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Mr. BOYER. I would like to emphasize the fact Mr. Nelson stated: that we are doing just that. We are scrutinizing

Mr. THOMAS. But we have not gotten any results. The more you scrutinize, the more our deficit goes up.

Mr. BOYER. I would like to make it clear that this estimate is still an order-of-magnitude estimate. If you want a precise engineering estimate, you would delay a program such as this probably from 18 to 24 months. So that we are faced with driving as fast as we can. That means the construction work, the design work, and procurement have to be telescoped so that you do not have the finished engineering designs on which to base your estimate. Therefore, these are orderof-magnitude estimates today. We are going to exert our best effort to make these structures economical without unnecessary refinements.

URGENT NATURE OF ATOMIC ENERGY DEVELOPMENT

Mr. THOMAS. Who is putting all that pressure on you now to go out and pay all of these premiums for steel and metal? What is the urgency? Who is putting the heat on, so to speak, that you have to go out and pay premium prices for steel and metal? I guess you are doing it for concrete and cement, too, besides steel.

Mr. NELSON. No.

Mr. Cook. The concrete for the Savannah River project is purchased under a unit price contract resulting from competitive bidding. Mr. THOMAS. Which industry of the country is competing in the cement industry?

Mr. Cook. The ready-mixed concrete industry. The successful low bidder for furnishing ready-mixed concrete in turn procures the cement and coarse and fine aggregate to make concrete. We do not buy the cement on that project.

Mr. NELSON. Those bids varied from, say, $10 to $18 per yard of

concrete.

Mr. THOMAS. How do you get those bids-by public advertising, negotiated bid, or what?

Mr. NELSON. We send out invitations to bid to the companies which are competent to handle the job.

Mr. THOMAS. Who does that-the prime contractor or the Commission?

Mr. NELSON. The prime contractor does it with our cognizance. Mr. Cook. And the award is approved by the Commission after review of the tabulation of bids, analysis, and recommendation.

Mr. BOYER. Mr. Thomas, you asked a question that I do not think I answered; that is, who is putting the pressure on us to get this project completed. I would say the Commission and the Congress. I must be out of date if I am not aware that there is tremendous pressure for us to build up our atomic resources, certainly within the approved program, as rapidly as we can. And we are exerting every effort to complete this program just as early as we can. Mr. THOMAS. I think you are right to the extent that the country is certainly willing to make the expenditure to do everything within reason so far as the production of atomic weapons is concerned. My point is going out and paying premiums for this and paying premiums for that, this, and the other. Letting your costs go sky

rocketing is a different proposition. As a matter of fact, too much haste is the best breeder of waste that I know of.

Mr. Cook. We do not go out and pay premiums indiscriminately; we only pay premiums in isolated instances, so that by the payment of that premium the total job will not suffer, which, in the long run, is

an economy.

ESTIMATES FOR PREMIUM PAYMENTS

Mr. THOMAS. Can you compile the total figure and with some reasonable breakdown as to the amount of premium dollars you have paid for material costs so far in your operations? How much have you contracted for? Have you contracted for the whole $695 million you now have on this project?

Mr. Cooк. Oh, no, sir. It is a small percentage of the total. We will try to break it out for you.

(The information is as follows:)

The amounts provided in the estimated cost of the Savannah River construction project for so-called "premium" payments have reference to the following: 1. Labor. These "premium" payments are included in the estimate to cover overtime payments to the labor forces during the life of the construction project where work in excess of an 8-hour day or 40 hours per week is required. At the present time all crafts are working on a 45-hour week. It is anticipated that in the near future the workweek will be extended to 54 hours. The present 45-hour workweek consists of five 9-hour days. The 54-hour workweek will consist of six 9-hour days. The amount included in the current estimate for such overtime payments amounts to $70,400,000 based on the total estimated cost for direct field labor of $330.5 million for a standard workweek. Through August 1951, $4,365,902 premium payments have been made for labor.

2. Materials.-"Premium payments" in connection with materials costs refers to amounts paid to manufacturers of materials and equipment in cases where it is necessary for such manufacturers to work overtime hours to complete and deliver materials to meet tight construction schedules. It also covers procurement from warehouse stocks, rather than from manufacturers or mills, to obtain required deliveries. Before applying to NPA for a directive for material or equipment from a manufacturer, all other practical means of securing the required deliveries must have been exhausted.

Warehouse stocks referred to are those held by firms which procure various sizes of pipe fittings, structural steel, etc., for resale to construction contractors or manufacturers who ordinarily procure in smaller lots. Since the cost of procurement from wholesalers is slightly higher than direct procurement from manufacturers or mills, the difference in the price paid for those materials procured from these wholesale distributors is referred to as "premium."

Total orders placed for materials and equipment on the Savannah River project up to September 13, 1951, amounted to $182,032,096. “Premiums" authorized against this total procurement amounted to $372,370, of which $333,291 has been paid to date. It is estimated that the total of such "premium payments" on the purchase of materials and equipment for the entire project will amount to approximately $700,000 as compared to a total estimated cost of equipment and material of $468,261,960.

SCHEDULED OBLIGATION OF FUNDS

Mr. THOMAS. I asked had you contracted or allocated the entire $668 million that is presently available for this project, or committed it.

Mr. Cook. I can give you the scheduled obligations. At the present time, by the end of September, our total expenditures and commitments will exceed $310 million; by April our total expenditures and commitments will be $699 million or a little bit greater.

Mr. THOMAS. I believe you state in your justifications it is anticipated that the presently appropriated funds will be fully committed by the contractor by the early spring of 1952. I presume that is the April date you gave.

Mr. Cook. That is right. Our present experience is running about 20 percent higher than the two figures I quoted you.

Mr. THOMAS. What is going to happen to your Paducah project in the way of cost?

Mr. Cook. At the present time we have no reason to believe it will be any higher than the present estimate. However, that estimate was not based on increases in labor and materials, and the experience since 1942 has been that the construction cost indexes have increased a little better than 11 percent per year. We will try to complete the job within the estimate, but we have no control over increases in material and labor costs

Mr. THOMAS. Mr. Boyer, you have a price ceiling, and I think if you pursue that issue long enough and hard enough, you certainly can limit the vast majority of your premium payments for materials.

Mr. Cook. I think the impression has been gained that we spend a lot of money in premium payments. The major portion of the money spent in premium payments is for working more than 8 hours a day or 40 hours per week. It is primarily all in labor. The premium payments on material as a whole are very small.

Mr. THOMAS. You gave us a figure of $70 million you have spent so far in premium payments for labor.

Mr. Cook. No. That is the total it is estimated it will cost us for the whole job.

Mr. THOMAS. Do you have any estimate for premium payments on material?

Mr. Cook. We do not have that.

Mr. THOMAS. Your materials are costing you about 40 percent of the total, and the labor bill is costing you only 28 percent. Would it be a fair assumption on that basis to say you are going to pay over $100 million in premium payments for material?

Mr. Cook. No, sir. The premium payments on material will be a small percentage.

Mr. THOMAS. Mr. Boyer, do you not think you can get a staff of engineers and architects and go over these plans and cut down some of those refinements and some of those gadgets that may be highly desirable if you were going to be in business for the next 50 or 60 years, but under present conditions you could reduce not only the scope and magnitude but cut out some frills and fads that are in there.

Mr. BOYER. As I say, we are making a very real attempt to do that with the people we have available.

Mr. THOMAS. I am talking of the estimates you have here before you.

Mr. BOYER. You mean can we reduce this estimate?

Mr. THOMAS. Yes. Cannot you reduce this estimate 10, 15, or 20 percent by a reduction in your plans and specifications?

Mr. BOYER. I do not think we can reduce them 15 or 20 percent below what are given here. We are going to make this as low cost a job, and still do the job that is expected of the plant, as we can. Now, irrespective of whether you appropriate more money than that or not

Mr. THOMAS. Well, every estimate we have gotten so far has been anywhere from 75 to 125 to 200 percent higher than the estimate you figured in December 1950.

Mr. BOYER. I think it was made clear then, as the chairman (Mr. Dean) said, that we hoped not to be held to those figures.

(Discussion off the record.)

Mr. BOYER. This is the first time we have what we might call an estimate. It is an order of magnitude estimate. If you change the scope of this and decrease the size of the plant, then you can reduce the cost, or if you change the scope and enlarge it, you will increase the cost. We, as I say, are making our best effort to get unnecessary refinements out of these structures you are talking about. We have taken seriously the admonitions you gave us before.

I would just like to add again that the limitations put on us personnelwise are hurting us today in carrying out this job. Mr. Nelson would like to have more people at Savannah.

COMMENTS ON REPRESENTATIVE WHEELER'S INSPECTION OF SAVANNAH

PROJECT

Mr. THOMAS. That reminds me. Did you see that article written on an interview given by Congressman Wheeler, of Georgia?

Mr. BOYER. I heard about it.

Mr. THOMAS. That he went down on the job and a large percentage of the people on the job were not working. I presume that is no fault of the people on the job. If the work was not there to be done, if it was not properly planned and supervised, why, they could not put in their time usefully during working hours. But that is no fault of theirs. He was down there, and he said half of them were sitting around doing nothing.

Mr. BOYER. I gather from what the article said he did not go inside the project, and he more or less looked through the fence. I think the facts, of course, show there is work being done.

Mr. THOMAS. Of course, a man can see through the fence whether men are working or not; can he not?

Mr. BOYER. He cannot see over 200,000 acres.

Mr. Cook. Mr. Wheeler only saw a small portion of the job. He did not see that portion of the job in the main manufacturing areas. Mr. THOMAS. Were you there?

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Mr. Cook. I know what he saw.
Mr. THOMAS. I say were you there?

Mr. Cook. I was not there when he was there.

Mr. THOMAS. Then you certainly do not know what he saw; do you? Mr. Cook. Mr. Nelson was there, and he can repeat the same words to you.

Mr. THOMAS. Did Mr. Wheeler call upon you, Mr. Nelson?

Mr. NELSON. Mr. Wheeler came to the du Pont office, the head office, and to some of the duPont personnel he said he had been out driving around. He was asked whether he wished to see the manager, and he did not.

Mr. THOMAS. I do not know whether it is very commendable of you gentlemen down there to back up what is going on, when everybody who goes down there comes up uniformly with the same report, and that report is very, very ugly, that it is very wasteful; people are sitting around doing nothing. It is not the fault of the employee that he is not out doing work if he does not have the necessary supervision and leadership to tell him what to do. You cannot blame him.

Mr. NELSON. I see that job almost daily, and in my experience I have not seen a job of such magnitude as this one is that was better supervised or better planned than this job. I cannot understand these reports.

Mr. THOMAS. Well, there certainly is a sharp disagreement there between you and some other people.

Mr. NELSON. I would be happy to have any competent engineer come down and give him his freedom; I would be glad to take him through and show him everything in order that he could make an appraisal. In fact, we have offered to take Mr. Wheeler through, but he did not want to be taken through.

Mr. THOMAS. I have been, I suspect, through a whole lot more Government projects than you have been through, regardless of your good efforts with the Corps of Engineers, and all through World War II. I went through hundreds of them and I have yet to see one that was right on the ball without 15 to 20 percent more waste than any private concern, if it were spending its own money, would have. And I think that is more or less axiomatic throughout the country. At least, if it is not true, you are not going to change John Q. Public's view on that.

Mr. NELSON. I would like to say that every day we take what is called a head count to see who is working and who is not working, who is engaged and who is not.

Mr. THOMAS. What I am talking about is that you have 100 men on the job and perhaps 75 or 80, if they utilized their time, would do the job and do it better than the 100 would do it. That is the point John Q. Public is talking about.

Mr. BOYER. I would like to make one point; that is that you have not in the Government a more loyal and conscientious group trying to do a job as best it can be done than you have here.

Mr. THOMAS. I think you are right about that.

Mr. NELSON. The point I would like to make is that this head count which does tell the number of people working at a given time as compared to du Pont's private jobs compares favorably with their private work. I think this is one of the best jobs I have seen.

Mr. THOMAS. Did the Commission make an error of 100 percent in its original estimate of cost of the project?

Mr. BOYER. This estimate now given by du Pont is approximately 100 percent greater than the initial estimate made by the Commission. But, again, remember that was a projection to get this project started, made without the benefit even of knowing the site on which we were going to put it.

Mr. THOMAS. You know, when you design a building of that type and magnitude, it does not make any difference whether it is on 250,000 acres of land or 5,000.

Mr. GORE. Or in Georgia or South Carolina.

Mr. THOMAS. That is right.

WORKING RELATIONSHIPS BETWEEN CONTRACTORS AND AEC

Mr. YATES. I did not get the answer that the witness gave to the chairman's question of what is the relationship between the Atomic Energy Commission, its prime contractor on the Savannah job, and the subcontractors. Who makes the estimates and lets the bid?

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