Mr. BEAL. Certainly.

Mr. TOLAND. How much?

Mr. BEAL. I can't tell you.

Mr. TOLAND. Why?

Mr. BEAL. I don't remember exactly.

Mr. TOLAND. I can get that record for you if you would like it. Did they pay you well?

Mr. BEAL. It depends on what you mean by "well.”

Mr. RIPLEY. Mr. Toland, I can answer that.

Mr. MAAS. Let's get it answered.

Mr. RIPLEY. $4,500.

Mr. TOLAND. He would make a good lawyer.

Mr. MAAS. What was the nature of these irregularities, Mr. Beal? Have you heard all the testimony so far in the last 2 days? Mr. BEAL. No; I have heard it just today.

Mr. MAAS. What was the nature of these irregularities, just the general nature of them?

Mr. BEAL. The investigation I made on the reported irregularities of complimentary bids indicates that bids were sent in of an entirely complimentary nature. Either the work was started and then bids were secured or it was necessary for them to secure bids having certain contracts-I refer now to Mr. Rainey-having certain contracts for electrical equipment, which seemed very useless to me to go out and secure bids, because he had contracts which would automatically give him lower prices than you would secure by going out and marketing for them. So, why the other bids were submitted, I don't know, unless to comply with the requirements of the Navy Department.

Mr. MAAS. Who paid you to make the survey?

Mr. BEAL. Cramp Shipbuilding Co.

Mr. MAAS. So, it was the company itself that wanted to investigate the irregularities when they were called to their attention by Captain Hanson?

Mr. BEAL. That is right.

Mr. MAAS. When you came across what you considered irregular bids, these silly bids where the work was already done, or could have gotten it under contract less than it could have been gotten under bid anyway, did you make any inquiry as to why they obtained those bids?

Mr. BEAL. I discussed it all with Admiral DuBose. I discussed it at great length with Captain Hanson.

Mr. MAAS. What was the purpose of obtaining these bids? What was the intended purpose of obtaining the bids?

Mr. BEAL. My opinion is that there was probably a misunderstanding on the method of operation under the subcontracts. I do not know whether the Navy Department knew that there were certain contracts existing on the part of Mr. Rainey, for instance, for electrical equipment which should give him a favorable price, and the company a favorable price, but the ruling of the supervisor's office required three competitive bids, and they simply automatically went out and tried to get them.

Mr. MAAS. Then, on the face of it the so-called complimentary bids were for the purpose of deceiving somebody?

Mr. BEAL. Well, I don't know as I would say that, Mr. Maas. I think, again, that there was probably a misunderstanding as to the procedure to follow in the rush to get work done. They were forcing production or rehabilitation and not following the procedure as outlined, as required.

Mr. MAAS. It was outlined for a specific purpose, wasn't it?

Mr. BEAL. That is right.

Mr. MAAS. All right. Then, to make it appear that that was being complied with was for the purpose of deceiving somebody, otherwise, how would you account for typing one bid on one typewriter and the other on another, and signing one with the right hand and the other with the left hand?

Mr. BEAL. I can't account for it.

Mr. MAAS. You found out those things?

Mr. BEAL. That is right.

Mr. TOLAND. You didn't discover all that?

Mr. BEAL. That was discovered prior to my investigation.

Mr. TOLAND. You didn't discover a lot of things, and the fact of the matter is, you didn't come in there until Captain Hanson had made the report.

Mr. BEAL. No.

Mr. TOLAND. The men of this committee and the O. N. I. had been in there.

Mr. BEAL. That is right.

Mr. TOLAND. Now, Mr. Minor, you agree, do you not, that that report of Mr. Beal is true and correct, and that the statements of individuals reflected therein that were made when you were present, are true?

Mr. MINOR. I have never read the report, Mr. Toland.

Mr. TOLAND. Were you present when statements were made to Mr. Beal by individuals?

Mr. MINOR. I was present at some of them, and at some of them I wasn't present.

Mr. TOLAND. At the ones you were present that he reflects in the report-you have never read the report?

Mr. MINOR. No.

Mr. TOLAND. Your report is an exhibit in that report, isn't it? Mr. MINOR. The only part of that report which I contributed to was the part on the price checks and I don't remember the exhibit number, but I returned all of it to Mr. Beal.

Mr. TOLAND. Did either one of you check the 12,000 or 6,000 purchase orders?

Mr. BEAL. What do you mean, did we check them?

Mr. MINOR. No.

Mr. BEAL. I did not.

Mr. TOLAND. Did you interview any witnesses-contractors outside of the company?

Mr. BEAL. I interviewed some.

Mr. TOLAND. How many?

Mr. BEAL. I interviewed none of the subcontractors under the Rohleder contract. I interviewed some contractors who were competing with Mr. Rohleder.

Mr. TOLAND. Whom did you interview?

70533-42-vol. 3-10

Mr. BEAL. I remember specifically Townsend, Shroeder, and Wood. Mr. TOLAND. They told you, did they not, that they never submitted any bid?

Mr. BEAL. No; they told me that they had difficulty getting into the Cramp business.

Mr. TOLAND. Did they tell you why?

Mr. BEAL. No; I don't recall that they ever did.

Mr. MAAS. Did either of you ever check any competitors to find out whether the prices that were paid were in fact as low as they could have obtained?

Mr. BEAL. We endeavored to check, the company itself checked electrical prices. I think they are an exhibit in my report. That was done by the Cramp's purchasing organization. The summation of those prices indicated that the prices on electrical materials were comparable with what they could have received any place else. We checked some 8 or 10 items aside from the electrical work. The result of that investigation showed that some of the quotations were lower and some of them were higher, but because of the lapse of time between when the original prices were made as against trying to go back and double-check 4 or 5 months later, it was almost a physical impossibility to be able to put your finger down and say the prices were higher or the prices were lower.

Mr. MAAS. So there is no accurate check or information as to whether these prices were in fact fair prices, high or low, as to what the general competitive situation would have been had there been actual competition.

Mr. BEAL. I think it is almost impossible to make a check on that. Mr. MAAS. What we are interested in from a legislative standpoint is to find out whether national defense naval contracts are being carried out both as speedily as possible and as economically as possible, and you can't give us any factual information on that other than what you have just mentioned?

Mr. BEAL. In my analysis of it, there has been, I would say, little or no, if any, monetary loss.

Mr. TOLAND. The fact of the matter is that you made no investigation to determine that, did you, except a brief investigation. You didn't interview all the subcontractors, did you?

Mr. BEAL. It was a physical impossibility to do so.

Mr. TOLAND. You didn't interview any substantial number of them, did you?

Mr. BEAL. I don't think that would have been the answer.

Mr. TOLAND. That isn't answering my question. Did you?

Mr. BEAL. No; I did not; but it wouldn't have been the answer

anyway.

Mr. TOLAND. That is a matter of opinion.

Mr. BEAL. That is right; but that is my opinion.

Mr. TOLAND. And what is that based on?

Mr. MAAS. You are not in a position to state whether they got it as cheaply as they might have or if the prices were fair, because you have no information on it.

Mr. BEAL. The only information we have is on the check prices that we were able to make.

Mr. MAAS. And that was only a very small percentage of the purchase orders.

Mr. BEAL. That is right.

Mr. MAAS. So you cannot actually state whether, in your opinion, they were fair prices or weren't fair prices.

Mr. BEAL. That is right.

The ACTING CHAIRMAN. How much is in the report of Mr. Beal? What is the volume of it? How many typed pages? That will be printed in the record and available to everybody.

Mr. TOLAND. Right.

You said you interviwed Townsend, Shroeder & Wood?

Mr. BEAL. Mr. Shroeder.

Mr. TOLAND. Did you tell him he was supposed to be a competitive bidder of Mr. Rohleder, according to the records of Mr. Cramp?

Mr. BEAL. I asked him how seriously he had attempted to get business at Cramps.

Mr. TOLAND. That still isn't answering my question. Did you ask him or tell him, if you knew, that according to the records of the Cramp Shipbuilding Co., he was supposed to be a competitive bidder of Charles

Rohleder?

Did you tell him that?

Mr. BEAL. I don't think I put it to him in that way.

Mr. TOLAND. Did Mr. Shroeder tell you that he ever submitted a bid?

Mr. BEAL. Yes.

Mr. TOLAND. Did he tell you whether or not he bid on the reconditioning of the office building?

Mr. BEAL. I don't remember what he said he bid on, but he told me that he had bid.

Mr. TOLAND. But the fact of the matter is that it appears on the record of the summary sheet of the bidders, in which Rohleder got the contract for the reconditioning of the four-story office building, the reconditioning of the mold-loft floor, and the reconditioning of the nine-story office building; the fact of the matter is that his company never had submitted a bid on those three jobs. Did you find that out? Mr. BEAL. That they had not submitted a bid?

Mr. TOLAND. On those three jobs.

Mr. BEAL. I can't say whether I found that out or not.

Mr. TOLAND. I will submit this at a later time.

Mr. COLE. What did Mr. Shroeder say when you asked him how seriously he had tried to get some of that business?

Mr. BEAL. He told me in one particular case-and I don't remember the exact contract number-that he had put in a fee which in his opinion. was very low, and his estimate of the completing of the job was low, but he had been told by the Cramp personnel that he had not taken the whole job into consideration, and that if he had put in a larger amount of estimated cost, based in relation to his fee, his fee would then not have been low, so he lost the job.

Mr. COLE. He lost the job because he didn't bid high enough?

Mr. BEAL. No. His estimate of how much the work would cost hadn't included, according to him, the complete work to be done; and then, in comparison with the Cramp estimate of what had to be done,

if his fee had gone up accordingly, then his fee would not have been low.

Mr. MAAS. They had no way of knowing that his fee would not have gone up proportionately.

Mr. BEAL. I don't know.

Mr. COLE. This was a bid to Rohleder?

Mr. BEAL. No; a bid to Cramp.

Mr. HESS. Did he say who the personnel was that told him?

Mr. BEAL. The plant engineering department. He mentioned no name, to my knowledge.

Mr. COLE. What was the difference between the amount he bid and the amount he might have put in?

Mr. BEAL. I don't know.

Mr. TOLAND. We have that, Mr. Cole. We will bring it out later. Mr. COLE. Did that happen on only one occasion, or was that a common practice that Cramp said to the person that the bid wasn't high enough?

Mr. BEAL. It is the only case that came to my knowledge at all.

Mr. TOLAND. Do you think that you are qualified on the amount of time that you put in on this survey and the limited scope that your investigation took of subcontractors, so that you can tell this committee whether or not this company or the Navy Department suffered any loss by reason of what has been produced here?

Mr. BEAL. If the check on the prices made is an indication of it;

yes.

Mr. TOLAND. Did you check the price on every subcontract?
Mr. BEAL. I did not.

Mr. TOLAND. That is all.

The ACTING CHAIRMAN. Are there any questions anybody else wishes to ask?

Mr. TOLAND. Mr. Rainey.

The ACTING CHAIRMAN. Mr. Toland informs me that he is ready to proceed with all the witnesses who have been subpenaed. So, Commander Weyerbacher, Mr. Rohleder, and the others, tomorrow morning Mr. Toland will proceed without referring to it again.

Mr. TOLAND. Mr. Rainey is a very short witness.

The ACTING CHAIRMAN. Do you solemnly swear that the evidence you are about to give before the Naval Affairs Committee is the truth, the whole truth, and nothing but the truth, so help you God? Mr. RAINEY. Yes, sir.

TESTIMONY OF JOSEPH P. RAINEY, J. P. RAINEY & CO.,
PHILADELPHIA, PA.

Mr. TOLAND. Give the reporter your full name.

Mr. RAINEY. Joseph P. Rainey.

Mr. TOLAND. Where do you reside?

Mr. RAINEY. Welsh Road, Huntington Valley, Pa.

Mr. TOLAND. What is your present business or occupation?

Mr. RAINEY. Electrical construction.

Mr. TOLAND. Do you know Mr. Rohleder?

Mr. RAINEY. Yes, sir.

Mr. TOLAND. How long have you known him?