The names of the sections are:

(A) The Navy Yard Management Section. (B) The Plant and Facilities Section.

(C) The Appointment and Information Section. (D) The Public Works Section.

Each of the foregoing sections will be in charge of an officer of suitable rank and of special training and experience to properly handle the work of the section.

Mr. UMSTEAD. Will the new arrangement mean the addition of naval officers and civil employees?

Mr. EDISON. No, sir; In fact, I think there will be an economy. It was merely the regrouping of work of existing people and putting them under the direction of four rather than eight officers having specialized experience. For instance, an engineering-duty-only officer would have certain things to do; a civil engineer would have certain other things to do; and so on. We would then have a well-rounded group of people to whom, when any problem came to me, I would be able to present this question and get some information from somebody conveniently located.

Mr. UMSTEAD. Under the system heretofore prevailing you, of course, have had available the bureaus involved, from which you could obtain information. For example, if you desired information dealing with some question of engineering, you would call the chief of that bureau.

Mr. EDISON. That would still obtain.

Mr. UMSTEAD. You do not, then, mean to undertake to set up in your office an arrangement which would have available within your office all the records and information available to a bureau?

Mr. EDISON. Oh, not in the least. The chiefs of bureaus will still be the principal people. There is no change in that.

Mr. UMSTEAD. I did not mean to infer that that would not continue. Of course it would prevail, of necessity. But how could this person in your office who is an expert in engineering, to whom you referred a moment ago, give you detailed information dealing with the Bureau of Engineering without obtaining that information from the bureau itself?

Mr. EDISON. That is exactly where he will obtain it.

Mr. UMSTEAD. Then, if I understand your analysis of what you are trying to do, it is merely to have a person in your office as a contact man between you and some particular bureau?

Mr. EDISON. On certain problems; but the door is still just as widely open to the chiefs of bureaus, and they will continue to be the principal ones upon whom I will place dependence for counsel and advice. The idea is like this. A problem will come in to me involving perhaps three or four bureaus. Rather than my sending for the four different chiefs of bureaus, I will say, for instance, to the engineer in my office, the engineering-duty-only officer, "Will you do the leg' work on this, and gather the information from the Bureaus and try to consolidate it so that when we meet with each of the bureaus we will have something crystallized?”

Mr. UMSTEAD. Of course we are interested not only from the standpoint of efficiency, but from the standpoint of expense; and I understand you to say that it will involve no additional expense

whatever.

Mr. EDISON. It should produce an economy. I would like to give you the figures on that. I do not know whether they have been finally worked out.

Mr. COMPTON. I might say, Mr. Secretary, that the shore establishments division originally consisted of eight sections-shore establishments 1 to 8, inclusive. The new arrangement, when it becomes operative, would reduce that number from eight to four. We would have four sections instead of eight, and the related functions would be coordinated and consolidated in these four sections rather than eight sections. So it ought to reduce personnel rather than increase it, with the corresponding economies.

Mr. EDISON. I can say this: There is no idea of duplicating any records, any work, any clerical staff or anything else. It is more to give me intelligent advice, which will come to me just as it always has, through the chiefs of bureaus, but will come to me in a more orderly manner and be gathered by people who are trained in the particular problems involved.

DESIRABILITY OF CHANGING EXISTING NAVY LAWS

Mr. UMSTEAD. Mr. Secretary, since you became Assistant Secretary of the Navy the Department has had the advantage of a trained businessman. Based upon your experience prior to your present position, I should like to know what your view is with reference to business as conducted in the Navy as compared with the efficiency of business outside the Navy, dealing with the expenditure of Government funds.

Mr. EDISON. May I state it this way: When I came down to this particular position, I expected to find a rather red-tape-ridden organization, without any progressive ideas, and with a wasteful way of handling everything, and inefficient throughout. I have had the privilege of working now less than a year with these different departments, and I have also had the privilege of inspecting nearly all of the shore establishments-that is, industrial shore establishmentsand I have found, much to my surprise and delight, that the whole thing seems to be going very well. They do operate under a lot of handicaps, which is necessary to some extent on account of its being a government function. This sheaf of laws, for example [indicating] causes a great many things that possibly should be studied and rectified.

There is the question of overage vessels. We have a situation in Philadelphia where some of these very, very old ships that are useless are lying up there, and there is a possibility that the ice might come in and crush the hulls and they might sink. The question was, Shall we sell them or not? Well, in the desire to obtain this scrap, I took the position that it would be much better to cut them up and save the valuable scrap instead of selling the ships as hulks, and getting just scrap iron prices for the whole thing. So I started out that way; and they said:

That can't be done; there is a law that was passed many years ago which states that no vessel can be sold as scrap unless it is sold as a complete vessel. So we are faced with selling these complete vessels as hulks, for a very small price.

Mr. UMSTEAD. Mr. Secretary, have you or other officials of the Navy Department made any effort to take up with the Naval Affairs Committee of the House the desirability of changing existing laws, which would give you the latitude you need to effect economies in the disposition of materials such as you mention?

Mr. EDISON. I have not, sir, except that I have taken the first step, which is merely to find out what these laws are; and that is all this file is.

Mr. UMSTEAD. Most of the legislation affecting the Navy Department is sponsored by the Department. Therefore there must have been, at the time the restrictive laws referred to by you were passed, some reason for those statutes. It seems to me that it would be a fine thing, now that you have compiled a list of the existing statutes which affect the Navy Department, to present that list to the legislative committee with some recommendations from the Department. Conditions may have changed since the time some of those acts were passed, and the reasons for their passage may no longer exist; and yet, no doubt, from your statement, they have continued to prove restrictive and detrimental.

Mr. EDISON. That was exactly what I had intended to do with this list. First I wanted to get a list of laws that govern the actions of the Navy Department; second, I wanted to make a study of those laws to see whether some of them were no longer desirable or necessary; in other words, some old law that had been passed, just as you say, for some special circumstance that no longer exists, but which still blocks efficiency in handling some of the work of the Navy. And then I wanted to take that up with the proper people in Congress to see if some action could not be taken to give us a little more elbow

room.

Mr. UMSTEAD. Of course, the establishment of a routine from year to year in the Navy Department regarding its business affairs may or may not work for efficiency. For instance, restrictions such as you have mentioned illustrate that some factors in the established order of things are expensive, and necessarily so, and I think an establishment spending as much money as the Navy Department owes a duty to the Congress and to the country to make every effort possible to operate in such a way as to save all the money it can save. I am sure that is the desire of you gentlemen in the Navy, but, at the same time, I think sometimes that you move toward that objective rather slowly.

Mr. EDISON. The bigger the body, the slower it moves, sir.

Mr. THOм. When it comes to the disposal of an old ship, it would seem to me that the policy that ought to be followed would be something like this: You would get bids on the whole ship, and then also invite bids on parts of the ship; the sum which is the larger is the sum which you would accept.

Mr. EDISON. And we should be permitted to keep some of it as strategic material. Now we cannot do that.

Mr. UMSTEAD. Is there any further statement which you desire to make, Mr. Secretary?

Mr. EDISON. I think not, sir, at this time.

Mr. UMSTEAD. We thank you very much, and we are glad to have you with us this morning.

WEDNESDAY, DECEMBER 8, 1937.

BUDGET ESTIMATES FOR 1939

STATEMENTS OF REAR ADMIRAL H. E. KIMMEL, BUDGET OFFICER, AND CAPT. F. W. ROCKWELL, ASSISTANT BUDGET OFFICER

POLICY AND METHOD OF PREPARATION OF THE ANNUAL BUDGET IN THE NAVY DEPARTMENT

Mr. UMSTEAD. We shall be glad to hear now from Admiral Kimmel, the Budget Officer of the Navy Department.

Admiral KIMMEL. Mr. Chairman, I have a prepared statement which I will read. The initial step in the preparation of the annual budget of the Navy Department is the Estimate of the Situation, prepared annually by the Chief of Naval Operations. The decisions made as a result of this estimate, when approved by the Secretary of the Navy, were promulgated to all the bureaus and offices of the Navy Department and served as a basis upon which the plans and polícies: were prepared by the various agencies charged with their preparation. These plans and policies, when approved by the Secretary of the Navy, were issued to the bureaus and offices of the Navy Department and constituted a directive to all Navy Department agencies in the preparation of their money estimates. The plans and policies include the operating force plan, the fleet employment plan, the personnel plans for the Navy and Marine Corps, the proposed building program, the base development program, the district craft program, the naval aeronautical organization, the air operating policy, and the material improvement plan for vessels.

Projects not in conformity with the decisions of the estimate of the situation may not be included in the plans nor in the money estimates without reference to the Chief of Naval Operations and. the Secretary of the Navy.

The bureaus and offices of the Navy Department submitted their preliminary estimates based upon the aforementioned plans and policies.

ESTIMATES FOR 1939

The preliminary estimates for 1939 as submitted by the bureaus and offices of the Navy Department totalled $713,743,273. After extensive hearings in the Department and a thorough examination of each item, this original amount was reduced to $632,208,336. The Bureau of the Budget, after further hearings, and in line with the fiscal program of the President, has set up an estimate of $565,929,461 to maintain the Naval Establishment for the fiscal year 1939. There are many highly desirable, if not essential, items which have been omitted and which must be provided for in future estimates.

Mr. UMSTEAD. Admiral, heretofore the annual cost of the Treaty Navy has been submitted to us as $584,146,641. It is no doubt true that increased material and labor costs have changed that figure to some extent, but hardly to the extent of the difference between the top figure estimated by the Department heretofore, and the sum of $632,208,336 submitted by the Department to the Budget this year,

which difference is, roundly, $48,000,000. How do you account for that?

Admiral KIMMEL. In the first place, sir, that figure which was submitted by Admiral Standley 3 years ago was an average figure. Mr. UMSTEAD. Admiral, pardon me just a moment. The first figure submitted was $550,000,000.

Admiral KIMMEL. That is right.

Mr. UMSTEAD. That it was admitted by all of the officials of the Navy Department that an error of $29,000,000 was made. Admiral KIMMEL. In assembling the estimate.

Mr. UMSTEAD. In assembling the estimate.

Admiral KIMMEL. That is right.

Mr. UMSTEAD. And, of course, since that time new leave and sick laws have been passed?

Admiral KIMMEL. That is right.

Mr. UMSTEAD. Which justify adding an additional amount.

Admiral KIMMEL. The $584,000,000 was a flat figure, a correction to the estimate made by Admiral Standley, which was just a plain correction. The thing was wrong without any change in law or without any change in the purchasing value of the dollar, but the main point, and what I started out to say was that the $584,000,000 figure, at the time it was prepared, purported to be an average figure, and in an average figure you are going to run over or under it a little bit. You are going to change that average figure with the purchasing power of the dollar.

Mr. UMSTEAD. But that average figure was predicated upon a treaty-strength navy?

Admiral KIMMEL. That is right.

Mr. UMSTEAD. Toward which we are still building?
Admiral KIMMEL. Yes, sir; that is right.

Mr. UMSTEAD. And beyond which, as I understand, the present estimates are not designed to go?

Admiral KIMMEL. That is right, except that the strength of the treaty Navy as presented by Admiral Standley has been increased by the escalator clause invoked by Great Britain and Japan which have resulted in an increase in allowances of 20,270 tons of light cruisers, 40,000 tons of destroyers and 15,598 tons of submarines. Of course, if you get down to the $632,000,000, we had some money in there for strategic materials, which was never included in the original estimates, $3,000,000, and we had $15,000,000 for the naval supply account fund which was never included in the original estimate which was brought up here. Those were extraordinary expenses that have been injected by necessity, and for good and sufficient reasons into the estimates that were submitted. Ship building, Public Works, and plane construction, were some $30,000,000 in excess of Admiral Standley's estimate. I think if I had a comparison in front of you I could show you very quickly. Unfortunately I do not have that with me. If you turn to page 41, you can see where most of it went. We have laid out there the increases. Does that clarify it any, sir?

Mr. UMSTEAD. That is sufficient for the present, Admiral, unless you have some further statement you desire to make about it in addition to the statement to which you refer.

Admiral KIMMEL. I have nothing further.