Economics of Defense Procurement

The subcommittee met, pursuant to notice, at 9:43 a.m., in room 5302, Dirksen Senate Office Building, Hon. William Proxmire (chairman of the subcommittee) presiding.

Present: Senator Proxmire.

Also present: Richard F. Kaufman, general counsel; Steve Watkins, professional staff member; Mark Borchelt, administrative assistant; and Charles H. Bradford, minority counsel.

Senator PROXMIRE. The subcommittee will come to order.

Before I give my statement, I would like to let you gentlemen know that we are going to have a couple of interruptions this morning in the course of this hearing.

Senator Weicker is going to come in, and when he comes in, we want to accommodate him, and we will put him on. A little later I am going to have to go to the floor. I have a statement I have to make on the floor at about 10:30. We will recess the hearing during that period and I will be right back. It shouldn't take more than 15 minutes or maybe 20.

OPENING STATEMENT OF SENATOR PROXMIRE, CHAIRMAN

Senator PROXMIRE. This subcommittee has been holding hearings on Navy shipbuilding claims since 1969. They seemed large then, but they were only a small fraction of the $2.7 billion pending today.

Our purpose has been to inquire into the cost consequences of the claims and the effect of the claims problem on defense procurement. We are now enlarging our focus to include shipbuilding itself. One objective is to understand the problems of ship construction generally and why it takes so long and costs so much to build ships for the U.S. Navy.

There is general agreement that productivity in the shipbuilding industry is low and that it is especially low in the yards where Navy ships are built. The Electric Boat Division of General Dynamics is one of those shipyards. When there is low productivity in a shipyard doing work for the Navy, schedule slippages and cost overruns inevitably follow.

The question we are asking today is: Why is productivity and efficiency low at the Electric Boat Division?

We want to know how productivity in a shipyard is measured, how the Navy monitors it, and the steps being taken, if any, to improve productivity in the Electric Boat Division.

We want to know whether there is less efficiency at the Electric Boat Division than other major shipyards and, if so, why.

We also hope to learn the extent of Government responsibility for productivity problems at Electric Boat and the extent to which the company is responsible for its own inefficiency.

Our witnesses are very well qualified to throw light on these matters. We will begin with three individuals who have had direct experience at the Electric Boat Division, one as a management official and two as skilled workers.

They will be followed by Vice Adm. C. R. Bryan, Commander of the Naval Sea Systems Command.

We will also hear, as I pointed out, from the Honorable Lowell P. Weicker, Jr., a Senator from Connecticut.

We invited General Dynamics and the other two major shipbuilders, Litton and Tenneco, to this hearing so that they might present their sides of the story. Each has declined our invitation.

It is unfortunate that the contractors do not see fit to reply to the allegations made before this subcommittee and to complete the picture of Navy shipbuilding being provided to us. I hope they will change their minds about testifying, and once again I extend an invitation to them to appear before us and help us gather the facts we need to carry out our responsibilities.

We will start, then, with Mr. Ballato, Mr. Camara, and Mr. Eno. Mr. Ballato, we are delighted to have you. In order to give you guidance so that you will know how the time is running, we have a little system here. The green light goes on for 9 minutes and the yellow light (caution) goes on for 1 minute, and then the red light goes on, and the red light means that is it. OK?

That is for your help so you know when the 10 minutes are up. You may start now, and they will turn it on in a minute or two. Go right ahead.

STATEMENT OF CHARLES J. BALLATO, PIPEFITTER, ELECTRIC BOAT DIVISION, GENERAL DYNAMICS CORP., GROTON, CONN.

Mr. BALLATO. My name is Charles Ballato, and I am a pipefitter at General Dynamics in Groton, Conn. I have worked there for 13 years. I am a member of local 620 of the United Association of Journeymen and Apprentices of Plumbing and Pipefitting Industry of the United States and Canada. I am recording secretary of local 620 and was formerly chairman of its workman's compensation committee. The pipefitters union is a member of the Metal Trades Council of New London County, which is the certified bargaining agent at Electric Boat. I am also the chairman of the Occupational Disease Committee of the Metal Trades Council.

First of all, I would like to thank Senator Proxmire and this subcommittee for inviting me to speak here today. I hope my testimony will be helpful in trying to resolve some of the problems at Electric Boat. In my area, mostly, the most serious is the health problem.

The first priority always is safeguarding workers on the job for all our members, this permanent health clinic to examine all workers who have been exposed to asbestos and other occupational diseases. We hope they will live a more healthy and happier life.

I would like to thank the officers and the executive board and the membership of local 620 for the opportunity to testify on their behalf. Our local has devoted a lot to time and effort to this program and we intend to explore all avenues to reach our goal.

It is apparent to us through the health clinics that I mention in my statement, that was done by Dr. Irvine Selikoff of Mount Sinai Hospital, that in 1975 and 1976 a large number of X-ray abnormalities were discovered which indicated exposure to asbestos. It is very discouraging that with these findings, Electric Boat and General Dynamics Corp., do not really see the seriousness of these clinics, and have made no effort to conduct other clinics to examine people who were exposed to asbestos.

What they failed to do, we will do. It may take quite a long while, but as long as the unions are at Electric Boat, this clinic will take place. Thank you very much.

[The prepared statement of Mr. Ballato follows:]

PREPARED STATMENT OF CHARLES J. BALLATO

I am Charles J. Ballato, I am a pipefitter at Electric Boat Division of General Dynamics in Groton, Connecticut. I have worked there for 13 years. I am a member of Local 620 of the United Association of Journeymen and Apprentices of Plumbing and Pipefitting Industry of the United States and Canada. I am recording Secretary of Local 620 and was formerly Chairman of its Workman's Compensation Committee. The Pipefitters Union is a member of the Meal Trades Council of New London County which is the certified bargaining agent at Electric Boat. I am also the Chairman of the Occupational Disease Committee of the Metal Trades Council.

In early 1975, we learned for the first time that one of our members, Sammie Gray, had asbestosis. He was about 40 years old and was already totally disabled. At about the same time, we learned of the work of Dr. Selikoff and the Mount Sinai School of Medicine. We contacted Dr. Selikoff to explain the working conditions with asbestos at Electric Boat. In March of 1975, we brought one union member, Alan Eleazer, who had been a Pipe Lagger for about 17 years at Electric Boat to the Mount Sinai Clinic in New York City. He was examined there and found to have a clearly diagnosed case of asbestosis. We discussed the overall working conditions and problems at Electric Boat with Dr. Selikoff's staff. In July of 1975, the Mount Sinai team of Doctors and Technicians came to the union hall in Groton, Connecticut and examined about 200 people who had asbestos exposure as well as lead exposure. The preliminary results of this exam showed there were X-ray abnormalities consistent with asbestos exposure in about twothird of the people examined.

Dr. Selikoff and his team returned in the Spring of 1976 where he examined about 800 more shipyard workers at Electric Boat. These workers were from various trades some having a high degree of asbestos exposure and some having low exposure. The final results showed X-ray abnormalities ranging from 36 percent to 55 percent of all workers examined. For those workers with 20 or more years in the shipyard the range was from 36 percent to 73 percent. The 73 percent figure was found in our union of pipefitters which includes the pipe laggers. A copy of the survey is attached to this statement.

In the winter of 1976, the company hired its own physician to conduct a survey of the asbestos problem at Electric Boat. Although we cooperated with the survey, the unions have not been given the data, the findings or survey results of that test. It is believed however, that the survey included a very limited number of shipyard workers. Most of the people who were examined in the company survey had already been examined by the Mount Sinai Clinic in July 1975.

In the meantime, Sammie Gray, the first diagnosed case of asbestosis, had not been paid any compensation although he was totally disabled and the diagnosis

was clearly asbestosis. The diagnosis, in fact, had been make in the Fall of 1973. He was not paid compensation because Electric Boat had become a self-insurer on March 1, 1973. Electric Boat claimed that the responsibility of paying compensation should belong to the former insurance company as that was when the bulk of the exposure took place. The former insurance company claimed that Electric Boat as a self-insurer should pay the compensation because that was when the last asbestos exposure took place. The case was finally tried before an Administrative Law Judge of the Department of Labor under the Longshoremen's and Harborworker's Compensation Act in September, 1976. It was ruled that Sammie Gray was entitled to permanent total disability and that Electric Boat, as the self-insured, was obligated to pay. This decision was affirmed by the Benefits Review Board of the Department of Labor, and subsequently before the United States Court of Appeals for the Second Circuit.

In the meantime, Allen Eleazer, the pipe lagger who was first examined by Mount Sinai at its facilities in New York City, became totally disabled in the summer of 1976. He took a disability retirement, received social security benefits and the following summer, died of lung cancer, which was caused by his asbestos exposure.

Subsequent workman's compensation claims involving asbestos exposure have been filed. We are aware of about 75 claims that are now pending, although there are probably others, as well. Of the 75 that have been filed, approximately 10 . have been tried before Administrative Law Judges and in all cases to date the claimants have been found to have been seriously injured by asbestos exposure or have died of lung cancer, respiratory failure or mesothelioma, a rare and fatal form of cancer, whose only know cause is asbestos exposure. We are aware of at least 12 people whom we believe to have died as a result of asbestos exposure of the group of 75. Six had already died when their claims were filed. 6 others died while their claims were pending.

Most of these 75 people have filed law suits against the manufacturers and suppliers of asbestos products for their failure to warn Electric Boat or its employees of the dangers of asbestos exposure. In additon they have filed a suit against the United States Navy for its involvement in specifying the use of asbestos insulation and for the actual supervision of the installation and removal of asbestos insulation in nuclear submarines without warning the workers. These suits are now pending in the United States District Court for the District of Connecticut and have not yet been resolved.

Electric Boat has purchased x-ray and pulmonary function equipment for the testing of asbestos related diseases as well as other occupational disease. However, there are no adequately trained personnel to operate this sophisticated equipment and arrive at what is a difficult medical diagnosis as to whether an individual has asbestosis, lung cancer or mesothelioma. Even the local physicians have difficulty in examining the various symptoms and clinical evidence to arrive at the diagnosis. We frequently find the local doctors are simply unable to tell one way or the other whether an employee's symptoms are caused by asbestos or some other cause. When the employee is referred to the experienced Mount Sinai Clinic, it is usually able to give a clear cut diagnosis one way or the other. Thus we have seen a vivid example of the difference between experienced and inexperienced medical personnel, dealing with a very sophisticated disease and its problems.

With the help of Dr. Selikoff, the local and International Unions, the Connecticut Department of Health and Congressman Christopher J. Dodd of the Second Congressional District of Connecticut, proposals have been made to establish a permanent occupational health clinic to investigate and treat and educate workers and their families, not only for asbestos related diseases but for all occupational diseases. A separate program would be established for the education of the medical profession in the area as to asbestos as well as other occupational diseases. The University of Connecticut Medical Center in Farmington, Connecticut is in the process of applying for a grant from the National Cancer Institute, and possibly the Occupational Safety and Health Administration. It has been a very long time, however, there are still no visible signs of progress being made in the establishment of the permanent clinic which is vitally needed as soon as possible. It is important to locate former employees, offer them and their families immediate physical exams and explain to them what they should do in the future.

Since the OSHA asbestos standards were established in the early 1970's, Electric Boat has phased out the use of asbestos insulation on submarines and has restricted the indiscriminate removal, of asbestos insulation from submarines being overhauled. Asbestos has largely been replaced by fiberglass. Fiberglass causes dust

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