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- the most drastic curtailment of activities in 1937 was it possible

prevent a deficiency in that year. The following statement is bmitted :

Fuel oil

[blocks in formation]

8, 154,327 $0.6025 $4,912, 9838, 154,327 $0.6025 $4, 912, 983 7,040, 657 $0.9026 $6,354,918
7,911, 593 .7617 6, 026, 260 7,911, 593 .7617 6, 026, 260 6, 538, 853 9019
8, 104, 857

5,897, 202 95 7, 695, 1148, 104, 857 .7875 6,382, 575 6,833, 950 9325 6, 372, 588 8,898, 107 .8491 7, 555, 315 8,000,000 .844 16,752, 391 8,000,000 971 7, 768, 000 8, 237, 420

8,028, 190

. 9746

| Estimate.

FUEL-OIL PRICES

Mr. Thom. What did you pay for oil the other day on the Pacific past?

Commander KIRKPATRICK. I will have to refer to Supplies and Lccounts on that, sir.

Captain ZANE. Our last price at San Pedro was $0.8802 per barrel nd at San Francisco $0.977 per barrel.

Mr. Thom. Now, the Pacific coast price for oil is always consideribly higher than the Atlantic coast price? Captain ZANE. Just the reverse. Mr. THOM. What? Captain ZANE. That is much lower. At San Pedro it is the lowest.

Mr. ScrUGHAM. What is the Atlantic coast price at the present time, is compared with the Pacific coast price which you just gave us?

Captain ZANE. At New York, the latest price is $1.4057 per barrel. At Philadelphia, $1.5138.

Mr. SCRUGHAM. How does that compare; does that contain the Lame British thermal units as the Pacific coast oils?

Captain Zane. The same specifications; yes, sir.

Mrs. SCRUGHAM. What is the cost for shipping a barrel of oil from the Pacific coast to the Atlantic coast, approximately!

Admiral Conard. Well, we have no records on Navy shipments of that sort. We have shipped from the Gulf.

I will ask Captain Zane here to see if he has any figures.

Captain ZANE. We do not have any figures from the Pacific to the Atlantic. From Gulf to New York the latest price we have is September 1937, the tanker rate being 33 cents a barrel.

Mr. SCRCGHAM. Just for shipment? Captain ZANE. The price for shipping was 33 cents per barrel. Mr. Thom. Let us understand that. Thirty-three cents per barrel for bringing it around? Captain ŽANE. From the Gulf to the north Atlantic ports. Mr. THOM. That is from the Gulf of Mexico.

Admiral CONARD. From the Gulf of Mexico; that is, Gulf portsGalveston, Houston, or other ports on the Gulf.

Mr. THOM. 33 cents a barrel.
Captain ZANE. Yes, sir.
Mr. SCRUGHAM. That was in oil-tanker ships?
Captain ZANE. Yes, sir; that was really in a commercial tanker.

ITEMS OF INCREASE IN ESTIMATE

Admiral CONARD. I desire at this point to present a statement es plaining increases and decreases under projects 2 to 13.

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$151, 014 $148, 137 +$2,877 Increase due to increased consumptun

and increase in cost from $8 04 p ton for 1938 to estimated cost

$6.068 per ton for 1939. 239, 381 300, 720 -61, 339 Decrease in estimated consumption :

1939. 187, 949 209, 186 -21, 237 Decrease in estimated consuinption 1

1939. See note A. 36, 415 47, 606-11, 191 Decrease in estimated consumption |

1939. See note B. 559, 146 552, 811 +6,335 Increase due primarily to estimated i

crease in operating cost of yard ct
at Fleet Air Base, Pearl Harbor.d
to increase in aircraft operating tben

from.
166, 674 160, 875 +5,799 See note B.

12,865 12, 368 +497 Do.
438, 505 423,659 +14, 846 Do.

96, 234 93, 102 +3, 132 Do. 301, 526 290, 724 +10, 802 Do. 64, 438 62, 143 +2, 295

Do. 7, 663 7,857 -194 Decrease due to lower estimated a

of this project for 1939.

NOTE A.—With rezard to projects 4 and 5, gasoline for motorboats is not susceptib of much control. Ships'. motorboats are continually engaged in carrying personnel an supplies from ship to ship and from shore to ship and vice versa, and they must mal these trips as necessity requires. Consequently, about all that can be done is to ps1 mate the probable cost of these projects on the basis of past performance and set thu up as the probable obligation to the appropriation, absorbing any excess in project No "Fuel oil," which represents the major part of the whole appropriation.

NOTE B.- When naval vessels are at navy yards for repairs or otherwise their ou power plants are shut down and they obtain their requirements of water, ice, plercurrent, etc., from the activities on shore. Power plants at navy yards are operatei! a manner similar to commercial utility plants; that is, they “sell” their output to the customers. The "customers' of a navy yard power plant are the shops and ships ou'l ing the output of the power plant. In the shops, work is done under most naval app priations and the several varieties of power utilized in the performance of such wa enters into the cost of the work chargeable to the proper appropriation.

Similarly, the power furnished ships while at navy yards is "sold" to ships as a char to the appropriation under consideration. It is never definitely known precisely w ships will visit navy yards during a given year, nor the duration of their stay at t1 yards. This factor alone makes it impossible to compute accurately how much of t1 appropriation must be spent to cover the services in question.

Again, ships never know what they are going to have to pay for the services furnish them by the navy yard power plant because the value of such services depends large on the output of the power plant. By this is meant that when a great deal of power used, its unit rate may be lower than when the reverse is true.

Consequently, there is little direct control over the expenditures covered by projer 7 to 12, inclusive, and, therefore, it is necessary to estimate what the expected chiar to each of these projects may be during the year, basing this on past performance. these figures up as obligations under the appropriation, and absorb any excess project i, "Fuel oil," which represents the major part of the appropriation.

CHANGE IN LANGUAGE IN RE PROCUREMENT OF FUEL OIL Mr. UMSTEAD. Now, Admiral, I notice on page 75 of the committe print of the bill that you are asking for the elimination of the follow ing language:

Provided further, That no part of this appropriation shall be available, an provision in this Act to the contrary notwithstanding, for the purchase of an kind of fuel oil of foreign production for issue, delivery, or sale to ships at point either in the United States or its possessions where oil of the production of th United States or its possessions may be procurable, notwithstanding that oil the production of the United States or its possessions may cost more than ofl foreign production, if such excess of cost, in the opinion of the Secretary of th Navy, which shall be conclusive, be not unreasonable.

Please inform us why you desire that provision omitted from the ppropriation bill.

I believe that with the exception of oil, the provisions of the soalled Buy-American Act apply practically to everything the Navy ises or can use.

Admiral COXARD. That is correct.

Mr. UMSTEAD. And that this provision here, which you are requesting us to eliminate, is to bring the matter of the purchase of Sil in line with the existing buy-American statute?

Admiral CONARD. Exactly so. That is an exact statement of the situation.

Prior to the passage of the Buy-American Act we had in our annual naval appropriation acts two provisions requiring the purChase of domestic materials as against foreign materials. After the passage of the Buy-American Act, we had eliminated from the naval appropriation bill the general provision which was in substantially the same language as the Buy-American Act, putting ourselves in the position of all other Government departments so far as buying domestically.

We did not, for some reason which I cannot recall at the present moment, attempt to modify this particular clause in the appropriation act under fuel and transportation.

We then proceeded to buy fuel oil as well as every other commodity under the provisions of the buy-American law, thinking that the language in the appropriation act was substantially the same as in the Buy-American Act. Quite recently our attention was called by the Comptroller General to the slight difference in the language contained under the appropriation act which had the effect of requiring us to buy domestic fuel oil in all cases, no matter how it was actually produced, so that if there were in a given lot of oil any foreign oil, that threw the entire proposed purchase under the heading of foreign material even though it may have been processed several times before it was purchased by us.

The Buy-American Act makes a distinction between material which has been processed in the United States and raw material which comes in in the original state. It reads:

Only such manufactured articles, materials, and supplies as have been mined or produced in the United States, and only such manufactured articles, materials, and supplies as have been manufactured in the United States substantially all from articles, materials, or supplies mined, produced, or manufactured, as the case may be, in the United States, shall be acquired for public use.

Mr. Chairman, we want to delete the words: Prorided further, That no part of this appropriation shall be available, any provision in this Act to the contrary notwithstanding, for the purchase of any kind of fuel oil of foreign production for issue, delivery, or sale to ships at points either in the United States or its possessions where oil of the production of the United States or its possessions may be procurable, notwithstanding that oil of the production of the United States or its possessions may cost more than oil of foreign production, if such excess of cost, in the opinion of the Secretary of the Navy, which shall be conclusive, be not unreasonable.

Commencing with the Naval Appropriation Act for the fiscal year 1932, the appropriation "Fuel and transportation" has for each succeeding fiscal year contained the above-quoted provision. Presumably the intent of this provision was to favor the domestic petroleum industry by requiring the Navy Department to confine its purchases

of fuel oil to the domestic product unless the price was prohibitive as compared with fuel oil imported into this country.

On March 3, 1933, the President approved the so-called Buy Ameri can Act (47 Stat. 1520, 1521), which appears designed to accomplish for industry in general what the special provision in question was designed to accomplish for the petroleum industry in particular. This act provided :

Notwithstanding any other provision of law, and unless the head of the department or independent establishment concerned shall determine it to be inconsistent with the public interest, or the cost to be unreasonable, only such unmanufactured articles, materials, and supplies as have been mined or priduced in the United States, and only such manufactured articles, materials and supplies as have been manufactured in the United States substantially all from articles, materials, or supplies mined, produced, or manufactured, as the case may be, in the United States, shall be acquired for public use.

Attention is invited particularly to the words “Notwithstanding any other provision of law” appearing in the “Buy American Act. Presumably, this wording was interpreted as meaning that the Buy American Act superseded the appropriation act restriction, for there after fuel oil was advertised under the restrictions imposed by the Buy American Act.

Under date of September 15, 1937, however, the Acting Comptroller General by Decision A-88466 has held that, quoting:

The limitation in the annual appropriation acts has specific application to the purchase of fuel oil for the Navy, and under the general rule that where a specifie statute is applicable, there may not be applied the terms of a general statute. there is not for application the more general terms of the Buy American Act of March 3, 1933 (47 Stat. 1520, 1521). The above-quoted terms of the annual appropriation acts are unlike the Buy American Act of March 3, 1993, in that while the latter act requires products to be manufactured substantially all from materials mined or produced in the United States, the appropriation acts make no exception whatever, etc.

In view of the above the Navy Department must now advertise its requirements of fuel oil under the provision of the current annual appropriation act as interpreted by the Acting Comptroller General.

With the Buy American Act and the restriction contained in the Naval Appropriation Act, both on the statute books, the situation is this: The whole Federal Government, including the Navy Department, restricted in its purchases of all commodities by the Buy American Act with the single exception that the Navy Department is now restricted in its purchase of fuel oil not by the Buy Americar: Act but by the specific provision of the appropriation act. Since the petroleum industry of this country is protected by the Buy American Act to the same extent as all other industries, the special provision of the appropriation act appears no longer to serve any useful purpose.

In fact, it may prove definitely detrimental to the Navy in procuring its requirements of fuel oil by further restricting competition, and it may well lead to difficulties through bidders overlooking this special provision as now interpreted by the Comptroller General and assuning that the Buy American Act applies.

In view of the foregoing the Department requests that the language quoted and now in the Naval Appropriation Act be eliminated.

MONDAY, DECEMBER 13, 1937.

PAY AND ALLOWANCES, RESERVES

TRANSFER OF RESERVISTS TO RETIRED LIST, ETC.

Mr. UMSTEAD. Captain Wilkinson, we were considering Saturday The pay estimate for transferred members of the Naval Reserve. The estimate for 1939 is $15,507,347, applying to 18,405 individuals. We also had before us the estimate for pay of retired enlisted men in the amount of $8,599,950, which is an increase over the current year

of 3999,950, largely occasioned by transferred reservists going over to the retired enlisted men's list. We should like to know, as to the latter estimate, what portion of it is attributable to former transferred reservists.

Captain WilkINSON. Of the men going on to the retired list, 90 percent or more are men who pass to the retired list from the transferred Reserve. Very few men now stay in the Navy to the 30-year point.

Mr. UMSTEAD. And they constitute the bulk of the whole item?
Captain WILKINSON. By a large majority, almost entirely.

Mr. UMSTEAD. You made a statement, as I recall, to the effect that ultimately the annual cost of this group of personnel would level off around $5,000,000. I should like to have you amplify that statement.

Captain WILKINSON. I was speaking of the transferred Reserve class. By 1955 it is obvious that 30 years will have elapsed from 1925. Accordingly, all men in the service in 1925 will have either disappeared from the service or will have completed 30 years' active service, or active plus Reserve service, and consequently will be on the retired list. In other words, the only men still on the transferred Reserve list will be those men who have come in since 1925. Those men are allowed only the reduced pay carried in the act of 1925, which is 40 percent of their total active-duty pay, instead of 60 percent as now allowed. The maximum pay any member of the transferred Reserve might then be drawing is $756 per year. We estimate something over 600 men per year transferred to the transferred Reserve after 20 years service; that is, from 1945 on there would be approximately 1.500 to 1,800 eligible, with maybe an annual accretion of 600 or more. So that an average of 600 per year transferred throughout the whole 10 years should account for all of them.

Mr. UMSTEAD. Now, does the act of 1925 provide that at the end of 30 years, in addition to the 40 percent of the total pay, there should be added $15 per month after the 30-year period ?

Captain WILKINSON. It does. Assuming that 6,000 transfer during this 10 years, and none of them die, and all of them receive the maximum pay, both of which assumptions should counterbalance any disparity in the 600-average figure, the total pay for the transferred reserves from 1955 on would be something slightly over $4,500,000.

Mr. UMSTEAD. Unless a change is made in the law which was enacted in 1925, all men after 20 years' service in the Navy will continue to have the right at any time thereafter to transfer to the Reserve at pay upon the basis of 40 percent of their total pay at time of transfer?

Captain WILKINSON. Yes, sir.

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