(f) Increased cost of materials due to necessity of purchasing in small quanities instead of large quantities which in turn affects the appropriations gainst which materials are eventually charged. (9) Necessity for acceptance, at times, of nonspecification or inferior maerial due to stock depletion and consequent requirement for immediate delivry or at least a delivery in such a short time as not to permit manufacture of pecification material. (h) Additional cost to appropriation "Maintenance, Bureau of Supplies and Accounts," due to the doubling or tripling of procurement work incident to Lore frequent purchase, clerical and administrative labor increased. The necessary value of the fund to meet the present situation and that of the immediate future is‒‒‒‒ The present value of fund is: Inventory, June 30, 1937---- $66, 601, 503. 23 Accounts receivable_ Cash---- Accounts payable. Contingent liability. 1,369, 461, 56 $77, 000, 000. 00 $71, 158, 701. 97 985, 126. 12 1,224, 335. 31 69, 934, 366. 66 7, 000, 000. 00 Necessary increase to fund___. Mr. UMSTEAD. What would be the alternative if the present system were not continued? Admiral CONARD. The alternative would be to carry an inadequate balance of stock for the Naval Establishment. ACCELERATION OF SHIPBUILDING PROGRAM AS REASON FOR INCREASING CAPITAL Mr. UMSTEAD. Admiral, you mentioned the acceleration of the shipbuilding program as a reason for increasing the capital. Why should not the acceleration help rather than hurt, because materials would be more rapidly issued and made use of? Admiral CONARD. In view of the increased demand for issue of stock we should have correspondingly to increase the balance on hand to meet demands as they occur. Mr. UMSTEAD. Well, the shipbuilding program, certainly to the extent that you handle the material affords a very rapid turn-over of that portion of inventory used for that purpose, does it not? Admiral CONARD. Yes; but a large part of the material that is used is material that is ordinarily used by the Navy generally, and to buy that part which is required for the construction program alone, just to meet that demand, is not good economics. Commander MAYO. May I say that in any orderly progress of work you must have your material planned for in advance. If you do not have your material ready when you start your job, you have lost labor, lost overhead, and all of the charges go up in the air. You have got to have the material there, and that does not mean getting it there 10 days before. It probably means getting it there months ahead, if your progress in ship construction is going to be regular and economical.'" Mr. UMSTEAD. In the first place, of course, your Bureau has nothing to do with nearly 50 percent of the construction, which is built by private concerns. Admiral CONARD. Not private concerns, no, sir. Mr. UMSTEAD. Did I understand you few moments ago to say that the lack of sufficient capital has tended to slow up the building program of the Navy? Admiral CONARD. So far as ships being built at our own navy yards is concerned. Mr. UMSTEAD. Last year Admiral Land appeared before this committee and, as I recall it-and I am not undertaking, except from memory, to repeat what he said-testified as to the causes of delay and the slowing up of the shipbuilding program, and I do not recali that he made the statement that the lack of operating capital in the Navy supply fund was one of those causes. Admiral CONARD. He at that time had not been actually con fronted with delay in material, because we exerted every possible effort to keep ahead and have the material on hand. Mr. UMSTEAD. Now. Admiral, that was, I think, in the month of February of this year. The large increase in the Navy program has been going on since 1933. If the statement you just made a moment ago is correct, that up until February of this year there had been no inconvenience suffered by reason of the lack of sufficient capital in this fund, then with the peak of the building program certainly having been reached, if not passed, why is it that you now contend that it is necessary for you to have this additional fund to prevent the program from slowing up? Admiral CONARD. I do not think you can justly draw the conclusion that during the building program Admiral Land had not been confronted with lack of material. Pertinent to this point I would like to insert in the record an extract from a joint letter issued by the Bureaus of Engineering, Construction, and Repair, and Supplies and Accounts, under date of February 1, 1937. The Bureaus note that delays in the construction of vessels in navy yards are, in many cases, attributed to the failure to receive the materials by the dates they are actually needed for orderly progress of the vessels under construction. Such delays in the receipt of materials are conducive to increa❤xi cost of building the vessels, as well as to delay in completing the ships. Mr. UMSTEAD. I understood you to make that statement just a few moments ago. It was not a conclusion of mine. Admiral CONARD. I did not intend to convey that impression. The danger of its being delayed was always existent, and the situation has been met, but not met as it could well be if we had more capital. Mr. UMSTEAD. Much of the new material going into the construction of new ships would not be used for any other purpose. That is correct, is it not? Admiral CONARD. I think that is a fair statement. Commander MAYO. That is correct except Mr. UMSTEAD. Then why should not such material as is not used for any other purpose be bought directly under "Replacement. Navy." rather than first charged to the naval supply account fund? Admiral CONARD. That practice is followed in certain cases. Mr. UMSTEAD. If that is followed, why do you put in your justifica tion the slowing up of the building program as one of the reasons for increased capital? Admiral CONARD. We are referring to that part of the material that is bought under the naval supply account. It is true a proportion of the material is financed directly from the building program authorization, but a large proportion is procured through this fund, $21,000,000 last year, and it is that part which is liable to slow up the building program. Mr. UMSTEAD. Omitting from consideration "Replacement, Navy" funds, what other bureaus of the Department draw any considerable amount of material from the naval supply account? Admiral CONARD. All bureaus of the Navy draw material from the aval supply account. Mr. UMSTEAD. Well, a very large percentage of their appropriations expended upon personal services, is it not? Admiral CONARD. Some of them, but not the large technical bureaus. NORMAL VALUE OF SUBSISTENCE AND FUEL OIL STORES CARRIED IN NAVAL SUPPLY ACCOUNT Mr. UMSTEAD. What would be the normal value of subsistence stores carried in the naval supply account? Commander MAYO. We have a stock of provisions which runs $2.600,000. That may be taken as the approximate average stock roughout the year. Our issues of provisions amounted to $14,076.1988 for the year. Mr. UMSTEAD. What about fuel oil? How much do you carry in the aval supply account, on an average? Commander MAYO. $4.322,000, in round numbers. This includes all fel and gasoline. Mr. UMSTEAD. That is approximately half of the entire amount appropriated for the fiscal year 1938? Admiral CONARD. That $4,000,000? Mr. UMSTEAD. Yes. Commander MAYO. Of course, we have certain stocks, I do not Mr. UMSTEAD. What possible justification can there be for having e-half of a year's supply of oil on hand at one time in the navalSpply account? Admiral CONARD. It is distributed to all of the ships of the Navy, e oil that they are using from day to day, and also in our fuel ebots. Mr. UMSTEAD. Is it necessary, in order to meet normal requireents, to keep a 6 months' supply on hand? Admiral CONARD. Yes. It is only good business to have that ount of fuel on ships and in our storage depots. Mr. UMSTEAD. Other than subsistence and oil, give us the normal lue of the principal other classifications of supplies. Admiral CONARD. We have it all classified. Class No. Total stores, balances, by classes, June 30, 1937-Continued 148 U. 8. S. Sampson (DD394), U. S. S. Daris (DD395), and U. S. S. Jouett (DD396) S. Benham (DP:997), U. S. S. ElA (DDSIN), and U. S. S. Lang (DD399) _ Mayrant (DD402) and U. S. S. Trippe (DD)403) Phird (DD)404). Rouen (DD405 and U. S S. Stack (DD406) 149 151 152 153 U.S. Sterrett (DD467 157 158 1.39 U. S. S. Sturgeon (SS187). USS Salmon (SS182, U.S. S. Seal (58183, and U. S. S. Skipjack (88184)—– 161, U. S. S. O'Brien (DD415) and U. S. W. &D D416)... Class! No. Total stores, balances, by classes, June 30, 1937-Continued U. S. S. Swordfish (SS193). 200 201 Stores awaiting shipment. Special material to be stubbed out immediately. 202 Material reserved for specific purposes-outfits for decommissioned vessels, newly constructed vessels, etc.. 203 Shop store supplies ashore. 204 Services or material delivered direct to destination without passing into the custody of the supply officer 1 206 207 210 Appropriation purchases account material for immediate issue. Material purchased for use on Navy projects unler Civil Works Administration.. U. S. 8. Plunger (SS179) and U. S. S. Pollock (SS180). U. 8. 8. Mugford (DD389) and U. S. S. Ralph Talbot (DD390). U.S. S. Bagley (DD386, U. S. S. Blue (DD387) and U. S. S. Helm (DD388). 211 212 213 214 216 217 U. 8. S. Wichita (CA 45). U.S. S. Pompano (SS181). U. S. 8. Patterson (DD392) and U. S. S. Jarvis (DD393). U. S. 8. Somers (DD381), U. S. S. Warrington (DD383), U. S. S. Dunlap (DD384) U.S. S. Perch (SS176), U. S. Pickerel (SS177), and U. S. S. Permit (SS178). V. S. S. Phoenir (CL46). U.S. S. Boise (CL47).. Naval aircraft factory, Philadelphia-raw material required in the manufacture Overhaul department custody (aviation activities) 272 Navy Yard, New York-special class for Federal Standard Stock Catalog. Salvaged material. $44,016. 32 21.947.20 15, 648.59 22.00 18, 262.38 4,461.89 1, 148, 050. 78 9, 515. 59 434, 946. 09 396, 093. 51 12, 644. 08 13.20 797.75 39, 534.66 228,886.36 90,560. 04 120,083.30 102,862. 28 334, 237.72 395,778. 34 116,086.05 23, 950. 64 28, 353.52 75, 988. 23 96, 513. 14 28, 943. 01 27.468.38 47, 462. 28 164, 465. 17 1,303.68 1,995. 39 6.676.62 7,720.09 124, 563.61 45,066.59 45, 771.61 46,006, 59 2,549.23 15, 465. 51 5,611.34 2, 959. 71 64, 384. 14 59, 889.56 2,669.61 36, 974. 60 1, 188.32 489.67 7,305. 84 5,972. 44 15, 258.32 42 151, 882.97 237, 780. 34 257.50 7,378, 958. 11 206, 969.36 516, 993. 70 746, 397.56 60, 995, 586. 51 2, 232, 541. 01 3, 373, 375. 71 66, 601, 503. 23 |