Mr. SCRUGHAM. Now, I note that the Navy asks for an appropriation of $3,000,000 for this purpose. That was cut by the Budget to $500,000, is that correct? Admiral CONARD. That is correct. I have a statement that will give a picture of how the thing stands at this time. Of the $3,500,000 appropriated in the 1938 appropriations bill for the purchase of strategic and critical materials, $2,000,000 has been placed in administrative reserve and is not now available for expenditure during the current fiscal year. Mr. SCRUGHAM. Who placed the $2.000.000 in reserve making it not now available for expenditure during the current fiscal year, or, rather, by whose order was it? Admiral CONARD. The Bureau of the Budget states its requirement that we place a certain proportion of our funds in reserve, and this $2,000,000 not being in the status of immediate expendability was placed amongst other items in the reserve. Mr. SCRUGHAM. Was there any other item where 60 percent of it was made unavailable for expenditure during the year? Admiral CONARD. I do not know whether there was any other item where that proportion was placed in reserve. Mr. SCRUGHAM. I want to find out why this particular item was elected for this signal honor of being economized by being placed in reserve. Admiral CONARD. In view of the situation with respect to the specifications for the strategic ores that we want to buy, manganese particularly, we are not ready to purchase, and we knew we could not get around until toward the end of this year to actually spend that money. Mr. SCRUGHAM. These specifications for the various strategic materials have been prepared, or are they prepared at this time? Admiral CONARD. As far as manganese is concerned, we had specifications prepared and we advertised for purchases, with unsatisfactory results. Mr. SCRUGHAM. How about tin? Admiral CONARD. Tin we are buying rapidly. Mr. SCRUGHAM. How about silk? Admiral CONARD. Silk we are buying. Mr. SCRUGHAM. You are purchasing silk? Admiral CONARD. Yes. Mr. SCRUGHAM. How about chromium? Admiral CONARD. Bids on chromium open on January 4, 1938. Mr. SCRUGHAM. How about tungsten? Admiral CONARD. Tungsten we are holding out on, because of the very high prices of tungsten at the present time. Mr. SCRUGHAM. How about optical glass? Commander MAYO. The specifications are not ready on optical glass. Admiral CONARD. I may say, we will make every effort to put into operation the utilization of as much of this fund as is considered wise. In connection with manganese, we do not want to go ahead without proper specifications for manganese ores, particularly for our peculiar se. There is a considerable difference of opinion as to a proper description of them. Mr. SCRUGHAM. I have the impression, particularly in regard to the accomplishment of these stocks, that you have been somewhat dilatory, and I want a reasonable expression, if you please, in the record, it there is one, about the reasons for the delays. Admiral CONARD. The delay is actual. It has been more in the question of manganese ore. That is the thing that we have been considering, which is one of the great difficulties. The market for manganese ore has been predominantly for imported material. We are very anxious to develop the possibility of procuring domestic material if it can be established that the domestic material is suitable for our purposes. Mr. SCRUGHAM. What technical experience have you had in preparing these specifications in order that they might include ores prepared under the announced principle of developing domestically these ores! Admiral CONARD. The Secretary of the Navy has appointed a board of officers to make a study of these specifications, and as I said a short time ago, they actually prepared specifications and we advertised for a portion of the manganese. Mr. SCRUGHAM. I have had both verbal and written complaints that the specifications-from manganese producers, a number of themthat these specifications as drawn, for all intents and purposes, preelude any domestic producer from putting in a bid. Admiral CONARD. We had some rather unsatisfactory bids both from the domestic and foreign producers. We are in this difficult position: We do not ourselves use manganese ore to any appreciable extent. We are endeavoring to buy suitable ore for use by the large steel corporations when the emergency arises and to meet the requirements that they indicate as being necessary for all of this material. Mr. SCRUGHAM. Do you know whether the same thing applies to chromium ore and tungsten ore, and so forth-optical glass? Admiral CONARD. Optical glass-I think that well-defined specifications for that material will be ready in the very near future. Mr. SCRUGHAM. You stated that you had some difficulty in drawing up specifications for manganese ore that would cover the needs of the Navy and at the same time meet the requirements of the commercial organizations. That is my understanding. And do you have some difficulty in drawing up specifications for chromium ore and for tungsten ore? Admiral CONARD. We are now advertising for chromium ore, and I think that the specifications are satisfactory, but that question can only be determined as the result of the opening of the bids. I have n reason to think that they are unsatisfactory. Mr. SCRUGHAM. My only object in pursuing this line of inquiry 1to emphasize the desirability of paying special attention to the possi bility of the development of local supplies, and by that I mean supplie produced in this country, and I think, just or not, there is a feeling among local producers that the specifications were not so drawn. I have a number of letters-8 or 10-complaining, from persons wh have written or have come in person to see me, that the specificationas originally put out, especially for manganese ore, were of such a character that they would preclude, no matter whoever they may b or what they may be, that it would preclude them from bidding under the specifications, and my understanding is that your answer is that the specifications are now being recast. Is that correct? Admiral CONARD. That is correct. Mr. SCRUGHAM. And that these redrawn specifications are designed to be more liberal in their construction so as to permit a supply of suitable ore by domestic producers. Is my understanding correct? Admiral CONARD. It is to produce suitable ore, and leaves the domestic producer in the position of stating his ability to furnish that ore or not, as the case may be. Mr. SCRUGHAM. Well, that is entirely satisfactory. I understand similar specifications are being drawn of the other strategic materials also-that is, insofar as practicable, the producer in this country will not only be permitted but he will be encouraged to bid on the product. Admiral CONARD. That is the policy of the Navy. FUEL AND TRANSPORTATION Mr. UMSTEAD. Admiral, your next item is "Fuel and Transportation." Admiral CONARD. Appropriation for "Fuel and Transportation" for the fiscal year 1939. PURPOSE OF APPROPRIATION This appropriation, under which $10,290,000 is requested, covers in general the cost of providing fuel for the fleet. Project 1 covers fuel oil proper for fleet steaming and the estimated consumption is based upon the fleet-employment plan prepared by the Office of Naval Operations. Project 2 covers coal used by vessels float, and this is also based upon the fleet-employment plan. Project 3 covers Diesel oil used by submarines, in the operation of auxiliary machinery of vessels, by yard craft, and in ships running boats. Projects 4 and 5 cover gasoline used in motorboats. Project 6 covers the operation of the several fuel depots and fuel used by tugs, lighters, motorboats, crash boats, and so forth, attached to naval stations. Projects 7 to 12, inclusive, cover the cost of water, ice, electric current, compressed air, steam, and pumping charges furnished vessels when at navy yards while their own machinery is shut down. Project 13 covers small miscellaneous items, which are described under that project. I am first presenting all the basic facts in the rather condensed form which is before you. DISTRIBUTION OF ESTIMATE 1. The estimate of funds required under the appropriation "Fuel and transportation, 1939" is as follows: Project 1. Fuel oil: Fleet-employment plan, 8,031.765 barrels at $0.9746_ Total, 8,237,420 barrels at $0.9746_ 2 Coal, 24,887 tons at $6.068_ 3 Diesel oil, 151.891 barrels at $1.576- 4. Gasoline-motor, 1,718,000 gallons at $0.1094_ Gasoline-aviation (for use in motorboats), 259,000 gallons at $0.1406 6 Maintenance of fuel plants and fuel for yard craft-7. Water___. 9. Electric current. $7,827, 759 200, 431 8, 028, 190 151, 014 239, 381 187, 949 36, 415 559, 146 166, 674 12, 865 438, 505 2. Similar statement for fiscal year 1938 follows. 3. The estimate for 1939 is based on the fleet-employment plan submitted the Chief of Naval Operations. This plan provides for a fleet problem in the fiscal year. This plan calls for a total of 6,062,250 miles. Mr. UMSTEAD. Now, Admiral, take up the first project, which covers fuel oil for vessels of the Navy. Admiral CONARD. This project covers fuel oil for vessels of the Navy. The quantity is based on the estimated requirements to carry out the fleet-employment plan: 1 It is not to be understood that 6,733.149 barrels is sufficient to meet requirements during 1938. It merely means that, due to increased cost available funds will purchase only this quantity at $0.971 per barrel. 1938 allocation, 6,733,149 barrels, at $0.971939 base, 6,733,149 barrels, at $0.971- Increases requested: Increase in quantity (fleet-employment plan), 1,298,616 bar- Increase in quantity (unforeseen contingencies), 205,655 bar rels, at $0.9746_. Increase in cost, 6,733,149 barrels, at $0.0036 $6,537, 888 6, 537, 888 1, 265, 631 200, 431 24, 240 1, 490, 302 1939 estimate, 8,237,420 barrels, at $0.9746_. 8, 028, 190 Admiral CON ARD. It will be noted that the committee allocation for 1938 was $6.752,391. The Navy Department had estimated that $.898.107 barrels of fuel oil would be required during 1938, but this the committee reduced to 8,000,000 barrels to cost $6.752,391. This figures out to an average price of $0.844 per barrel. Since the hearings of last year, however, there has been a steady increase in the price of fuel oil, with the result that when the current fiscal year commenced on July 1, 1937, the average price had reached $0.971 per barrel, an increase of $0.127 over the $0.844 used in the estimate. The result of this is that if the Navy, during the fiscal year 1938, has to pay an average of $0.971 per barrel for its oil, the committee allocation of $6,752,391 would purchase only some 6,954,000 barrels It will also be noted that the Bureau allocation for 1938 was $6,537,888, or $214,503 under the committee allocation. This is explained by the fact that the cost of other projects has shown an indicated net increase of this amount, which has made it necessary to provide for these increases from the amount available for fuel oil. When we reach projects 4 and 5 and 7 to 12, inclusive, it will become more apparent why deficiencies in other projects must be made up principally from the amount available for fuel oil under project 1. From what has been stated it will be apparent that, due primarily to the advance in prices of fuel oil, funds available will not be sufficient to carry out the current fleet employment plan. Coming now to the estimate under project 1, of $8,028,190 for fuel oil for 1939-in keeping with the desire of the committee as expressed in last year's hearings that the margin of difference between estimated and actual consumption be narrowed-the estimate for fuel-oil requirements has been arrived at after careful analysis of all factors entering into the situation, in an effort not to overestimate actual barrelage requirements. It will be noted that a total requirement of 237.420 barrels has been arrived at, of which 8.031,765 barrels are for normal consumption, and 205,655 barrels are for strictly unforeseeable contingencies. This represents an increase of 237,420 barrels over the 8,000,000 barrels estimated by the committee as required for 1938, but is a decrease of 660,687 barrels from the Navy Department's original estimate of 8.898,107 barrels for 1938. It will be noted that the unit price per barrel used in the allocation for 1938 was $0.971. This is based on contracts in effect at many delivery points with varying prices during the first quarter, 1938. It will also be noted that the unit price used in the 1939 estimate is $0.9746 per barrel. This also is based on the contract prices in effect during the first quarter, 1938. The fractional difference is due to the fact that the quantities estimated to be taken at each delivery point 36929-38-21 |