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The Gulf Intracoastal Waterway carried in 1944 5,999,000,000 tonmiles, as shown in the book of graphs which was prepared for the committee members. That waterway carried in 1944, roughly, 24,000,000 tons.
I believe that if the Gulf Intracoastal Waterway is designed for 150 feet width and can carry 24,000,000 tons of traffic, and does carry it, there can be no doubt in anyone's mind that this waterway, with a proposed width of 150 feet in the forks and 200 feet in the Big Sandy, is adequate.
Senator OVERTON. The point, however, was made with reference to the Big Sandy, that on account of the curves in the two branches, it would be inadequate.
Colonel FERINGA. In our report we state that there will be suitable widening at the curves. We took cognizance of that.
Senator OVERTON. You are going to take the kinks out of it?
Colonel FERINGA. We will widen the curves and take some kinks out, as we do in all projects.
A point was also made that bids much in excess of Government estimates have been received in recent months. We have a law, a very helpful law, pertaining to contract work. As you know, the Corps of Engineers tries to do everything by contract. We do not undertake hired labor work unless we are forced to do so.
That law provides that if a contract bid is withîn 25 percent of the Government estimate, we may award the contract, and I may say that we always do award. If the bid is more than 25 percent of the Government estimate, we may not award and we do not award. Occasionally a contractor may protest and the Government estimate may be revised; because we, like anyone else, make mistakes. However, here are some examples on the other side. Take the Los Angeles breakwater. Of course I tried to pick out the most startling cases on the other side, where we received bids below our estimates. The Government estimate was $8,478,332. The low bid was $7,447,700, or 12 percent below the Government estimate.
In the case of the Dorena Dam, in Oregon, the Government estimate was $1,244,742. The low bid was $910,325, or 26 percent below the Government estimated.
For the Elmira, N. Y., flood-control protection project, the Government estimate was $2,369,853 and the low bid was $2,726,102, or 15 percent higher than the Government estimate.
In a recent case of high bids, in my position as Director of Civil Works, I went through the figures myself. We decided that we would throw out the bid because there was an error. We readvertised, and the figures just received are these. For the Youghiogheny Dam in Pennsylvania—and this project was originally bid some 25 percent over the estimate—the spillway lining was bid at $910,381.25. The Government estimate was $845,759.50. The new bid is 8 percent over the Government estimate.
I just bring those points forward because they were raised. We cannot award a bid that is over 25 percent; and I am grateful for that law.
Senator OVERTON. Let me ask you, before you leave that point, this question. I wonder whether the uncertainity of getting inaterials and the uncertainty of the cost of labor enter into and increase the bids of contractors. I know it does in private enterprise.
Colonel FERINGA. It does, very much, in Government work, too, Mr. Chairman.
Senator OVERTON. I wanted to build a second story to a commercial building that I own, and the lowest bid was an extravagant bid, but the contractor told me that we do not know what we will have to pay for materials; we do not know what we will have to pay for Tabor, and we have to be on the safe side. He said, “I suggest that you withhold construction for a while longer until the situation is in better shape." I do not know whether that would apply to these cases or not.
Colonel FERINGA. I think that is true. I think that things are steadying down now, because the Youghiogheny bid which I mentioned a few minutes ago was advertised at first in February, and there were only one or two bidders. Now we have a wholesome response, and the result was lower bids.
Many of the contractors have asked us to go to the escalator clause. We have gone into that at great length, and we do not find it necessary, because we are getting adequate response in the bids we have opened.
Prices are high. I do not know which way they are going to go. I am hopeful that they will stabilize. But the response to our requests for bids in all has been good.
Senator CORDON. How much does your experience show that construction costs are up over those of 1940 ?
Colonel FERINGA. I testified before the Senate Committee on Foreign Relations in connection with the St. Lawrence seaway-I see here one of the railroad representatives who was present at the time and there was much talk about the incorrectness of
estimate made by the Government, or anyone else, due to the transition stage that we are in. So I had the records of our own department studied, and I also went to the Engineering News Record cost index, which, so far as I am concerned, is the bible for all engineers, and that record showed that from 1941 to 1945 there was an increase of 20 percent. From 1938 to 1945 there is an increase of 30 percent. Then I had that drawn as a graph which went back to World War I, and I found that in 1918 there was a steep increase—well, in fact, starting in 1915 there was a steep increase. However, in 1919 it went up very sharply until 1920, and from 1920 it went down sharply to 1921 and kept on going down until 1922. In 1922 it went up until 1923, and then a plateau was established until about 1930. Then it dipped sharply to 1932, and since then there has been a steady rise.
If you would like to look at this graph, I will be glad to have you do so, but I would like to have it back, because I use it constantly.
In the first few months of 1946 there was a very steep increase. It is beginning to level off. You will find that that line is parallel to the line in 1919. Of course that is all conjecture. You cannot assume that history is going to repeat itself.
Senator CORDON. Have you checked the figures of the Bureau of Reclamation engineers?
Colonel FERINGA. No, sir; but I have checked from our own experience; and our curve, although a little flatter, corresponds this curve.
Senator CORDON. I am interested because I have got their figures during hearings before the Appropriations Committee, and, according to their figures, the costs this year over 1940 are as follows:
Concrete dams, a 55 percent increase; earth dams, 65 percent; canals, 60 percent; power plants, 30 percent; and transmission lines, 42 percent.
Senator McCLELLAN. Are those increases since 1940 ?
Senator McCLELLAN. If those are accurate, Colonel, how would you make allowance for the difference between their costs and yours for practically the same work?
Colonel FERINGA. I could not make any allowance for it. I do not know their costs. I do know our costs. I do know the Engineering News Record, which is the engineering magazine for the whole country. Any number of engineers
you that the Engineering News Record is the bible for engineers. It may well be that the costs in the West are as you have just indicated. The Bureau of Reclamation has able people, Senator Cordon, and maybe their costs were low in the first place and now perhaps they are much higher. I cannot answer that.
This curve is a composite curve. We do a great deal of dirt-moving and part of our work requires the building of structures.
Senator CORDON. How is it that your earth dams are 65 percent and their canals are 60 percent?
Colonel FERINGA. You would have to ask them, sir.
Senator CORDON. I have asked them, and I am asking you now. I was just wondering about the difference between two Government departments engaged in the same type of construction.
Colonel FERINGA. The figures I used are from the Engineering News Record index. I think that is the engineering magazine of the country. Senator CORDON. You have put the results of it in the record ?
Colonel FERINGA. I thought perhaps you would like this graph for your personal use. I will have a photostat made.
Senator CORDON. I will be glad to see it.
Colonel FERINGA. I can have enough copies made for the whole committee, if you do not mind my pencil notes on it.
Senator CORDON. How many contracts have you made during 1946 ?
Yesterday the statement was made that bids are very much higher than the Government estimates, and inasmuch as the chairman asked me to rebut some of the testimony I would like to rebut that, because I know something about it. I have picked out bids from the ones upon my desk last night, that were opened by me, and I would like to read them again.
For the Los Angeles breakwater the Government estimate was $8,478,332, and the low bid was $7,447,700, or 12 percent below the Government estimate.
Senator CORDON. When was the estimate made?
Colonel FERINGA. I assume about 6 weeks before the bids were opened. !
Senttor CORDON. Was the Government estimate on the basis of current costs?
Colonel FERINGA. If you mean, was it made in 1940, no, sir. We make our estimates just as carefully as a contractor does, because we have to know the cost of doing the work by hired labor.
On Dorena Dam, Oreg., the Government estimate was $1,244,742. The low bid was $910,325, or 26 percent below the Government estimate.
On the Elmira flood-control projection project, Elmira, N. Y., the Government estimate was $2,369,853. The low bid was $2,726,102, or 15 percent higher than the Government estimate.
In one case that I handled myself, the Youghiogheny project, we threw out the bids and readvertised, although we were told by the contractor that there was no use readvertising, we would get a higher bid.
Senator CORDON. These bids are without the inclusion of an escalator clause?
Colonel FERINGA. We do not use that, Senator, not yet. I hope we will not have to use it.
Senator CORDON. My understanding from the Bureau of Reclamation is that their figures include the escalator clause.
Colonel FERINGA. They are able people; they are excellent engineers. Their experience may be based on different factors. Possibly their costs were low in 1940 due to their efficient work and now the costs are higher. I know Mr. Page and Mr. Bashore. I like them and they are fine people and excellent engineers.
I want to proceed on this Youghiogheny bid. The contractor said that there was no use readvertising. He said, "you are not going to get lower bids.” But we readvertised. The new bid was $910,381.25, and the Government estimate was $845,759.50. The bid was 8 percent over the Government estimate after readvertising.
I could give you citation after citation where they were over 25 percent. We are going to readvertise or hold off or do the work by hired labor. I do not believe our estimates are wrong.
Seantor CORDON. Generally speaking, then, Colonel, your estimates are running about normal in ratio to the bids on those particular jobs. In other words, in other times you would have bids higher than your estimates and some lower, would you not?
Colonel FERINGA. Yes, sir. I think, Senator Cordon, that they are running generally nearer to the 25 percent limit than they used to because when I was district engineer I received many bids under the Government estimates. Now we receive comparatively few under the Government estimates.
Have I answered your question?
Colonel FERINGA. Now, to go into the difference between the figures used by the district engineer and those used by the Board. The district engineer used 15,000,000 tons, and he based that on the availability of the coal and the capacity of the waterway. He took for granted that if the mines could produce the coal, the consumers would buy it. He figured also on a 29-cent differential from the coal fields to the mouth of the Big Sandy River.
The report is first made by the district engineer, then by the division engineer, and then reviewed by the Board and by the Chief of Engineer. The division engineer did not accept the estimate of the district
engineer. to figure it another way; but we do not do that. Each one is an entity. The division engineer believed it would be a much fairer way, inasmuch as the coal was there now and was not moving to destinations in the upper Mississippi Valley, to find out how much coal would actually be taken by the consumers, and then apply the average cost per ton. He figured it at 89 cents a ton. The Board agreed with the division engineer, and developed a tonnage based upon the consumer demand which is 8,300,000 tons. The Board reduced the figure of the division engineer from 89 to 80 cents per ton; it would cost less to move a tow down the Ohio than up the Mississippi. We took all those cost factors into account.
We have been told by the opponents, before the hearing, that this was not fair; that we should not take credit for the feeder value, as they call it. But before I
into that further, I want to add one statement that was made before the Board, as an instance of saving water transportation to ship a ton of coal from Sprigg to Dubuque, Iowa. As far as I could make out—and probably the figure will be attacked, but I do not believe so—the rail rate would amount to $4.45 a ton and the
proposed barge rate would be $2.44 a ton. That would be an outside saving.
Now, about the feeder value. The Corps of Engineers is not alone in attributing a value to feeders. By way of confirmation, the Interstate Commerce Commission, in a case reported in 19 I. C. C. 71, stated, among other things, that
We are not unmindful that these branch lines traverse a new country where transportation conditions are difficult and the volume of business comparatively small. These lines, however, are operated as part of a great and prosperous system.
I would like to point out again the curve showing the amount of traffic carried by the inland waterways of the entire country.
They are feeders to the main line and help swell the revenue of that line. A part of any great railroad system might be selected and counting cost of operation and fixed charges, such part be shown to be unprofitable. This, however, would not truly indicate its value and profitableness as an integral part of the whole property. The fact that these branch lines considered by themselves fail to show large earnings does not justify charging unreasonable rates.
In another case, 76 I. C. C. 455, the Interstate Commerce Commission stated in part as follows:
A portion of a railroad system cannot be separated from the whole and the earnings and expenses charged and credited to such portion on a mileage prorate basis.
The same is none the less true of any transportation system, whether it be railroad, waterway, or highway. The system must be considered as a whole, since without its feeders the earnings would be diminished.
On this point, and relating to the subject matter, Mr. Ira Davis, vice president of the Chesapeake & Ohio Railway, testified that,
It is a long-time policy of the railway to furnish service by the building of branch lines or short spurs for those who want to develop coal mines, if they can show that they have the coal reserves in quantity and quality to justify, that they have the experience and money to develop a sufficient annual tonnage, and if they can show reasonable market prospects. · This was some of the information
that was gathered for the Board members after the hearing here in Washington, and of course I had it in my files, and I think it comes in properly at this time.