planners in an awful mess, because somebody is responsible for the tremendous uppage on this job. Mr. KINGSLEY FERGUSON. That is what we want to explain. Acting Chairman MEAD. I am beginning to think that the Army made a contribution toward it. Mr. Ferguson, you have the floor now. Mr. H. K. FERGUSON. Thank you. I have been waiting through eight sessions for this opportunity. Acting Chairman MEAD. The committee has been very liberal with you people in giving those eight sessions Mr. H. K. FERGUSON (interposing). I think you are liberal. PROBLEMS OF CONSTRUCTION Mr. H. K. FERGUSON. When we started this job, I don't think that anyone knew what was to be built. We were called in by Acting Chairman MEAD (interposing). Does that apply to the Army? Mr. H. K. FERGUSON. Yes, sir; to all of us, because Acting Chairman MEAD (interposing). I am beginning to think so. Mr. H. K. FERGUSON. They had no background for the new type of high explosive shell loading. They have been kept on low appropriations for a good many years in peacetime, and they have had to grow at a very high rate of speed overnight. Mr. FULTON. Major Horridge, I think, agreed with you on that when he testified that it was a 1917 plant. Mr. H. K. FERGUSON. May I have a chance? Nineteen-seventeen estimates, sir, not a 1917 plant. Mr. FULTON. He said they were still revising it, I think. Mr. H. K. FERGUSON. That is exactly right, and the revision has gone along through the progress of the designing, and the designing will not be entirely finished until the construction is complete and the plants are in operation. Acting Chairman MEAD. All of which brings to mind the evidence of one Army representative who, when asked by the chairman of the committee why he didn't have some plans to meet this emergency, said, "We didn't figure that there was going to be another war.' Mr. H. K. FERGUSON. All right, may I talk for a moment without interruption, please, gentlemen? We were called down here and told that we were to build a plant which would satisfy ordnance requirements and meet the supervision of Procter & Gamble, which is the operating contractor. We have cooperated with them through a long period of time. We were further given an estimate of eight-million-one-hundredsome thousand, which was later amplified by about $300,000 for some omission on the part of an estimator. At the time that estimate was given us, we were told that it was extremely low, because the Government had very shrewd bargainers, and they were basing our fee on a price that was about half of what the probable cost for the plant as then contemplated would be. Now, at the time of that estimate, sir, the amount allowed in it for roads was $330.000, and if that amount would come anywhere near building 91.5 miles of black-top road and 60 miles of temporary road, then I am the sucker of the Southland. Now, in addition to that, they had an estimated allowance of about 45 miles of railroad, and the total on the Wolf Creek project was 67. The estimate was set up on the basis of 82 storage buildings, and there were 216 required. I heard somebody talking about TNT the other day. TNT is just a joke as an explosive compared with the things that we have down there. We have tried to bear in mind three things. One of them is written in our contract. We must do it in the shortest possible time. Another thing that has been before us all the time is that since it is a highexplosive plant, with enormous rendering powers behind fortuitous explosions, we have had to build it carefully and as well as we could with the time at our disposal. I have been told my men who have seen the results of those chance explosions what happens to the people who are involved in them. I have no desire to see that because of careless work on our part. In addition to that, we have one other element in any good job— time, quality, and cost. It is also written into our contract, in addito the statement that we must do it the shortest possible time-and I can give you chapter and verse as one Bible student to another-that we are not responsible for the estimates of cost. We were also told that we should try to make this a job that would deliver shells quickly, loaded and ready to go, and we have at all times had that thing in front of us, Senator. We are loading shells from several lines now. We expect to turn over three or four more during this present week, and we will be through with this job come the 1st day of January. We are 96 percent complete on the Wolf Creek ordnance project now. We didn't get a start until the first week in February. At that time the Government didn't own a single piece of land. We brought in surveying crews and got surveys in less than 60 days which it took other jobs from 4 to 6 months to get. We have laid out railroads; we have built them. The total upping on cost on these wholly unforeseen things that came up on this project was: Road construction, $2,950,000; railroads, about a million dollars; storage building, about $2,159,000. Mr. MANIER. Because of the increased quantities. Mr. H. K. FERGUSON. These are all things over which we have had no control whatever, sir. They were demanded by the men who knew these high explosives, the experts of the Ordnance Department and of Procter & Gamble Co. The things that are left out of our control are roughly as follows: Procter & Gamble undertook, as engineering consultants, to buy the equipment. We are to place it. They have done that, and we have almost all of it placed at this time. The total amount allocated for that under the present estimate was $4,500,000. The land purchases will come close to $2,500,000. The overhead of the Army here in Washington, over which we certainly have no control, is also chargeable in that $51,000,000, as is also the overhead of the Army on this job. There are many other items that go into it, so that we have actually spent on the job as of November 15—our cash statement is right here-$23,000,000 on the ordnance project, which is 96 percent complete at this time, Senator, and the bills are paid right up to the minute. We have borrowed a total-Oman, Ferguson-of $5,000,000 at the banks to keep these bills paid. Mr. MANIER. On which you have to pay interest? Mr. H. K. FERGUSON. On which we are paying the interest out of our fee, Mr. Fulton, and there is a chance there for Government saving if they would set up a revolving fund. The Government can borrow short-term money at a much less rate than we can borrow it, and save the difference, if they will elect so to do. On the storage depot we had spent, as of November 15, $6,235,000, and that job was over 50 percent complete. Where somebody gets this erroneous idea that we are the custodians and the wasters of $51,000,000 is beyond my judgment and certainly beyond my consent. In conclusion, I simply have one or two other things to say. We believe that the accounting system of the Army, starting practically from scratch, needs streamlining desperately. I think you will probably agree with that. We understand that that arrangement is under way, and we would greet it with a great deal of welcome. because some of the things that have held over from the last war have tied our hands until we have had to fight until our men cried, actually cried, in my presence over the way they could not get results. We have worked them early, late, Sundays, holidays, Saturdays, and every other time to make this job move, and the chances are that we will complete it ahead of all the other projects, some of them started a year ago September, some of them started in November, but we are out in front ahead of them because we have taken the speed thing seriously. In addition to those things there were added two loading lines, which came into the project long after it was started, I think about the middle of June, and those things added to the cost of the project over $2.500,000; and that, Mr. Fulton, is the way this build-up has occurred. we are well satisfied that an over-all appraisal of the plant when we are finished, not a check as to whether it cost $1.50 to repair a tire or what not-although there was a very low operating charge on our cars over all-will show that this plant was built at prices which we have had to pay on the competitive bids and under the conditions which we have had to work, with heavy overtime because we were trying to catch up for an economical time down there when we were allowed to work no overtime, with bad weather, with the equipment situation as you must know it is-Mr. Oman had eight Caterpillar tractors commandeered at Fort Knox on the way to this job by some stripling second lieutenant, who was a pretty good man on his own job. We have tried under all those obstacles to get this work done, and we are satisfied that when a qualified appraisal of the property is made when we are finished, estimated under the conditions under which we have worked, it will more than bear that fact out. I have one other thing to say, and that is this: My father taught me the Preamble to the Constitution of the United States, which still is a good thing. We, the people of the United States, in order to provide― I have forgotten some of it. I am getting along in years, but don't worry about that in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, and promote the general welfare, do ordain and establish this Constitution for the United States of America. We have tried to stand up to it. We were told that we had as bosses, first the constructing quartermaster's department, which is named in our contract as the men to tell us what to do; secondly, our engineering background with ordnance and Procter & Gamble. We have tried to meet the requirements of all those chiefs. I never knew anything about Senator Truman or Mr. Hugh Fulton until some months ago. We have had questionnaires from them, and we have tried to fill them out to the best of our ability. We have met two of the requirements-good quality and fine speedand we have done our best to do what informally the Government men told us to do: Spend their money as we would spend ours if we had the Government's resources and the Government's emergency back of us. I thank you, Mr. Chairman. CONTRACTOR'S PROFIT Mr. JOHN OMAN, JR. May I say one word? I haven't taken up much of the time of the committee. It has been said quite frequently that the contractor is just spending this money recklessly. I want you to know that every addition to the cost of that job also cost us money, because when we started out we figured that we could handle this job with $2,500,000. We had to borrow $5,000,000. I think our interest for last month was $8,500. It should have been half of that. We should have gotten along, if these estimates had been correct, with about $4,200. So that the additional cost of this money comes out of the contractor's pocket in part. It costs us about $4,200 more every month, all of which comes out of our fee, than it would have cost if we had been able to build this job for the prices set out in our contract. Mr. MANIER. Your total interest charge would be about $55,000 coming out of your fee? Mr. JOHN OMAN, JR. Yes, sir; and that is going to cost us about $30,000 more than estimated in that. I thank you very much. Mr. H. K. FERGUSON. May I add the fee amount? Our total amount of fee, Oman and Ferguson, is $494,000. Of that, more than $100,000 is already obligated for nonreimbursables, including the interest charge which Mr. Oman spoke about. Mr. FULTON. Does that mean, then, that Mr. H. K. FERGUSON (interposing). That means that our gross take for the job is less than $400,000 which, split two ways between us, amounts to $200,000 for Oman and $200,000 for Ferguson. Mr. FULTON. And then the architect-engineer's fee, too. Mr. H. K. FERGUSON. Yes; I will get to that in a moment. Anyone who runs a main office, operating widely, knows that you must have main-office overhead, and, speaking for the Ferguson Co., our mainoffice allocation to this work cannot be less than $50,000 for overhead. That leaves us a net total of $150,000 from the job, $100,000 of which goes back to the United States Government next year in taxes. In other words, our net, after we are all through and maybe with some deductions for the expenses of investigations and other things, will be $50,000 on this job, less those additional expenditures. Now, about the architect-engineer, sir. That total of $400,000, Mr. Chairman, is less than 1 percent of the cost of the work which we have been called upon to do. That fee was built up-you have some of the shrewdest buyers I have ever seen. The fee was built up first with a fixed fee on a very low estimate on the original job. Second, they put the added work down there on the basis of supplementary contracts, because a larger contract carries a lower rate of fee, so that when they built this organization job of the ordnance project up by adding the ordnance storage depot to it, they increased the total amount to where a lower rate of fee took effect on the added work than would have been paid if it had not been made a supplemental contract. I have the figure right here which I can give you in just a moment. The total fee on the first job was $279,000, and the fee on the second job, which was $2,000,000 more than the amount originally estimated for the Wolf Creek project, was $215,000. Otherwise it would have been about $300,000 and something. That is the saving that they made by that supplementary contract use instead of by a separate contract. In addition to that fact they gave us on our original agreement a $73,000 engineering fee, and on the storage depot an investigation fee of $10,000. Those fees were later amplified by a $4,850 increase for tool engineering on the tool lines on the main plant, and $35,150 on the supplementary work on the ordnance depot. Our total fees for this job, therefore, from the standpoint of engineering, are $123,170, on the basis, roughly, of $40,000,000 worth of work-maybe thirty-eight or thirty-nine. We will know pretty soon. It is small; it is extremely small. That engineering charge includes our services in getting all the typography and everything else that goes with it, with the result that our net on the cost of the engineering from the job will be about 122 percent, and on private work we have never worked for less than 50 percent fee in addition to the cost of the engineering. Just making a brief comparison, we are getting 1 percent fee on the gross, on the total cost of the construction work, and on private work for a job of this magnitude the fee would have been from 21⁄2 to 3 percent. In other words, we are working for the Government for two and one-half times less or three times less than we would get on private work. Similarly, on the engineering we are getting 1212 percent, roughly, on the total cost of the engineering, as against a minimum of 50 and sometimes 75 percent on the cost of the engineering. Now, if you will just give some thought to the fact that our company, in the last analysis, has taken the job that we have had, has worked as hard as we have done, and has taken all the hell we have had from everybody concerned for a final payment of $50,000, you ought to know what we are going through right here. Mr. FULTON. Mr. Ferguson, how much would you estimate your out-of-pocket expense was on that architect-engineering? Mr. H. K. FERGUSON. I think we have done that job for a minimum of $50,000 out-of-pocket expense. Mr. FULTON. That would leave about $73,000, approximately. Mr. H. K. FERGUSON. My wife and I talked this thing over before we took this job, and we agreed that we wouldn't make a dollar out of it, and we went into it because we felt we had a definite obligation to our important customer, Procter & Gamble. Mr. FULTON. That is $150,000 on the net, over and above out-ofpocket! |