Mr. ROBERTS. That covers the charted waters of the world? Capt. KNAPP. Yes, sir. Of course, that is a matter that varies slightly. There are resurveys and new surveys.

Mr. ROBERTS. And we have 2,242?

Capt. KNAPP. Yes, sir.

Mr. ROBERTS. For which we have the plates?

Capt. KNAPP. The Hydrographic Office and the Coast Survey. We purchased from the British Admiralty 1,993 last year.

Mr. ROBERTS. Nearly half?

Capt. KNAPP. Yes, sir; roughly, 50 per cent.

Mr. ROBERTS. The others we get from the British Admiralty? Capt. KNAPP. You will notice on the chart here the darker the red the more charts we have to get from the British Admiralty. If you will notice, the only place where we are completely supplied with charts is the middle of the Pacific Ocean. All the numerous islands throughout the Pacific Ocean were surveyed in the early days when our ships were out there; and when I suppose most people were of the opinion that they were loafing around, doing nothing, they were surveying those waters. That is why we have them, the charts of the Pacific islands.

Mr. ROBERTS. Are the Pacific Ocean charts accurate?

Capt. KNAPP. They are accurate except, possibly, in longitude, but they have been used by the world and there have been corrections made by visiting ships since. They are practically accurate. The charts there are very much better than anything we had in the West Indies or Santo Domingo. The western coast of Central America and Mexico were surveyed by the Navy years ago. A great deal of time was spent there by Admiral Philip, familiarly called "Jack Philip." He did a great deal of work on the western coast.

The CHAIRMAN. If there is nothing further, Captain, we are very glad to have had you with us this morning.

Capt. KNAPP. I thank you very much.

Thereupon the committee adjourned to meet on Friday, February 15, 1912, at 10.30 o'clock a. m.

[No. 11.]

THE COMMITTEE ON NAVAL AFFAIRS, Friday, February 16, 1912. The committee this day met, Hon. Lemuel P. Padgett (chairman) presiding.

The CHAIRMAN. We have with us this morning Col. Buckner, vice president of the E. I. du Pont de Nemours Powder Co. and Admiral Twining is present, on the question of the further consideration of the manufacture and cost of powder. We shall be glad to have Col. Buckner state such matters as he may wish to submit to the Committee.

STATEMENT OF COL. E. G. BUCKNER, REPRESENTING THE DU PONT POWDER CO.

Col. BUCKNER. Mr. Chairman and gentlemen of the committee, two years ago, in 1910, this committee requested me to come before it to see if we could not arrive at a better understanding than that which had existed prior to that time.

I came and made a statement to you and so much benefit came from that meeting, I think of mutual benefit to this committee and ourselves, that when I discovered some days ago that there was a difference of opinion between the officers in charge of the Government plants and ourselves as to the actual cost of the manufacture of powder, I thought that the best thing to do would be for me to ask you to let us come back and discuss this matter again.

I want to say to the committee first, that in the question of price there has been a progressive reduction since the beginning of the manufacture of smokeless powder. The price has not fluctuated up and down, but there has been a continual decrease in the cost of powder from the start, and I want you to remember that this has been true through a period of time during which raw material, including labor, has been gradually increasing.

I am told-I do not know personally, for I was not in the smokeless powder business at the beginning-but I am told that the price at the start was $1.50, and I am further informed that at $1.50 the companies made no money. That was due to a lack of knowledge of the manufacture of powder. But from that time on down to the present day there has been a constant reduction in the cost of the manufacture and in the price charged to the Government. At the same time cotton, alcohol, acids, ether, and labor have all gradually increased in price, and yet this reduction has been made. We claim that this reduction has been due to improved methods, and that our company has been-I will not take all the credit-our company has been in the lead always in securing improved methods and bringing about these reductions, the benefit of which have always been given to the Government. All this time as a result you have been getting cheaper powder than any other Government in the world.

I believe that Admiral Twining has introduced here in his hearing some testimony on that subject, and it is a fact that no other Government in the world to-day buys its powder, Government powder or commercial powder, as cheaply as our company is selling it, and, as far back as I remember, that has been true. Now, in the matter of

cost

The CHAIRMAN (interposing). Can you put in the hearings a statement of what the different nations are paying?

Col. BUCKNER. From memory, I can give it to you, but I think Admiral Twining has given it to you. I will say this, I do not believe that any nation is to-day buying powder-like powder, nitrocellulose powder, the kind this Government uses-under 85 cents. I think Germany pays 90 or 99 cents and that it costs France, who manufactures her powder, from 59 to 70 cents, but I do not believe in my experience of competition with other countries, that any Government is paying under 85 cents for powder purchased except ours, and we do not give the price we give to our Government in any other bids we make in foreign countries.

Mr. LOUD. They have cheaper labor there?

Col. BUCKNER. Yes, sir; they have cheaper labor there, but it is chiefly due to a better knowledge of how to do the thing. That is all. Mr. ROBERTS. I would like to ask Admiral Twining if his powder costs appear in the hearings?

The CHAIRMAN. Yes, sir; in Appendix C.

Col. BUCKNER. Admiral Twining has made a statement of the cost of powder which, according to the memorandum I have here, totals $0.3361. I see he has made a change in another exhibit which makes that $0.3443. Now, I claim that these items which he has considered and which he has itemized for you do not constitute all that it is necessary to take into consideration when one starts out to manufacture powder. I say that he could not take the specifications under which he requires us to work and manufacture powder without considering and taking into account many other items. I have taken this statement of cost rendered by him, and as far as it goes I will say it is not far from correct. He has given his power cost too low, in my judgment; to be more explicit, it is below our cost of power. His cotton is cheaper than ours, due to the fact that he got ahead of us in buying his cotton from the only source in this country and we were forced-this is prepared cotton-to go abroad and buy a higher grade of cotton to make our powder.

In other matters we are almost the same. So, on the whole, he has given his cost beneath ours as far as he has gone, but I contend that there are four rules in business that the Government or any body else must observe if they wish to be fair in comparing outside cost of manufacture with Government cost.

It is stated before this committee that you do not have to pay interest on your investment. I do not see why, if the Government goes into business it should not consider interest charge, why it should not consider that before it begins to estimate its profit or the price at which it is producing the product, for we all know the Government borrows money. If you take a million dollars and put it into a business for the Government it is not fair to say that that million dollars is not worth anything. If you start out to manufacture powder you must have that million dollars first of all, and so it is only fair that a

just rate of interest-fix it yourselves, if you please-but a just rate of interest on the investment should be considered when you begin to estimate the cost.

We have close on to $6,000,000 invested in this Government business. We loan you that money, it is for your service, it is kept in your service, and it is only fair that we should have a just rate of interest on that investment in calculating the cost of our product when we begin to consider what the profit is. Every man does that in every business, and yet there has been no consideration in reference to that matter at all in Admiral Twining's estimate. That alone, for example, on your capital invested in your business and on your output if you should pay what we pay for money, equals 5 cents upon each pound of powder that you manufacture. Now, I say that that should be included in the cost.

The next thing to be considered is depreciation. Admiral Twining has no depreciation included in his cost. Yet, you know and I know that when you have run a plant for one year it is not worth what it was at the beginning, and you know that if you continue to do this, making no repairs, for 10 years, you have no plant. Any intelligent business man would consider depreciation in considering the cost of his product, and especially in the manufacture of powder. There is no business on earth that is so susceptible to depreciation as a powder plant. The chief destructive feature of the plant is acid; it runs through everything and it cats up everything, wood and iron alike, and if you do not keep the plant going every day, then it eats faster because an idle plant is damaged quicker than one operating. So that item should be considered.

Mr. BUCHANAN. Can I ask you a question?

Col. BUCKNER. Yes, sir.

Mr. BUCHANAN. Speaking of the capital invested, that includes the machinery, the amount that you allow for depreciation? Col. BUCKNER. Yes, sir.

Mr. Buchanan. Then you carry that depreciation and machinery cost and pay interest on it?

Col. BUCKNER. I do not follow you. If you mean to say

Mr. BUCHANAN (interposing). Let me try to state it so that you will understand it. Say you have machinery now that cost $1,000,000 and in your business you allow for depreciation so much, when that machinery is worn out that cost $1,000,000, you still carry that $1,000,000?

Col. BUCKNER. No, sir. We do not let it depreciate; we are constantly renewing it. We are throwing out machinery every day. Mr. BUCHANAN. I think your corporation is one exception if it does

not?

Col. BUCKNER. I think not. I do not think any corporation in the country to-day if they are wide awake are using old machinery until it wears out. The old machinery is thrown out long before it wears out. I think you will find that true of every wide-awake live manufacturer.

The CHAIRMAN. May I call your attention to Admiral Twining's Appendix C, page 111, in which he says: "Add the following percentages (overhead charges) recently received from the du Pont Co.," and he gives "administration, plant depreciation, experiments, insurance, idle plant, packing and shipping, rejections and penalties,