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I would request that the following statements marked "A." "B," nd "C" be included in the record.

- Statement shoicing the present stock and cash balance June 30, 19.37, and

the requirement for 1939

$69, 934, 366. 66

2, 618, 152. 00

094, 363.00

'alue of fund (including cash balance of $3,187,737.18).
dditional commitments : Stock expansion to maintain and op-

erate ships, building and authorized...
ncrease in provision stocks to care for 108,500 men in 1939,

against 87,574 in 1936 ($30 stock per man).
rerease in fuel stocks aboard ships to provide for additional

ships----
o offset higher prices at which present stocks must be replaced :
Department of Labor index 1936, percent..

79, 2 Department of Labor index 1937, percent.

87. 2

241, 309, 77

6, 726, 751.83

Increase

10.1 Difference between necessary cash balance of $7,500,000 and

(ush balance on June 30, 1937.--.

4, 312, 262. 82

Total value of fund necessary.

84, 527, 206. 08 Present value--

69, 934, 366. 66 Difference--

14, 592, 839. 42 This would indicate that an increase to the fund of $14,592,839.42 is required. However, an increase of only $7,000,000 is requested at this time,

B. Statement of receipts and issues, by years

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Admiral Conard. The next item is strategic and critical materials. This item, included in the 1939 Budget, is essential toward insuring an adequate supply of basic materials which must be obtained during peace from sources outside the continental limits of the United States or from limited stocks now in this country in order to make certain the condinued and effective industrial support of the Navy's efforts in ang national emergency. This insurance is particularly necessary during the early months of such emergency, when adjustments in

world trade and shipping may seriously curtail the supply or even cut it off entirely

This item is for the procurement of strategic and critical materials not produced in the United States. The following items have been designated :

MANILA FIBER, PIG TIN, CHROMIUM ORE. JANGANESC ORE, TUNGSTEN ORE. OPTICAL

GLASS, POWDER BAG AND PARACHUTE SILK
This list may be increased from time to time as funds are available.
Estimate, 1939 -

$50%), () Committee allocation, 1938.,

3, 500,00

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Decrease -

3,000,000 The items and quantities of materials procured will be controlled to a large extent by the amount of funds made available.

Mr. UMSTEAD. Admiral, have the procurements so far made under the appropriation for this purpose been of domestic or foreign production?

Admiral CONARD. They are all foreign except in the case of silk, which although foreign in the raw material is fabricated in the United States.

Mr. UMSTEAD. How much have you spent of the fund which was appropriated for this year!

Admiral CONARD. $1,099,787.
Mr. l'MSTEAD. I believe you had an appropriation of $3,500.00!
Admiral COXARD. Yes, sir: $3,500,000.
Mr. l'MSTEAD. What did you purchase for that amount of money!

Admiral CONARD. Manila fiber, tin, silk for cartridge bags, and silk for parachutes. That is what actually has been purchased.

Mr. ScROGHAM. Admiral, on pag S-5 of the justification, heade 1 “Strategic and Critical Materials, Navy," it reads;

This item is for the procurement of strategic and critical materials De produced in the l'nited States.

I am certain that is entirely in error. The object of Congress was that there might be materials not largely produced in the United States but as far as practicable it was distinctly intended we shoul: buy American, it was distinctly intended that the “Buy American Act should apply, and the objective was to encourage the provinctive of such materials in this country. Is that understood by the Narr officials?

Admiral COXARD. Yes. That statement as it appears here haappeared in other parts of the report, and I have personally corrected it. I simply overlooked it appearance here in that forin. It should be materials procurable in the United States if available."

I would like to point out the obvious fact that if a material is available in the United States in sufficient quantity it then is r. longer a strategic or critical material.

Mr. SCRUGHAM. Now, I note that the Navy asks for an appropriation of $3,000,000 for this purpose. That was cut by the Budget 10 $300,000, is that correct?

Admiral COXARD. That is correct. I have a statement that will give a picture of how the thing stands at this time. Of the $3,500,000 appropriated in the 1938 appropriations bill for the purchase of strategic and critical materials, $2,000,000 has been placed in aciministrative reserve and is not now available for expenditure during the current fiscal year.

Mr. SCRUGHAM. Who placed the $2,000,000 in reserve making it not now available for expenditure during the current fiscal year, or, rather, by whose order was it?

Admiral ConARD. The Bureau of the Budget states its requirement that we place a certain proportion of our funds in reserve, and this 12,000,000 not being in the status of immediate expendability was placed amongst other items in the reserve.

Mr. ScrUGHAM. Was there any other item where 60 percent of it was made unavailable for expenditure during the year?

Admiral CONARD. I do not know whether there was any other item where that proportion was placed in reserve.

Mr. SCRUGHAM. I want to find out why this particular item was elected for this signal honor of being economized by being placed in reserve.

Admiral COXARD. In view of the situation with respect to the specifications for the strategic ores that we want to buy, manganese particularly, we are not ready to purchase, and we knew we could not get around until toward the end of this year to actually spend that money.

Mr. SCRIGHAM. These specifications for the various strategic materials have been prepared, or are they prepared at this time?

Admiral COXARD. As far as manganese is concerned, we had specifications prepared and we advertised for purchases, with unsatisfactory results.

Mr. SCRCGHAM. How about tin?
Admiral CONARD. Tin we are buying rapidly.
Mr. SCRIGHAM. How about silk?
Admiral Conard. Silk we are buying.
Mr. SCRUGHAM. You are purchasing silk?
Admiral CONARD. Yes.
Mr. SCRUGHAM. How about chromium?
Admiral CONARD. Bids on chromium open on January 4, 1938.
Mr. SCRIGHAM. How about tungsten!

Admiral CONARD. Tungsten we are holding out on, because of the very high prices of tungsten at the present time.

Mr. SCRUGHAM. How about optical glass?
Commander Mayo. The specifications are not ready on optical

Admiral Coward. I may say, we will make every effort to put into operation the utilization of as much of this fund as is considered wise. In connection with manganese, we do not want to go ahead without proper specifications for manganese ores, particularly for our peculiar itse. There is a considerable difference of opinion as to a proper description of them.

Mr. SCRUGHAM. I have the impression, particularly in regard to the accomplishment of these stocks, that you have been somewhat dilatory, and I want a reasonable expression, if you please, in the record, if there is one, about the reasons for the delays.

Admiral CONARD. The delay is actual. It has been more in the question of manganese ore. That is the thing that we have been considering, which is one of the great difficulties. The market for manganese ore has been predominantly for imported material. We are very anxious to develop the possibility of procuring domestic material if it can be established that the domestic material is suitable for our purposes.

Mr. SCRUGHAM. What technical experience have you had in preparing these specifications in order that they might include ores prepared under the announced principle of developing domestically these ores!

Admiral CONARD. The Secretary of the Navy has appointed a board of officers to make a study of these specifications, and as I said a short time ago, they actually prepared specifications and we advertised for a portion of the manganese.

Mr. SCRUGHAM. I have had both verbal and written complaints that the specifications—from manganese producers, a number of themthat these specifications as drawn, for all intents and purposes, preelude any domestic producer from putting in a bid.

Admiral CONARD. We had some rather unsatisfactory bids both from the domestic and foreign producers.

We are in this difficult position: We do not ourselves use manganese ore to any appreciable extent. We are endeavoring to buy suitable ore for use by the large steel corporations when the emergency arises and to meet the requirements that they indicate as being necessary for all of this material.

Mr. SCRUGHAM. Do you know whether the same thing applies to chromium ore and tungsten ore, and so forth-optical glass?

Admiral CONARD. Optical glass, I think that well-defined specifications for that material will be ready in the very near future.

Mr. ScrUGHAM. You stated that you had some difficulty in drawing up specifications for manganese ore that would cover the needs of the Navy and at the same time meet the requirements of the commercial organizations. That is my understanding. And do you have some difficulty in drawing up specifications for chromium ore and for tungsten ore?

Admiral CONARD. We are now advertising for chromium ore, and I think that the specifications are satisfactory, but that question can only be determined as the result of the opening of the bids. I have ni reason to think that they are unsatisfactory.

Mr. SCRUGHAM. My only object in pursuing this line of inquiry as to emphasize the desirability of paying special attention to the possibility of the development of local supplies, and by that I mean supplier produced in this country, and I think. just or not, there is a feeling among local producers that the specifications were not so drawn. have a number of letters--8 or 10—-complaining, from persons who have written or have come in person to see me, that the specifications as originally put out, especially for manganese ore, were of such a character that they would preclude, no matter whoever they may be or what they may be, that it would preclude them from bidding under the specifications, and my understanding is that your answer is that the specifications are now being recast. Is that correct?

Admiral CONARD. That is correct.

Mr. SCRUGHAM. And that these redrawn specifications are designed to be more liberal in their construction so as to permit a supply of suitable ore by domestic producers. Is my understanding correct?

Admiral CONARD. It is to produce suitable ore, and leaves the domestic producer in the position of stating his ability to furnish that ore or not, as the case may be.

Mr. SCRUGHAM. Well, that is entirely satisfactory.

I understand similar specifications are being drawn of the other strategic materials also—that is, insofar as practicable, the producer in this country will not only be permitted but he will be encouraged to bid on the product.

Admiral CONARD. That is the policy of the Navy.

FUEL AND TRANSPORTATION

Mr. UMSTEAD. Admiral, your next item is "Fuel and Transportation."

Admiral CONARD. Appropriation for “Fuel and Transportation” for the fiscal year 1939.

PURPOSE OF APPROPRIATION

This appropriation, under which $10,290,000 is requested, covers in general the cost of providing fuel for the fleet.

Project 1 covers fuel oil proper for fleet steaming and the estimated consumption is based upon the fleet-employment plan prepared by the Office of Naval Operations. Project 2 covers coal used by vessels afloat, and this is also based upon the fleet-employment plan. Project 3 covers Diesel oil used by submarines, in the operation of auxiliary machinery of vessels, by yard craft, and in ships running boats. Projects 4 and 5 cover gasoline used in motorboats. Project 6 covers the operation of the several fuel depots and fuel used by tugs, lighters, motorboats, crash boats, and so forth, attached to naval stations. Projects 7 to 12, inclusive, cover the cost of water, ice, electric current, compressed air, steam, and pumping charges furnished vessels when at navy yards while their own machinery is shut down. Project 13 covers small miscellaneous items, which are described under that project. I am first presenting all the basic facts in the rather condensed form which is before you.

DISTRIBUTION OF ESTIMATE

1. The estimate of funds required under the appropriation "Fuel and transportation, 1939" is as follows: Project 1 Fuel oil :

Fleet-employment plan, 8,031,765 barrels at $0.9746. $7, 827, 759
Inforeseen contingencies, 205,655 barrels at $0.9746_

200, 431 Total, 8,237,420 barrels at $0.9746_

8, 028, 190 2 Coal, 24,887 tons at $6.068_.

151, 014 3 Diesel oil, 151,891 barrels at $1.576_

239, 381 4 Gasoline-motor, 1,718,000 gallons at $0.1094_

187, 949 5. Gasoline-aviation (for use in motorboats), 259,000 gallons at $0.1406_

36, 415 6. Maintenance of fuel plants and fuel for yard craft

559, 146 7. Water

166, 674 Irene

12, 865 3. Electric current.

438, 505

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