The contract involved development of the water supply in four basins, designated as Big Bethel, Harwood Mill, Lee Hall, and Skiffs Creek. As the Newport News Light & Water Co. was unable to finance the development deemed necessary, the Government undertook, by the terms of the contract of December 2, 1918, to construct and pay for the improvement necessary to increase the supply, consisting of dams, pumping stations, water-treatment plant, pipe lines, etc.

The development of the Harwood Mill, Lee Hall, and Skiffs Creek basins was primarily for the purpose of increasing the water supply for the military and naval activities at Newport News and vicinity. The Big Bethel improvement was primarily to supplement the water supply for Fort Monroe and Langley Field.

Prior to 1917, Fort Monroe was the only military activity in this neighborhood, and its water supply was obtained by purchase from the Newport News Light & Water Co., the price paid being 101 cents per thousand gallons.

With the establishment in the vicinity of Newport News during the World War of military activities at Langley Field, Camp Eustis, Camp Morrison, Camp Hill, Camp Stuart, Army Supply Base, Port of Embarkation, and increase of naval activities at this point, the demand for water greatly exceeded the capacity of the existing privately owned system to supply it, and at the same time take care of private interests. Hence the adoption of the plan to increase the water supply as indicated above.

The contract with the Newport News Light & Water Co. provides for the sale of the improvements to the water company after appraisal to be made three years after the termination of the war with Germany, payment therefor to be made to the Government partly on 10-year credit and partly in 50-year bonds of the water company.

The plan naturally divides itself into two parts, (1) for an adequate water supply serving Langley Field and Fort Monroe, of which the source was the Big Bethel Basin, or reservoir, and (2) increasing the water supply for the Newport News district by developing the Harwood Mill, Lee Hall, and Skiffs Creek Basins.

The abandonment of intensive Army and Navy activities at Newport News and vicinity rendered unnecessary the development of the Harwood Mill, Lee Hall, and Skiffs Creek Basins. On these three basins, the cost of the improvements proposed to be transferred to the water company was $530,000. These improvements have been appraised as having a present worth of $435,000. The contract of December 2, 1918, obligated the Government to purchase certain lands taken in connection with the improvements made at these basins, at a valuation of $125,000, and to replace certain roads and bridges damaged or destroyed at an estimated cost of $110,000. These obligations, amounting to $235,000, the Newport News Light & Water Co. agrees to assume under the terms of the proposed adjustment.

The improvements by the Government in the Big Bethel Basin cost approximately $700,000, consisting of a dam, water treatment system, etc. These improvements it is proposed to retain in connection with the water supply for these two stations. The Government, however, does not own the land within the limits of the basin nor that on which the dam is located. Under the terms of the proposed agreement the Newport News Light & Water Co. agrees to deed this property to the Government, comprising about 133 acres, for the valuation of $30,000 plus 6 per cent interest from the date of the option to the date of the agreement, and taxes paid by the company on the land, amounting in all to $3,647.54, or a total of $33,647.54 for the land. The company also agrees to transfer to the Government its pipe lines and accessories now located on the Fort Monroe military reservation, and forming a part of the distributing system at that place, at the original cost of $12,284.

There is due the Government from the light and water company for use of the Government improvements placed on the Harwood Mill, Lee Hall, and Skiffs Creek Basins, as rental for the same, $4,127.07.

The statement of the account between the Government and the Newport News Light & Water Co., as just described, and which forms a basis for settlement, is as follows:

CREDIT.

Present valuation of improvements on the Harwood Mill, Lee Hall, and

Skiffs Creek Basins.....

Rental for use of these improvements.

Total......

$435,000.00 4, 127.07

439, 127. 07

DEBIT.

Obligated for land required in connection with the Harwood Mill, Lee

Hall, and Skiffs Creek Basins..

Replacement of roads and bridges..

Land comprising Big Bethel Reservoir site.
Water pipe lines on Fort Monroe Reservation..

Total......

Balance due United States.....

Under the terms of the proposed agreement with the Newport News Light & Water Co. this amount due the United States in settlement is to be paid 80 per cent in United States Liberty or Victory bonds at par, and accrued interest, and the balance simultaneously in cash.

The Big Bethel Reservoir has a present capacity of 2,000,000 gallons of water per day. The present requirements at Langley Field and Fort Monroe average approximately 1,000,000 gallons per day. Under Government operation this water can be supplied at a total cost of between 9 cents and 10 cents per thousand gallons. Since July 1, 1920, the price of water furnished by the Newport News Light & Water Co., as fixed by the Utilities Commission of the State of Virginia, has been 19 cents per thousand gallons.

If the tentative agreement made with the Newport News Light & Water Co. can not be executed at the present time, a settlement will be forced at the end of three years after the formal declaration of peace, as provided in the terms of the contract of December 2, 1918. Under its terms the Government will be obliged to pay $125,000 for land, $110,000 for restoration of roads and bridges, and be compelled to dispose of its improvements in the Harwood Mill, Lee Hall, and Skiffs Creek Basins at a valuation probably lower than that now agreed upon, and in addition to purchase the land comprising the Big Bethel Reservoir at a figure possibly higher than that now acceptable to the owners, and the pipe lines and accessories on the Fort Monroe Reservation. During this three years' period also water will have to be purchased for the Fort Monroe garrison at nearly $4,000 per month.

Authorization to execute the proposed agreement with the Newport News Light & Water Co. will immediately turn into the Treasury over $158,000, and will insure an adequate water supply for Langley Field and Fort Monroe at about one-half the cost that it can be purchased from the water company.

Very respectfully,

J. M. CARSON,
Brigadier General, Quartermaster Corps,
Assistant Quartermaster General.

No appropriation is asked for by this bill but authority to bring into the Treasury of the United States the sum of $158,000, 80 per cent of which is to be paid in United States Liberty or Victory bonds at par and accrued interest and the balance simultaneously in cash. In addition, the Government will acquire valuable land and water rights.

67TH CONGRESS,}

SENATE.

{

REPORT No. 348.

PAYMENT OF COST OF TRANSPORTATION OF SUPPLIES FOR ARMY.

DECEMBER 12, 1921.-Ordered to be printed.

Mr. WADSWORTH, from the Committee on Military Affairs, submitted the following

REPORT.

(To accompany S. J. Res. 138.

The Committee on Military Affairs, to which was referred the joint resolution (S. J. Res. 138) authorizing the payment of the cost of transportation for certain supplies purchased by the Military Establishment, having considered the same, report favorably thereon with the recommendation that the bill do pass without amendment.

The necessity for this legislation is fully set forth in the following letter from the Secretary of War:

The CHAIRMAN MILITARY AFFAIRS COMMITTEE,

WAR DEPARTMENT, Washington, November 29, 1921.

United States Senate.

SIR: 1. The funds provided in the current Army appropriation act for "Army transportation" are extremely limited, and while authority is granted for the transfer to this appropriation of funds as needed from certain other appropriations, the demand upon transportation funds in connection with the discharge of enlisted men, the movement of supplies incident to the reduction of reserve stocks, and other movements incident to the reduction of the size of the Army, have proven so heavy that there is much difficulty in transporting, within the funds available, the supplies purchased by the several supply departments for military purposes. Under the procedure ordinarily followed, supplies required for military purposes have been charged to the appropriation available therefor, the purchase price ordinarily covering delivery i. o. b. cars at place of production, the supplies being shipped on Government bills of lading, and the cost of the transportation being charged to the appropriation for "Army transportation." This procedure has been most economical to the Government, since it has permitted prompt payment to the dealers and the consequent saving of discounts, and, further, since it has enabled the Government to secure the lowest rates for transportation. This method is, however, subject to the criticism that while the cost of the transportation of supplies is really an essential part of the cost to the Government of such supplies, delivered ready for use, a part of such cost (namely, the transportation to point of use) is not carried in the appropriation chargeable with the cost of the supplies, but is, instead, charged to the appropriation for Army transportation," the amount of which is ordinarily determined

without reference to the demands which will be made thereon for the transportation of supplies to be purchased from other appropriations.

2. The current appropriation for "Army transportation" is so restricted in amount that in order to secure the delivery of supplies procured from other appropriations it has been found necessary to contract for such supplies delivered at the focalities at which they are to be used, the purchase price thus actually including, in addition to the amount which under ordinary conditions would be charged to "Army transportation," (1) the increased amount represented by the difference between the Government rate and the commercial rate, (2) the increased price asked by the dealer on account of the increased risk assumed by him, and (3) the probability of the loss to the Government of the discount for prompt payment. It has even been necessary, where proper supplemental agreements therefor could be made with contractors, to modify existing contracts so as to require the contractor to pay the transportation charges, the contract price being, however, increased only by the amount which the Government would have had to pay for the transportation. These methods are distinctly uneconomical and detrimental to the interests of the Government. They have, however, been followed wherever practicable, since such a course was the only one permissible under the law and under which a deficiency could be avoided. In order to correct this condition at the present time and for the future it is recommended that legislation as follows be enacted:

"Hereafter when supplies for the Military Establishment are accepted by the United States at factory or other point of origin and are shipped to destination at the expense of the United S'ates, the cost of such transportation may be paid from the appropriation from which the supplies are purchased.

3. The Director of the Budget has been consulted and concurs in recommending the above legislation.

Respectfully,

JOHN W. WEEKS, Secretary of War.

Your committee is in entire agreement with the attitude of the War Department and urges that favorable action be taken.

Mr. SPENCER, from the Committee on Military Affairs, submitted the

following

REPORT.

[To accompany S. J. Res. 41.]

The Committee on Military Affairs, to which was referred the joint resolution (S. J. Res. 41) authorizing transportation for dependents of Army field clerks and field clerks, Quartermaster Corps, having considered the same, report favorably thereon with the recommendation that the bill do pass without amendment.

The proposed resolution would correct an oversight which occurred at the time of the passage of the act of May 18, 1920, commonly known as the Army and Navy pay act. Transportation for dependents was provided in this act for all officers and enlisted men of the Army, but field clerks, who are also subject to frequent transfers, were not included. The matter is explained in detail by a letter from the Secretary of War to the chairman of the Committee on Military Affairs of the Senate, dated April 21, 1921, which recommends the passage of the resolution. It reads, in part, as follows:

Through oversight Army field clerks and field clerks, Quartermaster Corps, were omitted by the War Department from specific mention in the study of the draft of the act of Congress approved May 18, 1920. These field clerks occupy the anomalous position of being neither officers nor enlisted men, but are appointed by the Secretary of War for indefinite periods. Their duties and their rate of pay warrant their being considered as above all noncommissioned officers but below commissioned officers. They are usually men of experience and are our most capable clerical assistants. Many of them have families, and their omission from the privilege of transportation authorized by the above-cited act inflicts considerable hardship on these men. The question has been asked of the comptroller as to whether or not these men could, under the wording of the law, be granted transportation for dependent members of their families and that officer has replied that they could not.

In the last two years during and in part due to the reorganization of the Army, field clerks have been the subject of many changes of station, perhaps as many as any class of persons in the Army, and I therefore request that the resolution be so framed as to make the same retroactive in order that these deserving men may be reimbursed for the traveling expenses of their dependents since May 18, 1920.

I am of the opinion that it was the intention of the Congress to cover the men in the status of field clerks in this regard in the provisions of the act of Congress approved May 18, 1920, but as they were not so provided for, I deem it necessary to request the enactment of the foregoing resolution.

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