The following tabulation shows the number of airplanes operated in the naval aeronautic organization during the fiscal years 1936 to 1939, inclusive: One of the greatest increases in cost, and one which is of serious concern to the Bureau, is that of aviation gasoline. In 1936 the contract price of aviation gasoline at San Diego, which is the principal point of consumption for the Navy, was $0.0809 per gallon. On January 1, 1937, a sudden and unexpected rise in price took place, and the contract price for delivery at San Diego for the 6 months beginning on that date rose to $0.1375 per gallon. On July 1, 1937, the price again rose to $0.1475 per gallon. This is an increase, in one year, of 82 percent in the fuel cost of airplanes operating on the west coast, where most of the naval airplanes are operated. Prices at other points on the west coast rose proportionately. Fortunately, there has been so far no material increase in contract prices of aviation gasoline on the east coast, but the quantity required on the east coast is less than that required on the west coast. With this great increase in the cost of aviation gasoline, it would have been impossible to carry out all scheduled fleet aircraft operations this year had it not been for the unexpected delay in the commissioning of the aircraft. carriers Yorktown and Enterprise and their accompanying aircraft squadrons. Mr. UMSTEAD. Admiral, what is the cause of the rather unusual and constant increase in the price of gasoline? Admiral Cook. Mr. Chairman, I am sorry I cannot give you any information on that. I understand that the Bureau of Supplies and Accounts, which is definitely concerned with it, has made or is making an investigation, but I do not know the results. PRICES OF GASOLINE DELIVERED ON EAST COAST AS COMPARED WITH WEST COAST Mr. UMSTEAD. What is the delivered price of aviation gasoline at Norfolk and Pensacola? Captain COBEY. Nine and three-fourth cents per gallon at Pensacola, and 10 cents at Norfolk. Mr. UMSTEAD. Then it is delivered at a lower price on the east coast than it is on the west coast? Admiral Cook. Yes, sir. EXPERIMENTS AND DEVELOPMENT There are included under the heading of "Experiments and development" all funds required for the various experimental aeronautical projects undertaken by the Navy. These are very important and are essential to the efficient and economical development of naval aviation. There is a very definite saving of expense in the thorough and orderly accomplishment of these experimental projects as a preliminary step to the placing of orders for quantity production of airplanes, engines, and general aeronautical material. In this work the Bureau of Aeronautics calls upon the Bureau of Standards, the Department of Commerce, the Naval Research Laboratory, the Navy Experiment Station, the Air Corps of the Army, and other Government agencies to assist in various experimental projects as far as practicable. Also, full advantage is taken of development work carried on by the National Advisory Committee for Aeronautics. This prevents duplication of effort and expense. The estimate for 1939 covers the usual experimental headings and contains various detailed increases and decreases. The several increases carried in the estimates under this project, over amounts appropriated for 1938, are more than offset by decreases, notably the nonrecurrence of the item covering a prototype patrol airplane. NEW CONSTRUCTION OF AIRCRAFT The estimates under this heading provide for the replacement of 284 airplanes of the Regular Navy and Naval Reserve, and for 35 airplanes for increase of the Regular Navy and the Naval Reserve, making a total of 319 airplanes. Replacement airplanes replace those which become obsolete in service, or are lost in crashes. "Increase of the Navy" airplanes are for the expansion of the Naval Aeronautic Organization to the authorized numbers in the various types of airplanes. The total estimate for new airplanes, both replacement and increase, is based upon unit costs as of July 1, 1937. These costs were obtained from contracts entered into during the last quarter of the fiscal year 1937 and from bids on hand early in the summer in the Bureau of Aeronautics. In general, these figures for unit costs average 23 percent higher for production airplanes and 76 pervent higher for experimental airplanes than those of July 1, 1936, and are due almost entirely to the increased complexity of the airplanes themselves and to a general rise of prices in the aircraft industry due to labor and material cost increases. A portion of the increased unit cost is due, however, to increasing the estimate for radio equipment to provide for more powerful transmitters to insure that the rad: range will be commensurate with the radius of the new aircraft being developed, and to provide for additional frequency coverage requiresi in the equipment for new airplanes for communication with all type of naval vessels, the Coast Guard, the Army, and the Department of Commerce radio system, The Naval Appropriation Act for 1938 authorized the procurement of a total of 397 airplanes and carried a total of $28,860,000, consisting of cash and contract authorization for that purpose. PLANES PROVIDED IN 1938 APPROPRIATION Mr. UMSTEAD. Admiral, the 397 planes provided for in the 1938 appropriation bill consisted of 251 so-called replacement planes? Admiral Cook. Two hundred and fifty-one replacement planes, and 104 new. Mr. UMSTEAD. One hundred and four program planes? Admiral Cook. Yes, sir; and 42 reserve planes. Mr. UMSTEAD. Forty-two Naval Reserve planes? The estimate of $28,860,000 as the cost for 397 airplanes was made by the Bureau of Aeronautics in July 1936 when the 1938 estimates were prepared. Although it was realized that, owing to certain recent labor legislation as well as normal increases in cost of labor and material, the cost of airplanes purchased a year to 18 months later would be greatly increased, there was no available yardstick on which to base an estimate as to what the increase would be. In actual procurement undertaken subsequent to July 1, 1937, bids received and other cost data have indicated that the actual total cost of the 397 airplanes would be about $36,856,286, an increase of $7.996.286, or 28 percent over the amount appropriated. Faced with this situation, the Bureau of Aeronautics has modified and reduced its 1938 airplane procurement program, as follows: [Column I indicates the planes by types and numbers as carried in the 1938 Appropriation Act, and Column II indicates the modified procurement plan] The 397 planes were appropriated for, and the money is sufficient to buy 320 planes, as indicated in column II. Mr. UMSTEAD. That statement, Admiral, indicates the insufficiency of the money carried in the 1938 appropriation bill to procure the number of planes which the money was intended to buy? Admiral Cook. That is correct, sir. Mr. UMSTEAD. And you are giving there the number of planes and the types that the money was intended to purchase, and you are also giving the number and types of planes that the money actually will purchase? Admiral Cook. Yes, sir. 36929-38-29 The October 31, 1937, estimate of the cost of the 397 planes in column I is $36,856,286, and the 1938 appropriation for 397 planes is $28,860,000, making a total shortage in the appropriation of $7,996. 286. The 1938 appropriation for the 397 planes in column I is $28.860,000, and the estimated cost of 320 planes in column II as of date October 31, 1937, is $28,187,340, leaving a remainder, available for changes during manufacture, further cost increases, and other contingencies, of $672,660. Mr. UMSTEAD. Admiral, I think it should be stated there that the failure of the appropriation to furnish the number of planes indicated was because of the increase in the cost of the planes, as you have stated heretofore, and that the appropriation for aviation for the current fiscal year represented all of the funds that were requested. Admiral Cook. That is correct, sir. Mr. UMSTEAD. All of the aviation funds requested of Congress by the Navy Department for the current fiscal year. Admiral Cook. Yes, sir. Mr. UMSTEAD. I believe that the appropriation under your Burean for this year is one of the few that was not cut in any manner at all. Admiral Cook. Yes, sir; all of the funds requested for the construction of new aircraft were appropriated by Congress. The foregoing shortage of $7,996,286, which represents the cost of 77 airplanes, based on October 31, 1937 cost estimates, eliminated from the 1938 procurement program, has been partially made up by including 26 of them in the 1939 estimates at a cost of $1,363,446. Due, however, to budgetary limitations, it has been impossible to include the remaining 51, costing $6,632,840, and consisting of 33 observation-scouting, 13 patrol-bombing, and 5 fleet-utility planes. The 1939 estimates, as submited by the Navy Department, are, therefore, $6,632,840 short of fulfilling the Navy's 1939 approved airplane requirements. In connection with the subject of the increased cost of airplane, attention is invited to the fact that the Appropriations Committee of the House in reporting the War Department appropriation bill. fiscal year 1938, included the following statement in its report: Airplane and airplane-engine manufacturers have stated to Air Corps officia's that they are experiencing considerable difficulty in obtaining materials r quired for Air Corps contracts as a result of existing conditions. These cond tions are caused by labor agitation for increased wages and additional firascial burdens imposed upon industry by the Social Security Act. The airplane and engine manufacturers are affected by these conditions in the same manner as other industries, as well as by the Walsh-Healey Act. Until the Secretary of Labor has completed necessary investigations and specified labor rates to be observed, it will not be possible to determine the extent to which the Walsh-Healey Act will affect 1938 prices. Air Corps audits have shown large losses incurred by important airplane manufacturers on three recent Air Corps contracts. There is no doubt” tha* contractors will endeavor to protect themselves against a repetition of these losses and that this protection will result in increased prices during 198 Most of these changes have occurred since the formulation of the airplate program contained in this budget and have given the Air Corps conside rubin concern. In view of the uncertainty of being able to execute the proposes! 1938 airplane procurement program as now drawn, a recent study was made to determine the funds that would probably be required for this purpose. This study indicates that an additional sum of $6,783,300 will be necessary if changes in the existing program are to be avoided. The Army Budget estimates originally included $26,973,261 cash and contract authorization for airplanes. This was increased by the committee, as noted above, by $6,783,300, or 25 percent, making a total of $33,756,561. The Navy, whose cost estimates were made at about the same time as the Army's original estimates, did not receive any increase over the amount originally estimated, $28,860,000, and as a result the appropriation was short, as stated above, $7,996,286, or 28 percent of the amount required to procure the 397 planes carried in the act. Had the Navy been given a similar increase over the original 1938 estimates, the present shortage of $6,632,840 in the 1939 estimates would not exist, and the total of the 1939 "Aviation, Navy" estimates, as now presented, would be ample for all requirements subject, however, to no further increases in costs. COMPARISON OF 1938 AND 1939 AIRPLANE COST ESTIMATES For the information of the committee, there is given below a table which compares the unit cost of planes carried in the 1938 Appropriation Act, computed as of July 1, 1936, and the unit cost of planes carried in the 1939 Budget estimates, computed as of July 1, 1937. In view of the fact that procurement of the planes carried in the 1939 estimates cannot start before 1 year, and in some cases nearly 2 years, after the date on which the cost estimates were prepared, there is every indication that the present upward trend of costs will again result in a shortage of funds necessary to carry out any 1939 plane procurement which may be approved by Congress and based on costs as of July 1, 1937. The unit costs given in both cases include the following: Airplane structure, engine, propeller, structural spare parts, spare engines, engine spare parts, spare propellers, propeller spare parts, radio equipment, radio spare parts, electrical equipment, instruments, instrument spare parts, and miscellaneous equipment. The increased Naval Reserve airplane requirements for 1939 are due to the necessity for providing additional airplanes for continuing the training and maintaining the proficiency of the rapidly inreasing number of Naval and Marine Corps Reserve aviators on inactive duty. This increase is due, in turn, to completion of active duty with the fleet and return to inactive status of large numbers of aviation cadets in accordance with the aviation cadet program. The first large group of these aviators will return to inactive duty in the |