Dr. HAWORTH. We will reimburse them for that-for the shipyard contract exactly what they paid the company. Senator ELLENDER. So there will not be any profit made by Brown & Root? Dr. HAWORTH. That is right. Senator ELLENDER. You are sure of that? Dr. HAWORTH. Their profit comes from the $1.8 million fee which is fixed. Senator ELLENDER. You say the contract has been entered into in 1962. Dr. HAWORTH. That is correct. Senator ELLENDER. They have been going on now for 4 years and now it will take 3 more years-about 3 more years to complete the construction of the platform? Dr. HAWORTH. About a year and a half, a little more than a year and a half. Senator ELLENDER. That is 812 years and now Dr. HAWORTH. You mean including the drilling? Senator ELLENDER. All of it. I am talking about the whole thingabout 8 years. Dr. HAWORTH. Yes. Senator ELLENDER. That firm is going to obtain only $1.5 million as profit? Dr. HAWORTH. $1.8 million is the fixed fee or profit. Senator ELLENDER. That is all the profit that Brown & Root will make out of this program? Dr. HAWORTH. Yes. Senator ELLENDER. Will they advertise for the muds and chemicals that will be used when the drilling comes? Dr. HAWORTH. Those things, as far as I know, are standard stock items. Senator ELLENDER. No, they are not. I can buy them by competition. There are many, many companies Dr. HAWORTH. You get prices rather than bids. On many items you get bids and on other items you simply get prices and get them by purchase order. Senator ELLENDER. Will you let Brown & Root make the contract for the purchase of these? Dr. HAWORTH. We approve all fixed price subcontracts in excess of $25,000 and all cost-plus-fixed-fee, and materials, and other special types of subcontracts in excess of $10,000. We have to approve them. Senator ELLENDER. I am informed that it will require over $3 million worth of mud alone to drill this and that mud of course, can be bought from some companies a little cheaper than from others. I am just wondering the extent to which you are going to force Brown & Root to advertise for items such as this, to see to it that the Government gets the cheapest price possible. Dr. HAWORTH. By the contract, they must get all these things at the cheapest price they can get them and still get satisfactory things. In general, specifications are developed and they then advertise for bids or price quotations. The award is made to the lowest qualified bidder. Senator ELLENDER. And they are responsible for it? Dr. HAWORTH. That is right. Senator ELLENDER. As the prime contractor? Dr. HAWORTH. That is right. Senator ELLENDER. And all of this work will be done for them through subletting of the contract? Dr. HAWORTH. Much of the work, yes. Of course, they have done some themselves, too, and they will themselves conduct the drilling operation with their own employees. Senator ELLENDER. I know. They have pretty good men, as I understand. Dr. HAWORTH. That is right. Senator ELLENDER. Who were engaged in this work. Dr. HAWORTH. That is right. Senator ELLENDER. And men who had experience. Of course, these men were hired by Brown & Root. As I understand it, Brown & Root is not a drilling contractor as such. Dr. HAWORTH. Some of the people are from the Brown & Root's own previous employees and some were hired especially. OVERALL COSTS Senator ELLENDER. What I would like to have put in the record, Mr. Chairman, is the estimate of the complete cost of this project. All of us have been watching this very carefully. I only regret that I was not able to be here last year. I was engaged in some other hearings when Mohole was discussed here. But the cost of this project has increased from year to year as I remember we started out with about a $20 million estimate. If I am wrong, let me know. That cost has increased until now we have spent $21 million and obligated another $33 million for a total of $53 million. Yet we have not completed construction of the platform. Dr. HAWORTH. The cost of the platform is included in the $54.5 million that has been obligated. An amount of $55.4 million has been appropriated. A little bit has been expended on the platform, but it is all covered by previous appropriations. Senator ELLENDER. $55.4 million? Dr. HAWORTH. Let me say again, because it is easy to get confused. I may say the wrong thing. We should speak of the shipyard contract, because that includes more than just the platform itself. It includes the installation of much of the drilling equipment, and the installation of station-keeping equipment, the devices which keep you in position over the hole. Other subcontractors will check out installations of equipment with which they are concerned. The shipyard contract, which is for approximately $30 million, is for contructing the actual platform itself, for providing part of the equipment, having to do with the propulsion and so on, for installation of all equipment with a few exceptions. So we do not have the cost of the platform itself before us, and there is no way we can get it, because this is a fixed price bid and, of course, the shipyard was not forced to tell us, when they bid the $30 million, how much of it they were allowing for this, this, and this. But within that $30 million, is the total cost of constructing the floating platform, plus other things. Senaor ELLENDER. In addition to that, as I understand, you are going to contract for the derrick and the equipment necessary to do the drilling? Dr. HAWORTH. That is right. And Brown & Root is subcontracting for most of that equipment with others than the shipyard. Senator ELLENDER. Let me ask you this now. Can you give a figure to the committee of the cost that the Government will be out on the day that Brown & Root begins the drilling operation? Because as I understand, that is a separate contract. Dr. HAWORTH. No, it is not separate. Senator ELLENDER. It is another phase of the original contract? Senator ELLENDER. In other words, your costs will be so much on the day that Brown & Root has its driller and equipment necessary to start in drilling. Now, the question is, what will that cost be up to that point when they take over and start drilling? Dr. HAWORTH. Let me repeat that on the day they take over the vessel, our estimate is that the cost of the Brown & Root contract will have been $83.1 million; that does not include the $2.5 million that NSF will have spent for site selection, and so forth. Part of the latter has gone to the National Academy of Sciences, part to M. Rosenblatt & Sons, Inc., and part to others. That will be, we estimate, $2.5 million. So that $83.1 million for Brown and Root, plus the $2.5 million we will have spent with other people, makes the $85.6 million that I mentioned at the end of the first paragraph on page 17. Senator ELLENDER. So that Dr. HAWORTH. So that when the Government takes possession of the fully equipped ship from the shipbuilder, Brown and Root will start to operate the platform. They will take it to sea, but, of course, they have to have a shakedown cruise and they have to try out the drilling equipment, they have to try out this, they have to try out that. And if I may read the next page, roughly the next page Senator ELLENDER. Before you do that, I want to try and pin you down. Dr. HAWORTH. I am going to pin myself down by this next page. Senator ELLENDER. This $85.6 million, what about the derrick and the pipe? Dr. HAWORTH. That is all there. Senator ELLENDER. And everything necessary to drill? Dr. HAWORTH. All that is there. Senator ELLENDER. All right. Senator MAGNUSON. One other figure before you get to your next page. We have $30.2 million, to go, to reach Dr. HAWORTH. To reach the point Senator Ellender is talking about, that is of additional appropriations. Senator MAGNUSON. If this year's budget estimate of $19.7 were put in, that would leave us $10,500,000 to go? Dr. HAWORTH. That is right, approximately. Senator MAGNUSON. Approximately $10.5 million to go. So the chairman understands that next year if we go ahead with this project, and if you get the $19.7 you will come up for $10.5 million or less? Dr. HAWORTH. $10.5 million or less-we will come up for $10.5 million for that, but we would come up also Senator MAGNUSON. I am not talking about the annual operating costs. Dr. HAWORTH. All right. Our best estimate is that we will come up for $10.5 million. Senator MAGNUSON. The subcontract has been made by Brown and Root to National Steel, of San Diego, Calif., to build the platform. That was the result of calling for bids, and shopping around. I understand from the shipbuilders that actually there were only three that wanted to tackle it, not four. Dr. HAWORTH. Four bid. Senator MAGNUSON. Only three wanted to tackle it? Dr. HAWORTH. One of them was higher. Senator MAGNUSON. Quite a bit higher. CAPITAL AND OPERATIONAL COSTS Senator ELLENDER. One more question. Does your statement include the cost of drilling? Dr. HAWORTH. Yes; that is what I am going to talk about, among other things. Senator ELLENDER. I would like to get in the record today, if we can, the complete cost of drilling to the depth that the scientists think we ought to go. COMPARISON OF ESTIMATED COSTS Dr. HAWORTH. If I may read the next page, a little more than a page, this will give it to you. Starting on page 17 where I left off. (In this connection it would be useful to look at the table on page 2 of attachment II.) (The table follows:) 3 Figures do not include $2 million shown in early estimates for sea testing since the concept was later changed. Does not include cost of scientific analysis of the cores. NOTE. All estimates include contractor's fixed fee of $1.8 million, prorated among entries. In June 1966 estimate $1.37 million is allocated to preoperational costs, and remainder to operations over a 3-year period. FIRMNESS OF PRIME CONTRACTOR COSTS UNTIL PLATFORM ACCEPTANCE During the interval since 1963 the estimated preoperational costs have approximately doubled, and the annual operating costs have increased about 45 percent, from $9 million to $13 million. However, we are now far enough along in the project that I believe the present estimates can be considered as quite firm and that future cost increases, if any, will be small. A significant fraction of the work (including nearly all of the design) is already completed and there are firm contracts on the basic platform structure and on many elements of the positioning and drilling system. Furthermore, as previously indicated, an amount of $4.5 million is included in the $85.6 million for change orders and unforeseen contingencies. Details are shown in the table on page 5 of attachment II. (The table follows:) 1 Although the costs of the work as specified are firm, these subcontracts are subject to possible agreed upon change orders which may require use of a substantial part of the contingency and change order allowance. 2 Prime contractor's general and administrative expenses, and that part of fixed fee ascribable to preoperational phase ($1.37 million) are allocated to these entries. (Remaining $0.43 million of fixed fee has been allocated to operational phase.) INITIAL SHAKEDOWN It is currently estimated that initial shakedown of the platform and testing of equipment, including some preliminary drilling for both technical and scientific purposes, will require a little less than 6 months and that continuous drilling can be embarked upon thereafter. From that point on, the program will depend upon what seems then to be the scientifically most advantageous program in the light of knowledge obtained from the preliminary drilling and other sources. It is now estimated that drilling the Mohole proper will require about 21⁄2 years. Here, of course, comes in this question of how much intermediate drilling we do. Senator ELLENDER. This $6 million is in the $86.5 million? Since, as I have said before, the drilling platform will undoubtedly be used for many years, in as yet only partly predictable ways, I do not believe it particularly meaningful to speak of any overall total costs. Any more than the overall costs of a telescope. You do not |