FUNDS AVAILABLE FROM WORKS PROGRESS ADMINISTRATION

Mr. DITTER. Has there been any indication, Admiral, of the amount of W. P. A. funds which will be allotted to you?

Admiral MOREELL. No, sir, there has been no indication of the amount that we will get. We asked for $1,800,000.

Mr. DITTER. There has not been any indication as to how much will be available to the Naval Establishment of W. P. A. funds for next year, has there?

Admiral MOREELL. We have already received for the 6 months. from January to June 1938, inclusive, $2,157,000 of W. P. A. funds. Mr. DITTER. I had in mind from July 1, 1938, on.

Admiral MOREELL. No, sir; we have no indication as to that.

THURSDAY, JANUARY 6, 1938.

REPLACEMENT OF NAVAL VESSELS

STATEMENTS OF HON. CHARLES EDISON, ASSISTANT SECRETARY OF THE NAVY, REAR ADMIRAL W. G. DU BOSE, CHIEF, BUREAU OF CONSTRUCTION AND REPAIR; REAR ADMIRAL CHARLES CONARD, PAYMASTER GENERAL; AND REAR ADMIRAL J. R. DEFREES

INCREASE IN SHIPBUILDING PROGRAM

Mr. UMSTEAD. Admiral, since you appeared here before the holidays there has been a modification in the Budget as regards Group IV (b) employees paid from "Replacement, Navy," and we shall go into that in a moment.

I wish first to make some further inquiries relative to our shipbuilding program. I notice from some documents you left with the committee that since March 3, 1933, funds have been appropriated for or toward the construction of about 141 vessels.

Admiral Du BOSE. Yes, sir.

Mr. UMSTEAD. May we not have a statement for the record showing the number by categories, the total cost, and the amount remaining to be appropriated for the present fiscal year?

Admiral Du BOSE. Yes, sir.

EMPLOYMENT FURNISHED BY SHIPBUILDING PROGRAM

Mr. UMSTEAD. Can you tell us what this program has meant in the way of providing employment?

Admiral Du BOSE. The shipbuilding program that was started in the calendar year 1933, fiscal year 1934, was intended, among other things, to provide employment for mechanics and workers of the country.

I have not available the number of employees in the manufacturing establishments of the Navy and the private shipbuilding yards as of July 1, 1933, but that can be obtained and inserted in the record.

The Navy Department's records indicate that as of July 1, 1933 the total number of employees in the naval industrial establishments was 33,000 and information obtained from the National Council of Shipbuilders is to the effect that on the same date there were employed in the private shipbuilding establishments 10,411 employees. The total number in the industrial establishment of the Navy includes those on shipbuilding as well as those on all other kinds of work, no separation as between the two classes of work is available. In the case of the private shipyards the number stated is the total number of employees engaged on both private and Navy work. At that time there was very little shipbuilding work other than Navy work how

ever.

In January 1935, there were employed in the navy yards and the ordnance establishments 22,459 people, and in private shipyards there were employed 11,090 people, or a total of 33,549 people on shipbuilding work.

Mr. THOM. For the United States Government?

Admiral Du BOSE. Yes, sir; for the United States Government. That does not mean in the case of the navy yards and the manufacturing establishments that that was the total number of civil employees. That is the estimate of the civil employees employed on shipbuilding.

Mr. DITTER. As of what date, Admiral?

Admiral Du BOSE. January 1935.

Mr. UMSTEAD. Of course, the number you have given there is exclusive of employment created in all sorts of private industry scattered throughout the country, incident to supplying and furnishing necessary materials used in the construction of the ships about which we are speaking.

Admiral Du BOSE. That is correct, sir. These figures relate to the number of people at the site, and in January 1935, the total was 33,549.

In November 1936, 11 months later, the total was 53,389; in May 1937, the total was 50,844, and in December 1937, the latest date for which we have records, the total number was 45,675.

PEAK OF EMPLOYMENT PASSED BETWEEN FEBRUARY 1936, AND MAY 1937

The significance of those figures, among other things, is that the peak of the shipbuilding load of additional employment was passed some time between February 1936, and May 1937, and today, with the existing construction in hand, it is definitely on the decrease. Of course, it will pick up again if we get additional ships under way. Mr. UMSTEAD. Admiral, as I recall it, it was testified here once that approximately 85 percent of all money appropriated for new construction goes to labor, directly or indirectly?

Admiral Du BOSE. Yes, sir; going all the way back to the mines and the forests.

Mr. UMSTEAD. Is that figure substantially correct, in your judgment. Admiral Du BOSE. Yes, sir.

ESTIMATED COST OF THE "NORTH CAROLINA" AND THE "WASHINGTON"

Mr. UMSTEAD. Admiral, the combined total estimated cost of the battleships North Carolina and Washington, now building, according to a statement placed in the record when you were here several days ago is expected to be $128,556,500. Those ships are being built in Government yards. The two battleships you are asking funds to commence in this Budget are estimated to cost a total of $141,700,600, which is an increase over the other two now being constructed of approximately $13,144,000. Is it the plan to build the two battleships, for which funds are requested in this Budget, in private yards? Admiral Du BOSE. I think the Assistant Secretary of the Navy could answer that. I will speak for him, if I may. I have heard the Assistant Secretary state that he would like to have two battleships placed in private yards so as to maintain a parity of construction between navy yards and private yards. Having put two battleships in the navy yards recently, the Navy Department would like to put two battleships in private yards the next time, provided we get satisfactory bids from the private shipbuilders.

Mr. UMSTEAD. Of course you would not put them in private yards unless you did get satisfactory bids as compared with the cost of constructing them in the Government yards?

Admiral Du BOSE. No, sir. The reason we did not put one battleship in a private yard when 55 and 56 were assigned was because. there was a disparity between the navy yard estimate and the lowest private bid of approximately $11,000,000.

Mr. UMSTEAD. Is the purpose of the increase in the estimated cost of the two ships included in these estimates over the two now being built to enable you to meet anticipated larger costs if they are placed in private yards, or does that have anything to do with it?

Admiral Du BOSE. The estimate furnished for the 1939 battleships was a preliminary estimate of what was assumed as the probable cost of the two ships, irrespective of where they were built. The estimate was prepared before we had definite approved characteristics from the General Board of the Navy. As I stated in my previous testimony, the time of submission or preparation of an estimate has a good deal to do with the accuracy of the estimate. The preliminary estimate is, necessarily, approximate to a degree. As we get more definite information, we can correct that estimate. It may go up or it may go down. Generally speaking, it will go down, because we,

naturally, make the preliminary estimates sufficiently high to cover any anticipated characteristics or specifiecations for the ship.

INCREASE IN ESTIMATES ON "NORTH CAROLINA" AND "WASHINGTON"

Mr. UMSTEAD. The estimates submitted by the Department early this year when we were considering the appropriation bill for the present fiscal year, as I recall it, were $60,160,000 each for the two battleships which are now being constructed, making a total of $120,320,000. The present figure in these estimates before us indicates that the two now being constructed will cost $128,556,500, which is an increase of more than $8,000,000 over the estimate submitted early this year.

Admiral DU BOSE. Yes, sir.

Mr. UMSTEAD. The estimates before us for the two vessels, which you desire to begin during 1939, exceed the original estimates of cost of the two battleships now building by approximately $10,700,000 each, or a total of $21,400,000 for the two. Can you explain that, Admiral?

Admiral Du BOSE. That increase is due to higher anticipated costs for the 1939 battleships than for battleships 55 and 56.

INCREASE IN COST OF SHIPBUILDING

We are specifying certain changes in military features which will involve added cost to build. We also noted the cost of shipbuilding, in general, has increased materially in the last 2 or 3 years. We anticipate that the navy yard estimate for the 1939 battleships will be considerably higher than their estimates for battleships 55 and 56. We cannot tell exactly how much higher it will be, of course.

We have not as yet completed our contract plans and specifications. We are not yet in a position to furnish data on which a more accurate estimate of cost can be prepared, but in the light of various things, changed characteristics, and added cost of labor and material, we think the increase in cost is justified at the present time.

TOTAL COST OF BATTLESHIPS BASED ON NAVY YARD AND PRIVATE BIDS

Mr. UMSTEAD. With reference to the two battleships under construction I should like to have you give us a comparison of the cost of each ship, that is, hull and machinery, all ordnance, and all equipage that it is customary to charge to the building cost, on the basis of navy-yard bids and private-yard bids.

Admiral Du BOSE. When the Navy Department asks for an estimate from a navy yard or a bid from a private shipyard, we send out certain blank forms which are to be filled in with details of the estimates. That was started as a result of congressional action several years ago. The information on these blank forms gives us a means of making a fairly accurate comparison as between the navy-yard estimate and the private shipyard bid.

Mr. THOм. Do you have the plans and specifications all completed for your ships?

Admiral Du BOSE. As the information furnished to the navy yards and to the private shipyards is identical, both submit their estimates of the cost on the same basis.

Mr. THOм. The question is, do you have a completely designed ship with no material changes in specifications to be made?

Admiral Du BOSE. Oh, not at all. We prepare what we call contract plans. It is a general portrayal of what we want. We have also detailed specifications which are a word picture of what we want. The contract plans and specifications taken together give complete information as to what the Navy Department wants.

After the navy yard or the private yard gets the contract or order, they must prepare a large number of working plans which are prepared from the data contained on the contract plans and the specifications, but at the time the estimate is prepared there is no complete set of plans, far from it.

Whenever the Navy Department sends out the plans and specifications to the building yards for the preparation of estimates or the shipbuilding yards for the preparation of a bid, the data is the same in both cases. It includes a set of the contract plans and a set of the detailed specifications, so that the shipyard bid figure is a firm figure which the Navy Department, if it accepts it, need not and will not go beyond.

The navy-yard estimate is made up of two component parts, the appropriation cost which represents the money to be specifically appropriated by Congress for building that ship, and what we call the statistical cost. The sum of the navy-yard appropriation estimate plus the navy-yard statistical cost, or the total navy-yard cost is roughly comparable to the private shipyard's bid. There are differences between the two, but, broadly speaking, the private shipyard bid and the navy-yard estimate, including the appropriation cost and the statistical cost, are comparable.

If we receive a bid of $30,000,000 and accept it, that means that $30,000,000 has got to be appropriated out of the Treasury ultimately to pay for that particular ship irrespective of any changes. If we receive from a navy yard an estimate of $26,000,000 appropriation cost, and $3,000,000 statistical cost, that means that there must be appropriated by Congress $26,000,000 not otherwise appropriated to build that ship. The $3,000,000, the statistical part, is made up from various appropriations, maintenance appropriations, which otherwise appropriated for by Congress.

Mr. UMSTEAD. For the navy yard?

are

Admiral Du BOSE. Yes; for the navy yard, or given by the Navy Department to the navy yard, sir.

So, in trying to get a fair basis of comparison between a navy-yard estimate and a private shipyard bid, to permit the Navy Department to decide which is more advantageous from a financial point of view, we must include the navy-yard appropriation cost and the statistical

cost.

Now, specifically, in the case of the two battleships you referred to, we received estimates from two navy yards, and bids from three private shipbuilding yards. One private shipyard bid was thrown out because it was an irregular bid. The low acceptable private shipyard bid for hull and machinery was $47,829,994. The New York Navy Yard and the Philadelphia Navy Yard submitted estimates. The New York Navy Yard estimate, including the proper statistical and all other appropriation costs was $37,265,843, or, roughly, $10,000,000 less than the low private bid.