Mr. ROONEY. You are the first one today to so apologize. We had an item here a while ago which was turned down only 7 days ago by both the House and Senate. Admiral TISON. The need for this supplemental developed only because the original contractor defaulted and the remaining available funds are insufficient to cover the completion of our ship construction program for which funds had been appropriated. The ships involved are the Fairweather and Rainier, for which a total of $9,435,000 was appropriated in fiscal years 1962 and 1963. On November 19, 1962, a contract was awarded to the Marietta Manufacturing Co., Point Pleasant, W. Va., for $6,822,458 to construct these two ships. The contract delivery dates originally prescribed were November 18, 1964, and March 18, 1965, respectively. Due to the contractor's financial difficulties, addendum No. 1 to the contract was issued on July 1, 1963, which provided for the establishment of a controlled account with a Navy AGOR/AGS contract, and extended the delivery dates to February 18, 1965, and April 18, 1965, respectively. Due to a labor dispute at the shipyard, the delivery dates were further extended to August 30, 1965, and October 28, 1965, respectively. This dispute lasted from October 1, 1963, until February 8, 1964. Soon thereafter, when it became apparent that the contractor would not be able to complete these ships, the Maritime Administration terminated the contract. I am convinced that before the contract was terminated, the Federal Government had provided every reasonable means of assistance to the contractor to carry out his responsibilities under the contract. As of November 18, 1964, when the contract was terminated, $1,069.000 had been paid the contractor. Of this amount, $972,000 was expended by the contractor for purchase of material and the contractor's design agent's fees. The remaining $97,000 was expended for labor. Physical progress on the construction of the ships was about 1.5 percent. Based on bids which were opened March 3, 1965, a new contract was awarded the Aerojet-General Shipyards, Inc., of Jacksonville, Fla., for $7,308,542. While this amount will complete the construction, the total cost of the ships, including contract supervision, payments made to the defaulted contractor, plan approval and outfitting is $11,121,889, which is $1,686,889 over the amount previously appropriated, and for which this supplemental request is made. The approval of this appropriation request will not result in a permanent additional expenditure on the part of the Government. It may be considered as an interim loan, pending final resolution of action which is being prepared by the Government to recover all losses from the surety bond organization, as a result of default by the Marietta Manufacturing Co. When these funds are recovered, they will revert to the U.S. Treasury. Your favorable consideration is requested. That completes my statement, Mr. Chairman. REASON FOR SUPPLEMENTAL REQUEST Mr. ROONEY. How much is unobligated in this account at the present time? Mr. AMSTADT. As of June 30, Mr. Chairman, there was $11,705,000 unobligated. Mr. ROONEY. When was the contract terminated? Admiral TISON. November 18, 1964. Mr. ROONEY. Then the $64 question is, Why was this not included in the regular 1966 budget? Admiral TISON. I do not know that I can answer that question, Mr. Chairman. Do you know, Mr. Amstadt? Mr. AMSTADT. No, I do not, sir. I think it was still in the state of negotiation with the contractor. Admiral TISON. Our agent on all this construction is the Maritime Administration. If I might refer this question to Mr. Stover, the Project Manager of the Maritime Administration, he is here. Mr. ROONEY. This contract was terminated November 18, 1964, and the Department was up here in March 1965. Admiral TISON. Yes. Mr. ROONEY. It could have been included at that time. If anybody wants to address himself to this, he is perfectly welcome. This would make this not a proper supplemental. Admiral KARO. I am the former Director of the Coast and Geodetic Survey and now Deputy Administrator of ESSA. I have appeared before you many times. Admiral KARO. I am trying to explain, to the best of my information and knowledge, what happened on this. We were negotiating with the bond surety, hoping that they would pick up and complete the ships. When they would not, we were forced to go out on bids to determine what it would cost to complete these ships. It was not until that bid was received that we were able to determine the amount which would be needed to fulfill the contract. That is why the interim time. Admiral TISON. These new bids were opened on March 3, 1965. REORGANIZATION Mr. ROONEY. By the way, your appearance here, Admiral Karo, reminds me about this so-called reorganization under which we were going to save money. Admiral KARO. There are administrative areas where we are consolidating the administration of the constituent components. Mr. ROONEY. We were going to have a new head of the Coast and Geodetic Survey, and a new head in the Weather Bureau Admiral KARO. Admiral Tison served as my deputy when I was the head of the Coast and Geodetic Survey. Now he has been made Director of the Coast and Geodetic Survey, one of the major constituencies of the new Administration. Mr. ROONEY. If we keep reorganizing, we will wind up with all generals and admirals. There will be no troops. Admiral KARO. No. Mr. ROONEY. That would be conceivable. |