way, also it may be started at once with a consequent material saving in time or cost for surveying the present structures, for preparing detailed plans and specifications and in obtaining bids. We have investigated a number of building contractors in this district and have selected Charles F. Robleder of this city as the one, in our judgment, best qualified to do the above work expeditiously and economically. He is well known, has good references and has an excellent reputation especially among his business acquaintances. He has submitted a report, which is attached, giving his experience record, a financial statement and a list of his construction equipment available. He has prepared estimates of the work proposed and has obtained competitive fixed price bids for certain parts of the work from numerous possible subcontractors and has obtained competitive prices for the materials involved. We have checked these estimates and believe they are reasonable and as nearly correct as possible considering the uncertainties in such repair work. This contractor has offered to do the new work proposed under cost-plusfixed-fee contracts, the fixed fees to be equivalent to 4 percent of the approved estimated cost in each case. No other contractors have offered to do such work on better terms. While United States Engineers and Constructors, Inc., of Philadelphia, also have offered to do our work for a fixed fee of 4 percent of the estimated cost, the terms are such as to include numerous additional items of overhead expense as part of the work in any contract so that their proposal is not as advantageous to us. On account of its urgency you have already approved the contract with Charles F. Rohleder, dated October 29, 1940, for reconditioning the four story part of the office, estimated to cost $19,752; certain work in the nine story portion of the office, estimated to cost $3,321; and repairing the roof of the fabricating shop, estimated to cost $25,812, all for a fixed fee of $2,200. We now request your approval of two other similar contracts, copies of which are attached with the same contractor, first for reconditioning the nine story portion of the office building, estimated to cost $135,391, for a fixed fee of $5,116, and second for reconditioning the mold loft floor, estimated to cost $48,902, for a fixed fee of $1,956. We should appreciate your approval at your early convenience. Very truly yours, CRAMP SHIPBUILDING COMPANY, Vice President and General Manager. HPR: K EXHIBIT NO. 278 ANALYSIS OF CRAMP PURCHASE ORDER No. 215 Purchase Order No. 215, for the rehabilitation of buildings Nos. 6, 3, 7, 17, 18, 19, 54, 27, 38, 39, and 20, was a cost-plus-a-fixed-fee contract. The quotation approval sheet (Exhibit 277), dated December 10, 1940, shows the bids on the work to be as follows: The estimate of the Cramp Shipbuilding Company's Engineering Department of the cost to do the work is stated thereon to be $190,000. The bids were trans mitted to the Supervisor of Shipbuilding by a letter of December 3, 1940 (Exhibit 279). A scrutiny of the actual bids themselves will show that the quotation approval sheet and the summary given thereon are not only erroneous, but actually misleading. Exhibit 277, showing the bid of C. F. Rohleder, reveals that his bid was actually 4% of the estimated cost, as stated on the summary. However, the rest are all wrong. The bid of Robert E. Lamb & Son shows that their bid was for cost-plus-afixed-fee of $8,300. Their estimate of cost was stated to be $132,157, or almost $58,000 less than that of the Cramp engineers. The bid bears the penciled note of H. P. Rust, Plant Engineer, that "estimate of cost entirely too low. H. P. R.." The bid of $8,300 is 4.36% of Cramp's estimate of cost, the basis upon which Rohleder bid. The summary sheet presented to the Navy Department states the bid to be 5.9%, which is obtained by dividing Lamb's estimate of cost into Lamb's bid. The failure to use the same basis for both the Rohleder bids and the other bids results very favorably for Rohleder. The same misleading method was used in converting the bids of Joseph R. Farrell, George H. Evans, and Irwin and Leighton into percentages. The bid of Joseph R. Farrell was for cost plus a fixed fee of $6,000, and their estimate of the cost was $130,000. The $6,000 bid divided by the Cramp estimate of cost, to put it on the same percentage basis as the bid of Rohleder, gives 3.15%. The summary sheet shows 4.6%, which is obtained by dividing the Farrell bid by the Farrell estimate of cost. The bid of George H. Evans & Co. was for cost-plus-a-fixed-fee of $7,000. This company made no estimate of the actual cost to do the work. The $7,000 bid dividend by the Cramp estimate of cost, to put it on the same percentage basis as the bid of Rohleder, gives 3.68%. The summary sheet shows 7.2% as the bid of George H. Evans & Co. This percentage cannot be related to any figure given anywhere, and would indicate that an estimated cost of $97,225 was used in calculating the percentage-either that or it was picked out of thin air. The bid of Irwin & Leighton was for cost-plus-a-fixed-fee of $7,000 also, and their estimate of the cost was $104,300. The $7,000 bid divided by the Cramp estimate of cost, to put it on the same percentage basis as the bid of Rohleder, gives 3.68%. The summary sheet shows 6.7%, which is obtained by dividing the Irwin & Leighton bid by the Irwin & Leighton estimate of cost. These figures can best be visualized if put into tabular form as follows: It is instantly apparent from the next to the last column that three bidders were lower than, and only one higher than, C. F. Rohleder. The last colmun contains the figures shown in the summary sheet, with the exception of that for George H. Evans & Co., which was 7.2%, and was apparently picked from the air, as that company made no estimate of cost. An additional bid, which the company did not even bother to put on the summary sheet, was received. It offered to do the work for cost plus a fee of $4,250. This company (Townsend Schroeder & Wood, Inc.), estimated the cost at $85,000. The bid bears a penciled note in the handwriting of H. P. Rust, Plant Engineer, as follows: "Estimate of cost entirely too low and would want larger fee if estimated correctly." Apparently this was considered sufficient justification for disregarding the bid. The bid of $4,250 is 2.23% of the Cramp estimate of cost, or $3,350 less than the bid of Rohleder, Mr. Schroeder, of Townsend, Schroeder and Wood, stated to the investigators that he had tried very hard to win this job and had therefore set the fee low. He stated that he was greatly surprised not to win and was anxious to get the work. It is worthy of note that, although the estimate of cost made by the Cramp Company was $190,000, estimates made by bidders competing with Rohleder were materially lower. These estimates, as can be seen from the schedule above, were $130,000, $132,157,and $104,300 for three of the bidders who were included on the summary sheet. The fourth such bidder made no estimate. The small variation in these estimates lends credence to them and indicates that they must have been carefully considered. The highest is approximately $60,000 less than the estimate made by Cramp. The estimate made by Townsend, Schroeder & Wood, Inc., whose bid was not included on the summary sheet, was $85,000, or less than half that of the Cramp Company. EXHIBIT NO. 279 ENCLOSURE B DECEMBER 3, 1940. SUPERVISOR OF SHIPBUILDING, U. S. N., Philadelphia. (Attention Lieut. C. B. S. Bishop.) PROPOSED BUILDING REPAIRS DEAR SIR: With respect to the necessary repairs and reconditioning of a number of the buildings in our shipyard, we believe this work should be done under a cost-plus-fixed-fee contract. Such repairs and reconditioning are urgently needed at the earliest possible date to enable us to proceed with other betterments. The extent of the repairs to each building can only be determined with any degree of accuracy as the work progresses and as there is an opportunity to examine various parts of each of the buildings in greater detail. Under a cost-plus-fixedfee contract the work may be specified and estimated only in a general way so that the time and expense necessary to make a proper survey such as is required for a lump-sum contract, may be saved. The repairs and reconditioning for each of the buildings include all those necessary to put the building proper in sound condition such as roofs and roofing, sash and glazing, siding, doors, stairs and painting, and some alterations. The buildings included are the following: The floor and roof of the mold loft are now being repaired under separate contracts. The proposed new contract will include the sash, siding, stairs, painting, and other work. The Morris group of buildings will be used for the turret shop and machine shop and the expense for the proposed repairs will be in place of those for Building No. 2. For Building No. 6, No. 3, the Mold Loft, and Buildings 19 and 54, it is also proposed to include the necessary plumbing, heat, lighting, and certain other electrical work for power connections. These Buildings are required most urgently and it is believed that it will advance the date they may be used if such services are included with this repair contract. Our plans for the other Buildings included have not yet advanced sufficiently far to enable us to determine such services with exactness so it is believed to be more advantageous to wait until our plans are further advanced before contracting for such facilities in the other Buildings. Our estimate of the cost of the work proposed is attached and the total amount is as follows: Building Repairs__. Light, Heat, Plumbing, Power, and similar services for Buildings 6, 3, 19, and 54 and Mold Loft____ Total $169,000 21,000 190, 000 We have invited several building contractors, who are qualified to do such work for the Navy Department, to make proposals after a survey of the work, and the percentage of estimated cost to determine the fixed-fee proposed by each is as follows: In their proposals certain of the contractors did not consider some of the work to be done. Charles F. Rohleder has made a complete survey and has given due consideration to all the work necessary. His proposed fee of 4 percent of the estimate, including the services in the four buildings, as now proposed, is the lowest. At present this Contractor is doing all the work of reconditioning our office building and the roof and floor of our Mold Loft under three previous cost-plus-fixed-fee contracts. His work is proceeding most expeditiously and cooperatively, and he is in the best position to start the new repair work immediately. We believe his proposal the most advantageous and strongly recommend that the contract be awarded to him. We request your appoval of a Contract with Charles F. Rohleder in the usual form for a fixed fee of $7,600 (which is 4 percent of the estimated cost) and should appreciate your approval at your early convenience. Yours very truly, CRAMP SHIPBUILDING COMPANY, By H. P. RUST, Plant Engineer. EXHIBIT 301 INTERDEPARTMENTAL CORRESPONDENCE CRAMP SHIPBUILDING COMPANY Date: June 10, 1941. From: Commander Weyerbacher. To: Mr. James Reed. Subject: Telephone conversation of above two gentlemen, June 10th, 3:15 P. M. Mr. R. Tommy? C. W. Yes, sir. Mr. R. Yes, Tom-go ahead. C. W. They have approved about 32 million and deferred the graving dock at the present time. Mr. R. I see. C. W. The reason for it-they haven't got more than 32 million set-up at the present time. Mr. R. Well, then, do we go ahead and spend the 31⁄2 million on the assumption * * * around the design that the drydock is to be there? C. W. Yes, sir. Mr. R. That's fine-that cinches it. C. W. You bet-it's only a question of time, anyway. Mr. R. Now, on what basis will they handle it? C. W. Well, that's what I'm * * they just decided this about thirty seconds ago and now we're going to discuss that, and I'll let you know. Mr. R. Tommy-let me give you a tip. C. W. Yes. Mr. R. Carleton Proctor of Moran, Proctor, and Freeman, and Swiegert, the President of Pacific Bridge (that's building these docks for the Navy all over), just left here--they've looked the whole proposition over. If it is possible to do so, we would like to have the Navy go into the same set-up that they have in other places where they make a joint contract to have that stuff-the engineering and the work handled, so that we could get something going expeditiously here. C. W. Yes. Well, I'll talk to them about that, Jim. Mr. R. Feel them out on it. C. W. Yes, I know. Mr. R. Is this Maritime money or Navy money? C. W. Navy money. Mr. R. Navy money. * * I'm going into discussion with them. It may be one of these Defense Loans ** * * and you and Ripley ought to get on the job here tomorrow and next day. M. R. All right, then, how are they going to how it is to be financed isn't at all settled? Well, the question of C. W. No, sir-I'll get all the information I can on it, Jim. Mr. R. Are you coming back tonight? C. W. No-I'll be there tomorrow. Mr. R. All right—I'll be down tomorrow. C. W. All right, Jim. Mr. R. I'll get a hold of you at Lemmler's, shall I? C. W. No, no-I'll be back at the plant tomorrow. * if anything develops later on, I'll call you before you get down here. You're not leaving until tomorrow morning? Mr. R. No. C. W. I can get you out at home later on tonight. Mr. R. Yes-that's Tennessee 2112. C. W. Just a minute-Tennessee 2112. Mr. R. Right. C. W. All right. Mr. R. All right, Tom. C. W. Well, we got at least 32 million C. W. Everything except the Drydock. about 32. |