(Witness: Cochran.) Mr. COCHRAN. In the four-year contracts the saving covers four years. The CHAIRMAN. So that to get the annual saving we would have to divide it by four? Mr. COCHRAN. Yes; on those two contracts. The CHAIRMAN. Which would give the net annual saving of those six items? Mr. COCHRAN. Yes. The net saving on those six items to be credited to the first year is $120,972.64, and on the four-year contracts there is a saving of $32,775 for each of the four years. The CHAIRMAN. State whether or not those six items include a large proportion in amount of the purchases made, or are they only samples of a very much larger sum? Mr. COCHRAN. They are the most striking instances, Mr. Chairman. They are the ones, of course, in which the largest savings were made, but they are not all the savings by any means. The CHAIRMAN. Would you be able to say that in no instance did you increase the cost? Mr. COCHRAN. No, sir. The CHAIRMAN. But as a rule you decreased the cost of the preceding year? Mr. COCHRAN. Yes. The CHAIRMAN. So that the six items you have just mentioned are the most striking and conspicuous illustrations of economy? Mr. COCHRAN. They are. The CHAIRMAN. But you say in no instance was there any increase of cost? Mr. COCHRAN. No, sir; I can not quite say that. There were not any striking instances. The CHAIRMAN. No material increases? Mr. COCHRAN. No; but there were some. The CHAIRMAN. Have you ever made any computation for the purpose of ascertaining what the aggregate saving was? Mr. COCHRAN. Yes, I have made it, but I can not give it at this moment. The CHAIRMAN. Have you it where you can furnish it for the record? Mr. COCHRAN. Yes. The CHAIRMAN. If you would do that we would be glad. (The information requested appears in the following:) Hon. CHARLES E. LITTLEFIELD, POST-OFFICE DEPARTMENT, Chairman Committee on Expenditures in the Department of Agriculture, House of Representatives. SIR: Complying with your recent request to be informed as to the number of contracts effected by this office during its first year of organization which had resulted in savings to the Government, and the amount thereof, I have the honor to advise that contracts for furnishing general supplies to the Post-Office Department and the postal service for the fiscal year ended June 30, 1905, were prepared and executed before the establishment of this office (July 1, 1904). The specifications for furnishing this class of supplies for the fiscal year ended June 30, 1906, contained 480 items. From the fact that there were many new items in these specifications which were not previously under contract, and be (Witness: Cochran.) cause many items of the same general class were differently described from those of the previous year, I am unable to make comparisons as to savings, except on 136 items. It appears that a less price was paid for 29 items in 1905, and a less price was paid for 107 items in 1906, showing a net saving of $11.446.20 in favor of the contracts entered into under the specifications of 1906 in addition to the $218,297.64, as stated in detail in my first annual report, thus making a net saving to the Government of $229,743.84 on the contracts arranged by this office during its first year's existence. Very respectfully, W. E. COCHRAN, Mr. COCHRAN. Yes; I can not, of course, show as much saving this year as last year or the year before, because when you have made a cut once you can not continue to cut. The CHAIRMAN. No; you can not keep on, if you have got approximately down to hardpan in the first instance; if you simply hold your own there you are doing well. Mr. COCHRAN. That is the way I look at it. I judge that if I can make a contract that does not go beyond the provisions of the previous contract I am doing remarkably well nowadays. The CHAIRMAN. Have you had any protests to your department on the ground that the large quantities in your proposals have operated to practically create a monopoly for one firm? Mr. COCHRAN. Yes; but in only one of our items, the item of twine. That is the reason that last year and the year before I split up that big twine proposal, so that any mill that furnished twine at all could bid on the quantity that was in the proposals; but we did not get any bids on the small quantities at all. We simply got the bids on the totals, as we had done before. The CHAIRMAN. It was an open bid? Mr. COCHRAN. Yes. The CHAIRMAN. So that in the only instance in which a complaint has been made to your Department you have promptly placed yourselves in a position to obviate any criticism on that account? Mr. COCHRAN. Yes; and it is the same way this year also. It taxes any mill, the very largest in this country, to furnish our twine; and as a matter of fact our contractor has to utilize two or three mills to get it. The CHAIRMAN. Yes. Mr. COCHRAN. And we have tried to get other bidders to get as many bidders as possible-and to get contracts for small amounts, but without success. The CHAIRMAN. Do you keep yourselves advised, as a rule, in handling your department and purchasing these supplies, as to the question as to whether or not the Government is paying, under that system of purchasing, more or less than articles of the same character sell for in the open public market? Mr. COCHRAN. I try to; yes, sir. I know, for instance, that this year the twine we are getting at this moment is furnished at a loss of about 4 cents a pound. The CHAIRMAN. By the contractor? Mr. COCHRAN. Yes. The CHAIRMAN. I suppose that is on account of the increase of price since the making of the contract? Mr. COCHRAN. Yes. (Witness: Cochran.) The CHAIRMAN. What do you find to be the fact with reference to your contracting generally? Are you able to get your contracts at about the market level, at the wholesale rate, or are you above or below? Mr. COCHRAN. My experience is that the Government is a cheaper buyer than a commercial buyer outside, as a rule. The CHAIRMAN. That is stated as a result of your investigations of the conditions under which these articles are sold to others? Mr. COCHRAN. Yes. For instance, we buy furniture at a cheaper rate than any householder could buy it in Washington. The CHAIRMAN. The householder would buy at retail? Mr. COCHRAN. Yes; the householder would buy at retail, of course; but the business men say that as a rule they make cheaper prices to the Government than to the customer. Some of them say that it is absurd and they should not do it; but they do, and will probably continue to do that. The CHAIRMAN. Does your department purchase all kinds of supplies? Mr. COCHRAN. Yes, sir. The CHAIRMAN. Typewriters and all things of that sort? Mr. COCHRAN. Yes. The CHAIRMAN. Take, for instance, the item of typewriters; are you able to get lesser rates on your typewriters? Mr. COCHRAN. We get less rates. The CHAIRMAN. You get less rates on typewriters? Mr. COCHRAN. We get approximately 10 and 10 off, and sometimes more than that. The CHAIRMAN. Less than the market wholesale rate? Mr. COCHRAN. I do not know that I should say the wholesale rate, but from their regular rate. The CHAIRMAN. The retail rate? Mr. COCHRAN. Yes. The CHAIRMAN. From the rate at which the machine sells in the market? Mr. COCHRAN. Yes. Of course typewriters The CHAIRMAN. I only used that as an illustration. Mr. COCHRAN. Yes. I do not think typewriters are usually sold at wholesale. The typewriter companies have agencies in the different places which are expected to sell at regular fixed prices. The CHAIRMAN. That is, they do not job them? Mr. COCHRAN. No, sir; I do not think they do. They distribute them through their own agencies. The CHAIRMAN. In the case of articles that are jobbed, and I presume you are in the market more or less for articles of that character, do you get for the Government practically the jobbers' prices? Mr. COCHRAN. I think we do; sometimes less. The CHAIRMAN. That is your opinion on such of it as you have investigated? Mr. COCHRAN. Well, I The CHAIRMAN. That is, that you keep advised about? Mr. COCHRAN. Yes. The CHAIRMAN. Of course, you can not expect to keep tab on every (Witnesses: Cochran, Zantzinger, Zappone.) Mr. COCHRAN. No. The CHAIRMAN. I do not think of anything further. Mr. ZANTZINGER. I would like to invite attention here to item 7250. The CHAIRMAN. That is 25,000, estimated quantity. Mr. ZANTZINGER. Yes. The price printed per thousand is $1.04. Now, compare that with item 7030, 89 cents per thousand printed. The CHAIRMAN. They are just about the same size. Mr. ZANTZINGER. Yes. How many are estimated? The CHAIRMAN. Nine hundred and seventy thousand five hundred. Mr. ZANTZINGER. Now, I will ask you to notice the difference in price of those two envelopes. They are of the same quality, but different in color only. Item 7250 is used exclusively by the Agricultural Department, and the color would not make that difference in the price. The CHAIRMAN. What is the difference in price? Mr. ZANTZINGER. One is $1.04 and the other is 89 cents. That is 15 cents a thousand difference in price. The CHAIRMAN. And that you attribute to the small number purchased in the one case? Mr. ZANTZINGER. The small quantity purchased. The CHAIRMAN. Professor Moore, my recollection is, referred to a letter that he had from some concern making some statement about this matter of large amounts being purchased in a lump sum, and I would like to have the Professor submit that letter, if he has it handy where he can get it, to Mr. Cochran, so that, if there is any occasion, we can take that matter up and look into it and see what, if examination should be made in relation to it. any, more Mr. ZAPPONE. He said that he would do it, and I will see that the correspondence is furnished. Mr. SAMUEL. You do not think that matter of the difference in color ought to make that increase in the price? Mr. ZANTZINGER. No, sir; the color would not make a difference of 5 cents at the highest, and that would be putting a very high figure on that. The CHAIRMAN. So that we can get an illustration on the record, I wish you would give, say, three or four typical instances of large amounts, with the prices, and then three or four typical instances of smaller amounts of the same quality and size, so that we can have an illustration of the difference in price which is apparently attributable to the number under the contract. Mr. COCHRAN. Do you want a letter to that effect? The CHAIRMAN. No; I will have Mr. Zantzinger give us that right here, if he can. Mr. SAMUEL. What is the object of having the difference in color? Mr. ZANTZINGER. Principally for identification in distribution. Mr. SAMUEL. Have you instances of that in other departments, also? Mr. COCHRAN. I think the Secretary of Agriculture wanted those envelopes for his reports on cotton statistics, so that they could be identified immediately when they came in. Mr. ZAPPONE. Yes; so that the postmaster here at Washington could pick them out readily, and send them at once to the Department in a confidential pouch, under lock and key. (Witnesses: Cochran, Zantzinger, Zappone.) Mr. COCHRAN. That is the only instance that I know of. The CHAIRMAN. I wish you would take three instances of the same kind, taking the largest number of envelopes contracted for, and take three instances of smaller quantities of the same kind of envelopes, and give us those so that we can see what the difference of price is that is in your judgment attributable to the difference in the number purchased, in each instance. Mr. ZANTZINGER (after examination of document). Compare item 7025, at 79 cents a thousand, 5,278,000 estimated for, with item 7130, 201,500 estimated for, at 84 cents per thousand. Compare item 7040, 60,000 estimated for, at $1.39, with item 7140, 35,000 estimated for, at $1.42. Compare item 7065, with 2,703,500 estimated for, at $1.35 per thousand, with item 7220, 310,000 estimated for, at $1.59 per thousand. The CHAIRMAN. Now, in these items you have given, the only substantial distinction between the various kinds of envelopes is the quantity furnished? Mr. ZANTZINGER. The quantity furnished, and the color; but the color will not make a very great difference in the price of the envelopes. The CHAIRMAN. That only applies to two kinds? Mr. ZANTZINGER. Yes, sir; two kinds. The CHAIRMAN. And as to the other kinds, there is in substance no distinction except that of the quantities furnished? Mr. ZANTZINGER. There is practically no distinction except as to the quantities furnished. The CHAIRMAN. That is all. We are very greatly obliged to you. AFTERNOON SESSION. COMMITTEE ON EXPENDITURES IN THE DEPARTMENT OF AGRICULTURE, The committee reconvened at 1.30 o'clock p. m., Hon. Charles E. Littlefield in the chair. STATEMENT OF MR. A. ZAPPONE, CHIEF OF DIVISION OF ACCOUNTS AND DISBURSING CLERK, DEPARTMENT OF AGRICULTURE. Mr. ZAPPONE. Before proceeding further, if it is agreeable to the committee, I would like to explain briefly the manner in which the various bureaus and independent divisions of the Department of Agriculture are authorized by the Secretary to incur expenses against the appropriations made by Congress for their use from year to year. Under the law (33 Stat. L., 3679) the appropriations made by Congress for contingent expenses or other general purposes must be apportioned by the heads of the several Departments at the beginning of each fiscal year, to prevent undue expenditures in one portion of the year that may require a deficiency later to complete the service of the fiscal year. The only case in which a deficiency is permissible under the law is when it is waived in writing by the head of the Department-that |