which company deals in contractors' equipment and heavy road machinery. My company has been in existence since 1918 and I have personally been engaged in this type of work during this entire time. Prior thereto I was in the road contracting business. My company sold to John Oman, Jr., who was succeeded by the Oman Construction Company, several years ago a number 601, 11⁄2 yard Koehring Deisel Shovel, serial #1545, which a few months thereafter was converted by John Oman, Jr. into the equivalent of a number 701 Koehring Shovel by the purchase from us of a heavier base and by adding a 14 yard rock dipper and other necessary change parts. After this was done this Koehring Deisel Shovel was equivalent to a number 701 shovel. The present replacement value of a number 701 1 yard Koehring Deisel Shovel is $29,470.00 F. O. B. factory. When we sold the number 601 Koehring Deisel Shovel mentioned above to John Oman, Jr. we took as a part of this purchase price an used number 501, 1 yard Koehring Gas Shovel at a price of $7,500.00 and we realized on the resale of this number 501 Koehring Gas Shovel the $7,500.00 which we allowed on the same as a trade-in value. I have kept in touch with the Koehring Deisel Shovel, serial #1545 during the entire time that it has been owned by the Omans. I am familiar with its upkeep. I am also familiar with its present condition and from my knowledge of this particular shovel, it could be sold on the market today at a price of from $15,500.00 to $16,000.00. A. M. WEESNER. Subscribed and sworn to before me this the 29th day of November, 1941. [SEAL] BESSIE J. HUGHES, Notary Public. My commission expires 10-14-44. MEMORANDUM No. 131-A MEMORANDUM The foregoing affidavit of A. M. Weesner refers to a shovel #301 and for further information pertaining thereto, reference is made to a schedule submitted by Joseph F. McCarthy indicating the cost of repairs on equipment of the Oman Construction Company and includes the cost of expenditures on this shovel. MEMORANDUM No. 132 SUPPLEMENTARY TESTIMONY OF H. K. FERGUSON (Statement prepared immediately following the hearing, to be part of the printed proceedings. Statement is made under the oath taken at the hearing.) Since there are still some points of testimony actually given or implied at the several hearings on the Wolf Creek Ordnance and Milan Ordnance Depot projects which the shortness of time prevented us from discussing at the hearings, I am taking advantage of the opportunity suggested to us by the Committee to insert the following somewhat unrelated but relevant facts into the record. (1) Under proper cost accounting as practiced according to usual corporate methods, these projects should be credited with all the Government equity established in recaptured equipment by rental payments made toward such recapture and charged to this work. This is obviously true since the rental system with recapture really provides a basis for installment purchase of the equipment and payments made on this basis toward recapture are therefore made in the interest of establishing a Government equity. This equity, when written down somewhat to provide for depreciation and obsolescence, is obviously a credit to this job if and when such recaptured equipment is removed from this work and assigned to other projects. Such a credit, if and when established, would run into a very considerable amount of money which is logically deductible from the finally recorded cost of these projects. (2) The circumstances as outlined with regard to equipment in paragraph (1) are obviously applicable to the several hundred thousand dollars worth of metal forms purchased and paid for at the expense of these projects. One of the reasons for buying these forms was that they were needed and could readily be used on other projects as soon as the Milan Ordnance Depot is completed on or about the first of February, 1942. As a logical result under usual corporate accounting practice, the properly depreciated value of these forms adequately established should be credited to the Wolf Creek and Milan Ordnance contracts if and when these forms are removed from the property and assigned to other work. (3) There have been some major misunderstandings throughout the hearings to date, which could easily have been avoided if the Committee's investigators had contacted any qualified key men of the contractor during the course of their investigation. Some of these misunderstandings are as follows: (a) The labor relation situation on this work was carefully set up with the Unions as of about the time of starting of the work. The rates as agreed upon through factual evidence presented to the Department of Labor were established on the basis of rates determined by the Department of Labor. The contractor's agreements with the labor organizations provided for the elimination of jurisdictional strikes and for the arbitration of any controversies arising during the progress of the work. The record of performance under these agreements is excellent to the extent that there has been no major interruption of the work, and only two or three minor interruptions for parts of single days. (b) The only claims of any improper practices which have come to light under the two investigations conducted to date are apparently some minor matters of payments made on an automobile, a hand bag, and a shotgun, and several watches given to foremen or superintendents during the progress of the work. (c) With regard to the charge made or implied that roads about the property were described as running aimlessly through the countryside for long distances without apparently getting anywhere, it could have been pointed out that this is not an ordinary camp construction project, but is a large project for the storage of extremely high explosives, the loading of shells with such high explosives, and the storage of loaded shells before shipment away from the project. Because of these facts, it has been necessary to work out with the Ordnance explosives experts, the engineer-consultant The Procter & Gamble Defense Corporation, and the construction officers of the Quartermaster's Corps, a carefully arranged layout of roads and railroads which provided for smooth and regular transportation of the materials and finished product from area to area, with a minimum of gatekeepers and watchmen who would normally work on a 3-shift basis; with a minimum of maintenace giving effect to the traffic requirements of the work; and particularly to maintain the necessary neutral zone limits which are required in plants of this character. These limits range from about 4100 feet in some instances around the outer areas of the project to 2600 feet or 2100 feet in other areas, and down to a minimum of 500 feet between igloos. It would therefore have been obvious on the basis of the above explanation to point out that roads on the project must necessarily provide for transportation through the neutral zones, in some cases of considerable length. (d) As to labor turn-over, as of about November 15th the total number of men hired on the work was 23,545, with total terminations to that date of 14,562, with remaining employment for 8,983. Giving effect to the fact that many of these employees were Tennessee farmers who came and went with regard to the seasonal requirements of their land, including the cotton crop, it is believed that this record is exceptional even under more favorable circumstances than those applying to this work. (e) With regard to the claims for contractor's fees, as has been previously pointed out in the record, these were very low in comparison with those obtained on private work. No recognition in fee increases was given to the major increase in the scope of the two projects, with the exception of the two production lines added to the Wolf Creek Ordnance project. On September 8, 1941 the H. K. Ferguson Company entered into an agreement with the United States Government providing that no claims or demands would be made for "additional fee by virtue of work or services which prior to this date were performed or authorized to be performed by the contractor in connection with or incidental to the projects involved in said contract". This results in the fixing of the total construction fee for the H. K. Ferguson Company at approximately 1% of the total cost of the work performed or to be performed under this contract. (4) With regard to the allusions to the effect that the contractor had refused to allow the Government to take over the timekeeping on the Wolf Creek or Milan Ordnance projects, claiming that such a change in accounting procedure would be a violation of the original and supplementary contracts, the contractor did object to this change for the following reasons: (a) Men already employed on the work by the contractor were qualified men who had worked through more than half of the project. (b) For the remaining period of time it was believed that any change in timekeeping procedure at the peak of employment when about 16,000 men were employed and pressure for progress was at the boiling point, might very well result in inaccuracies in timekeeping during the change-over period which might possibly result in serious labor difficulties. (c) The contractor's key men further felt that since money borrowed by them at their banks was being used to finance the work, and all the men usefully employed on the project except by subcontractors were actually employees of the contractor, that the expenditure of this money and the contacts with these men should be kept within the limits of the contractor's organization for the purpose of maintaining subordination and discipline through the channels of the principal contact with these employees, 1. e., their pay envelopes. After the peak load passed and in an effort to help develop the expected saving pointed out through the avoidance of duplication because of timekeepers employed by the contractors and checkers employed by the Government, the contractor did consent to such a change. At this time, without complete or sufficient data at hand, it is not believed that a major saving resulted. (5) As a constructive enterprise, the contractor discovered and developed sand pits on the property for the providing of material for use in the road construction program. Three such pits were developed in the Wolf Creek Ordnance and one in the Milan Ordnance Depot area, with the total result of furnishing about 750,000 cubic yards of sand for this work. This sand, delivered to the plant from outside sources by truck would have cost approximately $1.25 per cubic yard, or a total of $937,500. The actual cost of the excavation and delivery of this sand to the necessary areas on the project has been about 25¢ per cubic yard, with the result that the saving in the cost of the above amounts of material to the project is about $750,000. If, on the other hand, credit is given for the fact that this sand replaced some considerable amount of chert at the low price of $1.63 per yard delivered, the saving above mentioned would be considerably in excess of the figures used. (6) It has been pointed out elsewhere that the setting ahead of the completion date for the Milan Ordnance Depot will not only save the Government several hundred thousands of dollars, but will also give the Government the use of the entire project three months or more before the contract date of completion for the whole job. AFFIDAVIT No. 133 HAROLD K. FERGUSON. [In connection with this affidavit see Memorandum No. 133-A on p. 3718] W. L. SHARPE CONTRACTING Co., OMAN CONSTRUCTION Co., Nashville, Tennessee. GENTLEMEN: This is to certify that we bought from the Oman Construction Company five Euclid Tractrux that were located in the Wolf Creek Ordnance Plant at Milan, Tennessee for the sum of Twenty Thousand ($20,000.00) Dollars. We bought these machines to use on an Illinois Central Railroad contract. Very truly yours, DRIVER CONTRACTING Co. MAX COBB, Notary Public. Subscribed and sworn to before me, this 19th day of November, 1941. [SEAL] My commission expires Apr. 2, 1944. Sale of the above mentioned Euclids was made October 20, 1941. ANNIE B. HILL. The foregoing affidavit of Driver Contracting Company refers to five Euclid trailer wagons which were formerly the property of Jones and Shepard, a contracting firm. The Committee is attempting to ascertain the details under which these came into the possession of the Oman Construction Company and has been advised that the Oman Construction Company took over the business of Jones and Shepard and efforts are being made to contact Mr. Shepard for details thereto. The attached letter indicates that he worked for the Oman Construction Company in June 1941. Through Mr. Shepard it would be possible to ascertain the actual cost to the Oman Construction Company of these trailer wagons. The officials of the Driver Contracting Company have advised that there is still a balance of $11,000 due on the purchase of these trailer wagons for $20,000, as described in the foregoing affidavit. OMAN CONSTRUCTION COMPANY, Mr. HUGH A. FULTON, Chief Counsel, Special Senate Committee Washington, D. C. DEAR SIR: We have examined our pay roll and social security records but find no record of Bud Shepard ever having worked for us. However, in June, 1941, we did have Mr. Shepard, who was formerly a partner of Jones & Shepard, working for us but he left several months ago and did not leave his address.. Yours truly, OMAN CONSTRUCTION COMPANY, By STIRTON OMAN. Personally appeared before me, the undersigned authority, W. A. Walsh, who being duly sworn, deposed as follows: My name is W. A. Walsh, and I am employed by the Ferguson-Oman Company as Chief Accountant in the Wolf Creek Ordnance Plant and the Milan Ordnance Depot. When this project was started I came to the scene of the project at the beginning, that is, on January 25, 1941. It is my understanding that Mr. Thomas testified at the Senate Investigating Committee in Washington on November 26, 1941 that the Field Auditors' Staff of the Constructing Quartermaster was 130 employees before May 30, 1941, and that on May 30, 1941 it was cut to ninety employees. From the records of the Ferguson-Oman Company there were 186 employees of the Ferguson-Oman Company, performing functions similar to those performed by the Field Auditors' Staff of the Constructing Quartermaster. However, this staff of the Ferguson-Oman Company kept all of the time records and performed 100% field and time check, whereas the Field Auditors' of the Construction Quartermaster only made a 20% field and time check as of May 30, 1941. It is apparent from this comparison that the Ferguson-Oman Company employees performing these particular functions were not overstaffed. These employees were necessary for the proper progress of this defense project, and performed valuable services for the protection of the Government's interests. W. A. WALSH. Sworn to and subscribed before me, this 26th day of November, 1941. [SEAL] WINFRED H. LANCASTER, Notary Public. Registered as a Notary Public in Henderson, Carroll, and Gibson Counties, Tenn., as provided by Chap. 193, Public Acts of Tennessee 1935. My Commission Expires July 10th, 1945. AFFIDAVIT No. 135 AFFIDAVIT I, J. F. Baer, make the following voluntary statement. I am employed as purchasing agent by the General Tire Engineering Company at Flora, Mississippi. I was formerly employed as assistant purchasing agent by the Ferguson Oman Company at Milan, Tennessee. While with the Ferguson Oman Company I shared an office with A. L. Foltz, another purchasing agent, who was living with George Bowdin, a salesman representing the Keith Simmons Company, a building hardware and mill supply wholesale house. In connection with the large number of sales made by this company to the projects at Milan, I wish to describe certain transactions that I observed. Mr. Foltz on one occasion awarded twenty to thirty purchase orders each for less than $500 to the Keith Simmons Company. Better prices could, no doubt, have been obtained if the items covered by these purchase orders had been grouped together and bids obtained on the entire lot. Mr. Bowdin, the salesman, mentioned above, spent much of his time in our office. On one of his visits, I left the office and on my return found Mr. Bowdin examining the bids of competitors which were on my desk. With this information, he then submitted a bid one-quarter of a cent lower than any of the other bidders. However, in this instance, his improper action did not benefit his company because I prepared a recommendation which I forwarded to Lieutenant Bruce suggesting that the second low bid be accepted because it was actually the lowest legitimate bid and this recommendation was followed. On another occasion, I was handling the requests for bids on building hardware and did not ask Keith Simmons Company to submit a bid in view of the fact that they were not meeting the delivery requirements under another contract for similar materials. When I was prepared to make the award, Mr. Foltz found that the Keith Simmons Company had not submitted a bid and immediately took over this transaction. He postponed the bid opening date and I noticed later that the Keith Simmons Company secured this contract even though they were in default on their contract. |