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penses go up proportionately. I mean if you have one ship and you end up with two, maybe you double your overhead, but if you have 20 ships and you add one, I doubt that you increase it by a proportion of the amount.
Mr. SULLIVAN. Well, we felt that this is proper. This certainly was a negotiated thing, but in our view the additional work did justify putting this in.
Mr. MAILLIARD. Thank you.
The CHAIRMAN. I have one more question here. Why was the research allocation for nuclear propulsion given to General Dynamics rather than FAST, who are more experienced operators?
Mr. SULLIVAN. This is a study, sir, that requires several kinds of competences. They do have arrangements with several ship operators to feed information to them, but they also have naval architects and nuclear engineering capability in the form of a subcontract with the consulting firm known as MPŘ.
The CHAIRMAN. Does the company that is operating the Savannah have experience with ships and reactors of that sort?
Mr. SULLIVAN. Not in design. This is design and engineering study. Yes, sir, they certainly have competence, but not this kind of competence. They are too busy with Savannah. I don't see how they could take on any job like this.
The CHAIRMAN. They were busy?
Mr. SULLIVAN. Yes, sir.
The CHAIRMAN. Mr. Pelly.
Mr. PELLY. I have no questions.
The CHAIRMAN. Mr. Lennon.
Mr. LENNON. I believe General Dynamics is one of the three aerospace companies involved now in the FDL question. I believe the Government has a contract with those three for $54 million each to come up with a contract definition of the FDL some time by June of this year. It is rather significant that working in collaboration with the Navy, you have picked out one of these three aerospace corporations to make your study in depth to justify this. I believe it might be tied to the Navy's participation with General Dynamics.
The CHAIRMAN. Mr. Ashley.
Mr. ASHLEY. No questions.
The CHAIRMAN. Counsel, Mr. Drewry, has some questions.
Mr. DREWRY. Just one question, Mr. Davis, following up on what Mr. Lennon was commenting on about the $514 million dollars that the Navy is paying to each of the bidders on the FDL. They are also, I believe, paying something like $90,000 a month to each of the bidders to retain skilled personnel. Isn't that something comparable to the situation we have here where there is talk of a new nuclear program? Is there a danger of losing the capabilities and yet for a relatively small sum we are deciding that it is not economically feasible to continue it, but $270,000. a month seems to be nothing as far as the maintenance of skilled personnel for the FDL program is concerned? Mr. DAVIS. I am somewhat familiar with the contract which you are talking about which the Department of Defense has which they say is necessary in order to maintain certain skills in the event of a need. We certainly have no authorization for any contract at this time.
What you are saying is that maybe that constitutes a basis for continuing the operation of the Savannah maybe at a loss to retain the skilled personnel in the operation of nuclear-powered vessels in the event of a development of a second flight.
Mr. DREWRY. To protect the investment which has already gone into this, somewhat over $100 million. You haven't stated that the nuclear program was going to be abandoned.
Mr. DAVIS. No, we haven't.
Mr. DREWRY. On the contrary, you indicate that you expect it will be continued and your Galveston facilities, Mr. Sullivan said, will continue for other work. I don't know what other work it would be other than concern with nuclear projects.
Instead of asking questions, I am looking at the overall thing.
Mr. DAVIS. You are comparing this situation with a Department of Defense situation. I can speak to this one, but I can't speak to the Department of Defense situation.
The CHAIRMAN. Are there any other questions?
Thank you very much, Mr. Davis, Mr. Hoffmann, and Mr. Sullivan. Mr. DAVIS. Thank you very much, Mr. Chairman.
The CHAIRMAN. Our next witness will be Adm. John Will, chairman of the Board of American Export Isbrandtsen Lines.
Mr. LENNON. Mr. Chairman, are these gentlemen from the Maritime Administration going to remain with us during the presentation of Admiral Will's statement?
The CHAIRMAN. If they have the time.
Mr. DAVIS. Mr. Chairman, you know our situation with Mr. Gulick out and a new Administrator at this time. I would be happy for Mr. Hoffmann and Mr. Sullivan to stay if they wish. In fact, I will stay if the chairman wants.
The CHAIRMAN. I realize the position you are in. Mr. Gulick has his problems, unfortunately.
STATEMENT OF ADM, JOHN M. WILL, USN (RETIRED), CHAIRMAN OF THE BOARD; ACCOMPANIED BY MICHAEL ESPOSITO, COMPTROLLER; W. LYLE BULL, WASHINGTON REPRESENTATIVE, AND THEODORE KEDZIERSKI, MANAGER OF SHIP OPERATIONS,
AMERICAN EXPORT-ISBRANDTSEN LINES
Admiral WILL. May I proceed, Mr. Chairman.
Mr. Chairman and members of the committee, my name is John M. Will, and I am chairman of the Board of American Export-Isbrandtsen Lines, and in addition, board chairman and president of First Atomic Ship Transport (FAST).
I am accompanied here today by Mr. Michael Esposito, on my right, who is the comptroller of American Export-Isbrandtsen Lines and the man that keeps track of all the expenditures of funds in connection with this operation; Mr. Theodore Kedzierski, who is the manager of ship operations, and more recently last chief engineer of the Savannah, who is available to answer any technical questions and questions on operation; and in addition, I know that you all know our Washington representative, Mr. William Lyle Bull.
I certainly appreciate the invitation to appear before this committee today and the opportunity it provides to speak my thoughts for the record on the subject of continuing the NS Savannah's active operation.
As has been said before, the Savannah is not a ship, it is a program. Terminating this program will have a very adverse effect on the Nation's progress and position in maritime transportation. Consequently, all of us engaged in the shipping industry-designers, builders, operators, and regulatory agencies should, I feel, resist the recently announced proposal to lay up the ship.
A great deal has been said about this proposal in the last month since the layup announcement was reported in the press, and therefore I will do my best to avoid complete reiteration. I think what is needed today is, first, an explanation of my company's apparently lone interest among operators in maintaining the operation, and then a careful explanation by those with understanding of the implications hidden in the almost casual announcement of the layup.
This committee should be informed of all the potential layup costs and of the far-from-simple procedure involved in transferring responsibility for the Savannah to an organization different from the one presently licensed to operate her. The hard fact of the matter is that without waivers of previously established requirements and/or safeguards, the Maritime Administration does not possess adequate inhouse technical competence to accept the responsibility for the reactor of the Savannah.
There is nothing culpable in this state of affairs. It is consistent with Government policy that operations be left to the owners and charterers of Government-owned or subsidized ships, and redelivered ships are usually sent to Maritime Administration custody in absolutely idle or cold status, preserved against deterioration to as great a degree as possible. The rub lies in the fact that making cold iron out of the Savannah takes a lot more than merely shutting down oilfired boilers, draining, securing, and preserving structure and machinery. But I am getting ahead of my story; let me first explain my company's position in the matter-what we stand to gain or lose, and why we are advocates of continued operation of this ship.
Our company was well known and successful for many years before the Savannah program was even contemplated. Operation of the ship, first as general agent for the Government and later as charterer (through our subsidiary FAST, Inc.), was not necessary to our success. Neither the small potential profit or loss is of real interest to us. In fact, if profit alone were our motive, our present financial arrangement does not justify the time expended by key, and expensive, members of our staff. The very real risk of offending shippers, port officials, and government dignitaries at home and abroad through mistakes in public relations is another consideration that rules out the profit motive, since one major error in this field would reflect on our worldwide operations and not on the Savannah alone.
I refer particularly to the subsequent effect on our image when we have to deny special visiting privileges to important groups, particularly abroad, because of regulations against passing on technical information or limitations on the number of people who can be per
mitted on board the ship in port. I am sure you realize that when important people have to be denied access to the control room of other interesting areas on the ship, the onus does not fall on the Maritime Administration or the Atomic Energy Commission, who make the rules, but on us-the enforcers.
Nevertheless, I had some strong personal convictions in 1963 about the absolute necessity for us to step into the breach then and help to revise a faltering program of great value to our national prestige. While I may have been motivated to a great degree by patriotism, the hard business fact is that our company personnel were among those first interested in the development of nuclear power in the late 1950's. At that time, some of you may recall, proposals were made to the Government for installation of a reactor in the new tanker, Hans Isbrandtsen.
Our company has been continually on the lookout for new concepts, new techniques, and new prime movers-oil fired, nuclear powered, or jet fueled gas turbines. Frankly and obviously, the opportunity offered by the then faltering Savannah program was a natural for us in taking a look at the actual problems and potentials of nuclear
With the Savannah, we have benefited from good labor relationships when others have failed, we have demonstrated our technical competence in operations, and we see no reason to apologize for advocating continued operation of the Savannah. We are closest to the scene and better equipped to point out some of the work still to be done. We concede the theoretical phase of the nuclear experiment is over-but successful application of nuclear power to the merchant marine depends only in part on the physicist's slide rule.
Now before I tell you some of the things that remain to be doneand which cannot be done if the Savannah is deactivated-let me put to music some of the words that have not been sung on the proposed layup operation. This layup is represented as a savings to the Government of anywhere from $1 to $3 million, but before the authoritative stamp of final approval is given to this step, it should be understood that this approval can open a Pandora's box. We have all seen basic estimates go out the window once a project is begun, and the proposed layup project is no exception. An ultimate expenditure of from $3.1 to $9 million is a very distinct possibility.
To begin with, let me say again that the technical competence presently in the Maritime Administration organization and at the nuclear facility in Galveston is inadequate for the deactivation of the Savannah. We are committed by our charter agreement to maintain the watch and, in effect, be responsible for the reactor, until such time as we can safely be relieved. Unless a major segment of the FAST management staff and licensed officers from the ship were drafted into the relieving organization almost immediately on termination of the commercial operation, substantial costs would be entailed in forming an organization to take over the ship for the Government.
I believe the Government's cost projections are based on a transfer to take place about 10 days after the end of our second year of commercial operation on August 20 of this year. I find it hard to believe such a transfer can be made successfully in anywhere near that time.
I hope you will not hold it against us that we have made job offers to the highly competent key personnel-we can use them in the rapidly expanding activities of the parent company. There is no reason for these people to uproot themselves from the New York area and to move to Galveston for an obviously limited time to participate in the emasculation of their dreams.
Neither can we be callous about very recent additions to our staffpeople added at Government insistence and recruited from other organizations in the local area a few months-in one case, 1 day-before the announcement was made that the ship would go out of service.
Every effort will be made to protect these men from unemployment relocation, or other hardship attendant on this unexpected termination. Good management and consideration for the effect on the lives of others should dictate maintaining the operation at least through the contracted date of August 20, 1968.
It is doubtful that the AEC will, like Nelson, put its Division of Reactor Licensing telescope to its blind eye to assess watchkeeping competence required while fuel remains on board the ship. This can be for a period of over a year. Therefore, the Government must rely on the willingness of experienced reactor operators, whose commitments to the Government expired long ago, to participate in the dismantling of their hopes, or as a prominent labor leader once put it-impose on them "to train their own scabs."
We believe the relieving organization will require over 30 men just to maintain the shipboard watches in an idle ship. This figure allows for elimination of stewards, but this action will have to be compensated by lodging, subsistence, and travel allowances. We had to provide a minimum of 22 men in August of 1963 for plain shipkeeping dutiesall the trained specialists required during idle status at that time were provided by other organizations that have long since atrophied.
The point here is that the technical competence in operations is now vested in the ship's officers. In dealing for their services in such circumstances, the Government may be playing 5-card stud with its hole card showing. What the estimators project for personnel costs and what the actual costs are to obtain willing participation in this wake may be two different things.
In addition to these remarks in the "human element" category, I would like all concerned to analyze other cost projections carefully. The Maritime Administration, as far as we are concerned, has been somewhat indefinite on the actual scope of the deactivation program. Several alternatives have evidently been proposed-we suspect so because ultimately inquiries come to us on the "how to," "how much" and "can it be done this way."
The least costly program is obviously redelivery of the ship and termination of FAST, as an entity, as soon as possible. I have explained how this move requires almost complete absorption of the FAST personnel-if available. A temporary layup with the fuel remaining on board is estimated to cost over $1.4 million the first year on top of whatever it costs for the interim period of FAST responsibility. Costs then would continue at over $1 million a year until a new operator might be assigned. I refer to cost of maintaining the ship only-not the Galveston site or paying the other contractors.