the risk of loss of or damage to the Government Property, except to the extent that the Government may have required the Contractor to carry such insurance under any other provisions of this contract.

(3) Upon the happening of loss or destruction of or damage to the Government Property, the Contractor shall notify the Contracting Officer or his designated representative thereof; and shall take all reasonable steps to protect the Government Property from further damage, separate the damaged and undamaged Government Property, put all the Government Property in the best possible order, and furnish to the Contracting Officer a statement of all the details concerning the loss or damage and the insurance coverage, if any. The Contractor shall make repairs and renovations of the damaged Government Property or take such other action, as the Contracting Officer directs.

(4) In the event the Contractor is indemnified, reimbursed, or otherwise compensated for any loss or destruction of or damage to the Government Property, he shall use the proceeds to repair, renovate or replace the Government Property involved, or shall credit such proceeds against the cost of the work covered by the contract, or shall otherwise reimburse the Government, as directed by the Contracting Officer. The Contractor shall do nothing to prejudice the Government's right to recover against third parties for any such loss, destruction or damage and, upon the request of the Contracting Officer, shall, at the Government's expense, furnish to the Government all reasonable assistance and cooperation (including the prosecution of suit and the execution of instruments of assignment in favor of the Government) in obtaining recovery. In addition, where the subcontractor has not been relieved from liability for any loss or destruction of or damage to Government Property, the Contractor shall enforce the liability of the subcontractor for such loss or destruction of or damage to the Government Property for the benefit of the Government.

(g) The Government shall at all reasonable times have access to the premises where any of the Government Property is located.

(h) The Government Property shall remain in the possession of the Contractor for such period of time as is required for the performance of this contract unless the Contracting Officer determines that the interests of the Government require removal of such property. In such case the Contractor shall promptly take such action as the Contracting Officer may direct with respect to the removal and shipping of Government Property. In any such instance, the contract may be amended to accomplish an equitable adjustment in the terms and provisions thereof.

(1) Upon the completion of this contract, or at such earlier dates as may be fixed by the Contracting Officer, the Contractor shall submit to the Contracting Officer in a form acceptable to him, inventory schedules covering all items of the Government Property not consumed in the performance of this contract, or not therefore delivered to the Government, and shall deliver or make such other disposal of such Government Property as may be directed or authorized by the Contracting Officer. The net proceeds of any such disposal shall be credited to the cost of the work covered by the contract or shall be paid in such manner as the Contracting Officer may direct. The foregoing provisions shall apply to scrap from Government Property; provided, however, that the Contracting Officer may authorize or direct the Contractor to omit from such inventory schedules any scrap consisting of faulty castings or forgings, or cutting and processing waste, such as chips, cuttings, borings, turnings, short ends, circles, trimmings, clippings, and remnants, and to dispose of such scrap in accordance with the Contractor's normal practice and account therefor as a part of general overhead or other reimbursable cost in accordance with the Contractor's established accounting procedures.

(j) Unless otherwise provided herein, the Government shall not be under any duty or obligation to restore or rehabilitate, or to pay the costs of the restoration or rehabilitation of the Contractor's plant or any portion thereof which is affected by the removal of any Government Property.

(k) Directions of the Contracting Officer and communications of the Contractor issued pursuant to this clause shall be in writing.

LIMITATION OF COSTS (COST REIMBURSEMENT CONTRACT)

A. It is estimated that the total cost to the Government, exclusive of any fixed fee, for the performance of this contract will not exceed the estimated cost set forth in the Schedule, and the Contractor agrees to use its best efforts to perform the work specified in the Schedule, and all obligations under this con

tract within such estimated cost. If at any time the Contractor has reason to believe that the costs which it expects to incur in the performance of this contract in the next succeeding 60 days, when added to all costs previously incurred, will exceed 75% of the estimated cost then set forth in the Schedule, or if at any time, the Contractor has reason to believe that the total cost to the Government, exclusive of any fixed fee, for the performance of this contract will be substantially greater or less than the then estimated cost thereof, the Contractor shall immediately notify the Contracting Officer in writing to that effect, giving the revised estimate of such total cost for the performance of this contract.

B. The Government shall not be obligated to reimburse the Contractor for costs incurred in excess of the estimated cost set forth in the Schedule, and the Contractor shall not be obligated to continue performance under the contract or to incur costs in excess of the estimated cost set forth in the Schedule, unless and until the Contracting Officer shall have notified the Contractor in writing that such estimated costs has been increased and shall have specified in such notice a revised estimated cost, which shall thereupon constitute the estimated cost of performance of this contract. When and to the extent that the estimated cost set forth in the Schedule has been increased, any costs incurred by the Contractor in excess of such estimated cost prior to the increase in estimated cost shall be allowable to the same extent as if such costs had been incurred after such increase in estimated cost.

C. Notwithstanding the provisions of this clause, the Contractor is not authorized to exceed the limits of funding covered by the approved financial plan, without the prior approval of the Contracting Officer.

Senator GRAVEL. We have one last witness who is an attorney, Mr. Jim Bradley.

STATEMENT OF JAMES BRADLEY, ATTORNEY, ACCOMPANIED BY J. D. MCNAUGHTON, VANCOUVER, BRITISH COLUMBIA

Mr. BRADLEY. Mr. Chairman, members of the committee, my name is Jim Bradley. I am an attorney and practice law here in Juneau with my firm of Robertson, Monague, Eastaugh, Annis & Bradley. The gentleman on my right is Mr. J. D. McNaughton of Vancouver, British Columbia.

I would like to thank the Senators sincerely for their coming and for making it possible for us to appear.

I think our presence here signals good news and bad news. The bad news is that we are hitting you ice cold with a pretty complicated topic. The good news is that we don't want any money.

My client is Pacific Hovercraft, Inc., an Alaska corporation, a wholly owned subsidiary of Pacific Hovercraft, Ltd., a British Columbia corporation. They are, as far as I know, the only active commercial Hovercraft company in Canada and I think the Alaska subsidiary is the only active commercial Hovercraft operation in the United States. I know it was, perhaps it is not.

Senator Cook. Excuse me, Mr. Bradley, but there is a Hovercraft that operates on a routine basis between Annapolis and St. Marks Island in what is known as the Eastern Shore of Maryland.

Mr. BRADLEY. I think it is entirely inappropriate for me to ask questions, but is it a commercial operation?

you

Senator Cook. It is a commercial operation and carries passengers. I have seen it myself several times while fishing on the Chesapeake Bay. Mr. BRADLEY. Then I would amend my testimony to suggest that my client is one of two commercial Hovercraft operations in the United States.

Our presentation is informal in the sense that we have not prepared a written statement. We thought it might be more useful to discuss our situation for the Senators, and I would encourage you to please inter

rupt either me or Mr. McNaughton at any time during our statement when the questions occur to you.

I would like further as a preliminary matter to say that I would like to make the remarks that we make here without prejudice to some of the things we say. We want to be 100 percent candid with the committee and yet, depending on the relief that we get or don't get, it may be necessary to litigate certain questions with the United States. I would not want our attempt here to be candid, to prejudice our position.

I would like to ask Mr. McNaughton who is the executive assistant to the managing director of Pacific Hovercraft to briefly tell you just a little bit about the nature of the beast and what it is and how it works if that is agreeable to the chairman.

Mr. MCNAUGHTON. Well, I don't know how familiar you gentlemen are with this type of vehicle so it may be some help to lay a little background.

Senator GRAVEL. I have ridden on them both in Vietnam and as the Isle of Wight.

Senator Cook. You have ridden in one or operated one?

Senator GRAVEL. I touched one.

Mr. MCNAUGHTON. Generally we will say the craft was invented in Britain somewhere around 10 or 11 years ago, in 1959. This was developed on the principle of an air cushion vehicle. The principle of operation, of course, is a cushion of air underneath the craft supporting the vehicle at various heights depending on the design of the craft off the ground.

Now the manufacturer of a totally amphibious Hovercraft which are commercially feasible, the only one at the present time is British Hovercraft Corp. There are other manufacturers of amphibious Hovercraft and there is a good deal of development being carried on in the United States, but at this time there is no commercially operated Hovercraft other than BHC.

As you can see from the brochures, the appearance of the vehicle is similar in a lot of ways to an aircraft. This particular vehicle that we operate, the SRN-6 or the modified version of this, the PHL-2 is on cushion 4 feet off the ground. The hull would be 4 feet above the surface of the ground.

Senator JORDAN. The ground or the water?

Mr. MCNAUGHTON. Whichever one. Whichever surface it decides to travel on.

Mr. BRADLEY. It is fully amphibious, Senator.

Mr. MCNAUGHTON. It is fully amphibious. There are slight dif ferences.

Senator Cook. Fully amphibious in that it can easily travel on either water or land.

Mr. MCNAUGHTON. The limitations to the craft are quite a number. Reasonably flat terrain is required for a land operation and a reasonably calm sea is required for a sea operation. By reasonably calm we could say sea conditions up to 4-foot wave heights have been encountered with very little problem to either passenger comfort or injury to the craft.

Our craft, in fact, have operated 12-foot seas with crew only. In ice operations in the Arctic we have successfully cleared 6-foot pres

sure ridges, ice pressure ridges. The reason that this can be done is that the ridge is sloped on either side. This craft can negotiate approximately two and a half foot verticle obstacles. Now this has to be amended in that you cannot have a continuation of these obstacles. If you have one or two, that is fine but there has to be a space between obstacles.

At the present time the craft are reasonably versatile and have been used for passenger transportation, cargo transportation and they have been used for seismic exploration which permanently fixed equipment. They have been used for search and rescue. We have one at Vancouver Airport which is operated by the Canadian Coast Guard, and that is used primarily and solely for a rescue craft. The reason for that is because of the title flats at Vancouver International Airport. This is the only vehicle that can function in this sort of situation.

Our company has run a passenger service between Vancouver and on Vancouver Island. As you probably are aware, there are automobile ferry services running between England and the mainland of Europe. These craft have been used in military applications in both Britain and in the United States. At present we have one of our craft in the Arctic doing a shallow water hydrographic survey for the British Government. This is a continuation of the program that was initiated last year.

That is a general rundown of what has been going on and what the state of the art is at the present time.

Senator GRAVEL. We have two of them in the Canadian Arctic, and also one on the Alaska side working for Arco.

Mr. MCNAUGHTON. Yes, we have one up there at the present time. Senator Cook. Your maximum permissible weight is 22,000 pounds? Mr. MCNAUGHTON. That is the normal gross weight of the vehicle. Senator Cook. What is your empty weight?

Mr. MCNAUGHTON. Well, it varies. The empty weight is approximately between 12,000 and 14,000 pounds.

Senator Cook. Then your carrying capacity is 10,000 pounds.

Mr. MCNAUGHTON. Well, we have though what is termed in British terminology a gross overload condition where this craft can have a gross vehicle weight of 32,000 pounds on land and 26,000 pounds on

water.

Senator Cook. How many passengers can you carry in your present SRN-6?

Mr. MCNAUGHTON. The SRN-6 is capable of 35 passengers.

Senator Cook. At what speed does your hovercraft travel under calm water conditions?

Mr. MCNAUGHTON. Calm water, approximately 60 miles an hour. Senator Cook. When carrying passengers, what is your normal operating speed?

Mr. MCNAUGHTON. Between 50 and 60.

Senator Cook. Between 50 and 60.

Mr. MCNAUGHTON. On a calm day. The speed drops off depending on the extent of the sea conditions.

Senator Cook. In general, we are speaking of a form of transportation for 35 people at approximately 50 miles per hour.

Mr. MCNAUGHTON. That is right.

Senator Cook. What is the cost of one of your Hovercrafts?

Mr. MCNAUGHTON. Delivered in Canada with operational spares, our craft are approximately a million dollars each.

Senator JORDAN. What are they constructed of?

Mr. MCNAUGHTON. They are constructed basically of aluminum alloy.

Senator JORDAN. The hull?

Mr. MCNAUGHTON. The hull, yes. They use aircraft aluminum alloys. They use aircraft procedures in the construction because of the weight ratio.

Senator Cook. The speed of this type of marine transportation is impressive.

Mr. BRADLEY. Senator Cook, the questions that you asked Mr. McNaughton only partially illustrate what is available today. The SRN-4 which is also manufactured by British Hovercraft is capable of carrying 400 passengers at a speed of 88 miles per hour on land and 93, I think, on ice. It can also function as an automobile ferry and carry 25 automobiles and something of the order of 250 people.

Senator CoоK. You stated that the Canadian Coast Guard has a Hovercraft, unfortunately, our Coast Guard is not that modern.

Mr. MCNAUGHTON. The reason our Coast Guard does have it at Vancouver: for years it tried almost every vehicle imaginable to protect the area around the airport and it was impossible to do it with anything else.

Senator GRAVEL. I would like to see the Government take on the use of these boats in the Coast Guard or I would like to see some governmental agency perfect a ferry system. What is happening in this particular area, there is not enough research and development money going into it. Of course the costs are very comparable on that. The only way we can overcome those costs is the utilization of it so we can get some experience.

Mr. BRADLEY. May I respond to your question, Senator Gravel. The question essentially is what is your problem, why are we here? In 1963 the Treasury Department decided that Hovercraft were vessels. Having defined them as vessels and considering their British origin, we immediately run afoul of the tangle of foreign bottoms of the Jones Act. There has not been enough practical experience to find out just exactly how badly this hurts us. We know of several instances in the operation here in Alaska where it has hurt the company badly, and I might say has hurt the State, by way of example-you are aware that the red salmon run in Bristol Bay as it is going on right now, there are some problems in fully utilizing the fisheries resource because they simply are not able to harvest all the fish and process them. A proposal was made to fly the fish out of the airport up there in Hercules aircraft. My client, Pacific Hovercraft, was approached and asked to ferry the fish from a fish buyer to the airport, run a shuttle back and forth so that the fish buyer would not have to steam all the way to some port where they could be off-loaded in a more conventional manner. This would require going some 3 to 5 miles over shallows, too shallow for conventional vehicles to operate. I had to advise them that they might have problems with the Jones Act if they undertook to do this. Senator JORDAN. Where is this vessel manufactured? Mr. BRADLEY. In England.