Mr. Cook. I think there are two separate questions you have asked. In this instance, for this budget presentation, the estimate was prepared by the prime contractor with the assistance of the subcontractors, reviewed by duPont, reviewed and checked by the Commission

Mr. YATES. Let me interrupt just a moment. You say prepared by the prime contractor with the assistance of the subcontractors and reviewed by du Pont. Does that mean du Pont is your prime contractor?

Mr. Cook. That is true. The subcontractors have prepared certain portions of the over-all estimate. This estimate is assembled, and the balance of it is prepared by du Pont. They review the total estimate and submit this estimate to the Commission. It is then reviewed by Mr. Nelson's organization, and where there is any difference of opinion, the estimate is changed until it is mutually agreeable to both. The estimate is then submitted to the Commission in Washington where it again receives review. This budget is then prepared and submitted to the Bureau of the Budget. The Bureau of the Budget, in turn, reviews it before it is submitted by the President to Congress. Mr. YATES. When you speak of the prime contractor, other than duPont, whom do you mean? Who is the prime contractor on the job?

Mr. Cook. The prime contractor for design engineering and construction as well as later operation is the du Pont Co. They, in turn, subcontract parts of the engineering to firms that specialize in particular fields. They also, in turn, subcontract parts of the construction to firms that are specialists in the various phasis of construction. But they are responsible for the over-all management and coordination of the engineering and construction.

Mr. YATES. Were these contracts let on a negotiated basis or on a bid basis?

Mr. Cook. The prime contract with du Pont, as you know, was on a negotiated basis. They in turn negotiated contracts with specialist engineering firms for certain phases of the work in design and engineering. On the construction, portions of it are negotiated and portions of it are the result of competitive bids on unit prices or a lump-sum basis. The procurement is primarily let on a competitivebid basis.

Mr. NELSON. I think almost without exception the construction bids are on a competitive basis.

INVITATIONS TO BID

Mr. YATES. Are those invitations sent out by du Pont or by the Atomic Energy Commission?

Mr. Cook. The invitations to bid are issued by the du Pont Co. The du Pont Co. then receives proposals, analyzes the proposals, and recommends to the Commission the firm submitting the lowest proposal in response to the requirements of the invitation to bid.

Mr. YATES. Was your initial estimate on this job made in consultation with du Pont?

Mr. Cook. The initial estimate was prepared prior to du Pont's coming in on the project.

Mr. YATES. And was not made in consultation with them?

Mr. Cook. That is right.

Mr. YATES. How extensive are du Pont's invitations to bid? Do they go to a few people, or do they go to many people?

Mr. Cook. It all depends on the type of work involved.

Mr. YATES. I can understand that for specialty work there may be a limited number of firms, but what about construction?

Mr. Cook. They issue invitations to all firms who specialize in that type of work and who, by reason of past experience, are qualified to undertake it.

Mr. NELSON. In some cases, there are over 100, while in some specialty work there perhaps would be only 15 or 20.

Mr. YATES. Have you any idea as to what portion of the entire justification is represented by contracts under $10,000?

Mr. Cook. You would have to break it down. Even though some of the subcontracts are a larger figure, they in turn procure and quite a bit of their procurement is under $10,000. We do not have that figure here at this time. We can prepare an estimate and submit it

to you.

Mr. YATES. The reason for my question, I think, is fairly obvious, inasmuch as du Pont is given carte blanche to do anything it wants with contracts under $10,000.

Mr. Cook. They are not given carte blanche. We have a contract procurement policy, and they follow that policy in their procurement; and, whenever there is a contract of less than $10,000 which is not within the terms of the policy, they check with the manager of the operations office prior to making the award.

NUMBER AND AMOUNT OF PREMIUM PAYMENTS ON CONTRACTS

UNDER $10,000

Mr. YATES. If I understood your previous testimony, insofar as premium payments are concerned, contracts under $10,000 regularly now provide for such a provision without prior consultation with the Atomic Energy Commission?

Mr. Cook. Yes; to make such payment, to keep the job on a coordinated basis or on schedule. Most of the time they ask approval

of the manager.

Mr. YATES. The last sentence on page 13 of the secret justifications states that, referring to the scheduling of plants on the secret side, it is costly to make premium payments for material.

In regard to your testimony as to the premium payments for overtime where work would be done for such purpose, have you any idea as to what the total amount of premium payments might be?

Mr. NELSON. We can get those figures for the record, if you would like.

Mr. GORE. Also show for the record anything that you include on premium payments that have been made on the Savannah project. Mr. NELSON. Yes.

Mr. YATES. Could you also furnish us a statement of the gross amount of the contracts under $10,000 that have been let?

Mr. Cook. We can do that.

Mr. YATES. The gross amount and the number of contracts?
Mr. Cook. Yes.

(The information requested follows:)

PURCHASE ORDERS OF $10,000 OR UNDER ISSUED AT THE SAVANNAH RIVER OPERATIONS OFFICE BY EITHER THE PRIME CONTRACTOR OR COST-PLUSFIXED-FEE SUBCONTRACTORS

Through September 13, 1951, purchases made under $10,000 number 15,798, for a total dollar value of $15,395,048. These amounts do not include procurements made by lump-sum or unit-price subcontractors which they have awarded as a result of competitive bids.

LAND-ACQUISITION COSTS

Mr. YATES. At the time of the initiation of the project, survey teams were sent out to the Savannah location, and put in estimates as to the cost of the land; is that right?

Mr. Cook. No; there was no special survey team to specifically determine the cost of the land.

Mr. YATES. There were survey teams sent out, a part of whose duty it was to make a report on the cost of land, the estimated cost of land?

Mr. DEAN. There was a survey team that went over some five different sites, and came up with the data on those sites, and included in that data was an estimate as to the cost per acre at Savannah. That was the basis on which Mr. Thomas was given the information of the cost per acre.

Mr. YATES. Was that estimate which was given to you predicated upon actual inquiries in the area?

Mr. DEAN. I do not recall the data they had available.

Mr. Cook. There was no interrogation.

Mr. YATES. How did they arrive at the figure you testified to?

Mr. DEAN. May I ask Mr. Williams to discuss that?

Mr. YATES. Yes.

Mr. WILLIAMS. When they made their estimate, they made the estimate based on presurvey of the land; and they were told not to make it public and not let it be known we were interested. We had to handle it that way. When they made the estimate, they had to make the estimate on the basis of what they saw, the type of land it was, the type of soil, and at the time they were going over the land they did not take into account the fact that there were a number of small towns on it. We now have to go in and buy the improvements in those towns. That, of course, was not included, and results in increases in the present estimate.

The original estimate was a very rough estimate, without taking it up with the local people in the area which would probably have resulted in bidding up, if we let them know we were interested in the land in that vicinity.

Mr. YATES. When did you first get a realistic idea as to what the cost of the land was going to be?

Mr. WILLIAMS. After the Corps of Engineers-first let me say this: That, when we first made the estimate on the cost of the land, the actual estimate of requirement of land was considerably less than it is now.

Mr. YATES. The total acreage?

Mr. WILLIAMS. The total acreage, because we had hoped we would be able to get by with less land; we thought we might be able to get by with something like 150,000. That is the first item that has been changed.

Mr. YATES. What is the difference in the total acreage?
Mr. WILLIAMS. It is about 33% percent.

Mr. YATES. In total acreage?

Mr. WILLIAMS. After they had made the first trip and found out that Ellenton and a few other little towns were there, and after the committee looked over the design, it was apparent that we had to take in additional area that was not included; so, that boosted the price beyond what it was when they made the first estimate for this plant. And, I would like to go off the record for a moment.

(Off-the-record discussion.)

Mr. YATES. What portion of the land on which this estimate is based is to be used exclusively for the plant as opposed to community facilities?

Mr. Cook. There are no community facilities in the entire site to be constructed and to be operated by the Atomic Energy Commission. Mr. YATES. Is it contemplated that at a later date an appropriation will be requested for community-facilities development?

Mr. Cook. To the best of our ability, we will avoid any operation of any community facilities at the Savannah site.

Mr. YATES. What portion of the acquisition of land has been acquired by agreement and what portion through condemnation proceedings?

Mr. Cook. I have that table. There are 1,500 tracts; to date, only 74 tracts have been acquired by condemnation, and that has not been on the basis of price alone, but some have been to clear title: The condemnation to date is approximately 4.9 percent of the total. Mr. NELSON. It looks like it might run to 10 percent, I should say. Mr. YATES. Ten-per-cent condemnation?

Mr. NELSON. Yes; and that includes condemnation where title is not clear, not necessarily disagreement on the price. We must condemn if the title is not clear.

Mr. YATES. Are your purchases predicated upon appraisals in each instance?

Mr. Cook. The appraisals are made by the real-estate department of the Corps of Engineers, having many years' experience in acquiring land. The appraisal is presented to the owner, which he can either accept or reject. To date, there has been 748 appraisals made and 549 have been accepted.

Mr. YATES. Have the purchases been in accord with the appraisals?
Mr. Cook. Yes; there has been payment completed on 351.
Mr. YATES. On the basis of the appraisal price?

Mr. Cook. Yes.

Mr. NELSON. One price is given; it is not negotiated. There are two independent appraisals made; they make two appraisals for each tract of land, without either one knowing what the other has appraised it at.

Mr. YATES. Has the price increased much since the project was announced?

Mr. NELSON. Yes; it has gone up a little, but not significantly. The price of land near the project has been up.

Mr. YATES. But these increases in price are not reflected in the actual purchase of the land?

:

Mr. NELSON. Very little. Of course, it does bave some effect, because these people must go out and buy land to replace what was taken.

REVIEW BY AEC OF CONTRACT AWARDS

Mr. YATES. What check is made on the accuracy or propriety of the bids received and awards made by du Pont, by AEC?

Mr. NELSON. That is investigated in detail.

Mr. YATES. Each contract?

Mr. NELSON. Yes; above $10,000.

Mr. YATES. What is done; do you check the details?

Mr. NELSON. We have a contract board, which is composed of a representative of each of the divisions and these recommendations, proposals, are gone over in detail to see that they are all right.

Mr. YATES. This is an actual check, not a test check on a certain amount?

Mr. NELSON. It is an actual check on each one above $10,000.

Mr. YATES. What form does the check take? You have this contract board. What steps do they take to verify the propriety of the particular proposal?

Mr. NELSON. First and foremost we always like to get the lowest bidder, if he can produce the material in the schedule required time. Secondly, we like to avoid, if at all possible, any premium payments. We check to see if the chance was given to all bidders; that proposals were sent out to qualified bidders and if they were given time enough to make bids.

REVIEW OF PREMIUM PAYMENTS

Mr. YATES. What steps do you take to verify that premium payments are necessary?

Mr. NELSON. If we cannot receive the material on the scheduled time, or somewhere near the scheduled time, to keep the construction work on schedule. We may have to check up on the escalator clausethere are occasions where they may not have an escalator clause.

NEED FOR PREMIUM PAYMENTS

Mr. YATES. I can understand why premium payments might be necessary at the inception of construction, but insofar as delivery after construction is concerned, once the contract is let with the mill or the manufacturer, why should you have to pay premium price in view of the fact that you know what your requirements are at the time of the order from the mill?

Mr. Cook. The contract construction follows very closely the plans, and wherever possible materials are ordered in sufficient time to allow for normal manufacture and delivery to meet planned construction schedules. Occasionally there may be two or three items that are necessary to complete a unit, for which the plans had not been completed in time to allow for the ordinary procedure, and in those, in order to keep the job balanced and on schedule, it may be necessary to pay premiums to obtain delivery consistent with construction requirements.

Mr. YATES. That would be an insignificant proportion of the cost of the job, would it not?

Mr. Cook. That is right.

Mr. YATES. I am still a little bit disturbed about the last sentence on page 13 concerning the payment of premiums. Does that mean