GENERAL SITE DEVELOPMENT FACILITIES Mr. GORE. I am impressed with the enormous amount for general site development facilities, $112 million for general site development facilities. That does not include the production plant; it does not include the processing facilities. General site development facilities, that is, $112 million, and if you will excuse the expression, that is a tremendous amount of money to put under general development. PUMPING STATIONS Mr. Cook. It includes all utilities outside of the manufacturing areas themselves. For instance, it includes a river pumping station, furnishing all the cooling water for the operation of the plant facilities. Mr. GORE. How much would the pump cost? Mr. Cook. The pump station has a capacity of 700 million gallons. a day. Mr. GORE. Yes, I read that. Mr. Cook. That is equivalent approximately to the requirements for three-fourths of the needs of a city like New York. It has requirements for approximately a billion gallons of water a day. That gives you some idea of the magnitude of just the water facilities, the pumping stations to provide the cooling water for the total operation, which includes the operation of the pilot plant Mr. GORE. How much would the pump station cost? Mr. NELSON. The pump and water lines cost $62 million. Mr. GORE. Pump and water? Mr. NELSON. The water line, distribution line. Mr. GORE. $62 million. Mr. NELSON. Yes. Mr. GORE. It seems to me that an item of $62 million for a water system could well have been set out here for the enlightenment of the committee. Mr. Cook. It is set out in the plant-equipment book that we gave you. Mr. GORE. I got that this morning, just 5 minutes before the meeting I believe that is it-maybe I have not had it yet. Mr. Cook. That is on page 37. Mr. GORE. I could not very well be expected to know that it was on page 37, having had no opportunity to look at it, but I am glad to know that it is broken down. Mr. Cook. It is completely broken down on page 40. Mr. GORE. What is the next general item under general site development? ELECTRIC POWER STATION Mr. Cook. The next two largest items, the substation for the electric power system, including a complete distribution system for the whole area integrated with the power system of the manufacturing facilities. The next largest item is the railroad system. The next largest item is roads and bridges for the whole area. SERVICE BUILDING Mr. GORE. I notice you have a service building and headquarters, $24 million; $24 million ought to build a lot of service buildings and headquarters and supporting facilities, whatever they are. Mr. Cook. They are covered on sheet No. 36-that is under the project, general service, plant assistance and process development facilities. Mr. GORE. It also includes landscaping and walks and sidewalks, grading, culverts, and other items under general site development. I do not think you have underguessed that $112 million. I had thought that $1 million plant would be a large plant, but $112 million just for site, which probably includes the pumping station Mr. Cook. It includes all the services of utilities to the operating area, the fabricating area, and so forth, as covered under project "General site development and river water pumping systems" on pages 38 through 40. Mr. GORE. Does this include water mains? Mr. Cook. Yes. Mr. GORE. Electric conduits? Mr. Cook. Yes. Mr. GORE. Does it include transformer substation? Mr. Cook. It includes a complete electrical distribution system, outside the plant manufacturing areas themselves; the primary system and the network to the manufacturing area. Mr. GORE. Is it spelled out in this book? Mr. Cook. It is spelled out on page 38, a description of facilities and utilities involved in the central general site development. Mr. GORE. Why would a fire alarm and telephone system, sanitary sewer lines, storm sewers, why would they be under a secret classification? Mr. Cook. They would not have to be. We just tried to have a continuity in presentation of information along with the classified information. We could label these sheets as they actually were when we present them, but that is the only reason it was classified. Mr. GORE. I thought there must be some Mr. Cook. In the major manufacturing areas; we do get down to the classified part. PREMIUM PAYMENTS Mr. GORE. We will go into another item. I was impressed with the statement in your justification, one reason why the project was so expensive was the necessity of making premium payments for materials. I thought that we had authorities, priorities, under which you would not have to make premium payments for essential projects. PREMIUM PAYMENTS FOR MATERIALS Mr. Cook. The priority for materials does exist; however, if you are asking a manufacturer to produce materials on a forced-draft schedule, and he in turn must pay overtime, those are the premium payments involved. Mr. GORE. Are you exempt from the public contracts acquisition laws so that you can do that? Mr. Cook. Well, it is part of the total cost of the work on which he bases the price to us. Mr. GORE. Who determines whether he is going to have to work under forced conditions? Is that determined by you, by him, by the labor organization with whom he contracts, or by all three? Mr. Cook. No; it is determined by the requirements to receive materials by a given date to construct and place in operation a facility by a given date, and when you procure those materials you establish the delivery dates when you need those materials to go into the construction. Mr. GORE. Do you think the priorities system of handling that would not be sufficient to handle that problem without paying premium rates? Mr. Cook. The priority system assures you of materials and a position in the manufacturers' schedule; it does not by itself always assure you of having the materials manufactured into finished products. by given dates. Mr. GORE. Can you give us an exact example of a premium payment which you have made or contracted to make? Mr. Cook. Mr. Nelson. Mr. NELSON. I can give you an example which may be a little bit hypothetical because I do not remember offhand an exact example. Mr. GORE. Have you made any premium payments? Mr. NELSON. Yes, we have. Mr. GORE. Why would you not remember some of them? PREMIUM PAYMENT ON PUMPS Mr. NELSON. Well, for instance, we did make premium payments on pumps. We take bids on pumps from all the reliable vendors of pumps that we know of, and ask them not only for a price, but for a delivery date. In fact, most of them at the present time put in an escalation clause if they are to produce those by the time we need them. It is usually a shorter period of time than would be required for normal operation. Mr. GORE. Have you entered into such a contract with a pump company? Mr. NELSON. Yes, sir. Mr. GORE. What company? Mr. NELSON. The Worthington Pump Co., I think, for some. There are probably others. Mr. GORE. In what amount was the premium payment? Mr. NELSON. I do not remember but the escalation clause on a percentage basis usually is 10 percent or less. Mr. GORE. Are they standard equipment, standard products of the company? Mr. NELSON. Not usually, no. The pumps we need, for instance, are much larger than you would ordinarily require. Mr. GORE. What other type of premium payments have you contracted for? Mr. NELSON. In materials? Mr. GORE. Any kind of premium payment. PREMIUM PAYMENTS FOR LABOR Mr. NELSON. In order to meet our schedules on labor, for instance, we are now working five 9-hour days, which is 45 hours a week. So, we are paying a premium for that extra 5 hours in labor. Mr. GORE. What other kind of premium payments are you making? Mr. NELSON. The escalation in materials and on labor, time and a half for labor. Mr. GORE. Give me some more examples. If you have made others you ought to remember them. Mr. NELSON. Well, in metal materials. Mr. Cook has mentioned warehouse materials and pipe, and any type of metal materials require premium payments. Mr. GORE. I thought you just told us PREMIUM PAYMENTS FOR STRUCTUAL STEEL Mr. Cook. Where you buy material from a warehouse where it is carried in stock, like pipe and structural steel and you purchase that until you can get deliveries from the mill manufacturers, generally the payment that you make for warehouse material is considerably higher per ton or foot of pipe than it is from the normal source of supply. You only buy such an amount of that material as you need to keep yourself going until you can get it from the normal source. That is an example of premium payments. Mr. GORE. Have you made premium payments to contractors to make premium payments for structural steel? Mr. NELSON. We do. Mr. THOMAS. Mr. Boyer, have you examined this premium payment business? Mr. BOYER. I am familiar with the fact that when you want to meet a time schedule and get material from a storehouse that before you can get it you do have to pay a premium. Mr. THOMAS. Does not the price control law govern that? Mr. Cook. The price control law allows the warehouse price, which is generally higher than the normal mill price. Mr. YATES. Do you pay a premium price on top of the warehouse price, or do you pay the warehouse price? Mr. Cook. No; the warehouse price. Mr. GORE. Mr. Boyer, under what circumstances would you be justified, having price control and the priority system at the disposal of the Commission, in paying a premium price for structural steel? Mr. BOYER. This very largely had to be paid at Dana for the chemical processing plant, and that was being pushed at a time when price control and priority controls were not effective. I believe that is true, is it not, Mr. Nelson? Mr. NELSON. Yes. Mr. BOYER. Dana is fundamental to getting this process going because Mr. THOMAS (interposing). Did you ever call upon Mr. DiSalle and his enforcement agency? Mr. BOYER. He was not in office at that time when we were faced with this problem at Dana. Mr. GORE. He has been in office for about a year, has he not? Mr. BOYER. No. This was started last July when we ran into this problem. That was before he was here. Mr. GORE. Well, I will ask you another question, have you made, or contracted to make, premium payments on structural steel in the last 6 months? PREMIUM PAYMENTS ON ORDERS UNDER $10,000 Mr. NELSON. I do not think so. I do not recall any instances in the last 6 months. Of course, there are a number of smaller orders which I do not see personally, but I do not think so. Mr. GORE. Who would see these smaller orders, and who would determine whether a premium payment was to be made? Mr. NELSON. For instance, we delegate to the contractor authority to go ahead with orders of less than $10,000. Mr. GORE. He has authority to make premium payments? Mr. GORE. Well, if you give him that authority, if you give him authority to go ahead with items of less than $10,000, would that include the authority to make premium payments to get structural steel, pipe, cement, and such other materials as he might need? Mr. NELSON. Only if he showed justification for it. Mr. GORE. Well, you just said you did not see those small items. I asked who makes the determination, and in answer to that you said the contractor would. Mr. NELSON. My staff sees them eventually. We review these, and if they are not fully justified we, of course, take it up with the contractor. Mr. BOYER. I think I can answer that question by saying that if the contractor, in his judgment, felt it was necessary to pay a premium within his $10,000 range, in order to meet a time schedule set up, he would have that authority. Mr. PHILLIPS. And is he subject to post audit then as to that? Mr. NELSON. Yes, he is. Mr. PHILLIPS. Can you strike off that premium payment if you think it is unjustified? Mr. GORE. He just said, Mr. Phillips, that he had authority to go ahead and pay it. I think we may be getting into one reason why you have missed your estimate so much. I have heard lots of reports from both Savannah and Paducah that men and prices are running wild, that a lot of people are standing around with their hands in their pockets drawing overtime, and they are not even assigned to a specific job, and that there are a lot of equipment sellers who are very careful to get their material into warehouses before they price it to you. Maybe the Government is being held up here. I do not wish to make any charges, but this business of premium payments being made on structural steel, and then giving the contractor blanket authority to go ahead and make premium payments on contracts up to $10,000 if he thinks it is necessary should be looked into. He may think it is necessary to make a premium payment on cement, and it may be in a warehouse 10 miles away waiting for him. Somebody may have known he was going to need it. This business needs looking into. Mr. YATES. How much in premium payments is wrapped up in this estimate? Mr. BOYER. Do you have the answer to that, Mr. Cook? Mr. THOMAS. You are confining that question to material, or do you want it for premium payments for labor and material? Mr. YATES. For the whole construction job. |